Judgments

[1997] 3 F.C. 565

A-505-96

Ontario Hydro (Appellant) (Plaintiff)

v.

Her Majesty the Queen (Respondent) (Defendant)

Indexed as: Ontario Hydro v. Canada (C.A.)

Court of Appeal, Stone, Décary and McDonald JJ.A. —Toronto, May 27; Ottawa, June 10, 1997.

Energy — Appeal from F.C.T.D. judgment dismissing action to recover portion of costs of relocating National Energy Board from Ottawa to Calgary which utility had been required to pay — National Energy Board Act, s. 24.1 giving NEB power to make regulations for recovery of costs attributable to responsibilities under any Act of Parliament — Giving NEB discretionary power to determine what costs attributable to statutory responsibilities — Limited to costs attributable to statutory responsibilities — Relocation not within dictionary meaning of “responsibilities” — National Energy Board Cost Recovery Regulations, s. 6 defining costs attributable to statutory responsibilities of NEB as “program costs” — Program costs described in Expenditure Plan — Nothing therein contemplating relocation — When read in conjunction with Regulations, ss. 4, 6, Act, s. 24.1 permitting recovery of costs related to Board’s program; not including relocation costs.

Construction of statutes — National Energy Board Act, s. 24.1 giving NEB power to make regulations for recovery of costs attributable to responsibilities under any Act of Parliament — National Energy Board Cost Recovery Regulations, s. 6, determining cost recovery charges, passed at same time as s. 24.1 introduced — Same words used in Act, s. 24.1, Regulations, s. 6 — Trial Judge interpreting Regulations without regard to enabling statute — Where statute, regulations closely meshed so as to form integrated scheme, provisions of both interpreted in light of overall scheme — Some value had to be given scheme of Regulations in interpreting Act — When read in conjunction with Regulations, ss. 4, 6, Act, s. 24.1 permitting recovery of program costs related to Board’s program; not including costs of NEB’s relocation to Calgary from Ottawa.

This was an appeal from a Trial Division judgment dismissing an action brought by Ontario Hydro to recover a portion of the costs of relocating the National Energy Board from Ottawa to Calgary which the utility had been required to pay. National Energy Board Act, subsection 24.1(1) gives the Board, subject to the approval of the Treasury Board, the power to make regulations for the purposes of recovering costs attributable to its responsibilities under any Act of Parliament. Section 24.1 came into force on January 1, 1991. Pursuant to section 24.1, the Board passed the National Energy Board Cost Recovery Regulations, on December 20, 1990, which came into force on January 1, 1991, and which permit the Board, in accordance with the formula therein, to determine and recover from oil and gas pipeline companies and from exporters of electricity certain costs attributable to the performance of its statutory duties. Section 6, which determines the cost recovery charges, uses the same words used in Act, section 24.1 i.e. “costs attributable … to the responsibilities of the Board under the Act or any other Act of Parliament”.

In 1992, the Board rendered four bills to the appellant, each of which included the cost associated with the relocation of its head office in the calculation of the costs recoverable pursuant to the Regulations. The appellant paid each invoice under protest. The Trial Judge dismissed the appellant’s action to recover the amounts so paid on the ground that the Regulations expressly contemplated costs outside the Board’s normal activities would be “program costs”.

The issue was whether the appellant was liable to pay a portion of the relocation costs under Regulations, section 24.1.

Held, the appeal should be allowed.

Neither the Act nor the Regulations allowed the Board to require the appellant to contribute to the relocation costs.

The Trial Judge interpreted the Regulations without regard to the enabling statute. Where the statute and regulations are closely meshed so as to form an integrated scheme, provisions from both are interpreted in the light of that overall scheme. The Regulations were passed at the same time as section 24.1 was introduced in the Act and the wording used in the introductory passage of section 6 of the Regulations is similar to that used in section 24.1. Therefore some value had to be given to the scheme of the Regulations in interpreting the Act.

