National Transport Co-operative Society Ltd v Attorney General of Jamaica
| Jurisdiction | UK Non-devolved |
| Judge | LORD NEUBERGER |
| Judgment Date | 26 November 2009 |
| Neutral Citation | [2009] UKPC 48 |
| Court | Privy Council |
| Docket Number | Appeal No 0017 of 2009 |
| Date | 26 November 2009 |
[2009] UKPC 48
Lord Phillips
Lord Rodger
Lord Walker
Lord Neuberger
Lord Collins
Privy Council
Appellant
Lord Anthony Gifford QC
Patrick Bailey
(Instructed by Finers Stephen Innocent)
Respondent
Richard Mahfood QC
Douglas Leys QC
(Instructed by Charles Russell LLP)
Introductory
This appeal is brought by the National Transport Co-operative Society Limited ("the Society") against a decision given on 9 May 2008 (with reasons provided a month later) by the Court of Appeal of Jamaica, dismissing an appeal brought by the Society against a decision given on 29 November 2004 by Brooks J, setting aside an award made by arbitrators on 2 October 2003 in relation to a dispute between the Society and the Government of Jamaica (acting through the Attorney General).
The Government, acting through the Minister of Public Utilities and Transport ("the Minister"), entered into two Franchise Agreements with the Society whereby the Society was permitted and required to provide public transportation services, through a specified number of buses of different capacities along identified routes within defined areas in and around Kingston for ten years at fare rates set out in a table. After the Government had unilaterally determined the agreements, there were arbitration proceedings to determine whether the Society was entitled to damages suffered as a result of the Government having failed to publish a new fare table which would have increased the level of permitted fares. Two lines of defence were raised by the Government which require to be considered on this appeal.
The first issue is whether the Franchise Agreements were enforceable at all. The Government contends that they were purportedly entered into pursuant to legislation with which they did not comply, and that they are therefore ineffective, and, indeed, that their operation would have been illegal by virtue of other legislation. The Judge, at the start of his judgment, described the Government's case on this first issue as "truly remarkable", and went on to describe it as follows "although the Minister … on behalf of the Government … entered into a Franchise Agreement with … the Society, and although the parties expended tens of millions of dollars each pursuant to the said agreement, and although the parties entered into a second agreement which recognised the existence of the Franchise Agreement, and although, upon the said Minister seeking to unilaterally terminate the Franchise Agreement, the parties agreed to have their differences settled by reference to arbitrators …, and although all of this was conducted in the glare of public scrutiny, nonetheless, say the lawyers [for the Attorney General on behalf of the Government], the Franchise Agreement was illegal, and of no effect, as the said Minister had no legal authority to contract as he did."
Despite his evident, and unsurprising, distaste for the Government's contention on this issue, the Judge concluded that he was constrained to accept it, and the Court of Appeal agreed. As to the second issue, the Judge also accepted the Government's case, and the Court of Appeal again agreed with him. That issue is whether, contrary to the arbitrators' conclusion, the "second agreement" referred to in the passage just quoted operated to discharge the Government's obligation under the Franchise Agreements, which the Society contended had been breached. There were other issues, in particular relating to mitigation, and the measure of damages awarded by the arbitrators, which were considered in the courts below, but they do not arise on this appeal.
The relevant factual background
The relevant facts are as follows. The poor quality of the public transportation system in the Kingston area caused the Ministry of Public Utilities and Transport ("the Ministry") to instigate in 1994 the Kingston Bus Rationalization Project (known as "the KBR Project"), which involved dividing the Kingston area into six zones. Five of those zones, the Northern, Portmore, Spanish Town, Papine, and City, were to be subject to an exclusive franchise for passenger bus services to be awarded pursuant to a bidding process. The sixth zone, the Common Area, which comprised, in effect, central Kingston, was to be open to all the successful franchisees.
The bidding process was initiated by a detailed "Invitation to Apply for an Exclusive Licence and Franchise" ("Invitation to Tender"), which included in Section 1 a description of the "New Regulatory Framework", and set out in Section 2 the "Scope of Services and Application Requirements", which included a summary of the new proposed fare structure, bus service routes, recommended operating practices and plans, including safety and training plans.
