Scottish Court of Session Decisions

This was an action brought in the Sheriff Court at Aberdeen by William Buchan, builder in Aberdeen, against Alexander Melville, C.E., 42 Union Street there, in which the pursuer craved decree for £113, 11s. 6d., being the balance claimed by him as due under a building contract.

The defence was (1) that the action was excluded by an arbitration clause in the contract between the parties, and (2) that the defender, in respect of certain miscellaneous deductions claimed by him, damages due for delay, and deductions for defective workmanship, was entitled to credit from the pursuer for a sum exceeding the sum sued for.

On 13th September 1899 the pursuer wrote to the defender offering to execute the mason-work of two houses to be erected on ground belonging to the defender “in accordance with plans, specifications, and schedule of quantities prepared by you, at the total cost of £588, 9s., which sum by a subsequent letter dated 29th September he reduced to £550. On 29th September, in reply to the pursuer's letter of the same date, the defender wrote accepting the pursuer's offer to execute the work for £550, “subject to your signing the plans, specifications, and conditions of contract in the usual way.” The work was thereupon proceeded with.

On 27th October, in a letter to the pursuer, the defender wrote—“I notice you have not yet signed the plans, specifications, and general conditions of contract of the above houses. You might call here and get this done as early as possible.” On 27th November the defender again wrote—“Although I have written you requesting you to sign the plans and conditions of contract for these houses in terms of your offer and my acceptance of same I notice you have not done so.” In this letter he also stated that the plans and conditions were lying at his office for signature, and again requested the pursuer to call and sign them. At a date subsequent to these letters, but which was not exactly ascertained, the pursuer called and signed a document described as “general conditions of contract.” He also signed, at a date not exactly ascertained, a schedule of quantities of mason work of the two houses in which reference was made to “general conditions of contract.” The evidence was contradictory as to how far the pursuer at the time of signing was aware of the contents of the general conditions of contract, but he admitted he had had them before him, and had the opportunity of considering them before signing.

The “general conditions of contract” consisted of five loose sheets of paper, and contained sixteen lithographed articles and a seventeenth interpolated in manuscript. The pursuer had signed on the last page only, but identified the document produced as the one he had signed, although repudiating knowledge of the contents of the articles.

The 15th article was in the following terms:—“In case of any dispute arising between the proprietor and the contractor having relation to or arising out of the contract during the work or after completion, whether with reference to the execution of any part of the work, as to the true intent and meaning of these presents, or the settlement of accounts, or to anything else, whether executorial or non-executorial, the same shall be referred to Alexander Melville, C.E. and architect, Aberdeen, ( i.e., the defender), whose decision will be final and binding on all parties without further appeal.”

The 17th article, which was the one interpolated in manuscript, was in these terms—“It is specially conditioned that the architect shall not be disqualified by being the employer.” There was a conflict of evidence as to whether this article had been inserted

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prior to the date of signing, and the Court ultimately held that this had not been proved, and consequently that this article was not binding upon the pursuer.

The 1st and 16th articles contained a provision that the houses should be ready for occupation by 1st April 1900, and the 16th article in effect authorised the arbiter to award damages for breach of this provision.

The houses were being erected by the defender for himself, and he was consequently both proprietor or employer and architect. It was admitted that this was known to the pursuer at the time he made his offer.

The work was executed by the pursuer.

The defender had from time to time paid the pursuer certain sums, amounting in all to £425, to account of the sum stipulated in the contract.

The sum sued for was the balance of the sum stipulated in the contract together with £5, 2s. 6d. for extras, and with a deduction of £16, 17s. for some work included in the schedule but not executed.

The defender admitted the extras, with the exception of one which made a difference of 3s. 4d. He, however, averred that the deductions to which he was entitled amounted to £71, 1s. 6d., and he further averred that the pursuer was owing him £50 for loss and damage caused through delay in completing the contract, and £100 as an abatement for loss and damage arising from defective workmanship.

The defender pleaded, inter alia—“(2) The pursuer having contracted with the defender, in case of any dispute arising between them in relation to the contract during the work or after completion, whether with reference to the execution of any part of the work, as to the true intent and meaning of the said conditions, or the settlement of account, or to anything else, whether executorial or non-executorial, to refer the same to the defender, whose decision should be final and binding on all parties without further appeal, the jurisdiction of this Court is excluded and the present action is therefore incompetent.”

The pursuer pleaded, inter alia—“(2) The alleged conditions of contract founded on by the defender not being stamped, holograph, or tested, or duly signed by pursuer, cannot be founded upon in this action to any effect. (3) The defender being barred from acting as arbiter on the ground of interest, said alleged conditions of contract should be set aside, and the questions at issue between pursuer and defender decided at common law.”

After a proof before answer allowed by him “for the ascertainment of the terms of the contract between the parties, and particularly as to whether the conditions of contract founded on by defender are part thereof and binding on the pursuer,” the Sheriff-Substitute on 11th March 1901 issued the following interlocutor:—“Having considered the cause, Finds in fact that pursuer is bound by the conditions of contract, and specially by condition No. 15 thereof: With this finding appoints the case to be enrolled for further procedure, and grants leave to appeal.”

