Scottish Court of Session Decisions

This was a petition under the Arbitration (Scotland) Act 1894 by Archibald M'Millan & Son, Limited, shipbuilders, Dumbarton, praying the Court to name a single arbiter to act under a clause of reference contained in a contract between the petitioners and David Rowan & Company, engineers, 231 Elliot Street, Glasgow.

The Arbitration (Scotland) Act 1894 (57 and 58 Vict. c. 13) enacts as follows—section 1—“An agreement to refer to arbitration shall not be invalid or ineffectual by reason of the reference being to a person not named.” Sec. 2—“Should one of the parties to an agreement to refer to a single arbiter refuse to concur in the nomination of such arbiter, and should no provision have been made for carrying out the reference in that event, or should such provision have failed, an arbiter may be appointed by the Court on the application of any party to the agreement.”

Section 3 of the Act contains similar provisions with regard to an “agreement to refer to two arbiters.”

In March 1898 a contract was entered into between the petitioners and Rowan & Company whereby the latter firm contracted to construct for the petitioners the engines, boilers, and machinery of certain steamers.

One of the articles of the contract provided, inter alia, as follows:—“In case any dispute shall arise between the parties hereto or their representatives concerning the meaning or construction of these presents, or any clause or agreement herein contained, or any other matter or thing whatever in any way relating to the said engines, boilers, and machinery, all such disputes shall be referred to arbitration.”

Certain questions having arisen between the petitioners and Rowan & Company in connection with the contract referred to, the petitioners sought to have those questions determined by arbitration, but Rowan & Company declined to name or join with the petitioners in naming an arbiter or arbiters.

The petitioners thereupon presented the present application to the Court.

Answers were lodged for Rowan & Company. They stated certain objections which it is unnecessary to refer to particularly. They also averred as follows:—“The said clause of arbitration is invalid and ineffectual both at common law and under the statute referred to. Further, the prayer of the petition is incompetent, as it does not set forth what matters of dispute the arbiter is to be appointed to determine.”

On 22nd November 1902 the Lord Ordinary ( Stormonth Darling) refused the prayer of the petition.

Opinion.—[After narrating the facts and dealing with certain of the respondents' grounds of objection, which it is unnecessary to refer to for the purposes of this report, his Lordship proceeded]—“But then the respondents have an objection to the petition which goes to the root of my jurisdiction. They say that the only power a court has to appoint an arbiter is either, under section 2 of the Act, where there has been an agreement to refer to a single arbiter and one of the parties to the agreement has refused to concur in nominating him, or, under section 3, where there has been an agreement to refer to two arbiters and one of the parties has refused to name his arbiter. They further say that this case falls under neither of these heads, because it is impossible to tell from the contract here which mode of arbitration was agreed to by the parties.

Page: 266↓

“Now, the only case since the date of the Act which touches this point is Douglas & Company v. Stiven, February 2, 1900, 2 F. 575. That was not a petition like the present asking the Court to appoint an arbiter, but was an action for the price of goods, met by the defence that the matters in dispute ought to be remitted to arbitration, The peculiarity of the case was, that although the clause in the contract did not define whether the dispute was to be referred to a single arbiter or to two arbiters and an oversman, it did define that the dispute should be ‘referred to arbitration in the customary manner of the timber trade.’ The First Division held that the first thing to do was to ascertain by evidence what the customary manner was. The result of the proof was to determine that the customary manner of arbitration in the trade was to have two arbiters and an oversman, and the action was sisted till the matters in dispute had been determined in that way. Accordingly the case was dealt with in the end exactly as if there had been an express contract that each party should choose an arbiter with power to the arbiters to appoint an oversman. It was never necessary for the Court to exercise the powers conferred by section 3 of the Act, because once the question was decided the party resisting arbitration agreed, I presume, to name his arbiter. But if he had refused to do so the way would have been clear for the Court to exercise its powers.

Here, however, there is no reference to custom nor any other equivalent for an express provision defining the mode of arbitration. The clause is absolutely blank in that respect, and merely says that disputes ‘shall be referred to arbitration.’ It cannot therefore be said of this contract that it is either an ‘agreement to refer to a single arbiter,’ so as to let in section 2, or an ‘agreement to refer to two arbiters’ so as to let in section 3. And if it is neither the one nor the other the Court has no power of appointment under the Act, and certainly it has none at common law. In Douglas & Company's case it was pointed out, both in the Outer House and by Lord M'Laren, that our Act does not contain a provision which is to be found in the English Act, to the effect that ‘if no other mode of reference is provided the reference shall be to a single arbitrator.’

It is said that in my first opinion as Lord Ordinary in that case (at p. 577) I stated the leading purpose of the Scotch Act to be that where parties to a contract had agreed to arbitration, even in the most general terms, they should be held to their bargain, and that if either party refused to carry it out the Court should do so for him. Perhaps there is no great fault to be found with that as a general statement of the purpose of the Act, but if it were to be taken as implying that the Court had power to carry out each and every bare reference to arbitration, I must, of course, admit that it went too far. This, however, is of very small consequence, because my first interlocutor was recalled, and the case was ultimately decided, as I have already pointed out, entirely on the view that the parties had themselves provided for a particular mode of carrying out the arbitration.

In the case of Smith & Service v. Nelson & Sons, L.R., 25 Q.B.D. 545, the Court of Appeal in England held that they could not order one of the parties to appoint an arbitrator, it being conceded that the Court had no power under sections 4, 5, or 6 of the English Act itself to appoint an arbitrator in the particular circumstances. This serves to show how strictly a statutory power like that which is here invoked ought to be construed.

I must therefore refuse the prayer of the petition.”

The petitioner reclaimed.

Counsel for the respondents objected to the competency of the reclaiming-note, on the ground that under the Act there was no jurisdiction in the Inner House—Arbitration (Scotland) Act 1894, sec. 6; Strain v. Strain, June 26, 1886, 13 R. 1029, 23 S.L.R. 739.

The petitioners were not called upon to reply.

On the reclaiming-note the petitioners argued—A reference “to arbitration” meant a reference to a single arbiter. A reference to two arbiters would be unobjectionable, but the respondents did not suggest any construction that was preferable to that suggested by the petitioners; and the Court would attach some meaning to the clause in question rather than none. The cases of Smith & Service v. Nelson & Sons (1890), 25 Q.B.D. 545, and Douglas & Co. v. Stiven, February 2, 1900, 2 F. 575, 37 S.L.R. 412, did not affect the present question.

Argued for the respondents—The Act only applied when the parties had agreed to refer to one arbiter or to two arbiters— Smith & Service v. Nelson & Sons; Douglas & Co. v. Stiven, cit. Sup. This was conceded by the argument for the petitioners.

At advising—