Scottish Court of Session Decisions

On 18th June 1886 an agreement was entered into between the Great North of Scotland Railway Company, of the first part, and the Highland Railway Company, of the second part. Article 1 of the agreement provided—“This article applies to traffic passing in either direction between any place south of Grange South Junction (excluding Grange South Junction) on the one hand, and any place west or north of Elgin (excluding Elgin) or south of Forres (including Forres) on the other hand, and carried by any of the following routes, viz:—( a) via Keith, Mulben, and Elgin, in this article called ‘the Highland route’; ( b) via Keith, Craigellachie, Rothes, and Elgin, ( c) via Grange, Portsoy, Garmouth, and Elgin — in this article called ‘the Great North route.’ In dividing the receipts arising from the traffic covered by this article it is agreed that after deducting the usual clearing-house terminals arising thereon, and also paid-ons, paid-outs, proportions paid or due to other companies, the residue of the gross receipts (without any allowance for working expenses) shall be divided into two moieties, of which one moiety shall be deemed to be receipts in respect of traffic which has been carried via the Highland route, and the other moiety shall be deemed to be receipts in respect of traffic which has been carried via the Great North route, and such moieties shall be divided between the two companies respectively in accordance with the decision of James Beale (the arbitrator appointed by the agreement between the two companies, of even date herewith), one moiety as if it arose from traffic carried via Keith, Mulben, and Elgin, and the other moiety as if it arose from traffic carried via Keith, Craigellachie, Rothes, and Elgin.”

This article applied to the through communication from Aberdeen to Inverness. The Great North of Scotland line ran from Aberdeen to Keith, and then by a loop-line from thence to Elgin by Craigellachie, &c. The Highland line ran from Inverness to Elgin, then by a straight line to Keith, so that there could be no through traffic from one place to the other except by passing over both lines, but the journey from Inverness to Keith was shorter by the Highland Railway than by the Great North of Scotland line.

It was provided that for the due observance and carrying out of the provisions of the agreement a committee should be appointed, consisting of the chairman and three directors of each company, and that such committee should meet from time to time as might be mutually arranged, to consider any matters connected with or arising out of the agreement.

By article 27 it was provided that “any difference which may from time to time arise between the companies parties hereto in regard to the true intent and meaning or construction of this agreement, or in regard to any matter or thing arising out of this agreement, or in regard to the arrangements and provisions for carrying out the same, shall from time to time, so often as any such difference shall arise, be, and the same is hereby submitted and referred to the joint committee, and failing their agreement, to James Grierson, Esquire, general manager of the Great Western Railway, London, whom failing William Wainwright, Esquire, general manager of the Glasgow and South-Western Railway, Glasgow, as sole arbitrator, or, in the event of death or incapacity, tb an arbitrator to be appointed by the joint-committee, or failing agreement, by the Board of Trade.’

By an agreement to refer, entered into between the two companies, of the same date as the agreement above recited, the said companies submitted to the decision of James Beale, Esquire, solicitor, Great George Street, Westminster (arbitrator referred to in the first article of the previous agreement), the following questions—“1. Whether the proviso to section 82 of the Highland Act 1865 (providing for facilities and interchange of traffic between the two companies) applies to traffic exchanged under the Act of 1884” (the Great North Act) “between the two companies at Elgin, or whether the receipts of such traffic are to be divided between the two companies respectively in accordance with their re

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spective mileage, and under the rules of the clearing-house?” and “2. If the proviso applies at all, does it apply to anything other than competitive traffic passing via Aberdeen?”

On 9th July 1886 Mr Beale gave his award in the following terms—“Now I hereby award and determine that the proviso of section 82 of the Highland Railway Act 1865, printed on the fourth page of and referred to in the above-written submission, does not apply to traffic exchanged, under the Great North of Scotland Railway Act 1884, between the two companies at Elgin, and I further award and determine that the receipts of such traffic are to be divided between the two companies respectively in accordance with their respective mileage, and under the rules of the clearing-house.”

A dispute arose as to the meaning and effect of Mr Beale's decision.

At a meeting of the joint-committee on 19th October 1886 the Highland Company required the Great North Company to accept as their proportion the local fare on all passenger traffic booked between the systems in accordance with the rules of the railway clearing-house. The committee differed, and the Highland Company intimated an appeal to the arbitrator.

The question along with others was submitted to Mr Grierson. The Great North Company protested against any reference to Mr Grierson of this matter on the ground that Beale had been appointed the sole arbiter in the matter, but took part in the proceedings before the arbiter.

