October 5, 2004, E.C.B. No. 01/03/251

 
REASONS FOR DECISION

1.  APPLICATION

[1]  Under section 27 of the Water Act, R.S.B.C. 1996, c. 483, the claimants, R. Moray Ranching Corp. and Rita Moray (collectively the "Morays"), are seeking to expropriate an easement over land owned by the respondent, the Canadian Pacific Railway Company ("CPR"). The land is situated adjacent to the South Thompson River in or near Kamloops, British Columbia and is legally described as:

PID 010-887-822
That Part of Lot 3 Shown on Plan H9877 District Lot 235 Kamloops Division Yale District Plan 3270

(the "CPR Lands").

[2]  The Morays' intention to expropriate an interest in the CPR Lands as licensees under the Water Act has raised a constitutional question involving the division of legislative powers and, in turn, a jurisdictional question as to the authority of the board to hear and determine the matter.

[3]  This decision flows from an application brought by way of notice of motion which CPR filed with the board. The motion requests an order that the board suspend or discontinue all proceedings in relation to the Morays' notice of intent to acquire an interest in the CPR Lands. The principal basis for the application is CPR's contention that the land which the Morays seek to expropriate forms part of the right of way of an inter-provincial railway that is exclusively within federal jurisdiction. CPR maintains that the Water Act as provincial legislation is constitutionally inapplicable or inoperative in relation to the proposed expropriation. The respondent railway company also raises objections of a non-constitutional nature to the claimants' expropriation proceedings.

[4]  The notice of motion is supported by three sworn affidavits: those of William M. Seeley, CPR's area manager for support, Andrew Massil, CPR's regional manager for marketing, and Leo Coster, a British Columbia and Canada land surveyor retained by CPR with respect to this matter. The Morays have filed the sworn affidavit of Ryan Moray, acting as their agent, in response.

[5]  CPR gave notice to the Attorney General of British Columbia (the "Attorney General") who has intervened in this application pursuant to the Constitutional Question Act, R.S.B.C. 1996, c. 68.

[6]  CPR, the Morays and the Attorney General all agreed to address CPR's application through written submissions which they exchanged among themselves and filed with the board in accordance with a fixed timetable. In due course they also provided the board with copies of numerous legislative provisions, case authorities and commentaries upon which they respectively relied.

[7]  I have reviewed all of the materials received and decided the issues raised on this application alone in my capacity as chair of the board and in exercising the powers and jurisdiction of the board pursuant to section 26(5) of the Expropriation Act, R.S.B.C. 1996, c. 125.

2.  BACKGROUND

2.1  The Parties

[8]  Collectively the Morays own three parcels of land situated some distance south of the CPR Lands. R. Moray Ranching Corp. is the registered owner of two parcels legally described as:

(1) PID 003-393-186
Lot 1 Plan 32533 Sections 33 and 34 Township 19 Range 17 West of the 6 th Meridian Kamloops Division Yale District

(2) PID 003-538-389
Lot B Plan 32094 Section 34 Township 19 Range 17 West of the 6th Meridian Kamloops Division Yale District

and Rita Moray is the registered owner of a third parcel legally described as:

(3) PID 003-393-194
Lot 2 Plan 32533 Sections 33 and 34 Township 19 Range 17 West of the 6 th Meridian Kamloops Division Yale District

[9]  The Morays have asserted the right to expropriate an interest in the CPR Lands for the benefit of their own lands pursuant to a conditional water licence issued under the authority of the Water Act. Section 27 of the Water Act is headed "Licensee's right to expropriate land" and section 27(2) provides that a licensee "has the right to expropriate any land reasonably required for the construction, maintenance, improvement or operation of works authorized under his or her licence."

[10]  CPR is a corporation incorporated under the laws of Canada and operates railway lines under federal jurisdiction that run across the Canadian provinces and into the United States of America. The main line of CPR, which is the intercontinental connection of Vancouver, British Columbia and Montreal, Quebec, is in part situated on the CPR Lands. The evidence is that on average 40 trains per day operate on the portion of the main line that crosses the CPR Lands.

2.2  Chronology

[11]  To place the present application in proper context, it is necessary at the outset to review the lengthy history of the parties' association with the lands in question as well as their involvement with each other over a period of more than three decades. Much of the relevant chronology can be traced through various documents annexed to the sworn affidavits.

[12]  On May 1, 1970, CPR acquired the CPR Lands pursuant to an agreement (the "1970 Agreement") with the Provincial Crown as represented by the Minister of Highways (the "Province"). Under the 1970 Agreement, CPR agreed to exchange certain lands with the Province which would allow relocation of its main line railway corridor and, in turn, accommodate an expansion of the Trans Canada Highway. Among other things the 1970 Agreement contemplated that CPR would be provided with a minimum right of way width for its new railway corridor of 100 feet plus such other lands as might be necessary for the accommodation of slopes and ditches.

[13]  On July 1, 1970, CPR entered into the following three agreements with the Moray family:

(1) an agreement with Richard Moray allowing Mr. Moray to construct and maintain a water supply pipeline under the CPR Lands;

(2) an agreement with the same Mr. Moray allowing him to construct and maintain a power line under the CPR Lands; and

(3) an agreement with Chaparro Ranches Ltd. ("Chaparro"), a company controlled by the Moray family, to lease a portion of the CPR Lands for a term of 20 years for the purpose of constructing and maintaining a pump house.

Both the water pipeline agreement and the power line agreement had one year renewable terms but were also terminable on three months' written notice. Both contained provisions allowing CPR to require Mr. Moray at his expense to move or alter any works he had constructed if CPR desired or was ordered to make changes in its tracks, structures or facilities, wished to build on or otherwise use the property crossed by the works, or deemed necessary a change in the location or construction of the works in order to protect its tracks, structures or property.

[14]  On January 4, 1971, the comptroller of water rights for the Province of British Columbia issued conditional water licence no. 36655 to the "House of Moray" with a date of precedence of March 25, 1970. The licence and attached plan authorized the diversion of water for irrigation and domestic purposes from the South Thompson River along a route which was depicted as crossing the CPR right of way and the Trans Canada Highway and extending to a reservoir on land owned by the Moray family. The licence also authorized the construction of works consisting of a diversion structure, pump, pipe, reservoir and sprinkler system. The land upon which the water was to be used and for which the licence was said to be appurtenant was described as:

"Lots 3 of Section 33, Township 19, Range 17, West 6 th Meridian, Plan 17388, and East ½ of South-east ¼ of Section 33, Township 19, Range 17, West 6 th Meridian, except Plans 17388, 19145 and 19611, of which 16 acres may be irrigated."

The documentation provided to the board shows that in 1973 the legal description of the appurtenant land was slightly amended and that in 1985 an application was made to further amend the description so as to identify the three legal parcels currently owned by the Morays as the appurtenant land. The documentation does not, however, demonstrate that the licence was actually amended as a result of the 1985 application, a point upon which CPR has seized in these proceedings to suggest that the claimants' land is not the appurtenant land and that they therefore do not have standing as water licensees to expropriate any portion of the CPR Lands.

[15]  On October 17, 1971, a plan of right of way detailing the land exchange between CPR and the Province under the 1970 Agreement was filed in the land title office under plan no. H9877. The CPR Lands formed part of this filed plan of right of way.

[16]  On May 1, 1973, CPR entered into a further agreement with Chaparro to lease a portion of the CPR Lands on a year to year basis for use as a road access to the pump house (the "access lease"). The access lease was terminable on three months' written notice.

[17]  On November 5, 1982, a Crown Grant of an estate in fee simple was issued to CPR for the CPR Lands (the "Crown Grant"). The Crown Grant included the following provision:

"PROVIDED THAT the estate herein granted is subject to:

(a) any conditional or final water licence or substituted water licence issued or given under the Water Act, or under any prior or subsequent enactment of the Province of British Columbia of like effect, and to the rights of the holder of it to enter on the land and to maintain, repair and operate any works permitted on the land under the licence at the date hereof; (…)

EXCEPTING AND RESERVING, nevertheless to the Grantor, its successors and assigns the exceptions and reservations of the interests, rights, privileges and titles referred to in Section 47 of the Land Act."

[18]  In July, 1990, the 20-year term of the pump house lease having expired, CPR prepared a new lease agreement for execution by Chaparro (the "1990 draft lease"). The parties are agreed that the 1990 draft lease was never executed and that no rent was paid with respect to the pump house site for any period after 1990. However, Ryan Moray in his affidavit deposes that the applicable municipal taxes continued to be paid each year by Chaparro and that all payments required under the other agreements between CPR and the Moray family, including the water pipeline and power line agreements and the access lease, also continued to be made. The affidavit offers the explanation that there was an ongoing dispute regarding the terms of the 1990 draft lease. It also observes that CPR took no steps in the intervening years between 1990 and 2002 to collect overholding rents outstanding under the pump house lease.

[19]  On July 5, 2002, Mr. Seeley on behalf of CPR wrote to Richard Moray noting that Chaparro was "in serious arrears" on its rental account with respect to the pump house lease, requesting immediate payment of the arrears and interest, and at the same time giving three months' notice of termination of the access lease. Mr. Seeley added:

"Should you wish to continue having access across our lands, we would be willing to entertain a License interest only. The terms, including fees payable, will have to be discussed and will be conditional on agreeing to a form of agreement and final acceptance by CPR's signing authorities."

