London Bus Services Ltd v Tramtrack Croydon Ltd

A contract specifying passenger capacity for fleet-size determination and tram design does not, without clearer wording, impose an ongoing obligation to prevent overcrowding during operation. A requirement that services continue to comply with accommodation limits maintains the initial design standard; it does not require the operator to adapt capacity whenever demand exceeds that standard. General obligations of good industry practice, safety, efficiency or passenger comfort cannot supply an omitted overcrowding term. Where the parties seek declarations on whether a capacity increase is a Service Change or a Service Parameters Change, the court should ordinarily await the contractual process of giving reasons, assessing anticipated effects, consulting and serving a formal notice. The issue should then be resolved in a concrete dispute rather than hypothetically.

London Bus Services Ltd sought declarations concerning responsibility for capacity enhancements under a long-term concession agreement for the Croydon tram system. The central issue was whether provisions concerning fleet size, tram capacity, design expansion and service levels imposed an ongoing contractual obligation to remedy overcrowding, and whether a capacity increase would be a Service Change or a Service Parameters Change.

The Commercial Court, per Tomlinson J, held that the relevant accommodation limits were design criteria rather than operational standards and expressed the view that a 33% capacity increase would involve a change to or outside the service parameters: [2006] EWHC 531 (Comm). London Bus Services Ltd appealed.

The Court of Appeal dismissed the appeal, save that it set aside the passages of the Commercial Court judgments which determined, as a matter of principle, whether capacity-enhancement measures would be a Service Change or a Service Parameters Change.

1. No ongoing overcrowding obligation. Longmore LJ, with whom Hallett LJ agreed, held that the capacity provisions were directed to design and fleet-size determination. In particular, the wording and structure of clause 3.11 of section 5 of the Performance Specification did not impose an obligation concerning the number of passengers permitted to stand at any given time or over a particular period. The provision allowing the system to accommodate a 33% increase in passenger capacity established a design capability, not an obligation to implement that increase whenever overcrowding occurred.
2. Service-level provisions. The requirement in section 9 that the service should continue to comply with accommodation limits and standards referred back to the initial design standards. It did not require the operator to adapt its rolling stock to meet excess demand. The absence of workable contractual criteria for identifying breach supported that construction, although Sedley LJ did not accept that the imprecision of overcrowding was a sufficient reason to reject expert determination.
3. General contractual obligations. Good Industry Practice, the Cardinal Requirements and the customer charter could not create an ongoing overcrowding obligation which the parties had not included expressly.
4. Hypothetical classification issue. The court declined to grant the newly formulated declaration on clause 25. The Corporation should first provide written reasons and anticipated effects, consult the Concessionaire, consider its representations and serve a formal notice under clause 25.3. The legal classification could then be determined in a real dispute. Sedley LJ additionally considered that an expert could determine whether overcrowding existed, but agreed that the agreement did not make it a determinant of contractual performance.

• Court of Appeal (Civil Division) — Appeal dismissed save to the extent indicated. The passages deciding the Service Change and Service Parameters Change issue were set aside: [2006] EWCA Civ 1743.
• High Court of Justice, Queen’s Bench Division, Commercial Court — Tomlinson J held that the accommodation provisions were design criteria, not operational standards, and expressed the view that capacity-enhancement measures would constitute a Service Parameters Change: [2006] EWHC 531 (Comm).