Midland Great Western Railway of Ireland v Johnson and Another

• Jurisdiction: Ireland
• Judgment Date: 27 April 1858
• Date: 27 April 1858
• Court: House of Lords (Ireland)

English Reports Citation: 10 E.R. 1509

House of Lords

The Directors, etc. of the Midland Great Western Railway of Ireland

-Appellants

R. W. Johnson and T. W. Kinder

-Respondents

Mews' Dig. iv. 233; ix. 1294. S.C. 4 Jur. N.S. 643; 6 W.R. 510. As to contracts of trading corporations, see South of Ireland Colliery Co. v. Waddle, 1868-69, L.R. 3 C.P. 463; L.R. 4 C.P. 617.

Contract - Depreciation Fund - Mistake - Law and Equity - Corporation - Guarantie Fund.

MIDLAND GREAT WESTERN RY. OF IRELAND V. JOHNSON [1858] VI H.L.C., 799 The DIRECTORS, etc. of the MIDLAND GREAT WESTERN RAILWAY of IRELAND,-Appellants; R. W. JOHNSON and T. W. KINDER,-Respondents [April 16, 26, 27, 1858]. [Mews' Dig. iv. 233; ix. 1294. S.C. 4 Jur. N.S. 643; 6 W.R. 510. As to contracts of trading corporations, see South of Ireland Colliery Co. v. Waddle, 1868-69, L.R. 3 C.P. 463; L.R. 4 C.P. 617.] Contract-Depreciation Fund-Mistake-Law and Equity-Corporation- Guarantee Fund. Mistake as to a contract is a ground for equitable relief, but it must be a mistake in fact, not in law. Mutual mistake as to its construction will not entitle either party to relief in equity. Where the law has declared the construction of a contract, a court [799] of equity will not interfere to aid either of the parties merely on the ground of their own or their agents' dealings under it, for that would be to make a new contract, which can only be done by mutual consent, by persons properly authorised and in due form. If such dealings relate to a contract with an incorporated company, the new contract, like the old one, must be under seal. A. entered into a contract, under seal, with an incorporated railway company to do the haulage work of the company, and to keep in repair its rolling stock. He was likewise to' make new rolling stock, and out of the payments which should become due to him, a depreciation fund of five per cent, on the value of the stock as ascertained at the end of each year was to be formed; " and if the stock has diminished in value more than the allowed depreciation of five per cent., the contractor to pay the difference to the company; if it has increased in value, the company to pay the difference to the contractor." At law, it was held that the fund thus formed belonged to the company. The contractor did not impeach this decision at law, but filed a cause petition in equity, claiming to have this fund allotted to him; on the ground that while the contract continued in operation, the dealings between himself and the company's chief engineer, whose decision " on all and everything connected with the working of the contract, and the sums to be paid or deducted," was to be binding, without appeal, on both parties, had made monthly and annual calculations, in which the fund was treated as a mere guarantie fund, and had thereby induced him to go to larger expense than he should otherwise have incurred, in order to improve the rolling stock of the company: Held, that these circumstances did not establish any ground for equitable relief. This was an appeal against a Decretal Order of the Lord Chancellor of Ireland and against an order upon a rehearing affirming the same, by which his Lordship declared, " That the petitioners are entitled to be paid the sum of £3728 10s., being the difference between the sums retained by the Respondents on account of the guaranteed fund during the year ending the 31st of July 1853, and the amount of the depreciation of the working stock of the Respondents, as ascertained by valuation of their rolling stock, made in the month of August 1853." [800] The question arose upon articles of agreement, dated the 21st of February 1851, between the Respondents Johnson and Kinder, of the one part, and the Midland Great Western Railway of Ireland Company, of the other part, by which the Respondents undertook to work the rolling stock of the Appellants, and covenanted that they would keep in repair the locomotive engines and tenders, carriages, and waggons, of the company, of every nature and kind soever, and such stock as may be required for the conveyance of passengers, goods, cattle, and all other things connected with rolling stock and repairs thereof, on and over the line of railway of the company, from Dublin to Galway, at and subject to the several conditions and agreements hereinafter mentioned." The contract was to be for a term of five years, commencing promise, for if there had not been a consent to enter a nolle prosequi on the 8th count, the award of a venire de novo must have been affirmed. The Court, on this ground, refused the rule. 1509 VI H.L.C., 801 MIDLAND GREAT WESTERN RY. OF IRELAND