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In some instances, e.g. where there is no outstanding debt and no pro- prietary interests, all that may be required is a simple transfer of assets and liabilities, powers and duties, without any purchase consideration. We assume of course that the customary provision will be made for compensation to staff for forced loss of office, and for superannuation schemes, and the like. In many of the cases, we anticipate that the matter would present no difficulty, but in others, and notably in the case of the Greenock Harbour Trust, the position will inevitably be complex and difficult.
(146) We therefore suggest a scheme on the analogy of the Railways Act, 1921, the London Passenger Transport Act, 1933, and the earlier port amalgamations, whereby an independent arbitration tribunal shall be set up, consisting of an expert or experts to be nominated in the Act or by an independent authority, such as the Lord President of the Court of Session. It will be the duty of this tribunal (a) to approve any agreed amalgamation scheme which may be submitted by the constituent authorities whose under- takings fall to be merged in the new authority; (b) failing such agreement, to settle such a scheme themselves in accordance with the principles referred to below; and (c) to adjust the allocation of the securities to be issued by the new authority in satisfaction of the transfer consideration.
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(147) The formulation of the principles on which the tribunal is to proceed is, as always, a matter of difficulty, but they are entitled to more guidance than is given by the bare direction, to be found in some statutes, that they must have regard to all the circumstances of the case A just indemnity to all legitimate interests in the constituent undertakings must be combined with due regard to the extent of the burdens to be laid on the new authority, whose capacity to discharge functions of vital importance to the future of Scotland must not be impaired by the imposition of any obligations in excess of the proved necessities of the case or the true value of the assets to be taken over and thereafter maintained by the new authority. Nothing should be allowed for the fact that the amalgamation is compulsory. Account should be taken of the value on a pre-war net revenue earning basis of each constituent undertaking (a) as a separate undertaking, and (b) as a com- ponent part of the new unified undertaking, but nothing should be allowed for economies, accretions of traffic or other circumstances tending to enhance the value of such component undertakings in so far as these factors are attributable solely to the amalgamation.
(148) As regards the Clyde Navigation Trust, our impression is that, broadly speaking, the financial policy and methods of accounting which have been employed over a period of years by this large and stable public utility trust are substantially the policy and methods which will appropriately be applied by the new unified authority in regard to such matters as appropria- tion from revenue to reserve and provisions for maintenance, renewals and obsolescence. Subject to the adjustments which may well be required on an expert scrutiny, it follows that, to a first approximation, the Trust's accounts provide as they stand the general basis for an exchange of Clyde Trust stock into more or less equivalent stock of the new authority.
(149) But, for the reasons mentioned in Paras. (74) to (79), the position at Greenock is different. The financial policy and accountancy methods applied since the Act of 1913 are not those of an ordinary public utility authority or commercial undertaking, and are not those which could possibly be applied by the new authority. It will be for the suggested arbitration tribunal to consider whether, if no amalgamation had taken place and if Greenock reverted to peace-time conditions, the past financial policy could
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be much longer continued. Further, having regard in particular to the wide fluctuations in prices and to the fact that the nominal market value of the B Deferred Debentures appreciated by about 700 per cent. between 1940 and 1943, we do not consider that the market quotations can be accepted as indicative of the true value of the debentures for purposes of amalgamation. For these reasons it may be necessary completely to recast the Greenock accounts so as to secure a common standard of comparison with the Clyde Trust before the basis of transfer can be estimated, and it may even be neces- sary to have the undertaking valued as at the appointed day and to investigate the provision which will have to be made in future for maintaining and renewing the wasting assets.
(150) We have stressed these matters because of the plea made to us (Para. 91), that some equitable compensatory provision should be made to the B Deferred Debenture holders in respect of their valuable rights to benefit in the prosperity of the undertaking.' As already stated, we recom- mend that equitable compensation on the basis of a fair indemnity should be given not only to the B Deferred Debenture holders at Greenock, but to all expropriated interests; but the undertaking in which alone these stock- holders have an interest is the Greenock Harbour viewed as a separate entity, and operating in isolation under the conditions to be anticipated when peace is restored. They have no claim to a pepetual lien on the future prosperity of the new unified undertaking.
(151) In the case of Greenock and Dumbarton, as we have stated, there are at present certain liabilities on the local authorities respectively as guaran- tors of loans incurred by the undertakers. We propose that these should be discharged gratuitously as from the date when the respective harbour under- takings are absorbed. According to our conception the new authority will be self-supporting,
In the case of Greenock the harbour undertaking is exempt from liability to certain local rates, under s. 123 of the Greenock Corporation Act, 1909, and s. 210 of the Greenock Harbour Act, 1913. We propose that this exemption should continue; for we can see no justification for conferring upon this focal authority not only a gratuitous release from its guarantee obliga- tions, but also a windfall in the form of an annual cash payment, probably a large amount, from the extended undertaking, which will be valued as a unum quid for rating purposes on the basis of its whole revenues.
(152) Being unaware how far, if at all, our proposals will be accepted or what policy and projects the new authority, if created, may adopt, we have found it impossible to pursue the matter into further detail; nor have we sought to estimate the extent or structure of the new authority's capitalisation, for we do not know on what terms money may be obtainable. We must leave this question on the general statement of principles outlined above.
(153) The rates and dues which would require to be charged by the new authority in order to make the extended undertaking self-supporting will of course depend upon the post-war level of wages and cost of materials, and will doubtless remain above the pre-war standard for some time. It is esti- mated however that an expansion of the undertaking on the lines proposed will cause no increase of rates above the level of the Clyde Trust schedule, provided that new capital expenditure does not go beyond economic justifica- tion, and that the Greenock trade maintains the 1936-38 level. Various administrative economies will be possible, but they are unlikely to affect materially the annual budget, in which administrative costs are not a very
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