Scottish Court of Session Decisions

The Arbitration (Scotland) Act 1894 (57 and 58 Vict. cap. 13), section 3, provides—“Should one of the parties to an agreement to refer to two arbiters, refuse to name an arbiter in terms of the agreement, 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 the other party, and the arbiter so appointed shall have the same powers as if he had been duly nominated by the party so refusing.” Section 6—“For the purposes of this Act the expression ‘the Court’ shall mean any sheriff having jurisdiction or any Lord Ordinary of the Court of Session.”

On December 19, 1905, H. G. Cooper & Company, merchants, Glasgow, presented a petition, under section 3 of the Arbitration (Scotland) Act 1894, to appoint an arbiter to represent an arbiter whom they averred Jessop Brothers, Ossett, Yorkshire, ought to have appointed under an alleged agreement.

Jessop Brothers lodged answers. The following paragraph therefrom summarises their objections to the granting of the prayer of the petition:—“The respondents

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respectfully submit (a) that the Court has no jurisdiction to entertain this petition; ( b) that there is no binding agreement, and accordingly no agreement to refer to arbitration; (c) that in view of the terms of the alleged arbitration clause the Court has no power to appoint an arbiter; and ( d) that, as assuming the petitioners to be right in their contention, their claim is for damages which an arbiter would have no power to assess, it is unnecessary and inexpedient that an arbiter be appointed.”

The circumstances of the case and the averments of parties are sufficiently given in the opinion (infra) of the Lord Ordinary ( Dundas).

On 2nd February 1906 the Lord Ordinary pronounced the following interlocutor:—“Repels heads ( a), ( b), and (d) of the objections stated by the respondents in the last paragraph of their answers: Before further answer allows the parties a proof of the averments contained in the sixth paragraph of the petition and in the last sentence of the third paragraph of said answers, and to the petitioners a conjunct probation: Appoints the proof to proceed on a day to be afterwards fixed, and grants leave to reclaim.”

Opinion—“This is a rather peculiar application. The petitioners, merchants in Glasgow, aver that in August 1905 they contracted to buy from the respondents, Jessop Brothers, Ossett, Yorkshire, a considerable amount of ‘shoddy’ for manure purposes. The alleged contracts were made by correspondence. The first point, in my judgment, is to ascertain the true scope and terms of the contract as disclosed by the correspondence, in so far as these bear upon the respondents' objections to the jurisdiction of this Court to entertain the petition, and its power to apply the Arbitration (Scotland) Act 1894 to the facts of the case. On 28th July 1905 the respondents sent to the petitioners by post two separate samples of shoddy. On 8th August the petitioners wrote to the respondents enclosing copy of telegrams which had passed between the parties, ‘accepting 120 tons shoddy, No. 2, as per sample received from you,’ and awaiting confirmation. On 10th August the respondents confirmed the order. Then, on 11th August, the petitioners wrote to the respondents ‘We duly received your telegram and letter of 10th inst., and we now beg to enclose salt; note for the shoddy.’ In a P.S. they suggested further dealings with the respondents. In this letter the petitioners enclosed the ‘sale note’ dated 10th August. This document, partly printed and partly typewritten, bears to confirm the purchase, and contains at its close the printed words ‘Any dispute arising from this contract to be settled by arbitration here in the usual way.’ The respondents in the succeeding letters, while they wrote as to further business dealing with the petitioners, took no notice of the words about arbitration above quoted, and did not repudiate or object to them. In these circumstances the petitioners aver that it was a part of the contract that disputes under it should be settled by arbitration at the place and in the manner indicated. The respondents, on the other hand, contend that the contract for the sale and purchase of the shoddy was completed by the letters between the parties dated 8th and 10th August to which I have referred, and that the subsequent transmission of the sale note by the petitioners' letter of 11th August was of no effect or consequence, and did not import into the already concluded contract any agreement to refer disputes to arbitration. I think that his contention of the respondents is unsound. Where the constitution of a contract depends upon a correspondence, one must, I apprehend, read the correspondence fairly as a whole ( Hussey v. Horne-Payne, 4 App. Ca. 311), and further, I think that the respondents, by not in any way repudiating or objecting to the clause of arbitration, are personally barred from saying that that clause does not form a part or term of their contract. My view upon this point is fortified by the correspondence which passed between the parties in regard to the second of the two contracts which are now in question. On 19th August 1905 the petitioners offered to accept a further quantity of shoddy ‘at same price and same terms as last,’ and on the same day they sent to the respondents the sale note, which contains words identical with those in previous sale note as to the settlement of disputes arising under the contract. On 21st August the respondents accepted the order, making no reference or demur to the condition about arbitration. I hold, therefore, that the clause ‘Any disputes arising from this contract to be settled by arbitration here in the usual way’ is truly a part of both of the contracts in question between the parties.

