Scottish Court of Session Decisions

In February 1865 Mr John Taylor Gordon was sole partner of the firm of George Taylor & Company, coalmasters at Ann-bank in the county of Ayr, and tacksman of the pits at Enterkine, Sundrum, Gadgirth, and Blackhouse, which were respectively six, seven, eight, and two miles distant from Ayr. He entered into an agreement with the Glasgow and South-Western Railway Company for the carriage of coals to Ayr, Troon, and other places. The agreement provided—“ Fifth. The rates payable by the second party (Mr Gordon) to the first party (the railway company) on coal carried on the railways to be made under the authority of the said Act, from Enterkine, Sundrum, and adjacent coalfields to the harbour or other place of sale at Ayr shall be eightpence per ton; from these coalfields to the harbour at Troon, one shilling and fivepence per ton; and from Blackhouse to the harbour or other places of sale at Ayr, sixpence per ton. Sixth. To all other places than those above-named the rates on coal shall be as follows, namely—For distances not exceeding six miles, one penny half-penny per ton per mile; for distances exceeding six miles and not exceeding twenty-five miles, one penny half-penny per ton per mile for the first six miles, and one penny per ton per mile for the additional distance beyond six miles; for distances exceeding twenty-five miles, the above rates for the first twenty-five miles, and three farthings per ton per mile for the additional distance beyond twenty-five miles. The above distances shall be calculated at the actual distance from the junction of the second party's private railway with the main line: Provided and declaring always that in the event of the first party charging to any other coalmaster or coalmasters or other parties in the coal trade in competition with the second party rates lower than those fixed by this agreement, then the first party shall be bound to reduce the rates fixed by this and the preceding article to the rates given by them to the said competing parties, which reduced rate shall only continue, however, so long as the said reduced rate is given to said competing parties.”

The partners of the firm as now in right of this agreement raised this action against the railway company for declarator “that the defenders are not entitled to carry coals from coalfields farther distant from Ayr and Troon than the coalfields mentioned in article 5 of an agreement between the defenders of the first part and John Taylor

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Gordon, Esquire of Blackhouse, and then the sole partner of the pursuers' firm of the second part, dated 27th and 28th February 1865, at a lower rate per ton per mile than the pursuers pay under the said article without giving the pursuers a corresponding reduction; and the defenders ought and should be decerned and ordained by decree foresaid to make payment to the pursuers (first) of the sum of £25,386, 1s. 11d. sterling of principal, and (second) of the sum of £8348, 17s. of interest thereon, conform to state to be produced at the calling hereof, with interest at the rate of five per centum per annum on the said sum of £25,386, 1s. 11d. from the 31st day of December 1887, until payment.”

