Scottish Court of Session Decisions

A Variety of processes, involving a complicated accounting, being in dependence between the pursuer Fraser and Colonel Gordon of Cluny, for whom Fraser had been agent, they, in November, 1831, agreed to enter into a judicial reference of all actions depending between them to Messrs Guthrie Wright and Patrick Cockburn, accountants. In pursuance of this agreement they executed a submission to these gentlemen of all questions arising in the processes so agreed to be referred, and the submission was accepted on the 1st December. The several processes were, of subsequent dates, remitted by the respective Lords Ordinary to Messrs Wright and Cockburn. No mention was made in the submission of remuneration to the arbiters. At some of the earlier meetings (24th March, 3d and 5th April, 1832) communings took place as to the parties becoming bound for such remuneration, and a minute to that effect was drafted by Fraser's clerk, with consent of both parties, which was, however, allowed to lie over without being signed.

On 28th February, 1833, the submission having been in the interim proceeded with, and notes having been issued on several points of the pleadings, the following communication was addressed on the part of the arbiters to Fraser:—“I send you a minute by the parties in the submission and judicial references between Colonel Gordon and you, which the arbiters and referees considered necessary to be signed and given in before they issue their notes in the accounting, and as these notes are now ready to be issued, I will thank you to return the minute signed to-morrow forenoon. Mr Bennett has taken a copy of the minute, and he says that Colonel Gordon is ready to sign it.”

The following minute was on the same day signed by the parties:—“In the submission, &c., considering that the arbiters and judicial referees have already had a great deal of trouble and spent much of their time in considering the claims and pleadings of the parties and making notes thereon, and that they may still have a good deal of trouble before pronouncing their decreet-arbitral or award, and that it is reasonable they should be fully remunerated for their services and indemnified for the time bestowed by them on the business, the parties therefore without prejudice to the legal claims of the arbiters and judicial referees, and notwithstanding of any law or practice to the contrary, hereby agree and bind and oblige themselves, and their heirs, executors, and successors, jointly and severally, to make payment to the clerk to the submission of the joint expenses of the submission and judicial references and of the decreet or decreets-arbitral, or award interim or filial which may follow thereon, including a reasonable and proper remuneration to the arbiters, and judicial referees, not only for their professional services as accountants, but for the time and trouble already bestowed or to be yet bestowed by them in the whole matters falling under the submission and judicial references, and also a fee to any oversman who may be appointed in case of the arbiters and judicial referees differing in opinion, and fees to counsel who may be consulted by the arbiters and judicial referees in case of difficulty in terms of the submission, reserving to the parties severally such claim of relief as may be found due from the one party to the other for the whole or a part of the said expenses, as the same may be determined in the course of the submission or judicial references, or otherwise and in case any difference of opinion or difficulty should occur in regard to the extent of the remuneration to the arbiters and judicial referees or oversmen, it is hereby agreed that the same shall be referred to the Solicitor-General for the time being, who shall have power to fix and modify the same. And the parties hereby consent and agree that the arbiters and judicial referees or oversman shall have power in any decreet-arbitral or award interim or final to be pronounced in the submission or judicial references, to decern against them jointly and severally to make payment to the clerk to the submission of the joint expenses of submission and judicial references, to be fixed and ascertained as aforesaid, reserving relief, to be determined as aforesaid.”

In February, 1834, the arbiters, still proceeding with the submission, and the notes of opinion which had been agreed on by them being, on the whole, favourable to Colonel Gordon, Fraser raised action against Colonel Gordon, Wright, and Cockburn, stating the circumstances as to the submission having been entered into, and setting forth the obligation of February, 1833, as to remuneration to the arbiters, which he alleged had been improperly exacted by them from the parties, and was a corrupt and unlawful stipulation on their (the arbiters') part; and concluding to have it found and declared that the defenders, Wright and Cockburn, had, after acceptance of the submission, stipulated of the parties, and caused them to become bound in terms of the minute above mentioned, and had insisted on such obligation being granted and subscribed by the parties as an indispensable condition of communicating the notes which they had prepared; and to have it farther found and declared that the said minute was a corrupt and unlawful obligation, and that, in exacting it from the parties, the arbiters acted corruptly and unlawfully, and contrary to the duties and obligations inherent in the office of arbiters and judicial referees, as undertaken by them when they accepted the said submission and reference; and, moreover, that, by their misconduct in this matter, they had disqualified themselves from holding the office of arbiters and referees in exercising the functions thereof, whereby the submission and reference had fallen and become inoperative; and, further, that Wright and Cockburn should be interdicted from any longer assuming or exercising these functions. ¹

