Scottish Court of Session Decisions

Mat. Pollich, shipowner, Trieste, managing owner of, and as such representing the ownership of the foreign vessels “Alga” and “Marina,” both of Trieste, and Frank Pringle Lauder, Edinburgh, mandatory for the said Mat. Pollich, raised an action against W. R. Heatley, coal exporter, Glasgow, and against Richard Mackie, shipowner and coal exporter, Leith, and C. R. France, coal exporter, Glasgow, for any interest they might have. The pursuers sought reduction of an award or decree-arbitral granted by the said Richard Mackie and C. R. France. This award found that the amount due to the pursuers for demurrage was £374, 6s. 3d. The action was defended by the defender first called.

The pursuers pleaded, inter alia—“(1) The said arbiters not having dealt, as they ought to have done, with the questions of interest on the amount of the demurrage awarded and the expenses of the arbitration, and the said questions being embraced in the said reference, the said decree-arbitral is null and void, and the same should be reduced, with expenses.”

The defender pleaded, inter alia “(1) The pursuers' averments are irrelevant and insufficient to support the conclusions of the action. (4) The pursuers' averments, so far as material, being unfounded in fact, the defender should be assoilzied.”

The facts as to the nature and origin of the action are given in the opinions of the Lord Ordinary ( Salvesen), infra. As to the true import of the facts see the Lord President's opinion.

On 13th March 1909 the Lord Ordinary before answer allowed parties a proof of their averments and to the pursuers a conjunct probation.

Opinion.—“This is an action for the reduction of an award in a mercantile arbitration. The pursuer, who is a shipowner at Trieste, on 28th November 1907 raised an action in the Court of Session against the defender to recover demurrage in respect of the detention of two vessels which the defender had chartered. The charter-party contained a reference clause; and accordingly after hearing parties I sustained a plea that the action fell to be sisted until an award had been obtained from the arbiter, whose decision the parties had agreed should be final. My interlocutor was acquiesced in, and the matters in dispute were subsequently submitted to Provost Mackie, Leith, and Mr C. R. France, Glasgow. Neither party contem-plated any formal proceedings, but each handed a print of the record of the charter-party and other documents relating to the

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claims to the respective arbiters, and it was assumed on all hands apparently that the information contained in these documents would enable the arbiters to reach a decision. The arbiters accordingly, without hearing parties, issued the award quoted in the print. The total demurrage found due under this award was £374, 6s. 3d.; the pursuer thereupon enrolled the case before me and moved me to consider and decide the question of interest and expenses, which had not been expressly dealt with by the arbiters. I took the view that I had no power to adopt either course.

“The interlocutor giving effect to this opinion was not submitted to review; but the pursuer has now brought this action to reduce the award, on the ground that the arbiters have not exhausted the reference. He says that the arbiters were not merely entitled but bound to deal with the question of interest and expenses, and that they did not do so because they erroneously took the view that these matters were not for their determination but for that of the Court. The pursuer asked a proof of his averments, but the defender maintained that the action should be dismissed as irrelevant.

Before bringing the action the pursuer proposed that the parties should concur in asking the arbiters to decide these two questions, but the defender declined to do so. This attitude lends some support to the statement of the pursuer with regard to the view which the arbiters took, and I think it is unfortunate that there should be a new litigation with regard to a sum which in comparison with that which the arbiters have already awarded to the pursuer must be inconsiderable.

If the arbiters were not asked by the parties to decide any question except the amount of demurrage incurred to the two vessels, it would of course not be a ground for setting aside their award that they had not dealt with questions which might competently have been brought before them. On the pursuer's averments as now amended, however, I cannot hold it to be clear that the question of interest, at least, was not submitted to their adjudication. The summons in the earlier action, a copy of which was sent to each arbiter, embraces a claim for interest from the date of citation; and prima facie this would seem to have been submitted to the informal tribunal just as much as the principal sum sued for. The question, however, remains whether the failure of the arbiters to dispose of one of the matters submitted to them is a good ground of reduction of such an award.

The leading authority to which I was referred by the pursuer on the subject is a very old one— Halkerton v. Wishart, 30th June 1625, M. 645. The report is short, but appears to be in point. It is in these terms — ‘Arbiters being chosen by any parties, they are holden to decide all the differences referred to them by the compromit; otherwise, if they decern in one part and leave the other claims undecided, it will furnish an exception to any of the parties that find themselves hurt thereby.’ This case is referred to by all the text writers on ‘Arbitration’ as an authority; and although there is no subsequent decision where the Court reduced an award on the ground that it did not exhaust the reference, there are cases where the validity of such a plea was impliedly confirmed— Finlay v. Campbell, 12 S. 792; George v. Milne, 14 S. 404, and Mackenzie, 3 D. 318. In the case of George, Lord Gillies indicated an opinion that the arbiter had not exhausted the reference, and if so, that the award was reducible. The majority of the Court were, however, of opinion that he had in effect disposed of all the matters in dispute which were submitted; but they did not indicate any dissent from the opinion of Lord Gillies. In the case of Mackenzie it was laid down that when a judicial reference ‘was clear in its terms, correct in its form, embracing nothing which was not referred, and exhausting all that was referred, it was not competent for the Court to review such award on its general merits or set it aside.’ This clearly implies that it would be a ground of reduction of an award that the arbiter had not exhausted the reference.