[20]  Ryan Moray in his affidavit has deposed that CPR only revived the issue of the pump house lease after Chaparro declined to allow public access through the areas it was leasing for a public trail project undertaken by the City of Kamloops. Mr. Moray deposed that it was apparent from his conversations with Mr. Seeley that CPR was taking action "to accommodate the wishes of the City of Kamloops that public access be provided" for the trail project. A number of local newspaper articles and items of correspondence pertinent to this subject are annexed to the affidavit.

[21]  In early September, 2002, in response to CPR's expressed intention to terminate its lease arrangements, the Morays commenced expropriation proceedings pursuant to section 27 of the Water Act and Part 5 of the Water Regulation, B.C. Reg. 204/88. Their initial application was rejected by the Kamloops-Nelson Land Title Office for various technical deficiencies. However, on October 11, 2002, they succeeded in filing in the land title office a notice of intent to acquire an interest in land under No. KT111980. The interest indicated was an easement over that portion of the CPR Lands shown on an explanatory plan deposited under No. KAP72004 (the "explanatory plan"). The notice of intent was also accompanied by a statement offering compensation in the sum of $1,500 for the easement. The proposed terms of the easement included a provision giving the Morays a right to construct and maintain a security fence around the easement area.

[22]  On January 23, 2003, R. Moray Ranching Corp. applied to the board, pursuant to section 27 of the Water Act and section 30 of the Water Regulation, for a determination of the terms of the proposed easement it was seeking to expropriate and of the amount of compensation payable to CPR for the expropriation. At some point after these proceedings were first brought, Rita Moray was added as a claimant.

[23]  On February 24, 2003, CPR filed with the board a reply to the Morays' application. The reply alleged that the intended expropriation of an easement over lands that constitute CPR's main line corridor was unconstitutional and that the board had no constitutional jurisdiction in the matter. In the alternative CPR plead that the proposed easement was wholly inappropriate and deficient and that the proposed compensation for the easement was wholly inadequate.

[24]  Also in February, 2003, CPR retained the firm of Coster and Singer Land Surveying to produce a surveyed sketch plan of physical features located on the CPR Lands as well as a surveyed sketch plan showing the location of the proposed easement. The area of the explanatory plan was surveyed against the physical improvements on the CPR Lands. The Coster sketch plans demonstrated that the proposed easement area includes a portion of the CPR Lands upon which railway tracks are presently situated.

2.3  Legislation

[25]  Several legislative enactments are germane to the issues raised on this application and, for ease of reference, are set out together at this point.

2.3.1  The Constitution Act, 1867

[26]  The Constitution Act, 1867 governs the division of legislative powers as between the Parliament of Canada and the Legislatures of the Provinces. For federal legislative authority over CPR in the present instance, CPR indicates that the relevant constitutional provisions are section 91(29) and sections 92(10)(a) and (c) while, for provincial legislative authority pertaining to the expropriation of land by water license holders, the Morays cite sections 92(13) and (16).

[27]  Section 91(29) of the Constitution Act, 1867 provides:

91. It shall be lawful for the Queen, by and with the Advice and Consent of the Senate and House of Commons, to make Laws for the Peace, Order, and good Government of Canada, in relation to all Matters not coming within the Classes of Subjects by this Act assigned exclusively to the Legislatures of the Provinces; and for greater Certainty, but not so as to restrict the Generality of the foregoing Terms of this Section, it is hereby declared that (notwithstanding anything in this Act) the exclusive Legislature Authority of the Parliament of Canada extends to all Matters coming within the Classes of Subjects next herein-after enumerated; that is to say

29. Such Classes of Subjects as are expressly excepted in the Enumeration of the Classes of Subjects by this Act assigned exclusively to the Legislatures of the Provinces.

[28]  The relevant portions of section 92 provide:

92. In each Province the Legislature may exclusively make Laws in relation to Matters coming within the Classes of Subjects next herein-after enumerated; that is to say

10. Local Works and Undertakings, other than such as are of the following Classes: --

a. Lines of…Railways…connecting the Province with any other or others of the Provinces, or extending beyond the Limits of the Province;

c. Such Works as…are before or after their Execution declared by the Parliament of Canada to be for the general Advantage of Canada….

13. Property and Civil Rights in the Province.

16. Generally all Matters of a merely local or private Nature in the Province.

2.3.2  The Water Act and Water Regulation

[29]  The Water Act, R.S.B.C. 1996, c. 483 establishes the rights acquired by a water licence holder, including the right to expropriate land, while Part 5 of the Water Regulation, B.C. Reg. 204/88 sets out the procedures to be followed in any such expropriation as well as the powers and duties of the board.

[30]  The portions of the Water Act relevant to the present application provide:

[31]  The sections of Part 5 of the Water Regulation relevant to this application provide:

2.3.3  The Land Act

[32]  Section 47 of the Land Act, R.S.B.C. 1979, c. 214 (now section 50 of the Land Act, R.S.B.C. 1996, c. 245), which was expressly referred to in the Crown Grant of the CPR Lands, provided in part as follows:

2.3.4  The Canada Transportation Act

[33]  The Canada Transportation Act, S.C. 1996, c. 10 applies in respect of transportation matters which are under the legislative authority of Parliament. Certain provisions contained in sections 88, 100 and 101, and 142 are relevant to the constitutional issue raised on this application. Reference to the "Agency" in section 101 is to the Canada Transportation Agency. The provisions state:

3.  THE ISSUES

[34]  The principal issue for determination arising directly out of CPR's notice of motion is whether section 27 of the Water Act is constitutionally inapplicable or inoperative in relation to the claimants' proposed expropriation of an easement over a portion of the CPR Lands. This is the sole issue upon which the Attorney General has intervened.

[35]  In their written submissions CPR and the Morays go beyond the particular subject matter of the notice of motion and raise a non-constitutional issue. The issue is whether, irrespective of constitutional considerations, the terms of the 1970 Agreement and of the Crown Grant, including reference in the latter document to section 47 of the Land Act, provide the Morays with a right of expropriation in relation to the CPR Lands. There are also two subsidiary issues which are largely procedural in nature.

[36]  Although strictly speaking my decision need not go beyond resolving the constitutional issue squarely presented in the notice of motion, I propose to deal as well with the parties' submissions on these other issues in order perhaps to save a further application.

4.  THE CONSTITUTIONAL ISSUE

Is section 27 of the Water Act constitutionally inapplicable or inoperative in relation to the claimants' proposed expropriation of an easement over a portion of the CPR Lands?

4.1  The Board's Jurisdiction to Determine

[37]  This is, I believe, the first occasion on which the board has been asked to deal directly with a constitutional question and it is therefore prudent in my view to raise as a preliminary matter whether the board has jurisdiction to do so.

[38]  Counsel for the Morays submitted that the board has constitutional authority to proceed to consider their application for determination of compensation while counsel for CPR submitted that the board does not have such authority. However, as I understand them, these submissions really go to the central issue of whether section 27 of the Water Act is constitutionally applicable or operative to permit expropriation of a portion of CPR's right of way and to confer on the board, pursuant to the provisions of Part 5 of the Water Regulation, the jurisdiction to determine the terms of the easement and the amount of compensation to be paid. The submissions do not address the board's jurisdiction to hear and decide the threshold constitutional question arising out of CPR's notice of motion. Neither the parties nor the Attorney General have challenged the board's jurisdiction in this initial respect and, indeed, everyone concerned seems to have proceeded with this application on the assumption that the board has the necessary authority.

[39]  The board as a statutory body has only that jurisdiction which the applicable legislation confers on it either expressly or by necessary implication. At the same time the board has the ability to embark upon an examination of the boundaries of its jurisdiction. See McEachern v. British Columbia Hydro and Power Authority (1997), 60 L.C.R. 186 (B.C.E.C.B.) and the cases cited therein. See also Home Oil Co. v. Schulte (2003), 80 L.C.R. 123 (B.C.E.C.B.) at pp. 139-146.

[40]  In the present instance express authorization is absent. The Expropriation Act, the board's enabling statute, is silent with respect to the board's jurisdiction over constitutional questions. The main jurisdictional provision is section 26. Section 26(1)(c) says that the board must determine "compensation to be paid, or any other matter to be determined, if jurisdiction is given to it under any enactment". The board has previously ruled that the words "any other matter to be determined", standing alone, do not give the board an express general jurisdiction to deal with all matters which come before it: Whitechapel Estates Ltd. v. British Columbia (Ministry of Transportation and Highways South Coast Region) (1994), 54 L.C.R. 306 at pp. 314-315, and Spur Valley Improvement District v. Checkman Holdings (Calgary) Ltd. (2004), 83 L.C.R. 54 at p. 65. Section 2(3) of the Expropriation Act expressly limits the board's jurisdiction under certain enactments including the Water Act. Section 31 of the Water Regulation incorporates the applicable provisions of the Expropriation Act and addresses generally the scope of the board's powers in the context of expropriation proceedings under the Water Act. However, not surprisingly perhaps, neither the Water Act nor the Water Regulation gives the board express authority over any constitutional issues that may arise.

[41]  Compounding the uncertainty, I also note that recently the Legislature has enacted the Administrative Tribunals Act, S.B.C. 2004, c. 45 (the "ATA"). Section 44 of the ATA, which is expected to be made applicable to the board under one of a number of consequential amendments to the Expropriation Act, provides that the board, like most other administrative tribunals, "does not have jurisdiction over constitutional questions." This is a manifest indication of current legislative intent. However, while the ATA has been proclaimed in force by regulation of the Lieutenant Governor in Council, none of the consequential amendments affecting the board has yet been proclaimed.

