Scottish Court of Session Decisions

On 12th January 1910 the North British Railway Company, pursuers, brought an action against William Wilson, quarrymaster and contractor, Glasgow, defender, in which they sought payment of the balance which they alleged to be due on an account for work done and wages expended in connection with the construction of a siding at Croy Station.

The following narrative of the facts is taken from the opinion of the Lord President:—“Now the matter arises out of a contract, and the contract between the parties had to do with the construction of certain works at Croy Station. These works were divided into two portions—the works shown coloured green and the works shown coloured red on a plan; and the fourth article of the contract is—‘The first party’ [that is, the North British Railway Company] ‘shall thereupon construct the permanent way of the said siding and connection coloured red on the said plan and execute the other works shown coloured red on the said plan so far as not executed by the second party; and on the completion thereof the second party shall pay to

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them the cost of the labour incurred by them, and interest on the cost of the permanent way, materials, and of the drain, and of the retaining wall shown on the said plan, at the rate of 4 1 2 per centum per annum … as the amount of such cost and interest shall be determined by the engineer of the first party.’ Then the fifth clause is—‘The first party shall execute the works coloured green on the said plan, and the second party shall pay to them interest on the cost thereof as determined by the said engineer at the rate of 4 1 2 per centum per annum … as the amount thereof shall be determined by the said engineer.’

Now the work was done and a bill was rendered by the North British Railway Company which is appended to the initial writ, and is — ‘To amount expended in wages, &c., on siding and alterations at Croy Works coloured red on plan, Estimate No. 2, £187, 9s. 1d.’ I leave out all the matters of interest and cash payments on the other side. And then on 11th November—‘To interest on value of materials, &c., in siding and cabin at Croy, half-year to date £1107, 15s. 1d., at 4 1 2 per cent, per annum, £24, 18s. 6d.’

That bill not being paid the present action was raised, and in the course of the proceedings there was lodged a certificate from the engineer that the amount expended in wages, &c., at the place in terms of the agreement amounts to £187, 9s. 1d., and the value of materials to £1107, 15s. 1d., and upon that certificate the Sheriff-Substitute and the Sheriff-Principal have granted decree, the Sheriff-Principal particularly resting his judgment upon the observations of Lord President Inglis (then Lord Justice-Clerk) in the case of Trowsdale v. The North British Railway Company, 1864, 2 Macph. 1334.”

The defender pleaded, inter alia—“(1) The pursuers' engineer being under the contract in the position of an arbiter he ought to have given the defender an opportunity of being heard upon a detailed statements regarding the cost of labour and material, and having failed to do so the certificates founded on are not binding on the defender and ought to be set aside. (2) Alternatively, the pursuers' engineer not having personally ascertained the cost of the labour and material, and his certificates having been based on an erroneous statement placed before him by the company's employees, the certificates founded on are not binding on the defender and ought to be set aside.”

On 24th March 1910 the Sheriff-Substitute ( Fyfe) granted decree as craved, holding that the parties had mutually agreed to refer the matter to the pursuers' engineer, and that they were therefore barred from challenging his award.

On appeal the Sheriff ( Millar) adhered. Note.—“Under the contract the determination of the amount of the sums in dispute was referred to the engineer of the first party. He has granted his certificate. The defender maintains that the accounts upon which he granted that certificate were not submitted to him, nor did the referee hear them upon the question of the amount. It seems to me that that question has been settled in several cases. In the case of Trowsdale & Son v. The North British Railway Company, 2 Macph. 1334, the Lord Justice-Clerk Inglis says at p. 1338—‘These submissions have received the sanction of practice, and being legal are extremely convenient, not only for railway companies but also for contractors; because nothing is so indispensable in the construction of works of this nature under contract as that any dispute that may arise, as the execution of the work proceeds, should be settled at once and without delay; and no one in the position of an arbiter could settle such disputes in such a summary way, often without any other evidence than his own knowledge, but the engineer of such works, who is necessarily familiar with all their details.’ It seems to me that the result of that opinion is that it is for the arbiter to determine in what way he should inform his mind so as to come to a proper decision between the parties. If he determines to proceed upon his own knowledge, without further inquiry, Lord Justice-Clerk Inglis' opinion necessarily infers that he is entitled to do so. Of course if the defender averred facts and circumstances which showed that in giving his decision the arbiter acted corruptly or dishonestly, that would be another matter, but there is no such averment upon this record. Accordingly I think the interlocutor of the learned Sheriff-Substitute should be affirmed.”

The defender appealed, and argued—(1) The account sued on was overcharged. The appellant had asked for a detailed statement of the sums charged, but the arbiter had refused to furnish it or to hear him on the subject. In making up the account the arbiter had not relied on his own skill but on information supplied by the pursuers' employees. In so doing the arbiter had erred, for he was bound to hear both sides before issuing his award — Mitchell v. Cable, June 17, 1848, 10 D. 1297; M'Nair's Trustees v. Roxburgh, February 16, 1855, 17 D. 445; Cameron v. Menzies, January 25, 1868, 6 Macph. 279, 4 S.L.R. 235; Adams v. Great North of Scotland Railway Company, November 27, 1890, 18 R. (H.L.) 1, 28 S.L.R. 579; Holmes Oil Company, Limited v. Pumpherston Oil Company, Limited, July 17, 1891, 18 R. (H.L.) 52, 28 S.L.R. 940; Lanarkshire and Dumbartonshire Railway Company v. Main, July 17, 1894, 21 R. 1018, 31 S.L.R. 826. This was not the case of a reference to the opinion of an expert, as in Trowsdale & Son v. North British Railway Company, July 12, 1864, 2 Macph. 1334, on which the Sheriff had relied, but a remit to the pursuers' engineer as an arbiter who was bound to exercise his functions judicially. (2) The arbiter had acted ultra fines compromissi, in respect that he had wrongly charged the defender with the cost of rebuilding the wall of the siding, which but for the engineer's want of skill would not have fallen.

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Argued for the respondents — (1) The Sheriff was right. This was not an arbitration in the strict sense of the term), but a remit to a man of skill as an expert to assess the cost of the work done. Such a referee was not bound to hear parties, but was entitled to satisfy himself as he might think proper— M'Gregor v. Stevenson, May 20, 1847, 9 D. 1056; Trowsdale ( cit. sup.) at p. 1338; Logan v. Leadbetter, December 6, 1887, 15 R. 115, 25 S.L.R. 110; Paterson & Son, Limited v. Corporation of Glasgow, July 29, 1901, 3 F. (H.L.) 31, 38 S.L.R. 855; Stevenson v. Watson (1879) L.R., 4 C.P.D. 148; Alston Orr v. Allan, 1910 S.C. 304, 47 S.L.R. 203. The only alternative would be for the arbiter to allow a proof, and this the parties wished to avoid. To say that failure to furnish details and vouchers rendered the arbitration invalid was unsound where as here the reference was executorial and not judicial. (2) It was not averred that the arbiter had acted ultra fines compromissi. To entitle a party to raise that question the fact must be specifically averred on record.

At advising—