Langloan Iron and Chemical Company, Ltd v Lord Advocate (on Behalf of Ministry of Munitions)

JurisdictionEngland & Wales
JudgeViscount Haldane,Viscount Cave,Viscount Finlay,Lord Wrenbury
Judgment Date14 July 1922
Judgment citation (vLex)[1922] UKHL J0714-3
Date14 July 1922
CourtHouse of Lords

[1922] UKHL J0714-3

House of Lords

Viscount Haldane.

Viscount Cave.

Viscount Finlay.

Lord Dunedin.

Lord Wrenbury.

The Langloan Iron and Chemical Company, Ltd.
and
The Lord Advocate (on Behalf of the Ministry of Munitions).
Viscount Haldane .

My Lords,

1

The question which arises in this Appeal turns on the construction of an agreement forming one of a set of four. The first of this set of agreements was dated 29th March 1916, and was made between the Ministry of Munitions and the Scottish Ironmasters' Association. It was expressed to be relative to rebates in connection with hematite pig iron. The Association agreed that there should be a uniform price of 6 l. 2 s. 6 d. per ton for hematite pig iron. In consideration of this the Ministry of Munitions undertook to provide for certain advantages to the ironmasters, the nature of which has given rise to the dispute in the case, concerned with the freight to be paid for the carriage of the ore used and of Welsh limestone. The second of the agreements was made between the same parties and was of the same date. It related, not to hematite pig iron but to forge or foundry pig iron, and we are concerned with it only incidentally. The third of the agreements was made again between the same parties, but was dated 29th November 1916. It was supplementary to the earlier agreements, and continued their operation and provided for certain cases of rise in prices of foreign ore and of drop in the rate of freight. The last of the agreements was dated 29th May 1918. It also continued the operation of the earlier agreements and made certain variations on the earlier provisions, and is incidentally but only incidentally material to the question in the Appeal.

2

My Lords, the point to be determined turns primarily on the language of the first of these agreements. The circumstances out of which the dispute arose were these. The cases in which the maximum price of 6 l. 2 s. 6 d. was to govern were confined by that agreement to prices under contracts made between 8th March and 30th June 1916, and the ironmasters had agreed not to sell forward excepting at the stipulated price. Claims were made based on the tonnage output of hematite pig iron sold or contracted to be sold subsequent to 8th March 1916. Payments on account of these claims appear to have been made from time to time, but no final settlement was ever made. The action out of which the Appeal arises was brought to recover against the Government the balance of the claims. The matter in issue is that the Respondent maintains that these claims are excessive in so far as they are based on an amount of hematite pig iron for the production of which only a proportion of imported ore was used, the balance of the material employed being made up of already manufactured steel in the form of waste steel turnings, derived from the production of shells, mixed in with the ore in the Appellants' furnaces. It is common ground that a substantial proportion, possibly 20 per cent., of the material employed for the production of the hematite pig iron in question consisted of such shell turnings, which the Appellants purchased from the Government. The Respondent does not suggest that the agreements excluded the ironmasters from using these steel turnings as they did, or that the hematite pig iron produced by using them was not worth the maximum selling price fixed. What he says is that the Appellants are not entitled to have made good to them the cost of excess freight, or the increased cost of foreign ore, excepting where such excess cost was actually incurred. He contends that where the iron has in point of fact been produced from material other than foreign ore, such as, for instance, the shell turnings, and the excess charges specified have consequently not been incurred, the stipulated subsidies are not applicable, and are not chargeable under the agreements. The Appellants on the other hand claim that the payments stipulated for are not in the nature of mere indemnity against excessive freight or charges, but are of the character of an extra payment made to secure sales of the iron at the stipulated maximum price, whether such material as the turnings has or has not been used.

3

My Lords, as I have said this appears to be just a question of interpretation of the terms of the agreements, and particularly of the first of them. To this agreement I therefore turn.