Section 24.1 clearly gives the Board a discretionary power to determine what costs are attributable to its statutory responsibilities. That discretion was not absolute, in that only those costs attributable to its statutory responsibilities could be recovered. As relocation does not fall within the dictionary meaning of the word “responsibilities”, relocation could not be a cost attributable to the Board’s statutory responsibilities if one were to examine only the provisions of the statute. It was therefore necessary to look at the Regulations. Paragraphs 6(a) and (b) define costs attributable to the statutory responsibilities of the Board as “program costs”. The Board’s program was described in its Expenditure Plan. Nothing in that program description contemplated relocation. While program costs were set out in the Expenditure Plan, they were not defined by it. When section 24.1 of the Act is read in conjunction with sections 4 and 6 of the Regulations, the costs recoverable pursuant to section 24.1 are program costs related to the Board’s Program, which did not include relocation costs.

Regulations, paragraph 9(a), on which the Trial Judge relied heavily in reaching her conclusion, was restricted to the very narrow purpose of Part II of the Act, dealing with the advisory sub-activity of the Board. It merely recognizes that “program costs” may be incurred, at the request of the Minister, in activities which are outside the scope of the Board’s normal activities. If it expands the concept of “program costs” it does it solely to include, in addition to program costs incurred on a recurring annual basis, program costs exceptionally incurred on a once-and-for-all basis in the context of Part II. It did not permit costs unrelated to the Board’s Program to qualify as program costs for the purposes of recovery under section 6.

STATUTES AND REGULATIONS JUDICIALLY CONSIDERED

Federal Court Rules, C.R.C., c. 663, RR. 500 et seq.

Interpretation Act, R.S.C., 1985, c. I-21, s. 16.

National Energy Board Act, R.S.C., 1985, c. N-7, ss. 7(1) (as am. by S.C. 1991, c. 27, s. 2), 24.1 (as enacted by S.C. 1990, c. 7, s. 13).

National Energy Board Cost Recovery Regulations, SOR/91-7, ss. 4(3), 5, 6, 7, 9.

CASES JUDICIALLY CONSIDERED

REFERRED TO:

R. v. Compagnie Immobilière BCN Ltée, [1979] 1 S.C.R. 865; [1979] C.T.C. 71; (1979), 79 DTC 5068; 25 N.R. 361.

AUTHORS CITED

Allen, E. The Concise Oxford Dictionary of Current English, 8th ed. Oxford: Clarendon Press, 1990. “responsibility”.

Black, Henry Campbell. Black’s Law Dictionary, 5th ed. St. Paul, Minn.: West Publishing Co., 1979. “responsibility”.

Côté, Pierre-André. The Interpretation of Legislation in Canada, 2nd ed., Cowansville (Qué.): Éditions Yvon Blais Inc., 1991.

Reid, Hubert. Dictionnaire de droit québécois et canadien. Montréal: Wilson & Lafleur Ltée, 1994. “attributions”.

Robert, P. Le Petit Robert 1. Montréal: Les Dictionnaires Robert-Canada S.C.C., 1991. “attributions”.

Sullivan, Ruth. Driedger on the Construction of Statutes, 3rd ed. Toronto: Butterworths, 1994.

APPEAL from trial judgment (Ontario Hydro v. National Energy Board (1996), 112 F.T.R. 225 (F.C.T.D.)) dismissing an action for reimbursement of the amount paid by the appellant towards the relocation of the National Energy Board’s head office pursuant to National Energy Board Act, section 24.1 and National Energy Board Cost Recovery Regulations, section 6. Appeal allowed.

COUNSEL:

Eric R. Finn and Ilana Saltsman for appellant (plaintiff).

Frederick B. Woyiwada and Darrell Kloeze for respondent (defendant).

SOLICITORS:

Ontario Hydro Law Division, Toronto, for appellant (plaintiff).

Deputy Attorney General of Canada for respondent (defendant).

The following are the reasons for judgment rendered in English by

Décary J.A.: The issue in this appeal from a decision of the Trial Division [(1996), 112 F.T.R. 225] is whether, under the National Energy Board Cost Recovery Regulations[1] (the Regulations), the appellant is liable to pay a portion of the cost of relocating the National Energy Board (the Board) from Ottawa to Calgary.

