Scottish Court of Session Decisions

This case related to the construction of certain clauses of an agreement entered into in May 1875 between the Glasgow and South-Western Railway Company of the first part (therein designated the first party), and Allan Gilmour & Company, coalmasters at Portland and Hurlford Collieries, and other coalmasters and brick manufacturers in Ayrshire (therein designated the second party). The following were the provisions of the agreement which related to the present case:— First, That the first party should from 1st January 1874 be bound to carry all coal, dross, and common and fire-clay bricks and tiles as in another agreement between the first party and the Eglinton Iron Company, sent by the party of the second part over any of the first party's railways from or to the second parties' collieries and brickworks. “ Second, The second party respectively shall, subject to article eleventh hereof, as from the said date, pay to the first party, for and in respect of the traffic of the second party before mentioned, the charges following, viz.—For and in respect of … coal and dross passing along the said railways, the second party shall pay to the first party the charges specified in Schedule B hereto annexed. Ninth, It is hereby provided and agreed that, in the event of the first party charging to any other trader, for distances above six miles, for the said descriptions of traffic to any station or place, lower rates than those stipulated in this agreement to be paid by the second party, then and in that event the first party shall give to the second party a corresponding reduction in the rates payable by them for their traffic of a similar description to such station or place, while and so long as such lower rates are charged against such other trader. Eleventh, It is specially agreed that, notwithstanding the rates or charges before specified, the first party shall be entitled to charge, and the second party shall be bound to pay, rates or charges similar to those which may for the time being be charged to and paid by the Eglinton Iron Company in respect of the carriage of common and fire-clay bricks and tiles, and coal and dross for land sale and shipment, not exceeding the scale of rates and charges paid by the second party immediately preceding the first day of January Eighteen hundred and seventy-four, and in the event of any consideration being paid, given, or allowed by the first party to the Eglinton Iron Company for an increase in the charges payable by them for the carriage of the said traffic, a corresponding consideration shall be paid, given, or allowed by the first party to the second party.”

Schedule B, referred to in clause 2, specified the rates for coal and dross as follows:—“When carried six miles or under, the sum of seven-pence halfpenny per ton. When carried any distance above six miles, and not exceeding sixteen miles, the sum of one penny farthing per ton per mile. When carried any distance above sixteen miles, and not exceeding twenty-six miles, the preceding rate for the first sixteen miles, and for every mile thereafter the sum of three-farthings per ton per mile. When carried any distance exceeding twenty-six miles, the preceding rate for the first twenty-six miles, and for every mile, thereafter the sum of one halfpenny per ton per mile.” …

In December 1884 William Mackinnon, C.A., as trustee under a trust-deed for behoof of creditors, executed by Allan Gilmour of Allan Gilmour & Co. above mentioned, raised the present action in the Sheriff Court of Lanarkshire at Kilmarnock against the Glasgow and South-Western Railway Co. He prayed the Court to find and declare that under the terms of the above-recited agreement between the railway company and the various coalmasters, “in the event of the defenders charging to any other trader than those who are parties to said agreement, for distances above six miles for the descriptions of traffic therein specified, namely, for coal dross and common and fire-clay bricks and tiles, to any station or place, lower rates than those stipulated by said agreement to be paid by the second parties thereto,” namely, the rates specified in Schedules A and B, “then in that event the defenders are bound to give to the pursuer, as trustee aforesaid, and his successors in office, as one of the second parties to said agreement, a

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corresponding reduction in the rates payable by them for their traffic of a similar description, to such station or place while and so long as such lower rates are charged against such other trader,” and further, to find and declare that the defenders had been from a specified date charging to certain other traders specified, for a distance above six miles, for the carriage of coals to Troon Harbour, lower rates to the extent of 6d. per ton, than those stipulated in the agreement, and further to find and declare that the defenders were bound to give to the pursuer from the same date a reduction of 6d. per ton in the rate payable by him for the carriage of coals from Portland Colliery to Troon Harbour, so long as such lower rates were charged against the other collieries. There was also a petitory conclusion for payment of £198, 8s. 2d.

The pursuer averred breach of the agreement in several instances. The argument at the bar was confined to the instances averred, as follows, with the answers of the defenders thereto:—“(Cond. 10) As a further example of said disproportion of rates, the said defenders issued a table of rates for certain collieries in the New Cumnock, Cumnock, Auchinleck, and Water of Ayr districts, commencing at 25th August last, whereby they agreed to carry and are carrying coals from certain of these collieries to Troon Harbour, at rates considerably less than those stipulated in the said agreement, having regard to the respective distances. A copy of that table of rates is produced herewith and referred to. (Ans. 10) The agreement and table of rates are referred to. Quoad ultra denied. (Cond. 12) Further, in the case of Lanemark Colliery, New Cumnock (which is not embraced in said agreement), the defenders carry coal and dross therefrom to Troon and Ayr, distances of thirty-one and twenty-four miles respectively, at 1s. 9d. per ton to Troon and 1s. 7d. per ton to Ayr, while the rates according to said agreement should be 2s. 6d. to Troon and 2s. 2d. to Ayr respectively. (Ans. 12) Admitted that the defenders carry coal and dross from Lanemark Colliery to Troon and Ayr, distances of thirty-one and twenty-four miles respectively, at the rates specified. Quoad ultra denied.” The pursuer estimated the amount of overcharge made against him by the company at £198, 8s. 2d., being the sum sued for.