[42]  In the absence of either express authorization or (at this point) express prohibition, the question remains whether the board's jurisdiction to decide the threshold constitutional issue in this matter arises by necessary implication.

[43]  Support for the board's implied jurisdiction can be found both at common law and in statute. It is an established principle of common law, recognized in decisions of the Supreme Court of Canada, that the powers conferred by an enabling statute include not only those which are expressly granted but extend, by implication, to incidental and ancillary matters which are reasonably necessary for the accomplishment of statutory objectives. See the Whitechapel decision noted above and the cases cited therein at pp. 316-317. Section 27(2) of the Interpretation Act, R.S.B.C. 1996, c. 238 would appear to be a codification of the common law rule of statutory interpretation. It provides:

27 (2) If in an enactment power is given to a person to do or enforce the doing of an act or thing, all the powers that are necessary to enable the person to do or enforce the doing of the act or thing are also deemed to be given.

[44]  In the present matter the parties likely could have commenced proceedings at first instance in the Supreme Court of British Columbia and applied for a constitutional determination. They have not done so. The board itself does not have the statutory authority to state a case to the Supreme Court. As I see it the board in these circumstances cannot properly discharge its primary duties pursuant to section 27 of the Water Act and Part 5 of the Water Regulation to determine the reasonable necessity for the proposed expropriation by the Morays of an easement over the CPR Lands, the reasonable terms of any such easement, or the amount of compensation payable without first addressing the constitutional question raised. The determination of whether section 27 of the Water Act is constitutionally applicable to permit expropriation of an interest in the CPR Lands seems to me to be an incidental and ancillary matter which is reasonably necessary to accomplishment of the board's statutory objective.

[45]  Although in my view the question is not entirely free from doubt, I conclude from all of the foregoing that I should proceed on the basis that the board has at present the implied jurisdiction to hear and determine the threshold constitutional question posed in CPR's application.

4.2 Positions of the Participants

4.2.1  CPR's Position

[46]  CPR submits that section 27 of the Water Act cannot be used to expropriate any portion of or interest in the CPR Lands since those lands form part of the right of way of a railway which operates under the exclusive legislative authority of the Parliament of Canada pursuant to sections 91(29) and 92(10(a) and (c) of the Constitution Act, 1867.

[47]  CPR invokes two constitutional doctrines in support of its position: first and foremost, the "doctrine of interjurisdictional immunity" which it says is central to its motion for an order suspending or discontinuing the Morays' expropriation proceedings, and second, the "doctrine of paramountcy".

[48]  Under the doctrine of interjurisdictional immunity as broadly defined a provincial law of general application, even though valid in other respects, is said to be inapplicable to a federally regulated undertaking or enterprise and must be "read down" if the provincial law affects a vital or essential or integral part of the federal undertaking or enterprise.

[49]  In the present instance CPR submits that expropriation of an easement over the CPR Lands, where the easement extends even into the area occupied by the rail bed of its railway tracks and contemplates fencing off of the easement area, constitutes a serious interference which could prevent CPR from effectively operating and maintaining the main line of its railway pursuant to federal authority and under federal regulation. Accordingly, the expropriating power given to licensees under the Water Act must be read down as inapplicable to the federal railway.

[50]  Even if the proposed easement were less intrusive, CPR says the doctrine of interjurisdictional immunity would apply to those portions of the CPR Lands which in its judgment might be required for future railway operations and maintenance. In his supporting affidavit Mr. Massil deposes that for various purposes CPR requires control over the whole of the CPR Lands.

[51]  Under the doctrine of paramountcy, a provincial law must yield to the federal law and is said to be inoperative to the extent of an inconsistency between the two. CPR says the test for paramountcy is the "express contradiction test" which requires a determination of whether there is actual conflict in operation between the federal and provincial laws.

[52]  In the present instance CPR maintains that there is an express contradiction between section 27 of the Water Act, conferring a right of expropriation on the claimants as licensees, and section 101 of the Canada Transportation Act, which sets out a federal legislative regime for private parties such as the claimants to apply to the Canada Transportation Agency for an order permitting construction of a suitable utility crossing of CPR's railway right of way. CPR submits that section 27 is inoperative as regards utility crossings of railway rights of way since the conflicting section 101 is paramount. In its further submissions in reply, CPR alluded to another possible operational conflict. The expropriation of an interest in the CPR Lands pursuant to section 27 of the Water Act, CPR said, could cause the respondent railway to breach section 142(1) of the Canada Transportation Act which mandates the steps that CPR must follow in order to discontinue operations on a railway line or any portion of a railway line.

4.2.2  The Morays' Position

[53]  The Morays take no exception to the general propositions of constitutional law set forth by CPR, including its descriptions of the doctrines of interjurisdictional immunity and paramountcy. However, they argue that these constitutional doctrines do not apply in the present case once the true situation is clarified.

[54]  The Morays refer to the affidavit of their agent, Ryan Moray. Mr. Moray acknowledges that the easement area shown in the explanatory plan deposited in the land title office includes a portion of the CPR Lands upon which the main line railway tracks are situated. However, he states, the explanatory plan was incorrectly prepared and does not reflect the Morays' true intentions. In particular, it inaccurately depicts the southerly boundary of the area to be expropriated. The Morays say it was never their intention to apply section 27 of the Water Act in such a way as to deprive CPR of its ability to control access to its main line railway corridor. Rather, the lands properly at issue are those located north of the toe of the northerly slope of the rail bed which the Moray family have been using for more than 30 years and which have never formed part of the actual corridor for CPR's main line. The Morays contend that CPR is well aware of their true intentions but that its actions in opposition have been motivated by considerations other than concern for its railway operations, namely, its desire to support the City of Kamloops' public trail project.

[55]  The Morays submit that section 27 of the Water Act can be used to expropriate an interest in that portion of the CPR Lands which does not comprise the main line rail bed or the associated slopes or ditches since such a taking would not affect the vital and essential core of the management and operation of the railway. They reject the proposition that CPR's rights must extend to having complete control over the whole of the CPR Lands for possible future railway operations and maintenance. Accordingly, they say, the doctrine of interjurisdictional immunity simply does not apply in these circumstances. Instead, the Morays maintain that CPR's rights with respect to land within its railway corridor are themselves subject to important restrictions and should not be construed too broadly.

[56]  The Morays also submit that, in the circumstances of this case, section 27 of the Water Act is not in conflict with section 101 of the Canada Transportation Act and the doctrine of paramountcy does not come into play. According to the Morays, there is no express contradiction for two reasons. First, the lands which are the intended subject of expropriation do not in fact form part of the railway corridor used for CPR's main line; they merely abut the right of way. Therefore, section 100 which defines a "utility crossing" to mean "the part of a utility line that passes over or under a railway line" is inapplicable. Second, although section 101 establishes a process for applying for a utility crossing, CPR and the Moray family have already addressed the matter outside the scope of the statute through the agreements they made in July 1970 for water pipeline and power line crossings.

4.2.3  The Attorney General's Position

[57]  The Attorney General's constitutional analysis is wide-ranging but lends support to the position taken by the Morays in this matter. Like the Morays the Attorney General submits that section 27 of the Water Act can be used to permit expropriation of the CPR Lands so long as such expropriation does not affect the vital and essential core of the management and operation of the railway.

[58]  There are, the Attorney General says, long established constitutional principles providing an appropriate framework for resolution of the issue before the board. The first is a "presumption of constitutionality", that is to say, laws passed by Parliament and the Legislatures of the Provinces are presumed to be within their respective spheres of jurisdiction and therefore the party challenging the constitutionality of the law bears the onus of establishing its invalidity or inapplicability. When an enactment is challenged on constitutional grounds, the second principle requires the decision maker to identify its "matter" or "pith and substance", that is, its dominant and most important characteristic, so as to be able in turn to assign the matter to either a provincial or federal head of power under the Constitution Act, 1867. The third constitutional principle deals with "incidental effects". It recognizes that where, for example, the matter or pith and substance of a challenged enactment falls within a class of subject allocated exclusively to the Legislatures of the Provinces, then any incidental effects the provincial enactment has on federal jurisdiction do not affect its validity and may not affect its applicability to the federal subject. The courts, the Attorney General points out, have rejected the notion that there are federal "enclaves" completely immune from provincial jurisdiction.

[59]  In the present case no one has challenged the validity of section 27 of the Water Act as legislation coming within the exclusive constitutional jurisdiction of the Province. Only its applicability to CPR and the CPR Lands is in question. That being so, the Attorney General says the onus rests on CPR to establish that section 27 is constitutionally inapplicable or inoperative in the circumstances of the matter before the board.

[60]  While CPR has advanced a broad interpretation of the doctrine of interjurisdictional immunity to argue that section 27 is inapplicable to CPR's federal undertaking, the Attorney General takes a decidedly more restrictive view of the doctrine's reach, both historically and with reference to modern judgments.

[61]  Finally, for the doctrine of paramountcy to apply, the Attorney General says the conflict between federal and provincial law must be a serious operational one going beyond mere overlap or even duplication and resulting in express contradiction. In the present instance the Attorney General submits that there is no such actual operational conflict between section 27 of the Water Act and the Canada Transportation Act and therefore the doctrine of federal paramountcy is not applicable.

