Omnitrax Inc.'s name scratched off federal lawsuit against Churchill railway owners

Omnitrax owns the Hudson Bay Railway Company, but its lawyer says the parent company is not liable to pay any damages awarded in a federal government lawsuit against HBRC — the subsidiary that owns the washed-out railway to Churchill, Man.

​The Government of Canada has removed Omnitrax Inc. from its statement of claim, part of an ongoing battle over who should pay to fix the railway to the northern Manitoba town, after Omnitrax argued the HBRC is an entirely separate entity.

The railway has been shut down since flooding in May 2017 damaged the tracks, cutting off the only land link between Churchill, 1,000 kilometres north of Winnipeg on the shore of Hudson Bay, and the rest of the country, leaving residents struggling to get people and supplies into and out of the tourism destination.

When Denver-based Omnitrax said it wouldn't pay up to $60 million to repair the line, claiming it is "not economically feasible," the federal government threatened to sue if the company did not meet a 30-day deadline to begin the repairs.

In November, the government filed a lawsuit naming Omnitrax and HBRC. It sought to claw back the $18 million paid as part of a 2008 agreement which Transport Canada said obligated the company to keep the railway running until 2029.

At a hearing on Tuesday, lawyers for the attorney general of Canada and Omnitrax finalized a motion that will remove Omnitrax Inc.'s name from the statement of claim, meaning there will be no liability for the parent company with respect to the litigation itself, said Omnitrax counsel Jamie Kagan.

'This is a political action': Omnitrax

"Our view has always been that this is a political action mainly brought for the purposes of PR and not for a legal remedy, and it appears that the Government of Canada, when pushed, ultimately agreed and has withdrawn the allegations against Omnitrax Inc.," Kagan said in an interview after the hearing.

The lawsuit will continue, but now only against Hudson Bay Railway Company.

"As the private owner of the line, Hudson Bay Railway Company (which also conducts business under the name OmniTRAX Canada) had the obligation to repair the rail line when it was damaged," a spokesperson for Transport Canada said in an emailed statement.

The spokesperson said that "it would be inappropriate to discuss this matter" further because it is still subject to legal proceedings.

Kagan argued that even if all of the facts alleged in the statement of claim were proven true, there could be no successful claim against Omnitrax Inc.

When asked to clarify the argument that Omnitrax Inc. is a separate entity from HBRC, a spokesperson for the company wrote in an email statement that "OmniTRAX will not be providing comment on the court proceedings."

Omnitrax argues that the flood damage constitutes a force majeure — a legal term referring to unforeseeable circumstances that excuse a party from fulfilling a contract — and it is unable to fulfil its contract with the federal government.

The roughly 900 residents of Churchill have had to fly in all supplies since the railway closed, increasing costs for everything from food to fuel.

After the successful motion to strike Omnitrax Inc. from the statement of claim, the government will be required to cover $2,100 plus disbursements for legal costs the company incurred in filing the motion.

Omnitrax has long sought to sell the railway and Port of Churchill, which it bought from Canadian National Railway in 1997.

A consortium of northern Manitoba First Nations and municipalities have expressed interest in purchasing it.