“The next thing seems to me to be to ascertain the exact meaning of the words just quoted. There was not, and I think there could not have been, any doubt suggested that ‘here’ means in Glasgow. The petitioners maintain that the words ‘to be settled by arbitration here in the usual way’ are, upon a sound construction, equivalent to such words as ‘to be settled by arbitration in the usual way in the shoddy trade in Glasgow’. I agree with this contention. The words used must, I take it, be held to mean something, and they occur in documents relating to commercial transactions in shoddy entered into by purchasers of that material carrying on business in Glasgow. Now, the petitioners state that they believe and aver that ‘the usual way of arbitration in the shoddy trade in Glasgow is … for each party to nominate an arbiter, and for these parties to appoint an oversman.’ They have therefore nominated an arbiter to act for them, and the principal crave of the petition is that the Court should ‘appoint an arbiter to represent the arbiter whom Messrs Jessop Brothers fell to have appointed under the agreement;’ and the petitioners found upon section 3 of the Arbitration (Scotland) Act 1894. It is important to observe that the respondents admit ‘that disputes have arisen with regard to said

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contracts.’ They state, however, ‘that there is no shoddy trade in Glasgow, and no practice in said trade either in Glasgow or in Yorkshire with regard to arbitration.’ The respondents contend that assuming that the words in regard to arbitration form part of the contracts, they leave quite undetermined the form of tribunal or the mode by which the arbitration is contracted to be carried out, and therefore ( M'Millan & Son, Limited, 5 Fr. 317) that the Court is not in a position to appoint an arbiter under the statute. But, as I have already said, I think that the construction of the words fairly imports an agreement to refer disputes to arbitration in ‘the usual way’ (if such there be) ‘in the shoddy trade in Glasgow.’ Upon this point therefore the petitioners are, in my judgment, entitled to a proof of their averments of such usage. A somewhat similar proof was allowed and was successful in the case of Douglas & Company, 2 Fr. 575. That was not a petition under the Act here in question, but the defender in the action proved what was ‘the customary manner of the timber trade’ in regard to arbitration, with the result of excluding, primo loco at all events, the intervention of the Court.

“Up to this point therefore I am of opinion that the respondents are contractually bound to refer disputes under the contracts to arbitration in Glasgow, and that if the petitioners can prove the alleged usage of the shoddy trade there, I am entitled and bound, in terms of section 3 of the Arbitration (Scotland) Act 1894, to appoint an arbiter to act on behalf of the respondents in the matter.

I must now consider the other objections put forward by the respondents. They state in their answers that the disputes which have arisen under the contracts relate to which of two samples sent by them to the petitioners is the ‘Sample No. 2’ referred to in the correspondence; that the parties are at variance as to this; and that ‘in these circumstances the respondents maintain that there was never any consensus in idem, and accordingly that there is no binding contract and no agreement to refer to arbitration.’ In my judgment this objection affords no good ground for refusing the petition. The terms of the written contract between the parties disclose no ambiguity as to the samples sent, and if the dispute which has arisen is of the nature suggested by the respondents I think that their remedy would be by way of reduction or rescission of the contract. The case of Buchanan v. Duke of Hamilton, [1878] 5 R. (H.L.) 69, upon which they relied, and in which there was no completed contract in writing, appears to me to belong to a quite different category of law from the questions here under consideration. The only other objection stated by the respondent is to the effect that, if the petitioners' contention in regard to the question last dealt with is correct, the respondents would be unable to implement the contract; that the claim against them would resolve itself into one for damages; and that an arbiter has, apart from special stipulation, no power to deal with a claim of that nature. But even if matters should take the course indicated, I see nothing in that which should disentitle the petitioners to go (if otherwise entitled to do so) to arbitration, and to obtain such findings as the tribunal may think fit to pronounce. On the whole matter, I propose to repel heads (a), ( b), and ( d) of the respondents' objections, and before further answer to allow a proof upon the short point to which I have already referred.”

The respondents reclaimed.

The petitioners maintained that the reclaiming note was incompetent, and on that point argued—The Lord Ordinary was final, since he acted here in a ministerial and not in his judicial capacity— Magistrates of Glasgow v. Glasgow District Subway Company, November 8, 1893, 21 R. 52, 31 S.L.R. 70. The ministerial character in which he acted was not affected by the fact that some incidental inquiry might be necessary— Binning v. Easton & Sons, January 18, 1906, 43 S.L.R. 312. The definition of Court in section 6 of the Act coupled a Lord Ordinary and a sheriff, and would seem to exclude appeal. The only similar section was section 5 of the Married Women's Property Act 1881 (44 and 45 Vict. cap. 21), where no appeal was given though inquiry was necessary. In all Acts where appeal was contemplated it was provided for, e.g., as in section 6 of the Distribution of Business Act 1857 (20 and 21 Vict. cap. 56). In the case of Robertson (cited infra) there was not as here a special jurisdiction conferred, the Court in the Act there in question — the Law Agents Act 1873 — being defined as the Court of Session. The Lora Ordinary had not made, possibly might not make, any appointment; he could not accordingly (even assuming no agreement to arbitrate) until he did so be said to have exceeded his jurisdiction, as the Sheriff had in Farquharson v. Sutherlands, June 16, 1888, 15 R. 759, 25 S.L.R. 573. If any review were competent it should have been by suspension or reduction.