The defender quoted no Scotch decisions in support of their view, but he referred to certain decisions in England, the first of these in point of date being the case of Smith v. Johnston, 15 East, 213. The decision there was merely to the effect that where there has been a general reference of all disputes the Court will not allow an action to be brought afterwards in respect of matters which might have been but were not brought before the arbitrators. The decision in Rees v. Waters, 16 M. & W. 263, is to the same effect. Pollock, C.B., in giving judgment, said—‘I am of opinion that a reference of all matters in difference does not mean a reference of all possible matters, but of all matters which are brought before the arbitrator; and if the parties omitted to solicit his attention to a matter not being one of the questions in the proceedings themselves, no objection can be made to the award for not adjudicating on it.’ This implies that the award may be objected to if the arbitrator fails to deal with one of the matters which have been expressly submitted for his decision. In Hunt v. Hunt, 5 Dowling, 442, an award was actually set aside, inter alia, on the ground that the arbitrator ‘had not either specifically or by necessary implication adjudicated on each issue.’ The law would therefore seem to be the same in England and Scotland; and as after a general reference of all disputes a party is barred from taking action to enforce a claim which he has failed to submit, it would seem to follow that if he has in fact submitted a claim on which the arbiter has failed to adjudicate he must be entitled to obtain a remedy by setting aside the award. I am accordingly of opinion that on the assumption that the claim for interest was duly submitted, and still more, if the claim for expenses of the reference was made, and

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the arbiters failed to deal with these two claims or either of them on the mistaken view that they had no jurisdiction to do so, the award must be set aside. I shall accordingly allow the pursuer a proof of his averments.”

On 8th July 1909 the Lord Ordinary sustained the reasons of reduction and reduced the award.

Opinion.—“I refer to the opinion which I delivered after a hearing in the procedure roll, in which I stated my views as to the law applicable to a case of this kind. I have now to consider whether as a result of the proof the pursuer has succeeded in establishing that the questions (1) of interest upon the sum awarded in name of demurrage, and (2) of expenses in the arbitration, were duly submitted to the arbiters. If so, it is abundantly plain from their evidence that they did not consider these questions, and that the inference which would otherwise have been drawn from their award that the pursuer's claims on these heads were disallowed was erroneous.

The arbitration was conducted in a very informal manner. Each party submitted to the arbiter nominated by him such documents as he thought were required in his interest, and no communication took place between the parties and their agents on the one hand and the arbiter nominated by the opposing party on the other. The arbiters interchanged views by letter, and the terms of their award were thus adjusted. A proposal was at one time made that the arbiters should meet with parties' agents before the award was issued, but the meeting which had been arranged never took place owing to one of the arbiters being unable to attend, and the award was issued without parties having been heard or having any opportunity of stating before the tribunal the views which they took on the matters now in dispute. I think it is exceedingly unfortunate that the proposed meeting never took place, because I have no doubt that the matters of interest and expenses with which the arbiters did not deal would then have been brought under their notice and have been decided by them.

There is very little reference in the course of the correspondence with the arbiters to the question of interest, no doubt because it was treated by the parties as entirely subsidiary. The records in the actions, however, in which interest was claimed on the sum sued for from the date of citation were sent to each arbiter; and on 6th April 1908 the defender's agent wrote to the pursuer's agent suggesting that a minute should be lodged ‘agreeing to hold the closed record as the parties' pleadings in the arbitration.’ No minute was ever lodged, but parties seem to have proceeded on this footing. The only other reference to the matter of interest in the voluminous correspondence that took place is to be found in No. 35 of process, which is ‘a statement of facts for use of Provost Mackie re demurrage claims on s.s. “Marina.”’ This document contains the following paragraph—‘The claim for demurrage on the “Marina” is £271, 15s. 6d. Of course the questions of interest and expenses fall to be determined.’ There is no doubt that Mr Mackie received this paper at the time, but it is equally clear that he did not communicate it to his co-arbiter; and in his communings with the latter he never referred to the question of interest at all. It was. strenuously argued that the claim for interest was one which ought to have been brought to the notice of both arbiters, and that as it was never brought to the notice of the defender's arbiter at all, it could not be held to be part of the matters referred. There would be great force in the argument if this had been a formal reference. Here, however, it seems to have been understood that the pursuer should submit to Mr Mackie his claims in the arbitration which it was assumed he would communicate to his co-arbiter, that the parties should not correspond with the arbiter nominated by the other side, and that all the defenders' agent required to do was to furnish Mr France with the information and the arguments tending to minimise the claim. If, therefore, the claim was sufficiently made to Mr Mackie by the pursuer, as I think it was by the document in question, I think that was all the parties contemplated. Apart from this, both arbiters had prints of the records in the actions before them; and they were thus both apprised that interest on the amount of demurrage which might be awarded formed part of the pursuer's claim. The fact seems to have been that the matter was entirely overlooked, which, having in view its relative unimportance, is by no means surprising, although it demonstrates the inexpediency of arbiters proceeding to issue a final award without hearing parties or without giving them an opportunity of representing against the proposed findings. Even in formal arbitrations after the fullest hearing it is deemed expedient to issue proposed findings so that no possible point may be overlooked or dealt with on mistaken assumptions.