The Society was the successful bidder in respect of two of the zones, namely Northern and Portmore. Prior to the execution of the formal Franchise Agreements, the Government entered into a Memorandum of Understanding with the Society on 14 February 1995. Under this memorandum ("the 1995 MOU"), the Government undertook to provide a subsidy of $10 million in respect of each franchise zone "to offset some of the expenses to be incurred by the [Society] in commencing operations on 1 March 1995". The 1995 MOU also provided that there would be no fare increases before 31 March 1995.
Two Franchise Agreements, one in respect of Northern zone, and the other in respect of Portmore zone, but otherwise in identical terms, were duly entered into by the Government (acting through the Minister),
The Society's primary duty under the Franchise Agreements was to provide "public transport services" throughout the area covered by the agreement concerned, and it was plainly envisaged that this would be through the medium of buses, and "bus" was defined as "a vehicle satisfying the requirements of the Road Traffic Act as amended". By clause 5 of the Franchise Agreements, a specified annual fee per bus whose quantum depended on the capacity of the bus, $5,000 for a bus with the smallest seating capacity, was payable to the Authority. Each Franchise Agreement contained an annex which set out the specific routes which were to be covered and the number of "operational" and "spare" buses of various specified seat capacity which were to be initially provided both on an "all day" and on a "peak" basis.
The Franchise Agreements included, in clause 15, a requirement that "all buses and other equipment will be maintained and operated at all times in accordance with all applicable rules". It also included an obligation on the Society to "comply with all relevant road traffic enactments and applicable laws and regulations (including permits) for providing public transport services". Clause 15 also stated that the "granting of the franchise does not waive any applicable law or regulation". Clause 17 stated that the Society "will be appropriately licensed and authorised to perform the services required in the Franchise Agreement".
By virtue of section 16 of the Transport Authority Act ("the TA Act"), the Authority, subject to the approval of the Minister, had the power to set fares, and clause 32 of the Franchise Agreements was concerned with "Fare Structure and Fare Adjustment". By clause 32(a), the parties recorded that, even taking into account the $10m subsidy, they "appreciate[d] the inadequacy" of the current level of fares which was set out in a table in Appendix D. Of central relevance for present purposes, as it is the term which the Government is said to have breached, is clause 32(a) which provided that "a new fare table will be made available not later than April 30, 1995 to apply with effect from
Despite setting up a Commission to consider and prepare a new fare table, and receiving recommendations from that Commission, the Government failed to approve or publish such a table by 1 June 1995 or at all. The Society nonetheless continued to operate bus services in their franchise zones, as well as in the Central Area (as did the other three franchisees), charging fares based on the table set out in Appendix D. Meanwhile, meetings between representatives of the franchisees, the Authority, and the Government took place with a view to agreeing outstanding matters, which eventually led to the drawing up and executing of "Heads of Agreement" on 18 April 1996 (the so-called "second agreement"). This agreement began by referring to the meetings and stating that "the following agreements were reached on the matters indicated". There then followed eight paragraphs.
Paragraph 1 of the second agreement stated that the Government would give the Society $26.4m through the medium of the provision of buses on concessionary terms. This was duly done, at least to an extent. Paragraph 2 provided in some detail for further specific buses, at least some of which were provided. There was no paragraph 3. Paragraph 4 required the Government to provide the Society with a new depot at a "concessionary rental". This was never provided. Paragraph 5 stated that the Society would provide a new school bus service as described therein. By paragraph 6, the parties agreed "to cooperate in the design and scheduling of appropriate training programmes for drivers and conductors". Paragraph 7(a) allowed for an upward adjustment in fares based on increases in costs since February 1994. This increase took place with effect from 11 February 1996.
Paragraph 7(b)(i) of the second agreement stated that it was "agreed that the proposed new fare table will be reviewed and the computations revised" to reflect both "the concessions and assistance" accorded by the Government and increases in costs since the recommendations of the Committee appointed to...
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