4

The title of this first agreement describes it as one relative to pig iron rebates. Clause 1 states that the ironmasters protest that their standard maximum price would require to be 6 l. 14 s. per ton in order to put them on the same level as the East Coast makers, who have a maximum of 6 l. 2 s. 6 d. But so as to meet the views of the Ministry they agree that there should be the specified latter maximum price for hematite pig iron, subject to the Ministry making the arrangements in that agreement with regard to the supply of ore and limestone. This maximum price to be charged under all new contracts to be entered into between 8th March and 30th June 1916. All earlier contracts are to be unaffected; and the ironmasters will not during the named period sell forward for delivery after 30th June, except at the specified maximum price or such other price as the Ministry may sanction.

5

In consideration of this arrangement the Ministry undertakes:—

"( a) that the freight paid by the ironmasters for the carriage of all ore used in the production of hematite pig iron contracted to be sold after 8th March 1916, at the price of 6 l. 2 s. 6 d., shall not exceed 17 s. per ton Bilbao, f.o.t. Scottish ports, with parities for other ports," as stated in a certain schedule or to be subsequently adjusted,"the Ministry's representative shall deal direct with the shipowners in respect of any claim for demurrage."

6

My Lords, pausing at this clause it appears to me that so far in the agreement, the compensation for freight in excess of 17s, a ton is to be given only in respect of the ore actually "used" in the production of the iron contracted to be sold. If so, actually used ore is the subject of the agreement. But it may be that this primâ facie impression of the scope of the agreement must yield to the scheme disclosed in the subsequent clauses, and I am far from thinking the question to be one free from difficulty. The next head is as follows:—

"( b) To repay to the ironmasters the difference between what may be ascertained to be the average freight paid by each ironmaster for the conveyance of Welsh limestone to Scottish ports during the six months ending 31st July 1914, and the average freight paid by him during each month in the period from 8th March to 30th June 1916 on the tonnage of limestone as stated in the following paragraph, as used in the production of hematite pig iron, contracted to be sold during the last-mentioned period at 6 l. 2 s 6 d. per ton."

7

My Lords, the question before us relates only to the freight on imported ore, and not to that on limestone. The latter substance has to be used by the ironmasters in the production of iron. But it does not require to be imported and it is put on a footing of its own. The relevant feature in this head is simply that it bears out the view of the scope of the agreement as directed to material actually "used" in production for fulfilment of contracts.

8

The head which follows the one just quoted from the agreement gives rise to some difficulty. It is in these terms:—

"( c) For the purpose of ascertaining the quantity of ore and limestone on which the ironmaster is entitled to repayment, two tons of ore and 10 cwts. of limestone shall be allowed for each ton of hematite pig iron sold at the maximum price of 6 l. 2 s. 6 d. per ton. The rate of excess freight on ore shall be the difference between 17 s. per ton from Bilbao, with parities as above, and the average freight paid during each month under freight contracts entered into subsequent to 8th March 1916."

9

It is said for the Appellants that here there is no reference to the proportions on which the payment from the Government is to depend being proportions between the ore actually imported and the ore sold, but that a purely conventional proportion is adopted as the basis of calculation based on pig iron sold and that exclusively. It is said to bo agreed accordingly that the circumstance of some steel turnings having been used in providing the iron sold, can make no difference. All that is to be looked at in determining the basis of payment is the quantity of iron sold. Once ascertain this and it follows under the contract made that the ironmaster is entitled to repayment of freight on ore and limestone, here put on the same footing, on the artificial basis of two tons of the ore and 10 cwts. of the other being allowed, whether fully used or not.

10

My Lords, it is not without some hesitation that I have arrived at the conclusion that such a construction cannot prevail. In the clause to which I shall refer in a moment there are words which afford still further foundation for it. But I think that in the language employed in both clauses the generality of the wording must be taken as subject to the scope of the agreement read as a whole, and that this points to ore and limestone actually employed as what alone the agreement deals with.

11

Proceeding to the next clause, it is in these terms:—

"( d) The ironmaster shall be entitled to payment of the excess freight on ore and limestone in respect of hematite pig iron contracted to be sold by him during the period of the agreement at the maximum price of 6 l. 2 s. 6d., although such iron is not delivered and such ore and limestone is not brought in until after the expiration of the agreement."

12

My Lords, here again we have words used which, if they could be taken in isolation, would be at all events consistent with the Appellants'...

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