In defence the defenders stated—“That in none of the cases founded upon by the pursuers, nor, indeed, in any case, have the defenders charged to any other trader (not a party to said agreement), for distances above 6 miles, for the same description of traffic as that specified in the agreement, to any stations or places referred to in the condescendence, lower rates than those stipulated in the agreement to be paid by the second party thereto.” They also founded on the terms of article 11 of the agreement, and in reference thereto stated that “the rates charged by the defenders for the carriage of the pursuer's coals, referred to in the petition (said coal being for land sale or shipment), do not exceed the rates charged to and paid by The Eglinton Iron Company for the carriage of their coal to the same place for the same distance, and do not exceed the scale of rates and charges paid by the second party immediately preceding the first day of January 1874.” They also stated, that the pursuer's construction of the agreement would be unworkable, and in particular it would not be practicable to apply a deduction of so much per mile overhead consistently with the provisions of the schedule annexed to the agreement.

The pursuer pleaded—“(1) The defenders being bound under said agreement to carry pursuer's coals and other traffic above mentioned at the rates specified therein, and in the event of their charging a lower rate to any other trader for distances above six miles, to give the pursuer a corresponding reduction, and the defenders having charged to other traders a lower rate than that charged to the pursuer without allowing him a corresponding reduction, the pursuer is entitled to decree of declarator as prayed for.”

The defenders pleaded—“(3) The rates charged by the defenders for the coal traffic specified in the account annexed to the petition having been so charged in virtue of and in conformity with the terms and provisions of the agreement founded upon by the pursuer, the defenders are entitled to be assoilzied from both the declaratory and the petitory or pecuniary conclusions of the action.”

The Sheriff-Substitute ( Hall) pronounced the following interlocutor:—[After certain findings in conformity with the terms of the agreement]—“Finds it admitted by the defenders that for the carriage of coal and dross to Troon Harbour, for distances above six miles, they have, during the period from 1st September to 30th November 1884, charged to traders not parties to said agreement lower rates than those therein stipulated to be paid, and in fact paid during the same period by the pursuer for his traffic of a similar description to the said harbour, having regard to the respective distances: Finds that the pursuer is entitled to a reduction in the rates paid by him corresponding to the lower rates charged to such other trader . . … and with these findings, appoints the cause to be enrolled in order that parties may be heard as to the amount of reduction to which the pursuer is entitled, &c.

“ Note.—… . . The matter chiefly in controversy between the parties is the construction of article 9 of the agreement, and, in particular, the effect to be given to the words ‘lower rates.’ This expression the pursuer seeks to have construed as importing rates lower by reference to the distance for which they are charged. The defenders, on the contrary, maintain that rates absolutely lower are meant, and that the elements of distance does not enter into the question. Thus, for the carriage of coals from his Portland Colliery to Troon, a distance of 12 miles, the pursuer pays 1s. 3d. per ton, being the stipulated rate of 1¼d. per mile, when the distance does not exceed 16 miles. But suppose a trader, not a party to the agreement, whose colliery was 60 miles from Troon, should also be charged 1s. 3d. per ton for the carriage of the coals to that seaport, then, according to the defender's argument, such trader would not be charged a lower rate than the pursuer within the meaning of the agreement, and the pursuer would consequently not be entitled to any reduction. To the Sheriff-Substitute it humbly appears that the mere statement of this argument is sufficient for its refutation. Can anyone for a moment believe that the Kilmarnock coalmasters would

