Scottish Court of Session Decisions

John Watson, Limited, coalmasters, made an application to the Railway and Canal Commission, inter alia, for an order declaring that certain “increased rates” on coal charged by the Caledonian Railway Company and the other Scottish railways were unreasonable. Similar applications were made by certain other coalmasters.

In the application at the instance of John Watson & Company, Limited, the Railway Companies applied to the ex officio Commissioner ( Lord Stormonth Darling) for a diligence to recover certain business books and other documents. The specification contained the following articles, besides certain other articles which were ultimately withdrawn—“(1) All books, accounts, abstracts, statements, reports, returns, and other documents or writings made or kept by or on behalf of the applicants or their predecessors in business from 1871, that excerpts may be taken therefrom for each of the years from 1871 to 1900 both inclusive, of all entries showing or tending to show—( a) The quantities of coal, coal nuts, coke, culm, gum, duff, peas, beans, dross nuts, or other descriptions of small coal or dross, and the different descriptions and qualities thereof, sold by the applicants or their said predecessors from each of their collieries and pits, and the prices (pit and otherwise) charged and received by the applicants and their said predecessors for such minerals. ( b) The quantities and prices of such minerals despatched from said collieries by the railways of the respondents, or any of them, as distinguished from the remainder of suchminerals, and by whom the railway rates and charges were borne and paid. (c) The quantities and prices of such minerals despatched to the stations and places set forth in the schedules to the application, as distinguished from the remainder of such minerals, and by whom the railway rates and charges were borne and paid; and ( d) The quantities and prices of such minerals despatched for shipment, as distinguished from the remainder of such minerals, and by whom the railway rates and charges were borne and paid. (2) All books, accounts, abstracts, statements, reports, returns, balance-sheets, and other documents or writings made or kept by or on behalf of the applicants or their predecessors in business from 1871, that excerpts may be taken therefrom for each of the years from 1871 to 1900, both inclusive, of all entries showing, or tending to show, the total expenditure, including lordships, royalties, wayleaves, oncost, and cost of working and raising the minerals incurred by the applicants or their said predecessors in carrying on their business as coalmasters at or from the collieries mentioned in the application, and in working, winning, and marketing their foresaid coal and other minerals. (3) All books, accounts, abstract,

Page: 591↓

statements, reports, returns, balance—sheets, and other documents or writings made or kept by or on behalf of the applicants or their predecessors in business from 1871, that excerpts may be taken therefrom for each of the years from 1871 to 1890, both inclusive, of all entries showing, or tending to show, the gross and net profits or losses of the applicants or their said predecessors accruing from their business as coalmasters carried on at or from their collieries mentioned in the application, and the appropriation of such profits.”

On 21st March 1901 the ex officio Commissioner refused the diligence.

Opinion.—“I have here to deal with a call for documents which confessedly raises a question of principle, and one of considerable importance to the proper working of section 1 of the Traffic Act of 1894. That section throws upon railway companies the onus of proving to the satisfaction of this Commission that the increase of any rate made by them since 31st December 1892 is reasonable, and there are certain well ascertained methods of doing so.

But I think it has never been recognised as among these methods for the railway company complained against to inquire into the business affairs of the trader complaining, into the volume of his trade, the cost at which he carries it on, or the profit which he makes on it. It would be very strange if considerations of that kind were held to he relevant, because railway rates are not fixed with reference to the poverty or riches of individual traders, but in order to yield a fair remuneration to the companies themselves for the services which they render. That is entirely consistent with Lord Selborne's view in The Canada Southern Railway case ( 8 App. Ca. 723), because when he speaks of examining a rate ‘with reference to the service rendered and the benefit to the person receiving that service,’ he is arguing against the notion of testing the reasonableness of a rate by the profits of the railway company, and assuredly he gives no countenance to the notion of testing it by the profits of the trader. I agree with Mr Justice (now Lord Justice) Collins, that ‘the reasonableness of the rate is not to be tried by its effect upon the trade of the persons who have to pay it, ( Rickett, Smith, & Company's case, 9 B. & M. at p. 114). Certainly if the condition of the trade in any particular class of goods is to any extent a legitimate subject of inquiry, that inquiry must be directed to the condition of the trade in general, and not to the profits or losses of any particular applicant.

It is of course a mere accident that these applicants produce an article which forms a large item in the expenditure of every railway company. An increase in the price of coal may form a most important consideration in judging whether an increase in a railway rate is justifiable. But the companies have in their own possession the proper means of proving that, and the proof of it will not be helped by the books of the applicants.

What the specification really does is to propose a searching examination, extending over years, into every detail of the business carried on by the applicants and their predecessons—their output, their prices, their cost of working, their capital expenditure, their profits or losses, and many other things. If such a process were applied to each of the applicants in this congeries of cases, I do not know when the inquiry would end. Even if relevant, such a call would be objectionable as being altogether out of proportion to the question in dispute. But it seems to me to be wholly irrelevant, and I therefore disallow the entire specification.”

The Railway Companies appealed, and limited their diligence to the years 1897–1900.

Argued for the appellants—It was admitted that under section 1 of the Rail way and Canal Traffic Act 1894 (quoted in rubric) the onus of proving that an increase in rates was reasonable lay on the railway companies, but there were two elements in deciding what was reasonable. These were (1) Did the railway require the increase? and (2) Could the trade bear it? To determine this last element the diligence was necessary. If the applicant could prove that the increase of rates would crush the industry, that would be a strong ground for declaring it unreasonable— Per Lord Selborne in Canada Southern Railway Company v. International Bridge Company, 1883, 8 App. Ca. 723, at p. 731. Conversely, it was an important point to show that the trade was earning large profits, and could easily pay the increased rates. No precedent could be shown for the diligence asked for, but the reason was, that such cases had hitherto arisen in England, and the English procedure as to discovery differed from the Scotch diligence. The decision in Reckitt, Smith, & Company v. Midland Railway Company, 1893, 9 Browne & Macnamara 107, was no authority against the proposed diligence.

Argued for the respondents—The diligence should not be granted, because the evidence sought to be obtained thereby would be irrelevant. If it was a question of profits, the books of all colliery owners would have to be examined, not those of one or two individual firms. It was not disputed that the trade could bear the rates, but that was not a relevant consideration in deciding whether the increase was reasonable— Reckitt, Smith, & Company v. Midland Railway Company, cit. supra; Smith & Forrest v. London and North Western Railway Company, May. 18, 1900 (not yet reported). The principle laid down in these cases was, that it was for the railways to show that they could not afford the service without the increase of rates. If they failed to do that, no amount of profit in the trade would make the increase reasonable.