On 16th January 1887, after hearing parties, Mr Grierson issued this award—“… The award of James S. Beale, Esquire, which determined that the receipts on such traffic are to be divided between the two companies respectively in accordance with their respective mileage proportions, and under the rules of the Railway Clearing House, will be carried out by giving to each company their mileage proportion, not exceeding in respect of passenger traffic the local passenger fares.”

The Great North of Scotland Railway Company refused to implement Mr Grierson's award, and the Highland Railway Company raised this action against them for implement.

The pursuers averred—“The through fare is in all cases the sum of the local fares, and the said award means, and can only mean, that after dividing the whole receipts for passenger traffic covered by article 1 of said agreement into two moieties, one to be deemed to be receipts in respect of traffic via ‘the Highland route,’ and the other to be receipts in respect of traffic via ‘the Great North route,’ each moiety is to be divided between the pursuers and the defenders in proportion to the local fares charged by them in the case of passenger traffic actually carried via the route to which the moiety is attributed.”

The defenders “explained that the pursuers insist upon a method of apportionment of the receipts in question inconsistent with the application of the mileage proportion principle formulated in Mr Beale's award, and accepted by Mr Grierson. The agreement of 18th June 1886 related to traffic of all kinds with the single exception of mails, and under the reference to Mr Beale and his award, the whole receipts of the traffic fell to be divided according to mileage. The contention of the pursuers, as shown by their statement, ignores the basis of Mr Beale's award, namely, that division is to be made according to mileage proportion, and substitutes therefor a division proportionate to local fares. Although through fares are the sum of the local fares,, local fares are not in all cases proportionate to the mileage distance, and a division in proportion to the local fares as proposed by the pursuers would therefore be inconsistent with the principle of division in proportion to mileage. If it were the meaning of Mr Grierson's award to substitute a division in proportion to local fares for mileage division, it would be ultra fines compromissi, and null and void, because Mr Grierson could only explain and carry out Mr Beale's award, and could not introduce a new principle in its place, and the basis of Mr Beale's award was division by mileage proportion. The true meaning of Mr Grierson's award is that the receipts are to be divided into two moieties, that one of these moieties is to be divided according to the respective mileage proportions of the two companies, by the Great North route, and the other is to be divided according to the respective mileage proportions of the two companies by the other route, and that the limitation, ‘not exceeding the local fare,’ is to be read as applicable to the aggregate sum received by each company, the local fare alluded to being the local fare of the particular company for traffic by its route. Any other interpretation must ignore the division by mileage proportion, and is unwarrantable.”

The pursuers pleaded—“(1) Under and in terms of the said agreement, the defenders are bound to implement Mr Grierson's award, and to concur with the pursuers in taking all steps necessary to have the award carried into effect. (2) The defenders are bound to implement said award by concurring with the pursuers in requesting the Clearing House to divide the receipts in terms of the declaratory conclusions of the summons.”

The defenders pleaded—“(1) The pursuers' statements are not relevant or sufficient to support the conclusions of the summons. (2) The defenders having implemented, and being prepared to concur with the pursuers in giving effect to the award of Mr Grierson according to its true and proper construction, are entitled to absolvitor. (3) Separation—In the event of Mr Grierson's award being held to bear the construction contended for by the pursuers, the said award being ultra fines compromissi, is null and void, and the defenders ought not to be ordained to concur with the pursuers in addressing a letter to the Railway Clearing House Committee as concluded for.”

Upon 7th February the Lord Ordinary

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sustained the first plea-in-law for the defenders and dismissed the action with expenses against the pursuers.

“ Opinion.—In June 1886, the parties to this action entered into an agreement regarding inter alia the division between them of the receipts arising from passenger traffic passing between Aberdeen and Inverness, and they agreed that such division should be in accordance with the decision of Mr James Beale. Mr Beale decided ‘that the receipts of such traffic are to be divided between the two companies respectively in accordance with their respective mileage, and under the rules of the clearing-house.’ The parties very soon thereafter differed as to the meaning and effect of Mr Beale's decision; but instead of going back to Mr Beale to have his explanation of his own award, they submitted Mr Beale's award to a Mr Grierson, in order that he might determine how the receipts from the passenger traffic in question should be divided. Mr Grierson decided that ‘the award of James S. Beale, Esq., which determined that the receipts on such traffic are to be divided between the two companies respectively, in accordance with their respective mileage proportions, and under the rules of the clearing-house, will be carried out by giving to each company their mileage proportion not exceeding in respect of passenger traffic the local passenger fares.’ The parties having now differed as to the carrying out of Mr Grierson's view, the pursuers have raised this action to have the defenders ordained to implement Mr Grierson's award, by concurring with them in instructing the clearing-house to divide the receipts in question according to their respective local fares.

