Scottish Court of Session Decisions

In July 1889 the Police Commissioners of the burgh of Leven, through their engineers Messrs Leslie & Reid, issued a specification of the work to be done in connection with the execution of proposed waterworks for that burgh, and invited tenders. The specification contained, inter alia, the following general conditions—“The contractor will get possession of the ground immediately after acceptance of the tender (p. 4 of App.) … He must enter into a regularly stamped contract containing all the ordinary legal clauses.”

By letter, dated 10th August, G. Mackay & Sons, contractors, offered to construct the works, and their offer was accepted by the Police Commissioners on 11th September 1889.

A formal contract was subsequently concluded between the parties, of date 4th and 14th October. This contract proceeded on the narrative that Mackay & Sons had offered to construct the works in terms of the specification, “which specification, with the general clauses therein stated, is hereby incorporated as part of these presents that the Commissioners had decided not to proceed in the meantime with a certain branch pipe, but to have the other works “carried out now;” that Mackay & Sons had agreed to execute the whole works in accordance with the conditions stated in the specification and contract, and that the Commissioners had accepted their offer, provided that Mackay & Sons had therefore become bound, and thereby bound and obliged themselves, to complete the works to the satisfaction of the Commissioners or their engineers Leslie & Reid, according to the true intent and meaning of the specification, plans, and contract, “providing always (p. 9 of App.) that the first parties (the Commissioners) reserve right to appoint the time when the second parties (Mackay & Sons) may enter upon the lands and proceed with the works, the second parties being entitled to a similar extension of time to complete the works,” as that between 1st September 1889 and the date when entry was given. On their part the Police Commissioners bound themselves to pay the stipulated price. The contract further provided as follows—“And it is hereby provided and declared that in the event of the said works being stopped by interdict or other legal proceedings at the instance of any party, and damage arising thereby to the said second parties for which the first parties may be responsible, the amount to be awarded to the second parties on account of such damage shall be ascertained, and is hereby referred to arbitration as after provided for: And in the event of any dispute or difference arising between the said first

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and second parties, or the said J. & A. Leslie & Reid and the said second parties, in relation to the execution, construction, or completion of the said whole works contracted for, or any of them, or any part or portion thereof, or as to the quality or quantity of the work or the materials thereof, or as to the settling of accounts, or as to any points or matter whatever in regard to the works, or as to the contract, or the true intent, meaning, or effect thereof, or of the plans, drawings, specification and conditions, the same shall be submitted and referred to the amicable decision, final sentence, and decreet-arbitral of Alan Brebner, civil engineer, Edinburgh, whom failing by death, resignation, incapacity, or other cause, to Robert Carstairs Reid, civil engineer, Edinburgh; and the decree or decrees-arbitral, interim or final, of the said arbiter shall be final and binding on all parties.”

The Police Commissioners did not give Mackay & Sons entry to any part of the ground until June 17th 1890, and to the remainder of the land entry was not given until September 13th of that year or later.

In October 1892 Mackay & Sons raised an action against the Police Commissioners of Leven, concluding for declarator that the defenders were bound to join with the pursuers in submitting the following claims by the pursuers against them, viz., (1) a claim for £1470, 17s. 3d., as the balance due by the defenders on account of work executed under the contract of 4th and 14th October 1892; and (2) a claim of damages for £3255, 4s. to Robert Carstairs Reid, the surviving arbiter named in the contract, and for decree ordaining them to do so, and to pay the sums which the arbiter might find due, or otherwise to pay the sums sued for.

With regard to the first claim mentioned in the summons no question arose, as the defenders admitted that it fell under the arbitration clause.

With regard to the second claim the pursuers (to whose record considerable amendments were added in the Inner House) made, inter alia, the following averments—“(Cond. 3) The specification of the works declared that the contractor will get possession of the ground required for the execution of the works immediately after acceptance of tender; and the said letter of acceptance stated, ‘You can begin to make preparations for a start;’ and at a meeting which took place in Edinburgh soon after 11th September 1889 between the pursuers and the engineers, the latter advised the pursuers to… make all necessary arrangements for proceeding with the works forthwith. The said contract of 4th and 14th October 1889 likewise described the works as to be ‘carried out now.’ (Cond. 4) The pursuers accordingly, immediately after said 11th September 1889, … ordered materials and furnishings, and engaged assistants and men, and otherwise incurred expenses, … all with the view of executing the contract. Immediately on the acceptance of their tender the pursuers were entitled to enter upon the execution of the contract, … and in point of fact they did so. The defenders as well as the pursuers treated the contract from the said acceptance as in course of execution, the engineers of the defenders passing certificates for payment of sums to account of the cost thereof, which were met by the defenders. (Cond. 6) It was the duty of the defenders under the contract above-mentioned to give the pursuers entry to the ground immediately on the contract being concluded on 11th September 1889, or immediately after the date of the formal contract; or at all events, within a reasonable time thereafter… . The defenders, however, in breach of their contract, failed to give the pursuers entry to any portion of the lands until 17th June 1890, and it was not until 13th September 1890 that they got possession of any portion of the land through which the pipe-track was to pass, entry being given as regards the remainder only on 17th November 1890. (Cond. 7) Had reasonable diligence been used, the defenders could quite well have made such arrangements as would have enabled them to give the pursuers entry to the lands, but this they failed to use. They frittered away the time in vexatious disputes with the proprietor and his tenants, and in frivolous disagreements among themselves … and it was not until long after the formal contract had been signed that they took any steps to enable them to give the pursuers entry to said lands… . (Cond. 11) In consequence of the defenders' failure to give the pursuers entry to the lands in question in terms of the contract, the pursuers have sustained … loss and damage as per account produced … to the extent of £3255, 4s.” The pursuers also averred that before proceeding with the works, they had reserved their right to claim damages for the delay which had occurred.