The issue arose in the following circumstances. The appellant is a public utility that exports electricity out of the province of Ontario. As such, it is a party that meets the classification enumerated in section 24.1 of the National Energy Board Act[2] (the Act) and is thereby subject to any regulation made pursuant to this section “for the purposes of recovering all or a portion of such costs as the National Energy Board determines to be attributable to its responsibilities [“afférents à l’exercice de ses attributions” in the French text] under this or any other Act of Parliament”. Section 24.1[3] came into force January 1, 1991.

Pursuant to section 24.1 of the Act, the Board passed the Regulations on December 20, 1990, effective as of January 1, 1991. The Regulations provide that the Board may, in accordance with the formula set out therein, determine and recover from oil and gas pipeline companies and from exporters of electricity described in Schedules I, II and III, certain costs attributable to the performance of its statutory responsibilities. The appellant is referred to in Schedule III, Part I.

On June 21, 1991, the Governor General assented to an amendment to subsection 7(1)[4] of the Act which called for relocating the head office of the Board from the city of Ottawa to the city of Calgary. The relocation was completed by September 1, 1991. The amendment came into force on November 1, 1991. The Board estimated the cost of relocation to be $14,846,765 of which 50% ($7,423,383) was to be recovered in each of 1992 and 1993. Additional costs relating to the relocation were incurred during the years 1994 to 1997.

In 1992, the Board rendered four bills in respect of cost recovery charges to the appellant. In each case, the Board included the cost associated with the relocation of its head office in its calculation of the costs recoverable pursuant to the Regulations. The appellant paid each invoice under protest on the ground that the cost of relocation could not be included in the calculation of costs under section 6 of the Regulations. The amount at issue for the year 1992 was $83,864. Other charges were also debited from the appellant’s account during the following years. The appellant concedes that if the relocation costs were properly included in the calculation, the invoices are accurate. If the relocation costs were not properly included, the Board agrees to carry out an accounting and reimburse the appellant for relocation costs improperly charged.

The appellant filed a statement of claim in which it sought the reimbursement of the relocation costs, as well as a declaration that the relocation costs are not costs that can be recovered pursuant to section 6 of the Regulations.

The Trial Judge dismissed the action. She did so, essentially, on the basis of the following conclusion [at page 233]:

I am satisfied that, in ordinary parlance, and in the Board’s practice, its Program is treated as the sum of its Activities and the recurring Activity costs are the “program costs”. However, these are not determinative of the meaning of “program costs” in the Regulations . I say this because, in my view, this case can be decided having regard to the text of the Regulations. Section 6 essentially defines “program costs” as those costs which are set out in the Estimates. Section 9 deals with recoverable costs which, in my view, must mean “program costs” and allows the Minister to exclude “program costs” which “are outside the normal activities of the Board”. To me, this is a clear indication that, in the context of the Regulations, “program costs” is capable of meaning something other than the annual recurring costs associated with the Board’s Activities. Because the Regulations appear to expressly contemplate that costs outside the Board’s normal activities will be “program costs”, I see no reason why Relocation Costs cannot be “program costs”.

It will be useful to first set out the relevant provisions of the Act and of the Regulations:

The National Energy Board Act

Head Office and Meetings

7. (1) The head office of the Board shall be at Calgary, Alberta.

…

Fees, Levies and Charges

24.1 (1) Subject to the approval of the Treasury Board, the National Energy Board may, for the purposes of recovering all or a portion of such costs as the National Energy Board determines to be attributable to its responsibilities under this or any other Act of Parliament, make regulations

(a) imposing fees, levies or charges on any person or company authorized under this Act to

(i) construct or operate a pipeline or an international or interprovincial power line,

(ii) charge tolls,

(iii) export or import oil or gas, or

(iv) export electricity; and

(b) providing for the manner of calculating the fees, levies and charges in respect of the person or company and their payment to the National Energy Board.