On the question of the expenses incurred in the arbitration it is admitted that the arbiters and they alone had jurisdiction to deal with these. In the correspondence between the arbiters and the parties' agents hardly any reference is made to the question, and that for the obvious reason that until it was known what amount of demurrage was found to be due in each case the question of expenses could not be properly decided, for there had been various offers by the defender which might turn out to have exceeded the total amount awarded. From the letters which passed, however, between the parties' agents, and also to some extent from their parole communings, it is plain that the agents contemplated that this was a matter with which the arbiters would deal; and in the statement No. 35 to which I have already referred the pursuer's agent made express reference to it. Here again Mr Mackie seems to have failed to bring the matter under the notice of his co-arbiter;

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and it was not in the interests of the defender, having in view the award on which the arbiters agreed, that the matter should be mooted by Mr France. Mr Mackie, indeed, had a telephonic conversation through his clerk with the pursuer's agent, and inferred from what took place then that the arbiters were not to deal with the question of expenses. I am satisfied that Mr Scott did not withdraw this question from the arbiters, but that what he really asked was that the matter should be reserved, so that when the award as to the amount of demurrage had been issued the arbiters might be asked to deal with it. It was strenuously maintained on the correspondence following the issue of the award that Mr Scott all along took the view that the arbiters had no power to deal with expenses, and had accordingly withdrawn the matter from their consideration. No doubt when the award was issued Mr Scott took up the position, on the advice of counsel, that the omission might still be rectified by an application to the Court, but I accept his explanation on the matter, which indeed is alone consistent with the paragraph in No. 35 to which I have already referred. The result is that the question of expenses was not considered at all by the arbiters, Mr Mackie believing either that it had been withdrawn from their consideration or that it fell to be dealt with by the Court, and Mr France being perfectly pleased to concur in an award which implied that expenses were not to be awarded to either party. On this point also I think it is plain that there was a miscarriage, for which the pursuer and his agents are not to blame, but which resulted from Mr Mackie's misunderstanding and the informal way in which the whole proceedings were gone about.

The net result is that the pursuer has not had his claims for interest and expenses adjudicated upon by the arbiters, although these matters were within the reference and were submitted to the arbiter nominated by him. The claim for expenses, although believed by Mr Mackie to be of small importance, involved really a substantial sum, estimated by Mr Scott at close on £100. It is difficult to see how so large an account could be incurred, but it must be kept in view that as the pursuer was a foreigner all the correspondence and investigations had to be conducted by his law agents, who were of course entitled to charge for their trouble. Mr Mackie appears to have overlooked this entirely, having had in view arbitrations of the same informal kind where the correspondence and inquiries were made by the parties themselves, and where the main expense chargeable against an opponent would have been the arbiter's fee.

Holding as I do that the claims for interest and expenses were within the reference and were submitted to the tribunal in the way contemplated by the parties, I have no alternative but to reduce the award, following the decisions to which I referred in my previous opinion. The result is regrettable, because neither party has any fault to find with the decision of the arbiters of the principal matter submitted to their decision, and it may well be that if the arbiters had considered and decided the claims in question the amount of the award in favour of the pursuer would not have been materially increased looking to the views expressed by Mr Mackie in the witness-box. At the same time the pursuer was entitled to have these matters disposed of one way or the other, and his only remedy appears to be a reduction of the award. This of course involves that the proceedings should be commenced de novo either before the same arbiters or before other two selected by the parties. All this procedure might have been avoided had the defender consented, as I think he ought to have done, to the arbiters disposing of the claims for expenses and interest after the final award had been issued. Instead of this he stood upon what he regarded as his legal rights, and as in my opinion he has proved to be wrong he must take the consequences. I shall accordingly reduce the award and find the defender liable in expenses.”

The defender reclaimed, and argued—(1) The questions of expenses of the arbitration and interest on the demurrage were not submitted to the arbiters. Even had the question of interest been submitted, it could only have been interest prior to the closing of the record. The failure of the pursuer's arbiter to communicate to the defender's arbiter the statement of facts referred to by the Lord Ordinary, saying, “the questions of interest and expenses fall to be determined,” was a failure rather as agent for the party than as arbiter, and in any case that claim had not been communicated to the other arbiter. The charter-party and the record were the only documents which could be looked at to determine what the arbiters were asked to decide. (2) The question of expenses if ever submitted was withdrawn. (3) The pursuers had barred themselves by their actings from insisting in the action of reduction.

Argued for the pursuers (respondents)—This was an informal arbitration, and it was understood that each arbiter was to communicate any information given to him to the other; the parties took the risk of this being done. The arbiters had thus been asked to deal with interest and expenses. In any case the question of interest was by inference submitted to the arbiters under the clause of reference in the charter-party. Moreover, the arbiters had prints of the records before them showing that interest was claimed. The action had been sisted in order that the whole subject-matter therein might be settled by arbitration.