Argued for respondents—The reclaiming note was competent. Without proof the Lord Ordinary had repelled their objection that, being an English firm carrying on business in Yorkshire where the alleged contract was to be performed, they were not subject to his jurisdiction; without proof he had also repelled their objections that he had not authority to entertain the petition because there was no binding agreement, and because, in any event, on a just construction it included no agreement to arbitrate. A reclaiming note was the appropriate method of reviews Assuming the Lord Ordinary was merely explicating his power under the Act it would have been urged, and probably lightly, that he was final, and under Earl of Camperdown v. Presbytery of Auchterarder, November 6, 1902, 5 F. 61, 40 S.L.R. 45, an action of reduction was incompetent. Assuming the mere making of an appointment was administrative, yet in repelling these objections the Lord Ordinary was acting in a judicial

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capacity. In any event the petitioners were in a dilemma, for either in repelling the objections the Lord Ordinary acted in an administrative capacity, in which case by determining questions of right he had exceeded his jurisdiction, or in a non-administrative capacity, in which case appeal was competent, for unless a statute expressly excluded it, there was the right to appeal— Robertson, Petitioner, July 18, 1876, 3 R. 1101, 13 S.L.R. 665—but the Act here in question nowhere said the Lord Ordinary was to be final; on the contrary, the authority was primarily given not to him but “the Court.” There was a case under this Act in each Division where a reclaiming-note had been allowed without opposition— M'Millan & Son, Limited, v. Rowan & Company, January 16, 1903, 5 F. 317, 40 S.L.R. 265; Hallpenny v. Dewar, May 21, 1898, 25 R. 889, 35 S.L.R. 696; and in Stewart v. Marquis of Breadalbane, January 14, 1903, 5 F. 359, 40 S.L.R. 259, and March 3, 1904, 6 F. (H.L.) 23, 41 S.L.R. 373, the Sheriff-Substitute appointed an overs-man and an appeal was taken to the Sheriff, the Court of Session, and the House of Lords. There had been appeals under the English Act (52 and 53 Vict. cap. 49), and the object of the Scotch Act was to assimilate the laws of the two countries. (Reference was also made to Russell on Arbitration, p. 49.)

The parties were then heard on the merits of the reclaiming note.

Argued for the respondents (reclaimers)—The proceedings before the Lord Ordinary were incompetent. He had no jurisdiction. The respondents were an English firm carrying on business in Yorkshire. Assuming a contract, it was made by correspondence, and the locus of it was England as the locus solutionis. Further, there had not been personal service. Moreover, the Lord Ordinary had no authority or jurisdiction, because there was no binding contract. For the labels of the two samples must have got mixed, possibly through their fault, but also possibly, as they maintained, either through petitioners' fault or in transitu; there was therefore no consensus in idem. The Lord Ordinary was not entitled to assume this against them without a proof— Duke of Hamilton v. Buchanan, January 25, 1877, 1 R. 328, 14 S.L.R. 253, June 8, 1877, 1 R. 854, 14 S.L.R. 545, aff. March 8, 1878, 5 R (H.L.) 69, 15 S.L.R. 513. Assuming a contract, it was completed before the sale notes were sent. A sale note was not the proper place to introduce a new term into a contract. A so-called reference clause to arbitration “in the usual” way printed on “merchant” sale notes could not be construed according to the nature of the goods. It was too vague to receive any effect— M'Millan, cit. supra. Douglas & Company v. Stiven, February 2, 1900, 2 F. 575, 37 S.L.R. 412, was not decided under this Act, and the reference clause was not as vague. In Hussey v. Horne-Payne, 1879, 4 App. Cas. 311 (referred to by the Lord Ordinary), neither party thought the letters at the time contained the whole contract.

Argued for the petitioners (respondents)—This was a Scotch contract which they were seeking to enforce, but in any case the respondents had appeared, which cured any objection to the citation. There was a completed contract; the suggestion that the labels had been interchanged was a mere theory; and this idea was repudiated by the respondents in the correspondence. The sale notes were in each case acknowledged, and the clause of arbitration formed part of the agreement— Jacques Serreys & Company v. Watt, February 12, 1817, F.C. “Here” meant in Glasgow; there was accordingly prorogation of the jurisdiction of the Scotch Courts. “In the usual way” meant in the usual way in the shoddy trade in Glasgow— Douglas v.Stiven, cit. supra, and Lord Ordinary Stormonth Darling at p. 318 of M'Millan referring thereto. The Lord Ordinary was entitled to inquire into and decide incidental matters necessary to explicate his jurisdiction.

At advising—