They averred—“(Cond. 4) The pursuers have been in the practice since 1874 of sending large quantities of coal and dross to Ayr and Troon by the defenders' line of railway, for which they have been charged the lump rates mentioned in article 5 of said agreement, conform to the detailed statements produced herewith. The whole of the rates paid by the pursuers, and of which they claim a rebate as after mentioned, were paid by them in ignorance of the fact that lower rates were being demanded from and paid by other traders. (Cond 5) The pursuers have recently discovered that since the beginning of 1874 the defenders have been charging other coalmasters, in competition with the pursuers, lower rates to Ayr than those fixed between the pursuers' firm and the defenders by the said agreement of 1865, or by the reduced scale granted in consequence of the issue of the Kilmarnock scale referred to in condescendence 8 hereof. In particular, the defenders have privately charged to the proprietors of the Lanemark Colliery, New Cumnock, for the carriage of their coal and dross from that colliery to Ayr harbour, a distance of twenty-three miles, the rate of 1s. 7d. per ton, while according to the scale in article 6 of said agreement it should have been 2s. 2d. per ton. (Cond. 7) A corresponding reduction in favour of the pursuers to the said rate so given to Lanemark Colliery to Ayr would entitle the pursuers to have their said rate of 8d. per ton to Ayr, which they were charged by and paid to the defenders, reduced to 5 11 13d. per ton, so as to make it bear the same relation to 8d. which the Lanemark rate bears to the rate they should have been charged. The pursuers are therefore entitled to a rebate of 2 2 13d. per ton on all the coal and dross carried for them by the defenders to Ayr, from the beginning of 1874 down to 31st December 1887, and which amounts, on the quantity of 2,526,425 tons so carried, to the sum of £22,673, 0s. 11d., conform to the detailed statement No. 1 herewith produced. (Cond. 8) If the pursuers are not entitled to a reduction on their lump rate as fixed under article 5 of the said agreement, but are bound to apply a rate calculated according to the mileage distance of their respective pits from the harbour of Ayr, in that case the pursuers contend that they are not restricted to the schedule rates in article 6 of said agreement, but are entitled to fall back upon another scale granted by the defenders, which, for the purpose of comparison according to mileage, is more favourable to the pursuers. Since 1874 the defenders have, by agreement and otherwise, charged various traders in competition with the pursuers in the Kilmarnock districts according to a scale known as the Kilmarnock scale, which is lower than the scale in article 6 of said agreement, and to all other places than Ayr and Troon, notwithstanding the scale in said article 6, the pursuers have had the benefit of it. According to the Kilmarnock scale, the rates are as follows:—When carried six miles or under, the sum of 7 1 2d. per ton; when carried any distance above six miles, and not exceeding sixteen, the sum of 1 1 4d. 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 3 4d. 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 1 2d. per ton per mile. According to this scale, the rate for Lanemark Colliery to Ayr would be 2s. 11 4d.; while, as previously stated, the actual rate charged to Lanemark was only 1s. 7d., being a difference of 6 1 4d. The rates for the pursuers' pits, under the Kilmarnock scale, according to their respective distances from Ayr (which are approximately correct as stated by the defenders), are 7 1 2d., 8 3 4d., and 10d., which, being reduced in the proportion of 25 1 4 to 19, become 5 65 101, 6 59 101, and 7 53 101 and the sum claimed as rebate upon the quantities carried amounts to £18,285, 13s. 1d., conform to detailed statement No. 3 herewith produced. (Cond. 11) If the defenders are not due and restingowing to the pursuers the rebate as specified and calculated in the preceding articles, the pursuers aver that the defenders are due and resting-owing to them a rebate on the said coal and dross carried for them by the defenders to Ayr, from the beginning of 1874 to the end of 1887, calculated as follows, viz.—The distance from Lanemark to Ayr harbour is twenty-three miles. From 1874 to 1887 the defenders have charged the proprietors of Lanemark Colliery for the carriage of their coal and dross from that colliery to Ayr harbour at the rate of 1s. 7d. per ton, or 19 23d. per ton per mile. The pursuers' pits are severally distant from Ayr harbour six, seven, and eight miles, and during the said period the defenders have charged the pursuers for the carriage of their coal and dross the rate of 8d. per ton, or 1 1 3d. per ton per mile in the case of the six mile pits,1 1 7d. per ton per mile in the case of the seven mile pits, and 1d. per ton per mile in the case of the eight mile pits. The pursuers were thus, as compared with Lanemark, overcharged on said coal and dross sent to Ayr from their six mile pits at the rate of 3 1 23d. per ton, from their seven mile pits at the rate of 2 5 23d. per ton, and from their eight mile pits at the rate of 1 9 23d. per ton. The sum

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due and resting-owing to the pursuers by the defenders in respect of said overcharge amounts to £26,311,14s. 9d.”

The pursuers pleaded—“(1) On a sound construction of the agreement libelled upon the pursuers are entitled to decree in terms of the declaratory conclusions of the summons.”

The defenders pleaded—“(2) The pursuers' averments are not relevant to support the conclusions of the summons.”

Upon 30th January 1891 the Lord Ordinary sustained the defenders' plea and dismissed the action.

