27/11/2009 - Privy Council rules that ultra vires act takes effect as lesser intra vires act 

National Transport Co-operative Society v AG of Jamaica [2009] UKPC 48 concerned a licence issued by the Jamaican Government to the appellant ("NTCS") in 1995, purporting to grant NTCS a10-year right exclusively to operate bus services in certain parts of the Kingston area. The licence included a term under which the Government promised by a certain date to introduce a new fare table that would allow NTCS to charge higher fares that would enable it to make a reasonable profit from providing the service. The Government breached its promise and NTCS successfully claimed over $4 billion in damages from the Government in an arbitration award delivered in 2003.

The Government challenged the arbitration award on the grounds that the issue of licence had been ultra vires because the licence failed to comply with the terms of the statute under the authority of which it had been issued, the Public Passenger Transport (Corporate Area) Act ("PPT Act"). The argument had certain unattractive features: it required the Government to rely on its own failure to ensure that it was acting within its power, it had first been raised at a late stage in the arbitration, and it had been raised despite the fact that NTCS had been providing bus services under the licence for several years in good faith without the Government ever suggesting that the licence had been issued ultra vires.

Brooks J at first instance and the Court of Appeal nevertheless found for the Government. NTCS's appeal to the Privy Council was allowed. The Board (whose advice was delivered by Lord Neuberger) agreed with the judges below that the licence had been outside the terms of the PPT Act but went on to hold that the licence should be treated as valid to the extent that a licence could have been issued intra vires. Since the Government could properly have issued a non-exclusive 3-year licence under its more general powers in the Road Traffic Act, the licence would be treated as though it had been issued in accordance with that Act and therefore (despite its terms) took effect as a 3-year non-exclusive licence.

The Board also found for NTCS on a second issue as to whether the parties had agreed in 1996 to postpone the implementation of the new fare table, on the grounds that the Heads of Agreement reached in 1996 were too uncertain to be enforceable.

The matter was therefore remitted to the Court of Appeal to consider the adjustment needed to the quantum of damages awarded by the arbitrators to reflect the shorter period of validity of the licence.