The National Energy Board

Cost Recovery Regulations

Whereas the National Energy Board has determined that certain costs are attributable to its responsibilities under the National Energy Board Act or any other Act of Parliament;

…

REGULATIONS RESPECTING THE RECOVERY OF

CERTAIN COSTS OF THE NATIONAL ENERGY

BOARD

…

Payment of Charges and Fees

4. …

(3) Each exporter set out in Part I of Schedule III shall every year pay to the Board a cost recovery charge calculated in the manner set out in subsection 14(3).

5. (1) Each company set out in Part II of Schedules I and II and each exporter set out in Part II of Schedule III shall every year pay to the Board an administration fee of $10,000.

(2) Each company set out in Part III of Schedules I and II shall every year pay to the Board an administration fee of $500.

Determination of Board Costs

6. For the purpose of calculating cost recovery charges in accordance with these Regulations, the total costs attributable for a calendar year to the responsibilities of the Board under the Act or any other Act of Parliament are the aggregate of

(a) one fourth of the estimated program costs of the Board including the costs of goods and services provided to the Board by other federal departments or agencies, as set out in the Expenditure Plan published in the Estimates of the Government of Canada for the Board’s fiscal year ending in the calendar year, and

(b) three fourths of the forecasted program costs of the Board including the costs of goods and services provided to the Board by other federal departments or agencies, as prepared for the Expenditure Plan to be published in the Estimates of the Government of Canada for the Board’s fiscal year beginning during that calendar year.

7. The Board shall, on or before September 30 in every year, calculate

(a) the amount, if any, by which the total program costs determined in accordance with section 6 for the preceding calendar year exceed the actual expenditures of the Board during the preceding calendar year; or

(b) the amount, if any, by which the actual expenditures of the Board during the preceding calendar year exceed the total determined in accordance with section 6 for that preceding calendar year.

…

9. The Minister may determine that

(a) any costs otherwise recoverable or any portion thereof attributable to activities undertaken by the Board at the request of the Minister pursuant to Part II of the Act that are outside the scope of the normal activities of the Board are to be excluded from the total costs to be recovered by the Board;

(b) any costs otherwise recoverable or any portion thereof attributable to activities undertaken by the Board in a calendar year that are not for the direct benefit, in that calendar year, of the companies or persons in respect of which these Regulations apply are to be excluded from the total costs to be recovered by the Board or that the recovery of those costs is to be deferred to a later period; and

Counsel for the parties both approached this case on the assumption that the sole issue being the interpretation of the Regulations, it was not necessary to examine the provisions of the enabling statute. The Trial Judge also followed this approach, with the result that the Regulations were interpreted without having regard to the enabling statute.

This approach is inconsistent with the cardinal rules that where the provision to be interpreted appears in a regulation, it must be read in the context of both the regulations and the enabling statute as a whole,[5] and that where, as here, the expressions used in the Regulations are those used in the enabling statute, they have the same respective meanings as in the enactment conferring the power.[6] As the efforts of counsel were directed at determining the intent and purpose of the Regulations, there is little, if anything, before us, apart from the very words of the enabling statute, that can help us in the interpretation we must make of the statute.

Normally, in cases such as this one, the Court will examine the provisions of the enabling statute first in order to ascertain precisely what it is that Parliament has allowed to be regulated. It will then turn to the regulation. There being a presumption that the regulation has been passed in accordance with the provisions of the enabling statute and that there is coherence between the terms used in the statute and those used in the regulation,[7] the Court will endeavour to interpret the regulation in such a way as to keep it within the confines permitted by the enabling statute. Should that prove impossible, the regulation or part of it will be declared ultra vires. Reconciliation is therefore the rule, and it will be achieved in most cases.

It was observed in Driedger on the Construction of Statutes[8] that because regulations are a subordinate form of legislation, usually made after the enabling statute has been passed, they have limited value in interpreting provisions of the statute. In appropriate circumstances, where the statute and the regulations are closely meshed so as to form an integrated scheme, provisions from both are interpreted in the light of that overall scheme.