“ Opinion.—In this action the pursuers, who are a firm of coalmasters in Ayrshire, seek to recover from the defenders, the Glasgow and South-Western Railway Company, certain alleged overcharges for the carriage of coal, the said overcharges extending over the period since 1874, and amounting in gross to upwards of £25,000. The claim is based upon the provisions of a certain agreement made in the year 1865, between the defenders and the pursuers' late partner and author, Mr John Taylor Gordon, and according to the pursuers it is a claim analogous to that sustained by this Court and the House of Lords against the same defenders, in the case of Mackinnon v. The Glasgow and South-Western Railway Company, 12 R. 1309, and 13 R. (H. of L.) 89.

The agreement in question was made between the defenders and the late Mr Taylor Gordon, in consideration—as I think sufficiently appears—of the latter supporting a certain railway bill which the defenders were at the time promoting, and in consideration also of Mr Gordon undertaking to send along the proposed line of railway the whole traffic from his pits in the vicinity of Ayr. It is an agreement which contained a variety of provisions, and conferred various privileges on Mr Taylor Gordon, but in the view I take of the case it is only necessary to refer to those provisions which directly bear on the alleged overcharges. The other provisions are important as bearing on the question of the pursuers' title to sue, but that is a question which I do not find it necessary to decide.

The provisions in question are contained in the fifth and sixth clauses, both quoted at length in the record.

The fifth clause applied to traffic with Ayr and Troon, and the rates which it provided were lump-rates—that is to say, the defenders undertook to carry Mr Gordon's coal from his pits at Enterkine, Sundrum. and adjacent coalfields, to the town and harbour of Ayr at a lump-rate of 8d. per ton; from these coalfields to Troon at a lump-rate of 1s. 5d. per ton; and from Blackhouse to the town and harbour of Ayr at a lump-rate of 6d. per ton.

The sixth clause applied to traffic to all other places than Ayr and Troon, and its rates were fixed on a different principle, viz., that of a mileage rate graduated according to distance, the lower distances being charged a higher and the longer distances a lower rate per ton per mile. It is not necessary to recite the particular charges, but at the end of the clause occurs the following provision, out of which the present question arises—‘Provided and declaring always that in the event of the first party charging to any other coalmaster or coalmasters or other parties in the coal trade in competition with the second party rates lower than those fixed by this agreement, then the first party shall be bound to reduce the rates fixed by this and the preceding article to the rates given by them to the said competing parties, which reduced rate shall only continue, however, so long as the said reduced rate is given to said competing parties.’

It is not disputed that this proviso falls to be read as applying both to clauses 5 and 6, that is to say, both to Ayr and Troon traffic on the one hand, and to general traffic on the other. Nor is it disputed that for the purposes of the present question its effect is the same as if at the end of article 5 there had been added a declaration that in the event of the railway company charging to any competing coalmasters rates lower than those fixed by article 5, the railway company should be bound to reduce the rates fixed by article 5 to the rates so charged to the said competing coalmasters.

The question at the present stage is whether the pursuers have relevantly averred that a certain rate charged to a certain competing coalmaster — viz., the Lanemark Coal Company, for the carriage of coal to Ayr is a lower rate than the rate or rates to Ayr charged to the pursuers under the said fifth article. That is to say, the question is, whether what is averred on record with respect to the Lanemark rate, stamps it as being in the sense of the agreement a lower rate than the pursuers' rates under article 5. I have come to be of opinion that this question must be answered in the negative.

The facts which have to be kept in view, I think, are these—The pursuers' pits at Enterkine, Sundrum, and Gadgirth, to which the 8d. rate applies, are situated at varying distances from Ayr and Ayr Harbour, the distances being, as is admitted, respectively six, seven, and eight miles. The distance from Blackhouse to Ayr, the rate for which is 6d., is not set out on record, but the map produced shows it to be about two miles or perhaps less. The distance from Lanemark Colliery to Ayr Harbour is on the other hand said to be twenty-three miles, and the rate charged to the Lanemark Company is said to be 1s. 7d. per ton. It is not necessary in the meantime to go into the figures with respect to Troon traffic, except perhaps to say that the distances from the pursuers' pits to Troon range from fourteen to sixteen miles.