The defenders in answer denied that the delay had been caused by any fault of theirs, or that the pursuers had suffered any loss through their fault. They explained that they had pressed forward the statutory proceedings necessary to enable them to enter on the lands with the utmost despatch, and were unable owing to the position taken up by the proprietor of the ground to give the pursuers entry sooner than they did.

The defenders pleaded—“(1) The pursuers' averments are irrelevant. (5) The declaratory and first petitory conclusions of the summons are incompetent as regards the sum second sued for, in respect that the said claim, assuming it to be well founded, does not fall within the clause of reference.”

On 17th January 1893 the Lord Ordinary ( Kincairney) pronounced this interlocutor:—“Finds that the claim for £3255, 4s. does not fall within the clause of reference in the contract libelled, and that the defenders are not bound to submit the said claim to Robert Carstairs Reid as arbiter under said clause: Finds that there are no relevant averments in support of the alternative claim for said sum: Therefore assoilzies the defenders from the conclusions of the action so far as they bear on said sum, and decerns: Finds it admitted that the

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claim for £1470, 17s. 3d. falls within said clause of reference; and sists the process in order that the parties may submit said claim to the said arbiter.

“ Opinion.—… No substantial question arises as to the first claim. The defenders admit that the claim falls under the clause of reference in the contract founded on, and must be decided by the arbiter.

But the defenders maintain (1) that the second claim does not fall within the reference; and (2) that there is no relevant averment in support of it.

I agree with the defenders on both points. I think the record open to very serious criticism, but on asking the pursuers' counsel whether he wished an opportunity of amending it, was informed that he could not make it any better.

The contract is for the execution of waterworks in the town of Leven. In support of the second claim it is averred that it was the duty of the defenders to give, the pursuers entry to the ground immediately after 11th September 1889, but that they were not allowed to enter on the ground required for the reservoir until 17th June 1890, nor upon the lands under which the pipe-tracks were to be laid until 30th September 1890—when they got access to a part of the lands—and 17th November, when they got access to another part. They say that ‘the delay in giving the pursuers possession of the ground was due to the fault and breach of contract of the defenders.’ Then the record refers to another part of the work, but it was admitted at the debate that no claim could be made on that ground. It is then said that ‘in consequence of the breaches of contract or fault on the part of the defenders above narrated, the pursuers have sustained loss and damage as per account No. 2.’

That is all that the record says on the matter. For the nature and extent of the damage it is necessary to go to the account No. 2, in which a claim of a very extraordinary kind is stated. But whether that claim be unconscionable and extravagant or not is not the question. Whatever prima facie impression one may form of it, it would require to be considered and examined if a relevant ground for it were alleged. It is said that the pursuers' right to make this claim was reserved before they entered on the works in June 1890, and it is not said to be barred.

The clause of reference founded on is as follows—[ His Lordship quoted the clause].

In the first portion of that clause it is expressly provided that if damage should arise to the contractors from the causes there specified, the amount of damages to be awarded to the contractors should be ascertained by the arbiter. Express power is given to the arbiter to assess damages in the particular event there stated. That event had not occurred, and that part of the clause does not apply. The pursuers do not contend that it does. There is no power conferred on the arbiter to assess damages in any other case. Now, in this case the summons concludes for nothing in its second conclusion except that the defenders shall be decerned to submit to the arbiter a claim for damages. It is not averred—at least with any distinctness—what the question is on this point which has arisen between them, which the pursuers desire to submit to the arbiter. The action, so far as concerns the second conclusion, is brought for no other purpose than that the arbiter shall assess a claim of damages.