4.3  Discussion and Conclusions

[62]  I begin with the preliminary observation that, like other questions in law, constitutional questions can be heavily fact driven. In this instance the Morays acknowledge that their expropriation documents incorrectly depict the proposed easement area as extending into the rail bed of the CPR main line. This is a factual error which they perceive could affect the constitutionality of the proposed taking, given that the application of doctrines such as interjurisdictional immunity appear to depend in part upon the severity of the encroachment into an area of federal jurisdiction. It is an error that the Morays indicate they would seek to correct but they have not taken steps to do so. CPR submits that the Morays' application can only proceed and be dealt with on the basis that the easement sought would, if expropriated, encumber the whole of that portion of the CPR Lands included in the explanatory plan. Notwithstanding that the Morays have not amended their documents in the manner prescribed under section 28 of the Water Regulation, I believe this problem could be remedied if necessary at a later date. See Denault v. Barclay (2002), 78 L.C.R. 288 at pp. 298-300 (B.C.E.C.B.). To ensure that the constitutional question is properly canvassed on this application, I am prepared to take into account that the proposed expropriation may only be of an easement area within the CPR Lands that abuts, but does not actually include, any portion of the rail bed.

[63]  From my analysis of the law and its application to the factual context of this matter, I have concluded for the reasons which follow that section 27 of the Water Act is inapplicable under the doctrine of interjurisdictional immunity to the proposed expropriation of an easement over part of the CPR Lands. The section is also, in my view, inoperative under the doctrine of paramountcy by reason of an express operational contradiction with federal legislation.

[64]  Before dealing directly with the two constitutional doctrines which are at the core of CPR's argument and my determination of the issue, I wish to address two other principles raised in the Attorney General's submission: the presumption of constitutionality and the application of the pith and substance doctrine.

4.3.1  Presumption of Constitutionality

[65]  The presumption of legislative constitutionality is well established in Canadian law. In Nova Scotia (Board of Censors) v. McNeil, [1978] 2 S.C.R. 662, Ritchie J. wrote at pp. 687-688:

In all such cases the Court cannot ignore the rule implicit in the proposition stated as early as 1878 by Mr. Justice Strong in Severn v. The Queen [(1878), S.C.R. 70], at p. 103, that any question as to the validity of provincial legislation is to be approached on the assumption that it was validly enacted. As was said by Fauteux J., as he then was, in the Reference re The Farm Products Marketing Act [[1957] S.C.R. 198], at p. 255:

There is a presumptio juris as to the existence of the bona fide intention of a legislative body to confine itself to its own sphere and a presumption of similar nature that general words in a statute are not intended to extend its operation beyond the territorial authority of the Legislature.

[66]  This presumption operates so as to place the onus on a party challenging the legislation to prove that it is unconstitutional. Recently, in Reference re: Firearms Act ( Can.), [2000] 1 S.C.R. 783, where the Alberta government challenged Parliament's power to pass the licensing and registration provisions of what is commonly known as the federal gun control law, the Supreme Court referred to the McNeil decision in observing at p. 802:

The presumption of constitutionality means that Alberta, as the party challenging the legislation, is required to show that the Act does not fall within the jurisdiction of Parliament.

[67]  The recent case of Laboucane v. Brooks et al., 2003 B.C.S.C. 1247, shows that the presumption also applies when the question is whether an otherwise constitutionally valid legislative provision is applicable or operative in a specific factual context. There the issue was whether section 10(1) of the Workers' Compensation Act, R.S.B.C. 1996, c. 492, which absolutely bars an action by a worker for damages for personal injury arising within the course of employment, applied to a worker injured on a motor vessel moored at a dock in Prince Rupert Harbour. The plaintiff argued that the provision, although a valid provincial law of general application, in that instance invaded the federal power over navigation and shipping, including maritime negligence law, and should be found inapplicable. Burnyeat J. in his reasons observed that "the onus is on Mr. Laboucane to establish that s. 10(1) of the Act is constitutionally inapplicable in these circumstances." (para. 17). In the final analysis he was not satisfied that that the onus had been met.

[68]  It follows that in the present matter, where CPR has not challenged the constitutional validity of the right of expropriation given to licensees under section 27 of the Water Act in general but rather the applicability of that right in relation to a federal undertaking, CPR bears the onus of establishing that section 27 is constitutionally inapplicable in the circumstances. Similarly, it bears the onus of showing that section 27 is inoperative in relation to the CPR Lands because of what it says is an express operational contradiction with provisions of the Canada Transportation Act.

4.3.2  Pith and Substance

[69]  The central importance of the pith and substance doctrine to the determination of constitutional cases involving the division of powers is beyond doubt in light of recent judicial pronouncements. Burnyeat J. comments at paragraph 18 of Laboucane:

[18]  I am satisfied that when the constitutional applicability of an enactment is challenged, the first step in the constitutional analysis is to determine the "pith and substance" of that enactment. After determining the essential character or dominant feature of the provision, the second step is to determine whether the pith and substance of the enactment relates to one of the heads of power granted to the enacting legislature: Ward v. Canada (Attorney General), [2002] 1 S.C.R. 569; Kitkatla Band v. British Columbia (Minister of Small Business, Tourism and Culture), [2002] 2 S.C.R. 146; and R. v. Eurosport Auto Co. (2003), 225 D.L.R. (4 th) 277 (B.C.C.A.).

[70]  In Ward, where the issue was the constitutionality of a federal regulation prohibiting the sale of young seals, McLachlin C.J.C. remarked that, in order to resolve the issue, the Supreme Court had to determine the pith and substance of the legislation. She went on to state in part at p. 579:

The first task in the pith and substance analysis is to determine the pith and substance or essential character of the law. What is the true meaning or dominant feature of the impugned legislation? This is resolved by looking at the purpose and legal effect of the regulation or law….The purpose refers to what the legislature wanted to accomplish. Purpose is relevant to determine whether, in this case, Parliament was regulating the fishery, or venturing into the provincial area of property and civil rights. The legal effect refers to how the law will affect rights and liabilities, and is also helpful in illuminating the core meaning of the law….

[71]  In Kitkatla the Supreme Court had to decide whether provincial legislation to protect cultural heritage property should be struck down to the extent that it purported to allow aboriginal cultural objects (in this instance culturally modified trees) to be altered or destroyed in some circumstances. At issue was whether the legislation in its effect on native cultural objects fell within provincial jurisdiction over property and civil rights under section 92(13) or within federal jurisdiction over "Indians, and Lands reserved for the Indians" under section 91(24) of the Constitution Act, 1867. The Court used a pith and substance analysis to uphold the constitutional applicability of the legislation as falling within property and civil rights.

[72]  The Kitkatla decision affirms several principles that have particular relevance in the present case. First, a pith and substance analysis should be conducted even where, as here, the parties are agreed that the impugned enactment – section 27 of the Water Act – is a valid provincial law of general application and only its applicability to a federal object – CPR and the CPR Lands – is in question. Second, the proper approach to follow in such a case is to look first to the challenged provision, in this instance section 27, rather than to the pith and substance of the entire statute containing the impugned provision. Third, it is only after the completion of a pith and substance analysis that it may become necessary to consider doctrines such as those of interjurisdictional immunity and paramountcy.

[73]  In the Eurosport case the British Columbia Court of Appeal adopted a pith and substance analysis to uphold the constitutional validity of a section of the Insurance (Motor Vehicle) Act, R.S.B.C. 1996, c. 231, which made it an offence to provide false or misleading statements to the provincial insurance corporation. In pith and substance the impugned offence section was found not to be criminal law within federal jurisdiction but instead was said to have been enacted to further the valid provincial purpose of maintaining the integrity of the provincial automobile insurance plan.

[74]  The Court of Appeal's judgment in Eurosport reiterated the view expressed earlier by the Supreme Court of Canada that application of the pith and substance doctrine allows for a considerable amount of interplay and indeed overlap between federal and provincial powers. Braidwood J.A. for the Court wrote at pp. 284-285:

18 It is clear that where the "matter", "dominant characteristic" or "pith and substance" of an enactment, or part of an enactment, falls within a class of subjects allocated exclusively to the provincial legislatures by s. 92 of the Constitution, then any incidental effects the enactment may have on federal jurisdiction do not affect its validity.

[I]n a federal state it is inevitable that, in pursuing valid objectives, the legislation of each level of government will impact occasionally on the sphere of power of the other level of government; overlap of legislation is to be expected and accommodated in a federal state. [General Motors of Canada Ltd. v. City National Leasing, [1989] 1 S.C.R. 641, [1989] S.C.J. No. 28 (QL), 58 D.L.R. (4 th) 255, at para. 45 [p. 669 S.C.R.].]

19 It is possible for provincial legislation to impact on federal areas of exclusive jurisdiction if that impact is ancillary to an otherwise valid scheme.

[75]  Incidental effects flowing from the pith and substance doctrine, although viewed as irrelevant for constitutional purposes, are not necessarily trivial in their impact. Professor Peter W. Hogg, Constitutional Law of Canada, Loose-leaf Edition ( Toronto: Thomson; Carswell), vol. 1, comments at para. 15-8:

"It is important to recognize that this "pith and substance" doctrine enables one level of government to enact laws with substantial impact on matters outside its jurisdiction….There are many examples of laws which have been upheld despite their "incidental" impact on matters outside the enacting body's jurisdiction. A provincial law in relation to insurance (provincial matter) may validly restrict or even stop the activities of federally-incorporated companies (federal matter); a provincial law reorganizing municipalities (provincial matter) may validly alter the interest payable on debt owed to out-of-province creditors (federal matter); a federal law in relation to navigation and shipping (federal matter) may validly regulate labour relations in a port (provincial matter); a federal law in relation to the national capital region (federal matter) may validly regulate land use in Ontario and Quebec (provincial matter)."