In the case at bar, the Regulations were passed at the same time as section 24.1 was introduced in the Act and the wording used in the introductory passage of section 6 of the Regulations, which is at the core of this appeal, is similar to that used in section 24.1 of the Act. I am therefore prepared, in interpreting provisions of the Act, to give some value to the scheme set out in the Regulations. In the end result, therefore, the flaw in the approach taken in the Court below may prove to be of little consequence.

A look, first, at the enabling Act. The relevant sections are subsection 7(1), which determines the location of the head office, and section 24.1, which gives the Board the power to pass the Regulations at issue.

Subsection 7(1) is a purely administrative provision that gives no power whatsoever to the Board. It determines where the head office of the Board will be located. That determination is not made by the Board, but by the Governor in Council, and eventually by Parliament, as illustrated by the events that occurred in this case. The decision to move the head office from Ottawa to Calgary was an administrative decision in which the Board had no statutory authority to participate.

In subsection 24.1(1), the Board is given, subject to the approval of the Treasury Board, the power to make regulations “for the purposes of recovering all or a portion of such costs as the National Energy Board determines to be attributable to its responsibilities under this or any other Act of Parliament”.

The Board, clearly, is given a discretionary power to determine what costs are attributable to its statutory responsibilities. That discretion, however, is not absolute and counsel for the respondent conceded that the Board could not use that provision to recover costs unrelated to these responsibilities. The discretion is fettered in another way: the costs that can be recovered are not all the costs which the Board incurs in its activities; they are limited to such costs as can be attributed to its statutory responsibilities. Had Parliament intended to allow the Board to recover all and any of its costs, it would not have taken the extra step of limiting the application of section 24.1 to those costs that could be attributed to the Board’s statutory responsibilities. Counsel for the respondent did so recognize.

“Responsibility”, in Black’s Law Dictionary,[9] is defined as “The state of being answerable for an obligation”. In The Concise Oxford Dictionary of Current English,[10] it is defined as “b. authority; the ability to act independently and make decisions”. Its French counterpart in section 24.1, “attributions”, means [translation] “powers granted to the holder of an office, a body or a service” and is equated with [translation] “jurisdiction, right, function, power, prerogative, privilege, role” in Le Petit Robert 1.[11] In the Dictionnaire de droit québécois et canadien[12] it is defined as [translation] “1. Rights and duties of an office, function … 2. Matter or category of arts within an authority’s powers or jurisdiction”. As relocation does not fall within the meaning of the word “responsibilities”, it follows that if one were to examine only the provisions of the statute, relocation could not be said to be a cost attributable to the Board’s statutory responsibilities within the meaning of section 24.1.

Do the Regulations shed a different light?

The preamble to the Regulations, as well as their formal title, refer to the recovery of certain costs only. This, presumably, was done in recognition of the fact that section 24.1 of the Act, as we have seen, does not permit the recovery of all costs.

Sections 4 and 5 establish two types of costs: an administration fee, which is a fixed amount, and a cost recovery charge, determined and calculated in the manner set out in the Regulations.

Section 6 determines the cost recovery charges. It uses, in its introductory words, the same words used in section 24.1 of the Act, i.e. “costs attributable … to the responsibilities of the Board under the Act or any other Act of Parliament”. These words must, therefore, bear the same meaning as those found in the statute.

Paragraphs 6(a) and (b) define costs attributable to the statutory responsibilities of the Board as “program costs”. There was evidence before the Trial Judge allowing her to find that “program costs” meant repetitive annual expenditures that do not ordinarily include project costs such as relocation costs. There was also evidence that in the Expenditure Plan prepared by the Board, the “Board’s Program” was described as follows:

4. Program Description

Functions: The National Energy Board functions as a quasi-judicial tribunal. It serves as a regulatory enforcement body responsible for overseeing the construction and operation of certain approved energy projects. The Board regulates the tolls and tariffs of pipeline companies under federal jurisdiction to ensure that the tolls are just and reasonable and not unjustly discriminatory. It also serves as a source of advice to the government on specific policy questions and periodically undertakes studies of various energy issues both on its own initiative and at the request of the responsible Minister.