In this state of the facts, one thing is at the outset clear, viz.—that the Lanemark rate to Ayr is not absolutely lower than the agreement rate. It (the Lanemark rate) is 1s. 7d., while the highest agreement rate is 8d. I do not, of course, suggest that this is conclusive. On the

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contrary, I quite see the difficulty of holding that when the agreement speaks of ‘lower rates’ it means rates absolutely lower than the agreement rates. For one thing the agreement has for Ayr traffic not one, but two rates, viz.—8d. for Enterkine, and 6d. for Blackhouse, and if the question were one of absolute rates, the inquiry would always be, which of the two was the rate to be compared? It is not, however, necessary to consider how far this difficulty is insuperable. It is enough to note that in whatever other sense the Lanemark rate may be lower than the agreement rate it is not and cannot be said to be lower absolutely.

The point therefore really is, whether the Lanemark rate is relatively lower than the agreement rate, or rather the agreement rates. And this involves the question whether the pursuers have been able to point to any common standard of comparison applicable to both rates, and tested by which the Lanemark rate is lower than the agreement rates. After the best consideration I have been able to give to the pursuers' record, I am of opinion that they have failed to set forth any such common standard of comparison; that is to say, that they have failed to indicate any scale or standard capable of being applied to the two rates in contrast and capable of being so applied consistently with the true construction of the agreement.

Their first suggestion is that the two rates fall to be compared simply according to mileage; that is to say, they suggest that the agreement lump-rate of 8d. falls to be broken up into as many rates as there are pits at different distances within the defined district, and that the rate per mile being for each pit thus ascertained, that rate falls for each pit to be compared with the Lanemark rate (1s. 7d. for 23 miles), which is equal to of a penny per mile. The result is to exhibit the Lanemark rate as lower relatively than any of the agreement rates, the latter being in the case of the eight mile pits, 1d. per ton per mile; in the case of the seven mile pits, 1 1 7d.; in the case of the six mile pits, 1 1 6d.; and in the case of Blackhouse (which is close to Ayr), about 3d. per ton per mile.

In my opinion this method of calculation is illegitimate. A simple mileage standard is not, in my opinion, applicable to the pursuers' rates under article 5. It cannot, I think, be held that the parties to the agreement intended that the rates under article 5 should be judged by such a standard. Nothing seems plainer than that the rates in question were fixed altogether irrespective of mileage. The 8d. rate applies equally whether the pits are distant eight miles or seven miles or six miles, and would equally apply if pits were opened within the district mentioned, ten miles or twelve miles from Ayr. Moreover, the 6d. (Blackhouse) rate is, judged by mileage, about three times higher than the 8d. rate, and altogether it is quite obvious that article 5 proceeded on the principle first (as between the 8d. and 6d. rates) of charging higher rates per mile for short distances than for long; and next (as among the various pits within the Enterkine and Sundrum district) of ignoring mileage altogether. How in these circumstances it can be predicated that the Lanemark rate being 19 23rds. of a penny per mile for twenty-three miles is a lower rate in the sense of the agreement than either or both of the pursuers' rates under article 5, I do not understand. It is impossible to say what would have been the agreement rate for twenty-three miles had the pursuers' district extended to that radius. Judged by the difference between the two rates stipulated, it is quite possible that for so long a distance the rate would have been quite as low as the Lanemark rate.

In point of fact (apart from the difficulty of at all breaking up lump rates into mileage rates, and apart also from the difficulty that, when so broken up, the result is not one but several mileage rates) the pursuers' contention involves, as it seems to me, this cardinal absurdity. It assumes that rates for long distances were, according to the intention of the parties to this agreement, to be charged for at the same rate per mile as short distances. But this is contrary to all practice and all experience, and the absurdity is well illustrated by taking the 6d. rate from Blackhouse and applying the pursuers' principle to that rate. The result would be that because Lanemark (twenty-three miles) gets a rate of 1s. 7d., the Blackhouse rate (two miles) would have to be reduced from 6d. to something like 1 1 2d. in gross, or 3 1 4. per ton per mile, notwithstanding that for distances under six miles, the minimum rate shown on any of the tables or scales produced is 1 1 4d. per ton per mile.