[76]  The doctrine has contributed to eroding any notion of a federal "enclave" theory whereby federal undertakings might be seen as immune from otherwise valid provincial legislation. Indeed, the Supreme Court of Canada observed in Westbank First Nation v. British Columbia Hydro and Power Authority, [1999] 3 S.C.R. 134 at p. 147:

While Canadian federalism requires some separation between each level of government, this rule is not absolute. Canada's federal system is a flexible one, and the Constitution does not create "enclaves" around federal or provincial actors.

[77]  Despite the recognized importance of the pith and substance doctrine to constitutional analysis, none of the participants in the present application applied it. The Attorney General helpfully brought to my attention the relevant case authorities but did not go on to attempt a pith and substance analysis of the particular issue involved. Neither CPR nor the Morays referred to the doctrine at all in their submissions.

[78]  CPR in its argument moved directly to a consideration of the doctrine of interjurisdictional immunity. Its approach to the constitutional issue here closely parallels the approach adopted by the plaintiff in Laboucane, in respect of which Burnyeat J. made the following observation:

[28]  The plaintiff submits that the appropriate analysis is to assume the constitutional validity of s. 10(1) and then to commence with tests for inter-jurisdictional immunity as set out in Ordon Estate v. Grail, [1998] 3 S.C.R. 437. I am satisfied that this approach to analysis is contrary to numerous decisions of the Supreme Court of Canada as well as to the approach taken in Eurosport. I am satisfied that the analysis as set out in Ward, Kitkatla, and Eurosport is the appropriate approach. If the pith and substance of a provision does not intrude into a power of the other government, it is not necessary to consider the doctrine of inter-jurisdictional immunity.

[79]  Although I am without the benefit of a pith and substance analysis from the participants, I am nevertheless satisfied that the impugned section 27 can be characterized constitutionally as a provision of general application validly enacted by the Legislature under its exclusive power to make laws in relation to property and civil rights in the Province and, perhaps as well, in relation to matters of a merely local or private nature in the Province pursuant respectively to sections 92(13) and (16) of the Constitution Act, 1867. Water rights in general most clearly fall within property and civil rights in the Province.

[80]  The purpose of section 27 is to give effect to the right of licensees to gain access to and realize the benefits of water which they have been authorized through a settled process to divert and use for their own purposes on land to which their licence is appurtenant. The Legislature has recognized that in the absence of a power of expropriation that right could be frustrated and rendered useless by unwilling neighbouring owners.

[81]  The effect of section 27 is, of course, far-ranging inasmuch as it gives the licensee without other limitation the right to expropriate "any land reasonably required" for the construction, maintenance, improvement or operation of works authorized under the water licence. To the extent that a provincially granted right of expropriation could be exercised in relation to the main line corridor of an inter-provincial railway, in this instance a portion of the CPR Lands, the impugned provision contemplates what I would consider on its face to be a most substantial intrusion into a federal head of power over inter-provincial railways under section 92(10)(a) and over works such as the CPR which have been declared to be for the general advantage of Canada under section 92(10)(c) of the Constitution Act, 1867. I seriously doubt that the matter could be resolved in the present case by viewing this degree of interference merely as an "incidental effect" and, as such, constitutionally irrelevant.

4.3.3  Interjurisdictional Immunity

[82]  I have therefore concluded that consideration of the doctrine of interjurisdictional immunity would in all probability still be warranted in this matter following completion of a full pith and substance analysis of section 27 of the Water Act. Although the pith and substance doctrine enables a provincial Legislature to enact laws with substantial impact on matters outside its jurisdiction, in some circumstances the doctrine of interjurisdictional immunity will apply to render an otherwise valid provincial law inapplicable. In the Ordon Estate decision cited above, Iacobucci and Major JJ. stated at para. 81:

As a general matter within the Canadian federal system, it is constitutionally permissible for a validly enacted provincial statute of general application to affect matters coming within the exclusive jurisdiction of Parliament. The principal question in any case involving exclusive federal jurisdiction is whether the provincial statute trenches, either in its entirety or in its application of specific factual contexts, upon a head of exclusive federal power. Where a provincial statute trenches upon exclusive federal power in its application to specific factual contexts, the statute must be read down so as not to apply to those situations. This principle of statutory interpretation is known perhaps most commonly as the doctrine of "interjurisdictional immunity"…

[83]  The term "interjurisdictional immunity" is one of relatively recent vintage in Canadian constitutional law — coming into vogue only perhaps a couple of decades ago. Beetz J. in Bell Canada v. Quebec (Commission de la Santé et d la Sécurité du Travail), [1988] 1 S.C.R. 749 (" Bell Canada 1988") noted that the term derives from commentators who have criticized the constitutional theory which it reflects. Esson J.A. in Windermere Watersport Inc. v. Invermere (Dist.) (1989), 37 B.C.L.R. (2d) 112 mused as to whether it was Professor Hogg who had invented "this mystifying term" and went on to note that the learned commentator had not elevated it to the rank of a doctrine but had merely dealt with it far down in a long list of terms and principles put forward as being of assistance in the "characterization of laws".

[84]  The constitutional theory now labelled the doctrine of interjurisdictional immunity has, however, a considerably longer lineage reaching back at least to the early years of the twentieth century. Esson J.A. in Windermere Watersport speaks of two long established lines of constitutional cases. The first line was that involving federally incorporated companies; the second line, that of federally regulated undertakings such as utilities, railways, shipping lines and airlines.

[85]  The history of the evolution of this doctrine through the decided cases which I have had an opportunity to review indicates that the concept originated in very limited circumstances to prevent provincial laws from "sterilizing" federally incorporated companies, broadened for awhile to "immunize" a range of undertakings carried on under federal authority from provincial laws of general application, but has narrowed somewhat more recently in its application.

[86]  The application of the doctrine to protect federally incorporated companies is not without relevance here since, as I have noted, CPR is a federally incorporated entity. However, it is not to this line of cases which CPR looks since the cases afford protection only from provincial laws that can be said, in the graphic language of the cases in question, to "sterilize" or "paralyze" the functions and activities of the company or "impair" or "mutilate" its corporate status or capacity.

[87]  A modern example of the narrower scope of protection afforded in this respect is Reference re: Upper Churchill Water Rights Reversion Act 1980 (Newfoundland), [1984] 1 S.C.R. 297, where the Supreme Court had to consider the validity of provincial legislation targeted at the expropriation of a federally incorporated hydro-electric power corporation's assets. Although the Court ultimately set aside the legislation on other constitutional grounds, it declined to do so on the basis of what would soon come to be known as the doctrine of interjurisdictional immunity.

[88]  Writing for the Court, McIntyre J. first set out the governing principle as follows at
pp. 324-325:

The authorities make it clear that it is not competent for a provincial legislature to legislate to impair or destroy the essential status and capacities of a federal company. However, a federal company carrying on business within a province is subject to all laws of general application in the province and as well is subject to all laws of particular application to the business, trade, or function with which the federal company is concerned, and the federal company does not acquire any favoured position in relation to other companies or to natural persons or obtain any peculiar advantages by reason only of its federal incorporation.

[89]  The Court went on to note that the impugned provincial legislation on its face did nothing more than expropriate for all practical purposes all of the assets of the federal company. It could not be said that the legislation affected the corporate being of the federal company. The company's essential structure remained unchanged. McIntyre J. asked:

Can it be said that the mere fact of federal incorporation clothes [the company] with any immunity from expropriation under valid provincial law not possessed by a provincial company or for that matter a natural person?

Answering this question in the negative, he added at p. 327:

It is my opinion that, whatever attacks may be made on the validity of the Reversion Act under other heads of argument raised in this case, the Legislature in passing the Reversion Act did not contravene the constitutional strictures against interference with the essential status and powers of a federally incorporated company.

[90]  CPR finds support for its position instead from the second line of cases which mainly involve federally regulated communications and transportation undertakings. For an explanation of the doctrine of interjurisdictional immunity, CPR cites the judgment of the Ontario Court of Appeal in Greater Toronto Airports Authority v. Mississauga (City) (2000), 50 O.R. (3d) 641. That case concerned whether Parliament's exclusive legislative authority in relation to aeronautics, federal undertakings or public property under the Constitution Act, 1867 required that the Ontario building code regime, including the City of Mississauaga's development charges bylaw, be read down not to apply to the construction of new buildings at Pearson International Airport. Laskin J.A. wrote at p. 654:

[41]  What then is the test for interjurisidictional immunity? Mississauga says that the test is whether the provincial legislation impairs or interferes with a federally regulated enterprise or undertaking, and it points out the applications judge made no finding of impairment or interference. But that is the wrong test. The Supreme Court of Canada no longer uses the language of "impairs" or "interferes" or "paralyzes" or "sterilizes". Instead, the Supreme Court has posited a much broader test of immunity or exclusivity. If a provincial law affects a vital or essential or integral part of a federally regulated enterprise, then the otherwise valid provincial law does not apply to that enterprise.

[91]  The Court in the Mississauga case noted that that the Supreme Court of Canada had first approved of this broader test of interjurisdictional immunity in Québec (Commission du Salaire Minimum) v. Bell Telephone Co. of Canada, [1966] S.C.R. 767 ("Bell Canada 1966"). Bell Canada was a telecommunications undertaking incorporated by a special Act of Parliament and had been declared to be a work for the general advantage of Canada. The Court held that a provincial minimum wage law was inapplicable to Bell because it affected a "vital part of the management and operation of the undertaking". Martland J., writing for a unanimous Court, stated at p. 772:

In my opinion all matters which are a vital part of the operation of an interprovincial undertaking as a going concern are matters which are subject to the exclusive legislative control of the federal parliament within s. 91(29).