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¹ The proceedings in the submission went on, notwithstanding of this action, and of a bill of suspension presented by Fraser, which was refused July 5, 1834 (ante, XII. 887). A final decreet-arbitral was pronounced in March, 1836.

In defence, it was pleaded by Colonel Gordon—the defenders, Wright and Cockburn, adopting his defences:—

1. The action is incompetent, in respect that the grounds of action libelled would not, in any case, be sufficient to do more than reduce a decreet-arbitral, of which it could be averred that it had been pronounced from corruption; but it is incompetent to assume and conclude by anticipation, that a corrupt award will be given forth by the arbiters. The remedy of the pursuer lies in reducing any decreet-arbitral which may be pronounced, and for the reduction of which he may be able to libel relevant grounds. Even assuming the obligation libelled on to be questionable, it has never been acted on; there is no certainty that it ever will be acted on, and it is only when it shall have been acted on, that a relevant question can be raised.

2. The obligation libelled on implied no corruption or illegality on the part of the arbiters and referees, in respect that it is not illegal in arbiters to stipulate for remuneration, and that, from the very nature of the present case, it was and must have been the understanding of all parties, that the arbiters should receive a reasonable remuneration for their time and trouble.

3. The obligation libelled on was in no respect illegal, as it did not confer on the arbiters and referees any power to fix the amount of their own remuneration, but only to decern for it, when agreed on by the parties themselves, or when fixed by an impartial third party.

4. Even at common law, a judicial referee is entitled to remuneration, and it is not illegal to give him power to decern for it when its amount shall have been fixed by the parties, or by an umpire.

5. The pursuer is barred, personali exceptione, from quarrelling the obligation in question, in respect that he originally proposed such an obligation, voluntarily signed it, and after he had signed it, carried on the proceedings under the submission and references to which it had relation.

After various procedure, the following issues were sent to be tried:—“Whether, in the year 1831, certain actions at law were in dependence between the pursuer and the defender, Colonel Gordon? And whether, on the day of November of that year, they agreed by a minute, dated 18th and 19th November, 1831, to refer the same, and all other matters then in dispute between them, to the decision of the defenders, Thomas Guthrie Wright and Patrick Cockburn, as arbiters and referees, and did thereafter enter into the submission of which No. 43 of process is a copy?

“Whether, on or about the first day of December, 1831, the said arbiters accepted of the said submission, and proceeded to investigate the mutual claims of the parties? And whether, on or about the 28th day of February, 1833, the said arbiters, or either of them, contrary to their or his duty as arbiters or arbiter, did wrongfully and corruptly exact or require and obtain from the parties to the said submission, or either of them, a writing or obligation, dated 28th February, 1833, of which a copy is contained on pages 3 and 4 of the summons, No. 75 of process?”

These issues having come to be tried, June 19, 1837, the jury, after the examination of one witness, by agreement of the parties, returned a special verdict, embodying, inter alia, the circumstances above stated, narrating the submission, &c., and also the final decreet-arbitral, pronounced in 1836, and concluding in these terms:—“And the jury farther say, that if the Court of Session shall be of opinion that the said arbiters, or either of them, did, in point of law, contrary to their or his duty as arbiters or arbiter, wrongfully and corruptfully exact or require and obtain, from the parties to the said submission, the said writing or obligation, dated 28th February, 1833, then in respect of the matters proven before them, they find for the pursuer. But if the Court shall be of opinion that the said defenders did not, in point of law, contrary to their duty as arbiters or arbiter, wrongfully and corruptly exact or require and obtain, from the parties to the said submission, the said writing or obligation, then in respect of the said matters proven before them, they find for the defenders.”