It appeared to be thought that the adoption of a simple mileage standard receives support from the case of Mackinnon. That, however, is not so. The pursuers in that case were themselves charged according to a mileage scale graduated according to distance, and there was no difficulty in applying that scale, both to the pursuers' traffic and to the traffic of the competing traders who were said to have got lower rates; Accordingly, what was there done was first to compare the lower rate complained of with the rate which according to the graduated mileage scale, was the appropriate rate, and then to reduce the pursuers' rate proportionately to the difference between the appropriate rate and the actual rate charged to the competing traders. This method was obviously legitimate, and made full allowance for the diminution of the mileage rate according to distance and accordingly all that was struck at in Mackinnon's case was an undue diminution in the mileage rate, which the difference in distance did not justify. There was no suggestion in that case of a simple mileage standard such as is suggested here. The question was between rates absolutely lower, and rates relatively lower according to a prescribed and graduated mileage scale; and what the Court held was only this, that where ‘lower rates’ are mentioned in an

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agreement for rates fixed according to mileage, the reference is not to rates absolutely lower, but rates relatively lower according to the prescribed mileage standard.

I reject, therefore, as quite inadmissible the pursuers' first standard of comparison. But, apparently conscious of the difficulties which I have pointed out, the pursuers have on record suggested two other standards of comparison in the shape of two graduated scales or schedules which they find in force on the defenders' system, and by means of which they seek to perform the same comparison as was properly and successfully performed in the case of Mackinnon.

The first of these scales or schedules they find in article 6 of this very agreement, and if that schedule had been applicable to Ayr traffic, and had been the schedule under which the pursuers' traffic here in question was charged, the reference would have been no doubt legitimate. But the conclusive answer, I think, is that the schedule in the 6th article is expressly confined to traffic to places other than Ayr and Troon, while both the Lanemark traffic and the pursuers' traffic is traffic to Ayr. The schedule in question therefore cannot possibly form a standard of comparison between the pursuers' and the Lanemark Company's traffic to Ayr. It not only does not apply to both—it does not apply to either. Moreover, it is a schedule by which it would be quite unfair to judge the pursuers' rates; for this reason if for no other, that it starts on a higher scale than the pursuers' rates—I mean those under article 5. The pursuers' 8d. rate under article 5 would, under the schedule in article 6, have been 9d., 10d., and 11d., according to the distances from Ayr of the respective pits. To say therefore that the Lanemark rate is lower than the schedule rate in article 6, is by no means to say that the Lanemark rate is lower than the pursuers' rate. The pursuers' rate is also lower than the schedule rate. But yet this is really what the pursuers' second method of calculation comes to. The matter is perhaps a little complex; but so soon as it is understood, the fallacy is I think apparent.

The second schedule or scale, to which the pursuers appeal, is in my opinion, even more obviously inadmissible. It is a scale or schedule fixed under a totally different and subsequent agreement—viz., an agreement, dated in 1875, with a number of coalmasters in the Kilmarnock district, not including either the pursuers or the Lanemark Company. To that agreement there is a schedule of rates appended, graduated according to distance; and the pursuers' suggestion is that, because the Lanemark rate is lower than the rate fixed by that schedule for the Lanemark distance (twenty-three miles), it (the Lanemark rate), is therefore lower than the rate charged to the pursuers under article 5 of the pursuers' agreement. I confess I am quite unable to understand how this follows; or indeed, how this Kilmarnock agreement can in any way be a medium of comparison as between the pursuers and the Lanemark Company. In point of fact the rates in the Kilmarnock scale bear no sort of relation to the rates under the pursuers' agreement, and in particular to the rates under article 5. They are in one case (that of the six-mile pit) fractionally lower, but in all other cases they are considerably higher; and therefore, to say that the Lanemark rate is lower than the Kilmarnock rate for the same distance is really, it seems to me, to say what has no possible bearing on the question.