[92]  In a trilogy of cases in 1988, the Supreme Court reaffirmed that the test for interjurisdictional immunity was whether a provincial law "affected" a "vital part" of a federal enterprise. In one of those cases, Bell Canada 1988 which I have already cited above, the Court held that an order made under provincial health and safety legislation assigning a pregnant worker away from a video display terminal was a massive intrusion into the field of management and operation of a federal undertaking and could not apply to that undertaking. Beetz J. wrote at p. 833:

I think it is quite impossible to distinguish the circumstances of the case at bar from those of Bell Canada 1966. The working conditions and labour relations as well as the management of federal undertakings such as Bell Canada, are matters falling within the classes of subject mentioned in s. 91(29) of the Constitution Act, 1867, and consequently fall within the exclusive legislative jurisdiction of the Parliament of Canada.

[93]  Beetz J. noted that the exclusivity rule approved by Bell Canada 1966 applied not only to labour relations or to federal undertakings but was, as he put it,

…one facet of a more general rule against making works, things or persons under the special and exclusive jurisdiction of Parliament subject to provincial legislation, when such application would bear on the specifically federal nature of the jurisdiction to which such works, things or persons are subject.

[94]  The effect of section 91(29) and the exceptions in section 92(10), he added at p. 839, is "to create exclusive classes of subject, those of federal undertakings, to which a basic, minimum and unassailable content has to be assigned".

[95]  As to the severity of the test to be applied in the circumstances of the case before the Court, Beetz J. commented as follows at p. 857:

I am quite prepared to admit that the exercise of this right by a pregnant worker would not go so far as to impair or paralyze the undertaking. However, given that it deprives the undertaking of part of its work force in the long distance communication sector requiring the aid of an operator, I would not be ready to concede that such a right of re-assignment does not by its very nature affect a vital or essential part of the Bell Canada undertaking.

. . . . . .

I am therefore of the view that the test of impairment is insufficient and is not conclusive in cases where, without going so far as to impair or paralyze federal undertakings, such application affects a vital part of those undertakings.

[96]  CPR argues on the basis of these cases that if provincial labour and occupational health and safety legislation does not apply to a federal undertaking so as to affect a vital or essential part of the undertaking, a fortiori provincial legislation that would operate to expropriate property interests from a federal railway's main line right of way must be read down as inapplicable to the federal railway. By its very character, CPR maintains, the power to expropriate and grant competing property interests in a parcel of land held and used for a federal undertaking is a power that is inconsistent with the federal character of the railway undertaking. Section 27 of the Water Act should therefore be read down as inapplicable to CPR's main line right of way.

[97]  If the case law governing the doctrine of interjurisdictional immunity went no further, I would without hesitation agree with CPR's argument. However, the foregoing cases may perhaps be seen as the high-water mark of immunizing federal undertakings from provincial laws of general application. They do not represent the last word on the subject and further analysis of the issue therefore becomes necessary.

[98]  CPR also cited in support of its position the judgment of the Supreme Court of Canada in Construction Montcalm Inc. v. Minimum Wage Commission, [1979] 1 S.C.R. 754, but I do not think that this case is of assistance to CPR. There the issue was whether a company which had contracted with the federal Crown for doing construction work on federal Crown land, namely, the runways of the new Mirabel international airport near Montreal, was subject to provincial wage legislation and decrees. Although there was a dissent in favour of exclusive federal authority over aeronautics and federal public property, the majority of the Court declined to extend such broad immunity. Beetz J. wrote at p. 771:

In my opinion what wages shall be paid by an independent contractor like Montcalm to his employees engaged in the construction of runways is a matter so far removed from aerial navigation or from the operation of an airport that it cannot be said that the power to regulate this matter forms an integral part of primary federal competence over aeronautics or is related to the operation of a federal work, undertaking, service or business.

[99]  Over the past decade and a half a significant modification has occurred in the way the courts have approached the doctrine of interjurisdictional immunity. As the case authorities brought to my attention by the Attorney General demonstrate, the courts in recent years have retreated somewhat from the broader test for federal exclusivity and immunity by seeking to distinguish between the direct and indirect effect of a provincial law on a matter under federal jurisdiction.

[100]  The change came with a key qualification by the Supreme Court of Canada in Irwin Toy Ltd. v. Québec (Attorney General), [1989] 1 S.C.R. 927. In that case among the constitutional questions raised were the issues of whether provincial legislation prohibiting commercial advertising directed at children was ultra vires the Legislature or was rendered inoperative by conflict with the federal Broadcasting Act. The Court held that, if the law purported to apply directly to a federal undertaking, it would be inapplicable if it affected a vital part of that undertaking – the same broader test enunciated in Bell Canada 1966 and upheld in the trilogy of cases which included Bell Canada 1988. However, if the provincial law had only an indirect effect on the federal undertaking, the provincial law would remain applicable unless it impaired, paralyzed or sterilized the undertaking – the same narrower test which had been applied particularly to federally incorporated companies and which had figured in Reference re: Upper Churchill Water Rights Reversion Act 1980. Dickson C.J.C. and Lamer and Wilson JJ. in Irwin Toy put the matter this way at p. 955:

The federal government has exclusive jurisdiction as regards "essential and vital elements" of a federal undertaking, including the management of such an undertaking, because those matters form the "basic, minimum and unassailable content" of the head of power created by operation of s. 91(29) and the exceptions in s. 92(10) of the Constitution Act, 1867. No provincial law touching on those matters can apply to a federal undertaking. However, where provincial legislation does not purport to apply to a federal undertaking, its incidental effect, even upon a vital part of the operation of the undertaking, will not normally render the provincial legislation ultra vires.

[101]  The Court in Irwin Toy held that the provincial law which prohibited television advertising directed at children was applicable, even though television was federally regulated, because the law was aimed directly at the advertiser and only indirectly affected the broadcaster. The challenged provisions did not therefore trench on exclusive federal jurisdiction by purporting to apply to a federal undertaking, namely broadcasting, and in so doing affect a vital part of its operation. Neither did the provisions in their effect impair the operation of the undertaking in the sense that the undertaking was sterilized in all its functions and activities.

[102]  This distinction has been noted in subsequent cases before both the Supreme Court of Canada and in the British Columbia Court of Appeal.

[103]  In Air Canada v. Ontario (Liquor Control Board), [1997] 2 S.C.R. 581 ("Air Canada 1997"), the issue was whether the provincial liquor control board was entitled to charge a markup on the liquor the airlines purchased abroad and kept in bond at Pearson International Airport. The appellant airlines argued that the provincial liquor monopoly was constitutionally inapplicable to them. Canada's airlines were federal undertakings and aeronautics was a matter of exclusive federal competence. Accordingly, the airlines contended, they were not subject to provincial regulation in any department of their affairs that could be described as vital or integral to their undertaking.

[104]  Writing for the Court, Iacobucci J. rejected the airlines' submissions. He noted the evolution of cases in the Supreme Court between Bell Canada 1966, where a provincial law was inapplicable because it merely affected a vital part of the management and operation of the federal undertaking, and Irwin Toy, where a provincial law that did not purport to control an undertaking directly was not found to be inapplicable because it did not impair, sterilize or paralyze that undertaking. Iacobucci J. concluded that the provision of liquor was not an integral part of the airlines' undertaking. He added at pp. 610-611:

…the facts of this case are more closely akin to the facts that this Court had to consider in Construction Montcalm Inc. v. Minimum Wage Commission, [1979] 1 S.C.R. 754. In Construction Montcalm, the argument had been advanced that a provincial minimum wage was constitutionally inapplicable to a contractor that was working on the construction of an airport runway. The Court rejected that argument on the ground that the impugned legislation did not attempt to govern any matter that had "a direct effect upon [the airport's] operational qualities and, therefore, upon its suitability for the purposes of aeronautics" (p. 771). In just the same way, the provision of liquor, though it may be important if the airlines are to maintain their "competitive edge", is not essential to the operation of aircraft.

[105]  In KLM Royal Dutch Airlines v. British Columbia, [1998] B.C.J. No. 204 (C.A.), the issue was whether a provincial fuel tax levied on airline fuel transported from outside the province to Vancouver International Airport for storage was constitutional. The appellant airline maintained that, because aeronautics was within the exclusive jurisdiction of Parliament, it was within Parliament's exclusive power to make decisions concerning such matters as the granting of tax exemptions to international aeronautics. The appellant relied on the doctrine of interjurisdictional immunity. Huddart J.A. noted at para. 19:

This argument follows the reasoning of Beetz, J. in Bell Canada v. Quebec, [1988] 1 S.C.R. 749….In that decision and the earlier Quebec Minimum Wage case (Commission du Salaire Minimum v. Bell Telephone Co., [1966] S.C.R. 767) the Supreme Court established the principle that a federally-regulated undertaking was immune from provincial laws that touched on a vital part of its management and operation. In Irwin Toy Ltd. v. Quebec (A.G.), [1989] 1 S.C.R. 927 at 955, and more recently in Air Canada v. Ontario (Liquor Control Board). [1997] 2 S.C.R. 581 at 609, the Court confined the application of this ground for immunity to those provincial laws that "purport to control an undertaking directly." In other cases, the provincial law will apply unless it "impairs, sterilizes, or paralyzes" that undertaking.