Now, I understand that this is precisely what an arbiter cannot do without express powers. It was so decided in Blaikie Brothers v. The Aberdeen Railway Company, June 17, 1852, 15 D. (H. of L.) 20, the fullest report of which is to be found in 24 Jurist, 537. In the important judgment of Lord Rutherfurd Clark in Mackay v. The Parochial Board of Barry, June 22, 1883, 10 R. 1046, in which the other Judges concurred, his Lordship says expressly, ‘without express power an arbiter cannot assess damages,’ p. 1050. In M'Alpine v. The Lanarkshire and Ayrshire Railway Company, November 25, 1889, 17 R. 125, Lord President Inglis, in considering whether a claim fell under a clause of reference, says—‘There is another most important objection to holding this claim of damages to be within the reference clause, because the claim being one of damages, the arbiter, or referee, or engineer, or whatever he may be called, is not empowered to assess damages, and unless he is expressly empowered to assess damages he cannot do so. This was fixed by the judgment of the House of Lords in the case of Blaikie v. The Aberdeen Railway Company.’

The pursuers referred to Levy & Company v. Thomsons, July 10, 1883, 10 R. 1134, in which a claim for damages was held to come under a clause of reference, but in that case there was no question as to assessing damages because the damages were liquidated by the contract.

So standing the authorities, I am bound by authority to hold that the arbiter in this case has no power to assess damages, although I do not see clearly on what principle this limitation of an arbiter's powers depends.

Now, in this case I am not asked to order the defenders to submit any question or difference to the arbiter, but only to ordain them to submit this claim of damages.

I am further disposed to hold that this claim of damages does not fall within the words of the reference, although the words of the reference are very wide, and if the arbiter had had power to assess damages I might have had a difficulty on this point.

There remains the alternative claim of the pursuers for damages without reference to the clause of reference.

The defenders meet this claim by reference to a clause in the contract by which it is provided ‘that the first parties reserve right to appoint the time when the second parties may enter on the lands and proceed with the works.

The pursuers refer to a provision in the contract whereby the specification with its ‘general clauses’ is incorporated with the

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contract, and to a clause in the specification which provides that ‘the contractor will get possession of the ground immediately after the acceptance of the tender.’ I cannot doubt that the provision in the contract qualifies this clause in the specification, and that under it the Commissioners of Police had power to fix when the works should commence. They explain their reasons for the delay which occurred, but the important point is that the pursuers do not aver that the delay was caused by any unfairness or neglect or want of diligence on the part of the Commissioners.

I am of opinion that the bare averment that the pursuers did not get possession until June 1890 is not relevant to infer damages, because the defenders had power under the contract to delay giving possession.

The pursuers argued that even should it be held that the defenders had power for adequate reasons to delay putting the contractor in possession of the land, that did not warrant them in giving possession piecemeal; but I do not think that a sound interpretation of the contract, and the pursuers have not averred any special damage which they suffered from not getting possession of the ground for the pipe-track at the precise time when they got possession of the ground for the reservoir.

For these grounds I consider that the defenders are entitled to absolvitor from the conclusions of the summons in regard to their claim for £3255, 4s. I think further consideration of the action should be superseded in order to allow the parties to submit to the arbiter the pursuers' claim for £1470, 17s. 3d.”

The pursuers reclaimed, and argued—The claim of the pursuers was based on the ground that they had not got timeous entry in the sense of the contract. That raised a question as to the true meaning of the contract, which fell, in terms of the clause of reference, to the arbiter to decide, even' though he might not be empowered to assess the damage due— Shotts Iron Company v. Dempster, October 27, 1891, 29 S.L.R. 40. The Court would give effect to a clause of reference according to its terms — Caledonian Railway Company v. Gilmour, December 16, 1892, 30 S.L.R. 172. Further, the defenders' explanation was that the delay had been caused by the necessity of taking statutory proceedings to obtain entry to the lands. That was a “legal proceeding” in the sense of the clause of reference, and the arbiter was specially authorised to assess the damage arising thereby. Assuming the pursuers to fail in the above contention, they were entitled to go to proof on the question of damage. Under the specification and contract they were entitled to practically immediate entry, it being left to the defenders to fix the exact time at which they were to enter, and everything that had passed between the parties warranted the pursuers in believing that they were getting immediate entry. The contract did not contemplate a delay of over eight months. Such a delay was out of all reason, and the pursuers were entitled to damages for the loss occasioned to them thereby.

Argued for the defenders—The question was whether the pursuers had got timeous entry. If they had not, their remedy was to have declined to proceed with the contract. The claim was not under the contract, which left it entirely to the defenders to appoint the date of entry. Besides, the clause of reference did not give the arbiter power to assess damages except where the works were stopped by “legal proceedings.” The statutory proceedings necessary for the acquisition were clearly not “legal proceedings” in the sense of that clause. The claim being one of damages could not therefore be dealt with by the arbiter— M'Alpine v. Lanarkshire and Ayrshire Railway Company, November 26, 1889, 17 R. 113. Assuming that the claim was not to be referred to the arbiter, the pursuers had stated no relevant case to be admitted to proof.

At advising—