I therefore find that the pursuers have failed to set out any facts or figures which imply or enable me to affirm that the Lanemark rate is lower than all or any of the pursuers' rates under article 5. And this is tantamount to saying that the pursuers have not stated a relevant case, and that their action must be thrown out. I have not found it necessary to decide—and indeed it is impossible to do so by anticipation—what exactly the agreement means when it speaks of lower rates. It may be that in some future case rates may come into controversy, the amounts and conditions of which may make it possible, or even easy to affirm that they are lower than the agreement rates. But for the purposes of the present case it is, I think, enough that the Lanemark rate complained of is not shown to be a lower rate in the sense of the agreement, assuming everything to be true which the pursuers aver.

I have said nothing as to the minor question, as to the Galston rate to Troon Harbour. The same reasoning applies mutatis mutandis.

Neither have I said anything as to the pursuers' title to sue. I assume their title, at least as regards the period subsequent to 1877. Indeed, I incline to be of opinion that the agreement is one which it was intended should be assignable to Mr Gordon's successors in the collieries, and which was therefore well assigned to the present firm by the contract of copartnery. But it is not necessary to decide those points or either of them. I find the action irrelevant on its merits, and dismiss it with expenses.”

The pursuers reclaimed, and argued—The Lord Ordinary was wrong in thinking that the pursuers had produced no standard by which the two rates could be tested. The case was peculiar in this way, that it was the first time two lump sums charged as rates for the carriage of coals had to be compared. The pursuers, however, reduced both the lump sums to a mileage rate, taking into account the length of the distance sum, and the actual amount paid per ton. When this was done it was found that the Lanemark Company paid a smaller rate per ton per mile than the pursuers did under the agreement, therefore the railway company were bound to reduce their rates so as to be equal to the Lanemark Coal Company's rates. The case was therefore entirely within Mackinnon's case. The distance could be taken into calculation only for ascertaining what was the rate per ton per mile paid in the lump sum. Mackinnon's

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case had decided that the giving of distance meant the giving of money. It might be that in the proof, which was all that was now sought, the defenders might be able to show that in calculating the rate per ton per mile, which was afterwards averaged into a lump sum, they had gone upon the principle of giving a lessening rate as the distance increased, but it was not necessary for the pursuers to aver that, it was for the defenders to prove it. The pursuers had only to aver that the rate per ton per mile charged to any other coalmaster carrying his goods to the same destination was lower than the rate paid by the pursuer. If this was not so, the railway company could neutralise the natural advantage obtained by the pursuers' position near a shipping port, and favour the Lanemark Company to their disadvantage. If that plan was not satisfactory, then the pursuers were willing to have the two sums reduced to mileage, and tested by what was called the Kilmarnock scale, which was a very general scale, but even under that the defenders were liable in a large sum— Mackinnon v. Glasgow and South-Western Railway Company, July 15, 1885, 12 R. 1309; Dalmellington Iron Company, Limited v. Glasgow and South-Western Railway Company, February 26, 1889, 16 R. 523.

The respondents argued—This case did not fall under the principle of Mackinnon's case at all. The pursuers here agreed to have their coals carried for a certain distance, a varying distance for a certain lump sum—that was the bargain; but they now brought an action against the railway company, and asked to have their lump rate turned into a mileage rate. It was impossible to compare the pursuers' lump rate and the Lanemark lump rate; they had been arranged for with all the varying accessories which went to the making up of a lump rate. The reason of the difference was that the Lanemark rate was a rate for a long distance, while the pursuers' rate was for a short distance, and the only way in which this equality clause could come into operation was where the distances, the rates for which were to be compared, might reasonably be considered the same. The pursuers ignored the question of the distance altogether, but that question could not be put out of sight as it was plain that the rates for a long and a short distance might be different, the amount for labour and haulage being plainly very different. The pursuers had no averment that they would calculate the rate according to a graduated scale, all that they asked for was to find the rate per ton per mile paid by each company, and if by that rough division it was found the pursuers paid more per mile than another company the rate was to be reduced to them. There was also no averment as to the Kilmarnock scale, and the pursuers were not within the limits to which that scale applied. The defenders withdrew the plea of no title to sue, to which the Lord Ordinary referred.

At advising—