Scottish Court of Session Decisions

The Courts (Emergency Powers) Act 1919 (9 and 10 Geo. V, cap. 64) enacts—Section 1—“(1) Section one of the Courts (Emergency Powers) Act 1917, which confers on the Court power to suspend and annul certain contracts shall have effect as if—( a) For subsection (1) thereof the following sub-section were substituted:—Where, upon an application by any party to a contract (including a contract confirmed by Act of Parliament or Order having the force of an Act) entered into before the first day of January Nineteen hundred and seventeen, the Court is satisfied that, owing to …, the alteration of trade conditions, occasioned by the present war, the contract cannot be enforced according to its terms without serious hardship, the Court may, after considering all the circumstances of the case and the position of all the parties to the contract and any offer which may have been made by any party for a variation of the contract, suspend or annul, or with the consent of the parties amend as from such date as the Court may think fit … the contract or any term thereof or any rights arising thereunder on such conditions (if any) as the Court may think fit. …”

The Greenock and Port Glasgow Tramways Company, applicants, brought an application under the Courts (Emergency Powers) Act 1919 (9 and 10 Geo. V, cap. 64) craving the Court to make an order suspending

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or annulling from such date as the Court should think fit the contract of lease under which the applicants ran certain tramways, in so far as concerned the provisions in clauses 13 and 14 of the lease which fixed maxima for fares chargeable by the applicants. The Corporation of Greenock appeared as respondents.

The application set forth—“That by the Greenock and Port-Glasgow Tramways Act 1887 (50 and 51 Vict. cap. clxxvii) the applicants were incorporated, and were empowered, inter alia, to construct and work certain tramways running from Greenock to Port-Glasgow and between other points in the district. By section 54 of the said Act the applicants were empowered to levy tolls or charges upon their tramways not exceeding 1d. per mile or fraction of a mile, provided that for any less distance than two miles any tolls or charges not exceeding 2d. might be charged. By section 61 of the said Act the applicants were obliged to run cars during certain hours for artisans, mechanics, and daily labourers at fares not exceeding one halfpenny per mile, the applicants nevertheless not being required to take any fare less than one penny. By section 66 of the said Act the Board of Police of Greenock were empowered to lease to the applicants the right of user of certain tramways constructed by them within the burgh of Greenock, under the powers of the Greenock Street Tramways Act 1871, and the right of demanding and taking the tolls and charges authorised by the said Act of 1871. By section 26 of the said Act of 1871 the Board of Police were empowered to levy tolls or charges, in respect of the tramways authorised by the said Act of 1871, not exceeding 1d. per mile (any fraction of a mile beyond an integral number of miles being deemed a mile), provided that for any less distance than three miles any sum not exceeding 3d. might be charged. Power was given by the said section to the Board of Trade under certain conditions to limit the sums chargeable in cases where for distances not exceeding two miles charges exceeding twopence were being made.

By section 22 of the Greenock and Port-Glasgow Tramways Act 1899 the applicants were authorised to accept and take from the Greenock Board of Police a lease or leases of any tramway owned by the Greenock Board on terms to be agreed, and subject to such terms to demand, take, and recover in respect of such tramway, tolls, fares, and charges, not exceeding the tolls, fares, and charges authorised to be taken upon such tramways by the Act or Provisional Order relating to or regulating the same.

By lease dated 14th and 15th May 1900 the Greenock Board set in lease to the applicants the right of user of the tramways belonging to them, situated in the burgh of Greenock for twenty-eight years from 15th May 1900. The Act relating to and regulating the said tramways is the foresaid Greenock Street Tramways Act 1871. By clause thirteenth of the said lease it was declared that it should not be lawful for the applicants to take or demand rates or charges exceeding one halfpenny for each half mile within the burgh of Greenock, nor to exceed threepence for the fare extending over the four-and-a-half miles within the burgh of Greenock. By clause fourteenth of the said lease the applicants bound themselves to run cars within the burgh of Greenock at certain hours for artisans, mechanics and male and female workers, at fares not exceeding one halfpenny per mile. By section 22 of the Greenock and Port-Glasgow Tramways (Extension) Order Confirmation Act 1902, the said lease was confirmed and made binding on the parties.

