File No.

CI 17-01-

THE QUEENS BENCH

WINNIPEG CENTRE

BETWEEN:

ATTORNEY GENERAL OF CANADA,

plaintiff,

- and -

HUDSON BAY RAILWAY COMPANY,

also carrying on business under the firm name and style of
OMNITRAX CANADA, and OMNITRAX, INC.,

defendants.

STATEMENT OF CLAIM

ATTORNEY GENERAL OF CANADA

Department of Justice Canada

Prairie Regional Office
301-310 Broadway
Winnipeg, Manitoba
R3C 0S6
Fax: 204-984-6488

Per: Randal T. Smith, Q.C.

Tel: 204-984-0931
E-mail: randy.smith@justice.gc.ca

Counsel for the Plaintiff

 File No. CI 17-01-

THE QUEENS BENCH

WINNIPEG CENTRE

BETWEEN:

ATTORNEY GENERAL OF CANADA,

plaintiff,

- and -

HUDSON BAY RAILWAY COMPANY,

also carrying on business under the firm name and style of
OMNITRAX CANADA, and OMNITRAX, INC.,

defendants.

STATEMENT OF CLAIM

TO THE DEFENDANTS:

A LEGAL PROCEEDING HAS BEEN COMMENCED AGAINST YOU

by the plaintiff. The claim made against you is set out in the following pages.

IF YOU WISH TO DEFEND THIS PROCEEDING, you or a Manitoba

lawyer acting for you must prepare a statement of defence in Form 18A prescribed by the
Queens Bench Rules, serve it on the plaintiffs lawyer or, where the plaintiff does not have
a lawyer, serve it on the plaintiff, and file it in this court office, WITHIN 20 DAYS after
this statement of claim is served on you, if you are served in Manitoba.

If you are served in another province or territory of Canada or in the United

States of America, the period for serving and filing your statement of defence is 40 days.
If you are served outside Canada and the United States of America, the period is 60 days.

IF YOU FAIL TO DEFEND THIS PROCEEDING, JUDGMENT MAY

BE GIVEN AGAINST YOU IN YOUR ABSENCE AND WITHOUT FURTHER
NOTICE TO YOU.
 -2-

IF YOU PAY THE PLAINTIFFS CLAIM, and $750.00 for costs, within
the time for serving and filing your statement of defence, you may move to have this
proceeding dismissed by the court. If you believe the amount claimed for costs is
excessive, you may pay the plaintiffs claim and $750.00 for costs and have the costs
assessed by the court.

____________________ Issued by:________________________

Date Deputy Registrar

TO: Hudson Bay Railway Company,

also carrying on business under the
firm name and style of Omnitrax Canada
c/o DArcy & Deacon LLP
2200 One Lombard Place
Winnipeg, Manitoba
R3B 0X7
Attention: Roger D. Gripp and Jonathan L. Goldberg

AND TO: Omnitrax, Inc.

252 Clayton Street, 4th Floor
Denver, Colorado 80206
USA
 -3-

CLAIM

1. The plaintiff claims:

a) An order piercing the corporate veil of Omnitrax, Inc. such that it is jointly and
severally liable, with Hudson Bay Railway Company, for its indebtedness to
the plaintiff;
b) An order that either or both of the defendants forthwith return to the plaintiff,
$18,800,316.62, as a debt now due and owing;
c) Pre-judgment and post-judgement interest on the debt until paid;
d) General damages against Hudson Bay Railway Company for breach of its
contractual obligations, including any costs incurred by Canada in enforcing
Hudson Bay Railway Companys obligations under the contract;
e) General damages against Omnitrax, Inc. for inducing Hudson Bay Railway
Company into breaching its contractual obligations to Canada;
f) A declaration that the defendants, or either of them, have a contractual
obligation to repair the rail line, and maintain it in a good state of repair; and
to restore and diligently maintain efficient railway operations, to properly serve
Northern Manitoba, from Gillam to Churchill, until March 31, 2029;
g) Interest on the damages awarded;
h) The costs of this action.

2. This action is brought on behalf of Her Majesty in right of Canada (hereinafter

Canada) who has suffered the damage or loss complained of, or is otherwise
entitled to the relief claimed.

3. The defendant, Hudson Bay Railway Company (hereinafter HBRC), is a

company incorporated in the Province of Nova Scotia, and registered to do business
in Manitoba, with its head office in The Pas, Manitoba; also carrying on business
under the firm name and style of Omnitrax Canada.

4. HBRC is the registered owner of the subject railway line (the Rail Line).
 -4-

5. HBRC is part of the Omnitrax group of companies, with the parent company being
the defendant Omnitrax, Inc., a body corporate pursuant to the laws of the State of
Colorado, in the United States of America, having its head office in the City of
Denver, Colorado, and carrying on business in the Province of Manitoba
(hereinafter Omnitrax).

6. Canada states that, in May 2017, spring flooding washed out some of the Rail Line
to Churchill, Manitoba, leading to suspension of rail service by the defendants.

7. Since then, the defendants have refused, and continue to refuse, to effect the
necessary repairs to the Rail Line, asserting publicly that it is not economically
feasible to repair the Rail Line and restore its operations; and declaring that Canada
should now assume the financial responsibility to do so.

8. Canada states that the quality of life and safety of all Canadians must be ensured,
and that the loss of railway service to Churchill, Manitoba must be addressed, so
that its citizens will have access to life-preserving amenities, such as food and
medical supplies, which are currently in high demand and short supply.