It will be observed that Mr Grierson gives no independent judgment on the question between the parties. His award only expresses his view as to the manner in which Mr Beale's award can be carried out. But in expressing this view he has added a condition which is not warranted by Mr Beale's award, and which seems to me to create the whole difficulty.

By Mr Beale's award the receipts in question were to be divided between the parties, ‘in accordance with their respective mileage, and under the rules of the clearing-house.’ If the first clause of this award had stood alone, there could have been no doubt as to the principle of division. It would have been according to mileage. But the addition of the second clause gave rise to the contention on the part of the pursuers that the mileage rate was only to be given subject to the ‘rules of the clearing-house,’ which they say limits the proportion to be received by the defenders to their ‘full local fare.’ Accordingly the pursuers contend that, if the defenders get their local fare, they can claim no more, although, if reckoned by mileage, they would be entitled to more. I think it is quite open to the defenders to answer to this, that the governing principle laid down by Mr Beale is ‘mileage proportion, and that the reference to the rules of the clearing-house is only subordinate; and that, in any view, the rules of the clearing-house, when they prescribe that a through fare is to be divided so that each company shall receive ‘its full local fare,’ do not say (whatever they may imply) that in no case and under no circumstances is any company to receive more than its local fare. But Mr Grierson's award meets this answer, for it provides that the through fare shall be divided by giving each company its mileage proportion ‘ not exceeding’ … the local passenger fares.’

Mr Beale's award is not submitted in this action to the construction of the Court, but I may say (as I heard an argument upon it) that if it had, I should have held that it fixed mileage proportion as the principle of division, the reference to the clearing-house rules being merely for the purpose of settling where, when, and how that particular kind of division was to be effected, and its amount calculated and determined.

It is Mr Grierson's award that the pursuers seek to have the defenders ordained to implement; but they conclude that the defenders shall be ordained to implement it by concurring with the pursuers in instructing the clearing-house to divide the receipts in question by giving to each such part thereof ‘as shall be proportionate to the local fares charged by them ‘respectively.’ To such a decree I think the pursuers are not entitled on the facts averred by them. The pursuers ignore the fact that mileage proportion is as much an element in Mr Grierson's award as local fares. Indeed, according to Mr Grierson's award, mileage is the principle of division subject to the condition that the mileage proportion ‘shall not exceed’ the local fare. To give the pursuers decree as concluded for, would be giving them more than Mr Grierson has awarded; for it is not disputed that the division by mileage is more favourable for the defenders than the local fares if the latter are ascertained in a particular way.

I suggested, early in the course of the case, that the parties should go back with their difference to Mr Beale. The pursuers, however, declined to act upon the suggestion, although I understood the defenders were willing to adopt it.”

The pursuers reclaimed, and argued:— On the competency — The agreement provided that any dispute that arose as to its meaning should be referred to Mr Grierson. Mr Beale, as agreed, had decided this question as to the division of the passenger traffic receipts, and his award had become part of the agreement. When the joint-committee were divided in opinion as to its meaning, the whole matter was competently brought before Grierson as provided. Mr Grierson was now dead, so that no explanation could be got as to the meaning of his award, and the pursuers' only resource was to bring this action, but they were willing to refer the whole matter to Mr Wainright, as provided for in the agreement. The defenders had gone into the arbitration before Grierson, and although they protested at the beginning, they had taken part in the proceedings, and could not now say that they

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were incompetent, as it was really a question of the construction of the agreement. On the merits—The question was whether the moieties into which the sum arising from the through passenger traffic receipts were to be divided, were to be apportioned by mileage or by local passenger fares. Mr Grierson's award meant that each company was to get a sum not exceeding its own local fares, i.e., the sum was to be divided in proportion to the local fares, disregarding the mileage. That was the only fair mode. The through fare from Aberdeen to Inverness was 9s. 1 2d., If that was divided according to the proportion of local fares, the Highland Company got 4s. 7d., the Great North Company got 4s. 5 1 2d., whereas if it was divided by mileage, the Highland Company got only 2s. 10 1 2d., while the Great North got 6s. 2d.

The respondents argued—The reference to Grierson was incompetent. The Great North Company had protested against it, and had only gone on under protest. The question of how the moieties were to be divided had been settled by Beale in his award. He was the person appointed by the agreement to decide the question; he had done so, and there was no power to have his award reviewed by Grierson. Beale had decided that the division was to be upon the mileage principle. The Great North Company were willing to go back to Beale for explanation of his decision, but the Highland Company objected. Even under Grierson's award, read along with Beale's, the pursuers must fail, because although he specified the local fares, the principle still remained that the division was to be by mileage. The only local fare that could be charged was that on the defenders' line from Aberdeen to Elgin, and that was the only consistent way of dealing with the question, and the defenders did not seek to get more than their proportion of that local fare.”

At advising—