Upon this verdict it was argued, inter alia, for the pursuer:—The purity of arbitrations is very strictly guarded by the law, and, with reference to the cases decided by the Court, the obligation of February, 1833, was illegal and corrupt. ¹ It has been held that an arbiter is not entitled de jure to a honorarium, even in matters referred to him entirely on account of his professional skill, and that he cannot decern therefor; ² but here, by the minute in question, a reward is exacted for the arbiters' time and trouble as referees. The present is not a question as to motives or personal corruption, but is one of law upon the facts as appearing ex facie of the special verdict. ³ The obligation was wrongfully exacted by the arbiters, who refused to communicate their notes to the parties, as in the discharge of their duty they ought to have done, until the minute was signed; and such compulsitor being equally fatal to the proceeding, as withholding the decreet-arbitral would have been. And the stipulation contained in the minute, which was completed after acceptance of the submission, inferred in itself legal corruption against the arbiters who obtained it; the difference being clear between a stipulation before and after acceptance of the submission, as in the one case the parties are not in the power of the arbiters, while in the other they are.

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¹ Blair v. Gibb, Jan. 12, 1738, Elchies v. Arbitration— Mackenzie v. Clark, Dec. 19, 1828 (ante, VII. 215)—Elliot, Dec. 15, 1789 (M. 668)—Lord Mon-creiff's note in suspension between same parties (ante, XII. 887).

² Napier v. Lord Elphinstone, Nov. 20, 1746 (M. 5729)— Montgomery v. Strang, June 13, 1798 (M. 631)— Jack v. Cramond, March 6, 1777 ( M. v. Arbitration, App. No. 5)— Macalluw v. Laurie, June 26, 1810 (F.C.), Lord President's Opinion)—Kennedy, Jan. 20, 1819 (F.C.)— Peterson v. Earl of Breadalbane, Feb. 19, 1819, Note to Kennedy, supra.

³ Donaldson v. Manchester Insurance Company, March 2, 1836 (ante, XIV. 601).

For the defenders it was argued:—

The minute in question was not in the circumstances wrongfully exacted, nor was the proceeding such as to imply corruption; particularly as the arbiters were professional accountants, and employed as such, a submission to them implying remuneration. ⁴

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⁴ Macallum, supra.

Besides, that in terms of the minute, the arbiters were not to fix their remuneration, but an impartial third party. It is admitted that remuneration may be legally stipulated for before acceptance of the submission, but, on principle, there is nothing in the time at which the obligation in the present case was completed, to make it illegal or corrupt, no step of importance having been taken in the submission, and nothing having followed upon the stipulation. In the cases of Jack v. Cramond, ¹ Montgomery v. Strang, ² and Stewart v. Ross, ³ the decreets-arbitral were reduced only in so far as they decerned for a fee to the arbiters, showing that there was held to be no such corruption as to vitiate the submission, or cause the whole proceeding to fall. Supposing the parties had come voluntarily forward and agreed to bind themselves for remuneration to the arbiters, it would not have vitiated the proceeding; but there is no difference in effect between that and what was here done. Such a stipulation as this has no tendency to interfere with the purity of arbiters, but rather to reserve the possible danger of partiality, and put them on an independent footing. Even where there has been no stipulation as to recompense in a reference or submission, if one of the parties have paid the arbiter's fee, he has a claim upon the other for the share advanced for him, from the moral obligation which exists to remunerate arbiters for trouble. ⁴

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¹ Supra.

² Supra.

³ Feb. 21, 1822 (ante, I. 335; or now ed. 313).

⁴ Jolly v. Young, Dec. 12, 1834 (ante, XIII. 188)— Edinburgh Oil Gas Company v. Baillie, Feb. 6, 1835 (ante, XIII. 414)— Drummaond v. Leslie, March 11, 1835 (ante, XIII. 684).