9. Canada has consistently maintained and communicated, as the facts are, that HBRC
is contractually obligated to repair the Rail Line, and resume service, pursuant to a
July 2008 Contribution Agreement (CA), as amended, entered into by HBRC and
Canada.

10. The CA specified the expectations, obligations and requirements of both Canada
and HBRC, for the rehabilitation and operation of the Rail Line from the yard in
The Pas, Manitoba to and including the rail right-of-way in the Port of Churchill,
Manitoba (the Project).

11. Article 4.1(a) of the CA provides in effect, that as long as HBRC fulfilled its
obligations under the CA, Canada would contribute a maximum of 1/3 of the total
costs of the Project, not exceeding $20 million in contributions, over the duration
 -5-

of the Project, which was then expected to take 10 years to complete. It was
anticipated that Manitoba would also contribute 1/3 of the total costs of the Project.

12. On or about March 31, 2010, the CA was amended to extend its term, by one year,
so that the duration of the Project was until March 31, 2019.

13. Since the CA was entered into, Canada has contributed a total of $18,800,316.62 to
the Project.

14. Article 4.1(b) of the CA provides in effect that Canadas involvement in the Project
is limited to making a financial contribution, and to taking any steps necessary, to
enforce HBRCs obligations under the CA.

15. Article 4.2(b) of the CA provides in effect that, aside from Canadas contributions
under the CA, HBRC is responsible to fund all costs of the Project, including any
cost overruns.

16. Article 4.2(c) of the CA provides in effect, that HBRC was and remains solely
responsible for the complete, diligent and timely implementation of the Project, and
that it had, and continues to have, full responsibility for the ongoing repair,
operation, and maintenance of the Rail Line, for the duration of the Project.

17. Articles 16.4, 17.2(b), 19.6 and 19.7 of the CA provide in effect, that if HBRC
defaults under the CA, and abandons this Rail Line, Canada may require, among
other things, repayment of Canadas entire financial contribution, which then
becomes a debt owing to Canada, payable forthwith upon demand, and which
accrues interest in accordance with the Interest and Administrative Charges
Regulations (SOR/96-188) of the Financial Administration Act, RSC 1985 c F-11,
at the rate of the average bank rate plus 3%, compounded monthly, from the date
of default until paid.
 -6-

18. On or about October 13, 2017, Canada delivered to the defendants a notice of
default, pursuant to Article 16.3 of the CA, wherein Canada stated that because of
HBRCs failure to repair the Rail Line, and restore its operations, it is in default of
its CA obligations, and that unless those repairs were made and rail service restored
within 30 days from the date of the letter, Canada would take legal action for
HBRCs breach of contract, and would therein seek all available remedies,
including the return of Canadas financial contributions to the Project.

19. The defendants have failed to comply with the notice of default, and they continue
to refuse to repair the Rail Line and restore its operations, effectively leaving the
remote northern town of Churchill, Manitoba, and its citizens, without the railway
services which they depend on to bring essential goods and services to their remote
community, where no roads go.

20. Canada says further that, during the term of the CA to date, HBRC has also
defaulted on other CA provisions, including HBRCs reporting obligations under
Article 7.2 Aboriginal Consultation Information, Article 10.1 Payment
Conditions, Article 11.5 Annual Report, Article 20.1 Independent Engineer,
Schedule D Audit Framework, and Schedule E Information.

21. In addition to HBRCs ongoing obligation to repair and maintain the Rail Line, it
also has an outstanding future obligation under Article 17.2(a), which provides in
effect, that HBRC will keep the Rail Line repaired and operational, from April 1,
2019 until March 31, 2029.

22. By reason of the foregoing, Canada states that the continued default of HBRC to
comply with the CA constitutes breaches of contract.

23. At all relevant times, Omnitrax has held itself out as being in control of this Rail
Line, and its operations, and that it alone decides what will, and what will not, be
done to repair and operate it.
 -7-

24. By its decisions, conduct, and inactions, Omnitrax effectively prevented or

impeded HBRC from fulfilling its contractual obligations under the CA, to repair
the Rail Line and restore its rail service, as previously particularized.

25. Omnitrax knew that its actions, or lack thereof, would effectively induce HBRC to
breach the CA, which was done by Omnitrax in an attempt to transfer to Canada,
the financial losses of repairing and running this Rail Line.

26. By reason of Omnitrax inducing the breach of contract, Canada says that Omnitrax
should be liable, in tort, for the claims herein.

27. Canada further states that because Omnitrax completely dominates and controls
HBRC, to the point that the latter does not function independently, its corporate
veil should be pierced, and each defendant found to be jointly and severally liable
for the $18,800,316.62 debt plus interest owing to Canada.

28. By reason of all of the foregoing paragraphs, Canada, including its citizens in
Manitoba, have suffered loss and damages.

29. Canada pleads and relies upon the provisions of the Crown Liability and
Proceedings Act, RSC, 1985, c C-50, and the Financial Administration Act, RSC
1985, c F-11.

November 14, 2017 ATTORNEY GENERAL OF CANADA

Department of Justice Canada
Prairie Regional Office
301 310 Broadway
Winnipeg, Manitoba
R3C 0S6
Fax: 204-984-6488

Per: Randal T. Smith, Q.C.

Tel: 204-984-0931
E-mail: randy.smith@justice.gc.ca

Counsel for the Plaintiff