Owing to the alteration of trade conditions occasioned by the war there have been very large increases in the costs of both labour and materials required for the working of the said tramways. As regards labour—the wages paid for operating the tramways (excluding renewals) increased from £11,024 or 2.67d. per car mile in 1913 to £34,529 or 8.66d. per car mile in 1919, an increase of 213 per cent. For the current year the estimated wages at existing rates amount to £39,500 or 9.21d. per car mile—an increase of 259 per cent. Moreover, while wages have increased, the hours of labour have been greatly diminished. Further, at the present time additional increases in wages are being demanded by the tramway workers, who threaten to strike work, and so bring about a stoppage of the tramway services, unless further wage increases are made. As regards materials—the costs have increased as between 1913 on the one hand, and January 1920 on the other, by amounts varying (in percentages) from 150 per cent. to 335 per cent. Since January 1920 prices have continued to advance.

As against the foregoing increased costs there was during the war an increase in receipts brought about by the abnormal war conditions of the district. This has hitherto enabled the tramways to be operated without serious loss, but it is estimated that for the current year the receipts will show a decrease, and the working of the tramways a heavy loss.

Before making any provision for reserve or renewals the year 1913 showed a working balance of receipts over expenses of £21,379, representing 8 1 2 per cent. on the capital expenditure of the company. The year 1919 shows a similar balance of £15,464 representing 6.38 per cent. on capital expenditure. The cost of renewals, however, has enormously increased. The total amount set aside for reserve and renewals stood at £39,594 at 31st December 1918. The estimated annual sum required for renewals, additional to the income on the said £39,594 is £11,644. The annual interest payable on borrowed money amounts to £2355. There is therefore a charge of £13,999 against the said working balance of £15,464, leaving a free balance of £1465. The interest payable on the preference shares (£70,000) amounts to £3500 per annum. The ordinary share capital amounts to £115,000 and interest upon that sum at 6 per cent is £6900.

The estimated working balance for 1920, without allowing for any further increases in costs, is £7888. Taking the foregoing

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charges for renewals, interest on borrowed money and preference and ordinary share dividends into account, this shows a deficit for the year of £16,511.

In the circumstances thus existing which have been occasioned by the war, the contract contained in the foresaid lease, in so far as it restricts the fares chargeable by the applicants in terms of clauses 13 and 14 thereof, cannot be enforced without serious hardship. The tramways cannot be worked on the existing scale of fares except at a loss. Moreover, it is highly probable that further increases in costs will fall on the applicants, as appears, for instance, from the fact that the Corporation of Greenock have had under consideration for a considerable time the question of increasing the charges made by them to the applicants in respect of the supply of electric current required for operating the tram ways.

Having regard to the foregoing situation the applicants on 4th June 1919 addressed a letter to the Corporation of Greenock (who now represent the Greenock Police Board) in which they asked that the said lease should be revised so that the fare for ordinary passengers should be a penny per mile, and that on the cars provided for workmen the rate should be two miles for a penny. The proposals thus made were very moderate as at their date, and are now insufficient to protect the applicants from serious hardship, having regard to the increases in running costs which have since taken place and are likely to take place. Nevertheless the Corporation of Greenock have not given their assent to these proposals. A correspondence followed upon the applicants' said letter of 4th June 1919, but the Corporation neither made any proposals of their own nor accepted the applicants' proposals. On the contrary, on 12th February 1920 they finally intimated that apart from any reference to the Statutory Undertakings (Temporary Increase of Charges) Act 1918 they did not see their way to acquiesce in or give their consent to any increase of fares by the applicants in Greenock. The Act of Parliament to which they referred affords no relief from the terms of a contract such as the contract contained in the said lease. In these circumstances, the applicants are compelled to apply to your Lordships for an order under the Courts (Emergency Powers) Act 1919 suspending or annulling the terms of the said contract of lease in so far as contained in clauses 13 and 14 thereof.”