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take the trouble of bargaining with the railway company, not that they should get the advantage of their greater proximity to the Ayrshire seaports, but simply that they should not be handicapped on that account in their competition with more distant traders? What must be presumed to have been their intention on entering into the agreement is borne out by the language of the deed, which cannot without a forced and unnatural construction of its terms be made to yield the sense contended for by the defenders. In particular, their reading requires that the word ‘rates’ should mean one thing when used in connection with the second party, and another thing when used in connection with the outside traders, being equivalent to so much per ton per mile in the former case, and to so much per ton without reference to distance in the latter. It is said that the enforecment on all traders of an equal mileage rate without taking other circumstances besides mere distance into account is impolitic in the public interest, and reports by the Railway Commissioners were cited in which that opinion is expressed. But assuming the agreement to be binding at all, considerations of public policy, however material before it was concluded, cannot be permitted now that it has become the measure of the rights and obligations of the parties to regulate its construction or modify its effect. It is further said that the agreement in the view contended for by the pursuer is unworkable on account of the extreme difficulty and complexity of the calculations which it would involve. The Sheriff-Substitute has not for the present decided how the provision contained in article 9 falls to be practically applied. That matter was not argued to him, and he has reserved it for future consideration. But in the meantime it must be observed that any difficulty which may be found in the application of article 9 as it stands forms no reason for wresting it from its natural sense, though if sufficiently great it may be a good ground for so far setting aside the agreement altogether. With regard to article 11, on which the defenders also found, its bearing on the present question is not very obvious. The purport of that article is to empower the defenders, notwithstanding the rates specified in the agreement, to exact from the second party rates similar to those paid for the time being by the Eglinton Iron Company, not exceeding a certain fixed maximum, which of course implies that in the contemplation of the parties such rates were to be higher than those stipulated. Article 11 thus appears to be intended as a qualification of article 2, and it is so set forth in the agreement itself. During the period, however, to which the petition applies, no attempt was made by the defenders to raise the rates charged to the pursuer, or the other coalmasters forming the second party, above those stipulated in the agreement, and accordingly the provisions of article 11 never came into operation at all. It is stated by the defenders that ‘the rates charged by the defenders for the carriage of the pursuer's coals, referred to in the petition, do not exceed those charged to and paid by the Eglinton Iron Company.’ This statement is unfortunately somewhat ambiguous. If it means that the rates paid by the pursuer do not exceed those charged to the Eglinton Iron Company, having regard to the respective distances, then judging by the tables produced it appears not to be true in point of fact, at least as regards some of their collieries. But assume that it is true, and that the Eglinton Iron Company are less liberally treated in the matter of rates than some other traders who are not parties to the agreement, is this to be held as indirectly operating a restriction of the pursuer's right under article 9, or is that article to be read subject to the implied proviso that the second party shall not be entitled to claim a reduction on account of lower rates being charged to other traders, unless and in so far as the Eglinton Iron Company gets the benefit of these lower rates. Are we, in short, to construe the words ‘any other trader’ in article 9 as meaning the Eglinton Iron Company, and the Eglinton Iron Company alone? The Sheriff-Substitute thinks that to give such a wide application and such a generally controlling effect to article 11 is inconsistent with the fair reading of the agreement. The case would be different if the rates payable by the second party were raised in virtue of article 11 to bring them into conformity with those charged to the Eglin ton Iron Company, and if at the same time lower rates were charged to other traders; then undoubtedly a question of some nicety on the construction of article 9 might present itself; but it is one which does not arise, and need not be considered in this action.”

Having thereafter resumed consideration of the case, the Sheriff-Substitute pronounced the following interlocutor:—“Finds that on a sound construction of article 9 of the agreement the pursuer is entitled to select any individual trader, not being a party to said agreement, to whom lower rates than those therein specified are charged by the defenders, and to insist on being placed on an equal footing with him: Finds that the rate charged by the defenders to the proprietors of Lanemark Colliery, who are not parties to said agreement, for the carriage of coal and dross from the said colliery to Troon Harbour, a distance of 31 miles, was, during the period from 1st September to 30th November 1881, 1s. 9d. per ton, instead of 2s. 6d. per ton, to which it would have amounted if calculated on the scale of rates specified in said agreement, being a reduction of 9d. per ton compared with said rates: Finds that between 26th September 1884, being the date of the pursuer's protest, and 29th November 1884, the pursuer paid to the defenders for the carriage from Portland Colliery to Troon, a distance of 12 miles, of 7936 tons 8 cwt. of coal, the sum of £529, 2s., being at the agreement rate of 1¼d. per ton per mile, where the distance does not exceed 16 miles: Finds that the pursuer is entitled to a reduction on the rates so paid by him, bearing the same proportion to 1s. 3d. which 9d. bears to 2s. 6d.—that is to say, 4½d. per ton: Therefore decerns against the defenders for the sum of £148, 16s. 1½d., with interest, as concluded for: Finds it unnecessary to dispose of the remaining conclusions of the action: Finds the defenders liable in expenses,” &c.

The defenders appealed to the Court of Session.

Appellants' authority— Murray v. The Glasgow and South-Western Railway Company, November 29, 1883, 11 R. 205.

Respondent's authorities— Ransome v. The Eastern Counties Railway Company ( Ransome, No. 2), 27 L.J., C.P. 166; Denaby Main Colliery Company v. Manchester, Sheffield, and Lincoln shire Railway Company,

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3 Rail, and Can. Cas. (Neville & Macnamara) 426.

At advising—