V. JOHNSON [1858] from the day on which the contractors should be put into possession of the whole line of railway. The 5th clause of the agreement was, that " The contractors are to keep the rolling stock in good and perfect condition and efficient working order, to the satisfaction of the chief engineer, who shall be the sole judge thereof. The contractors will be allowed by the company, out of the five per cent, depreciation or reserved fund, the cost of the following articles when replaced new in engines and carriages." To this clause was appended a specification of the articles which were the subject of it. The 6th clause provided thus: " The contractors nevertheless to be subject to the following deductions, to be made monthly, on account of rolling stock, viz., at the rate of five per cent, per annum as interest, on the estimated value of the rolling stock at the commencement of this contract, consisting partly of engines and carriages which shall have been in use before the commencement of this contract, and which are to be taken at a valuation at the time of commencing this contract, and partly of new [801] engines and carriages to be furnished by the contractors at prices to be agreed on between them and the company, the cost price of which is to be added to the amount of the valuation above-mentioned for the purpose of calculating the interest thereon, and also a farther deduction of five per centi per annum payable monthly on the whole of the said estimated amount of the value of the rolling stock as a depreciation fund on the same. Either the company or the contractors to have power to call for a new joint valuation of the whole stock at the end of every year, and if the stock has diminished in value more than the allowed depreciation of five per cent., the contractors to pay the difference to the company; or if the plant or the stock has increased in value since the last valuation, the company to pay the difference to the contractors, less by any advances they may have made under the heads specified in clause 5." The 30th clause of the contract provided for an indemnity fund: " The contractors to deposit with the company, either in money or in rolling stock, the sum of £6000 as security for the repairs and depreciation of the whole of the plant and rolling stock in their hands; and the said sum is to remain in the company's hands until the completion of this contract, said contractors being allowed by the company interest on the same at the rate of five per cent, per annum." The 35th clause was, " That the decision of the chief engineer of the company upon all and everything connected with the working of the contract, and the sums to be paid to, or deducted from the contractors, shall at all times be final, and binding on both the contractors and the company without appeal." Possession of the stock was delivered, and the contractors began working on the 31st of July 1851, and on that day a valuation of the stock was made, amounting to £46,487. On the 31st of July 1852, the same stock was [802] valued at the sum of £44,750 6s., the amount of actual depreciation according to that valuation being £1736 14s. The depreciation fund of five per cent, which was agreed upon in the contract amounted to £3195 6s. 8d., and deducting the amount of the actual depreciation from the agreed five per cent, depreciation, the balance was £1458 12s. 8d. The sum of £1458 12s. 8d. was paid by the Appellants to the Respondents after the accounts had been certified by the Appellants' chief engineer; but the Appellants denied that it was paid on that account. There was contradictory evidence on this point. On the occasion of the first valuation the valuers differed, and Mr. John Viret Gooch was called in as arbitrator. Mr. Gooch stated the principles on which his award was made, and Mr. Hemans, the Appellants' chief engineer, thereupon wrote the following letter to the Respondents, dated the 29th October 1851: - " As the above-mentioned valuations entail a very heavy loss on the company, on comparison with the original cost of this rolling stock, it becomes my duty to see that the understanding come to between your Mr. Kinder, Mr. Gooch and myself, prior to the latter gentleman's award, be now carried out, namely, that the principle on which the valuation of the engines was arrived at on the valuation, should be adopted in all subsequent ones between you and the company; the principle I understand to be as follows: First, a mileage rate of depreciation fixed, and rateable on the number of miles run by the engines, regardless of their actual condition. Secondly, a mileage rate on the miles run by the engines, having reference to their actual condition, as to what it would cost to put them in thorough good working order. 1510 MIDLAND GREAT WESTERN RY. OF IRELAND V...