Activity Structure: The National Energy Board program consists of one activity—Energy Regulation and Advice and five sub-activities as described below:

Advice and Inquiry: Use of the Board’s expertise and data bases to provide information and analysis on the control, conservation, use, transportation, marketing, and development of oil, natural gas, and electricity. Inquiry into aspects of the North American energy situation important to the maintenance of Canada’s energy security.

Facilities Regulation: Ensuring expeditious, safe, and environmentally sound construction and operation of gas and oil pipelines and power lines subject to federal jurisdiction.

Traffic, Tolls, and Tariffs Regulation: Ensuring that tolls of pipelines under federal jurisdiction are just and reasonable and that pipeline services are provided on a continuing basis, without unjust discrimination, and in a cost-efficient manner.

Energy Trade: Ensuring Canadian interests are served through participation in the developing North American market for electrical power, gas, and oil.

Program Management and Services: Providing effective support and advice to Board Members, departmental managers, and employees so that program objectives may be achieved. [A.B., Vol. IV, at pages 669-670.]

It follows, in my view, that the word “responsibilities”, in section 6 of the Regulations, refers both to the “Functions” and to the “Activity Structure” as described above. I see nothing in the Program Description that even comes close to contemplate relocation.

Counsel for the respondent has submitted, and the Trial Judge seems to have accepted, that because paragraph 6(a) uses the words “program costs … as set out in the Expenditure Plan published in the Estimates of the Government of Canada”, any costs set out in the Expenditure Plan under the expression “program costs” are “program costs” for the purposes of section 6. I see no merit in this submission, which is tantamount to saying that the Board can, by toying with words, transform into program costs, costs that do not fit the definition of program costs. Program costs are definitely set out in the Expenditure Plan, but they are not defined by it.

I have therefore no problem, at this stage, in reaching the conclusion that when section 24.1 of the Act is read in conjunction with sections 4 and 6 of the Regulations, the costs recoverable pursuant to section 24.1 of the Act are the program costs related to the Board’s Program, which costs do not include relocation costs.

The Trial Judge relied heavily, in reaching her conclusion that program costs included relocation costs, on section 9 of the Regulations. I am of the view, to the contrary, that section 9 is of little assistance.

Paragraph 9(a)—which is in any event of a very limited application because it is restricted to the very narrow purpose of Part II of the Act, dealing with the advisory sub-activity of the Board—does not distract from the rule set out in section 6. It cannot but refer, as the Trial Judge herself noted, to program costs identified in section 6, as it refers to costs “otherwise recoverable”. It merely recognizes that “program costs” may be incurred, at the request of the Minister, in activities which are outside the scope of the Board’s normal activities. If it expands the concept of “program costs”, it does it solely so as to include, in addition to program costs incurred on a recurring annual basis, program costs exceptionally incurred on a once-and-for-all basis in the context of Part II of the Act. It does not permit costs unrelated to the Board’s Program to qualify as program costs for the purposes of recovery under section 6.

In the end, I have reached the conclusion that the Board is over-reaching when it attempts to recover the costs of relocating its head office in Calgary. Neither the Act nor the Regulations allow the Board to require the appellant to contribute to these costs.

The appeal should therefore be allowed, the judgment of the Trial Judge should be set aside, a declaration should issue that the costs incurred by the National Energy Board in relocating its head office from Ottawa to Calgary are not costs that can be recovered from the appellant pursuant to section 24.1 of the National Energy Board Act and to section 6 of the National Energy Board Cost Recovery Regulations, and an order should issue granting repayment by the Board to the appellant of the sum of $83,864 on account of the relocation costs for the year 1992 and of the sum, with respect to subsequent years, to be determined by a reference under Rules 500 et seq [Federal Court Rules, C.R.C., c. 663].

The appellant should be entitled to pre-judgment and post-judgment interests on the sum repaid as well as to costs in both Divisions of this Court.

Stone J.A.: I agree.

McDonald J.A.: I agree.

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