[106]  In rejecting the application of the doctrine in this instance and holding that the provincial tax could be applied, Huddart J.A. further stated at para. 25:

The Act and the impugned taxing provision can only be characterized constitutionally as a statute whose purpose was to provide revenue to the province. The Act does not seek to control a vital part of the management or operation of federally-regulated airlines. Nor in my view can it be said that the tax "impairs, sterilizes or paralyzes" such an undertaking. There is no evidence to support such a finding, although it is obvious that the transfer tax decreases KLM's profit. In any event, the test is not whether the impugned provision affects the operation of airlines. The question is whether the transfer tax affects the essence of the federal aeronautics power, in that it "bear[s] on the specifically federal nature of the jurisdiction": Bell Canada at 833.

[107]  Although CPR's counsel did not directly cite the Irwin Toy decision, discussion of it figures prominently in the Mississauga judgment of the Ontario Court of Appeal to which CPR directed my attention. After setting out the broad test for interjurisdictional immunity as quoted earlier, Laskin J.A. also said this at p. 655:

[44]  The Supreme Court of Canada has qualified this broad test in one important way and that qualification does require impairment…In Irwin Toy Ltd. v. Quebec (Attorney General), [1989] 1 S.C.R. 927, 58 D.L.R. (4 th) 577, the Supreme Court drew a distinction between the direct and indirect effect of a provincial law on a federal undertaking. If a province seeks to apply its law directly to a federal undertaking – the usual case – the provincial law will not apply if it affects a vital part of that undertaking. If, however, a provincial law only indirectly or incidentally affects a federal undertaking, it will apply unless it impairs, paralyzes or sterilizes the undertaking.

[108]  The Court of Appeal in Mississauga adhered to the broader test for interjurisdictional immunity and found the provincial law inapplicable. Laskin J.A. reasoned in part as follows at p. 656:

[46]  The qualification discussed in Irwin Toy does not apply in this case. Here, Ontario's building code regime would not merely affect Pearson Airport indirectly or incidentally. Mississauga is attempting to control an aeronautics undertaking directly by applying the Ontario building code regime to the redevelopment of the airport.

[47]  Thus, Mississauga's first submission turns on whether Ontario's building code regime would affect a vital part of the redevelopment at Pearson Airport. In my view, it undeniably would, and for that reason the Ontario regime is constitutionally inapplicable to the redevelopment.

[48]  Provincial or municipal laws that seek to regulate the physical structure of airports and airport buildings will affect a vital or integral part of an aeronautics undertaking.

[109]  CPR has argued, and I would agree, that the more recent cases such as Air Canada 1997 and KLM, which have not given immunity from provincial legislation to federal undertakings under the doctrine, provide examples of situations involving far less interference with federal works and undertakings than would occur with expropriation of an interest in lands used for the main line of a federally regulated railway. In my view the situation here is far more akin to Mississauga in that section 27 of the Water Act does not merely purport to affect the CPR Lands indirectly or incidentally but, through expropriation, to give a water licensee some direct control over a small but important part of the operation of the federal undertaking.

[110]  I am convinced that, insofar as the intended expropriation includes a portion of the CPR Lands upon which railway tracks are presently situated and which contemplates the fencing off the easement area to be taken, the application of the provincial statute in question would affect a vital part of the federal railway's operation and also could likely impair, paralyze or sterilize the undertaking since it could prevent CPR from effectively operating and maintaining its railway main line.

[111]  But what if the intended corrections are made to the Morays' explanatory plan so that the easement area does not actually include any portion of the rail bed but merely abuts the main line corridor?

[112]  The Morays have cited the judgments in Canada (A.G.) v. Canadian Pacific Ltd., 2000 BCSC 933, aff'd 2002 BCCA 478 evidently for the proposition that CPR's rights to the appropriation of Crown lands pursuant to early federal railway legislation are subject to important restrictions, in particular, they must be lands lying on the route of the railway and must be necessary for completing and using the railway and associated works. From this the Morays, as I understand their argument, derive the proposition that incursions into those portions of the CPR Lands that do not affect the rail bed itself may be permissible. However, while these judgments contain much information of historical interest and demonstrate that there are restrictions on alienation and use of railway lands, they do not assist in determining the issue of whether the whole of the CPR Lands in this instance is a vital and essential part of the federal undertaking.

[113]  CPR has cited the case of Canadian Pacific Ltd. v. Saskatchewan (Heritage Property Review Board), [1984] S.J. No. 636 (Q.B.) for the proposition that the doctrine of interjurisdictional immunity would also apply to those portions of the CPR Lands which in the railway company's judgment might in future be required for railway operations and maintenance. On the whole, I find this submission persuasive.

[114]  In the Saskatchewan Heritage Property case the Court had to decide whether, in the face of the railway's plan to remove and demolish a station because of changes in its operational program, a municipal council pursuant to provincial legislation had the constitutional power to pass a bylaw declaring the station a heritage property and preventing its removal. With reference to decided cases in the Supreme Court of Canada, the Court pointed out that there was no principle of absolute immunity from provincial legislation of railways that were under exclusive federal regulatory control. The exclusive jurisdiction vested in Parliament to enact laws relating to railways did not mean that the provincial Legislature could not pass legislation otherwise within its jurisdiction which affected railways. More recent judicial decisions, the Court noted, had tended to examine the property of a railway company affected by provincial legislation to determine whether it was part of, or used in, the railway system. However, in this instance the railway's superintendent had deposed that the site occupied by the station was required for a building to house a train register and store materials, to provide access to railway trackage for maintenance purposes, and to provide parking for railway company and private vehicles. There was no question of the bona fides of the purposes for which the railway station site was stated to be required. The Court concluded at para. 10 of its decision:

If it cannot be established that the property of a railway company which may be subject to provincial legislation is but a convenience and not an essential part of the transportation operation, a court should not interfere in a bona fide decision of a railway company that the property is required to maintain the operation of its railway system.

[115]  In the present instance Mr. Massil, CPR's regional manager for marketing, has deposed that CPR requires control over all of the CPR Lands (which have a minimum width of 100 feet) to provide the necessary flexibility for future relocation, addition or realignment of the tracks and other railway structures or equipment, to accommodate servicing and maintenance needs, to provide safe operating clearances, to provide erosion and vegetation control, and to provide geotechnical support and slope protection.

[116]  The Morays have called into question the bona fides of these purported railway purposes by reference to CPR's support of the City of Kamloops' public trail project. However, after reviewing the documentation provided on that matter, I am not inclined to treat the evidence as proof that the operational considerations put forward by the CPR are disingenuous.

[117]  The Attorney General has suggested that the fact that CPR has granted rights to the Morays in the past which are similar to the water rights they now seek through expropriation is a further indication that those rights do not impinge on the vital core of the railway. Insofar as it relates to the long since expired pump house lease, which had a term of 20 years, there is perhaps some force to this suggestion. However, as I have noted, all other agreements between CPR and the Moray family pertaining to its railway right of way have provided for the primacy of rail operations and have been made terminable on short notice. In contrast the easement which the Morays now seek is perpetual and makes no allowance for changes in operational use by CPR of the CPR Lands.

[118]  It seems likely in light of the decided cases, including those cited in the Saskatchewan Heritage Property decision, that not every parcel of property owned by CPR or another federally regulated railway, no matter how tangential to the management and operation of the undertaking, would be exempt from provincial expropriation legislation. However, after considering the specific factual context of the present matter in light of the constitutional cases reviewed, I conclude that section 27 of the Water Act should be read down as inapplicable to any portion of the CPR Lands since expropriation would affect the vital and essential core of the management and operation of the railway.

4.3.4  Paramountcy

[119]  The doctrine of paramountcy, which CPR invoked as a secondary constitutional argument intended to defeat the Morays' expropriation plans, applies where there is a federal law and a provincial law which are each valid but also inconsistent. In Clarke v. Clarke, [1990] 2 S.C.R. 795 at p. 830, the Supreme Court endorsed the following description of the doctrine's effect by Professor Peter Hogg in Constitutional Law of Canada (2 nd ed. 1985) at p. 367:

Once it has been determined that a federal law is inconsistent with a provincial law, the doctrine of federal paramountcy stipulates that the provincial law must yield to the federal law. The most usual and most accurate way of describing the effect on the provincial law is to say that it is rendered inoperative to the extent of the inconsistency.

[120]  An earlier decision of the Supreme Court in Multiple Access Ltd. v. McCutcheon, [1982] 2 S.C.R. 161, had, however, already delimited the circumstances that would justify application of the doctrine of paramountcy. Dickson J. (as he then was) espoused the view that the doctrine would only need to be invoked in instances where it was impossible to comply with both legislative enactments. Overlap or mere duplication were not enough to create a true repugnancy. He stated at p. 191:

In principle, there would seem to be no good reasons to speak of paramountcy and preclusion except where there is actual conflict in operation as where one enactment says "yes" and the other says "no"'; "the same citizens are being told to do inconsistent things"; compliance with one is defiance of the other.

[121]  When confronted with a paramountcy issue, the courts therefore have embarked upon an inquiry into whether there actually exists between the federal and provincial legislation what the Supreme Court in Bell Canada 1988 referred to as "a practical and functional incompatibility".

[122]  In Bank of Montreal v. Hall, [1990] 1 S.C.R. 121, the issue before the Supreme Court was whether a chartered bank was required to comply with provincial legislation requiring prior judicial approval before enforcing its security interest created under the federal Bank Act. Writing for the Court, La Forest J. inquired into whether there was an "actual conflict in operation" between the two statutes. He stated at pp. 152-153:

I am led inescapably to the conclusion that there is. The Bank Act provides that a lender may, on the default of his borrower, seize his security, whereas The Limitation of Civil Rights Act forbids a creditor from immediately repossessing the secured article on pain of determination of the security interest. There could be no clearer instance of a case where compliance with the federal statute necessarily entails defiance of its provincial counterpart. The necessary corollary to this conclusion is that to require the bank to defer to the provincial legislation is to displace the legislative intent of Parliament.

[123]  The Court in Hall therefore applied what has been called the "express contradiction test" to hold the provincial legislation as inoperative in respect of the security taken by the chartered bank under the Bank Act. In another decision of the Supreme Court the test for paramountcy has been described as the "impossibility of dual compliance test". See 114957 Canada Ltée (Spraytech, Société d'arrosage) v. Hudson (Town), [2001] 2 S.C.R. 241.

[124]  In the present instance CPR points to what it says is the express contradiction between section 27 of the Water Act, conferring a right of expropriation on the Morays as licensees, and section 101 of the Canada Transportation Act, which sets out a federal legislative regime for private parties to apply for utility crossings over or under a railway line. The Morays' reply to this submission is that their easement area, properly described, would merely abut the railway main line and not pass over or under it. Furthermore, even though the Morays require a utility crossing for a water line and power line, these are already in place pursuant to the agreements concluded between CPR and the Moray family in 1970. Therefore, according to the Morays, the provisions of the Canada Transportation Act do not come into play and there is no question of any contradiction with provincial legislation.

[125]  In my view the Morays' arguments carry little weight for two reasons. First, as CPR points out, the term "railway line" is not defined in the Canada Transportation Act but I am persuaded that the clear intent of the applicable provisions in the statute is, as CPR contends, to provide for crossings of what might better be called "railway rights of way" and not only the actual area occupied by the bed of the railway tracks. The narrow interpretation of "railway line" favoured by the Morays might otherwise lead to the absurd result that persons seeking to rely on those provisions would be able to cross the bed of the railway tracks but not the rest of the width of the right of way. Second, while the Morays may presently enjoy utility crossings for their water line and power line, they do so under agreements that have annual terms only and that are terminable at any time on three months' notice. Practically speaking, the Morays on short notice could be in the position of having to seek relief under either the Canada Transportation Act or, if operative in this context, section 27 of the Water Act.

[126]  This brings me to the question of whether there is an express contradiction or impossibility of dual compliance between the two statutory regimes insofar as they relate to the CPR Lands. I have concluded that such a serious operational conflict does exist.

[127]  Parliament through section 101 of the Canada Transportation Act has put in place a procedure by which persons who need access over or under a railway right of way for a utility line, and who are unsuccessful in negotiating an agreement, can apply to the Canada Transportation Agency for authorization to construct and maintain such a line. Under this scheme Parliament has seen fit to vest decisions concerning the appropriateness of granting access across federal railway lines, and the dimensions and locations of such approved utility crossings among other matters, in a body of federal regulators.

[128]  The Legislature through section 27 of the Water Act has put in place a procedure by which water licensees who need to acquire land, or access over land, for works of accommodation for their rights to water may take such land as is reasonably necessary for that purpose. Under this scheme the Legislature has seen fit to vest decisions as to what land is reasonably necessary, the nature of the interest in land to be taken (e.g., licence, easement or fee simple), the terms and conditions of the instrument, and the compensation to be paid for the taking in the Expropriation Compensation Board.

[129]  Resort to section 27 of the Water Act by a water licensee wishing to gain access over a federally regulated railway line is, in effect, defiance of the procedure provided for under the federal statute. It conflicts with and frustrates the operation of the relevant access provisions under the Canada Transportation Act. Accordingly, I find that section 27 is inoperative in relation to the CPR Lands under the doctrine of federal paramountcy.

[130]  In light of what I have already decided with respect to section 101 of the Canada Transportation Act, it is unnecessary in my view to consider whether the doctrine of paramountcy also arises with respect to section 142 of the same statute. The issue was raised by CPR only in its final reply submissions, is somewhat speculative in nature, and was not addressed by either the Morays or the Attorney General.

5.  THE NON-CONSTITUTIONAL ISSUE

Do the terms of the 1970 Agreement and the Crown Grant (including reference in the Crown Grant to section 47 of the Land Act), give the claimants a right of expropriation in relation to the CPR Lands?

[131]  Irrespective of constitutional considerations, the Morays say that they have a right of expropriation in relation to the CPR Lands under section 27 of the Water Act by virtue of the terms of the 1970 Agreement and, more importantly, the Crown Grant which also contains reference to an applicable provision of the Land Act. CPR denies that any such right has been conferred.

[132]  With respect, I found the Morays' brief argument concerning the effect of the 1970 Agreement to be somewhat obtuse. CPR points out that the 1970 Agreement was a private contract between the Province and CPR for an exchange of land and submits that it could not possibly found an expropriation by a person not party to the contract. I would agree.

[133]  However, as I understand the Morays' argument, the 1970 Agreement has relevance to the issue inasmuch as it confirmed or was not inconsistent with the restrictions on ownership and use of land by railways under early federal railway legislation. It limited the quantity of land CPR was to receive at the new location to "sufficient land as will provide a right-of-way having a minimum width of one hundred feet (100') together with such additional width of lands as may be necessary for the accommodation of slopes and ditches." According to the Morays, the 1970 Agreement did not contemplate that the additional width of land to accommodate slopes and ditches might be used for the various purposes which Mr. Massil in his affidavit indicated were part of CPR's operational considerations for the future. Therefore, the additional lands outside the rail bed of the main line forming part of the CPR Lands need not be construed as being beyond the reach of expropriation by a water licensee for the purposes of access or for works of accommodation. I believe I have already effectively disposed of this argument when dealing with whether expropriation of the CPR Lands lying outside the rail bed would be constitutionally permissible in light of the doctrine of interjurisdictional immunity. In my view, the terms of the 1970 Agreement do not assist the Morays in this matter.

[134]  The more salient consideration is whether the terms of the Crown Grant of an estate in fee simple in the CPR Lands in November 1982 give the Morays a right of expropriation. It will be recalled that the estate granted under the Crown Grant was made subject to "any conditional or final water licence or substituted water licence issued or given under the Water Act" and to "the rights of the holder of it to enter on the land and to maintain, repair and operate any works permitted on the land under the licence at the date hereof". The Crown Grant also reserved to the Crown the rights, privileges and titles referred to in what was then section 47 of the Land Act while section 47(1)(a)(iii) specifically reserved the right in any person authorized by the Crown to take and occupy "water privileges" and to enjoy "the rights of carrying of water over, through or under any part of the land granted" for specified purposes.

[135]  Addressing the specific factual context in this matter, the Morays say that their water works existed on the CPR Lands pursuant to the conditional water licence issued in 1971 prior to and at the date of the Crown Grant and that as licensees they are persons authorized by the Crown pursuant to section 47 (now section 50) of the Land Act. By the Morays' interpretation, the Crown Grant did not give them the right to enter the CPR Lands; it only reserved that right. Where in this case ongoing entry has been or is about to be denied, the Morays argue that they may exercise the right reserved and proceed with expropriation as an alternative to reaching a voluntary agreement with CPR.

[136]  CPR has two responses to these submissions. First, it says, the Morays have not proved that they had any existing rights to use the CPR Lands at the time of the issuance of the Crown Grant. Indeed, it argues, the Morays have no standing as water licensees to make application to expropriate an easement in the absence of proof that the water licence is appurtenant to the lands they own. In 1985, two years after the Crown Grant was issued, the Morays applied for a transfer of appurtenancy but, as I indicated earlier, no evidence was provided that such a transfer took place.

[137]  Second, CPR says, neither the Crown Grant nor section 47 of the Land Act gives the holder of a water licence or of "water privileges" any rights to enter upon the CPR Lands and install or maintain any works. Even if the Crown Grant purported to do so, such rights would have to be in the nature of an interest in land in order to be effective against CPR's fee simple title. The Morays' proposed expropriation is to obtain just such an interest. An attempt to interpret section 47 so as to allow entry on the CPR Lands would raise another constitutional challenge.

[138]  The question of the Morays' standing to bring expropriation proceedings in light of the uncertain status of their position as water licensees is a matter which would require prior resolution if the remedy of expropriation was otherwise available. However, I consider it a moot question in the circumstances because I am of the view that CPR's other submission with respect to the effect of the Crown Grant and of section 47 of the Land Act is correct. Neither gives the Morays a right of entry to the CPR Lands. Neither authorizes expropriation proceedings which would not otherwise be available with respect to the CPR Lands. The reservation of water rights does not confer a right of expropriation and, even if it did, the right insofar as it affected a federal undertaking would be subject to the very same constitutional challenge already discussed at length above.

6.  SUMMARY CONCLUSION AND ORDER

[139]  For all of the reasons given, I have concluded that the expropriation by the Morays of an interest in any portion of the CPR Lands is constitutionally impermissible and, further, that the Morays cannot rely on the 1970 Agreement, the Crown Grant or section 47 of the Land Act or its successor provision to found expropriation proceedings. The board is without jurisdiction to hear and determine the matter.

[140]  Accordingly, CPR's application for an order that the board discontinue all proceedings in relation to the Morays' proposed expropriation is hereby granted.