Note.—“This is an unpleasant case in some respects. There is a direct conflict of evidence between defender and hs three employees on the one hand, and pursuer and two of his co-contractors on the other hand.

I confess to having the very greatest difficulty in coming to a conclusion as to which party is telling the truth on the matter of fact chiefly in dispute between them, but in the view I have come to I do not absolutely require to come to a conclusion on this matter in order to dispose of the case.

I think that upon pursuer's own evidence, combined with the undoubted facts, I must hold that he is bound by the general conditions.

As will be seen, his offer contains no reference to the conditions, but the acceptance does, it being subject to the plans, specifications, and conditions being signed. The conditions were not signed at once, but the schedule was very soon after the acceptance, and the form of tender there signed bears reference to the general conditions.

Defender's evidence is to the effect that he read over the conditions to the pursuer before even an offer was given in. Pursuer denies this, and I cannot hold it as proved.

It is proved, however, that more than one letter was written by defender to pursuer asking him to call and sign the general conditions, the last being on 27th November.

By this time the work under pursuer's contract was well advanced, and the terms of defender's letter show that he was urgent that pursuer should sign.

Defender says he does not know when pursuer did sign the conditions, but thinks it must have been soon after 27th November, as no further letters were written. Defender's clerks cannot speak definitely as to when they were signed, except that it was after 27th November. One of them thinks it was about January 1900, and another says there was snow on the ground, and pursuer himself says it was about the middle of January, and I think we may take it that that was about the time; but whenever it was there is no question that pursuer did sign the conditions.

As to what occurred when he did sign there are varying statements. Pursuer says he asked one of the clerks present if there was anything particular in the conditions, and was told there was nothing. This is denied by the two clerks who were present, and is not proved. Pursuer goes on to say he looked through the conditions, but not properly—he read little bits of them. He identifies No. 13 as the conditions he signed, but says he did not notice the 15th clause, and that if he had he would not have signed, as he had been warned through the association not to sign such a thing.

He is asked whether this should net have made him more careful in reading the conditions, and he replies he had not

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time. In reply to further questions put by myself, he says he had heard of previous cases in connection with defender and his conditions, and that what he was warned not to sign was a condition making the proprietor sole arbiter. I quite believe pursuer may have been warned by his association, because this condition is well known in connection with former cases both in this Court and in the Court of Session. But when pursuer admits that he was warned, that he had the conditions put before him with the opportunity of carefully considering them, that he did not take this opportunity, but went over them carelessly ‘because he had not time,’ it is, I think, altogether out of the question that he can be listened to when he now says he did not know of the conditions and would not have signed if he had, and asks to be let off in consequence.

No doubt there is evidence to the effect that the conditions had been added to since they were signed—the point on which there is so much contradiction. If this were proved there might be something to be said for the view that the whole conditions were invalidated, and a great deal for the view that the additions made would not receive effect. But, as I have already indicated, I am hardly prepared to accept the pursuer's evidence and that of his witnesses as against the witnesses for defender and defender himself as actually proving that the written additions were made after signature.

In the view I take it is sufficient to hold that it is not proved that these additions were made after signature, while it is unquestionable that clause 15 was there when pursuer signed the conditions.

It is fair to point out, however, though in my view it is not required for the disposal of the case, that there seems no reason why the witness Copland at all events should be at all biassed in defender's favour, while the two tradesmen examined for pursuer have still to settle up with defender, and the way they are dealt with may quite possibly depend upon whether the clause in question in this case is to be operative with them. And I further think it more likely that the 1st April should have been inserted at the commencement of the contracts, when it was a reasonable date for their completion, than that it should have been added after everybody had signed, and at a time when plainly it must cause a dispute if sought to be enforced.”

On 29th March 1901 the Sheriff-Substitute sisted the cause till the next Court-day in order that the defender might, if so advised, issue his award.

On 10th April the defender issued an award, in which, after narrating the purport of the articles of the conditions of contract under which he was acting, and that having failed to get the pursuer to attend with him he had himself gone fully into the measurements and quality of the work, he found that, allowing for various items detailed and for two sums of £30 and £45 in respect of defective workmanship, the pursuer had been overpaid to the extent of £69, 18s. 8d., and further found the pursuer liable to the defender in payment of the sum of £50 in respect of his failure to complete his contract timeously. For both these sums he decerned against the pursuer.

On 12th April the Sheriff-Substitute allowed the award to be received and seen.

The pursuer lodged the following minute:—Morrison, for pursuer, stated that since the contract for the erection of two dwelling-houses in Bonaccord Street, Aberdeen, mentioned on record, was entered into between pursuer and defender, on or about the 29th day of September 1899, and particularly while the work was in progress, the defender has from time to time falsely alleged ( first) that the pursuer was delaying the erection of said buildings, and ( second) that the pursuer's work was defective and untradesmanlike, he well knowing the said allegations to be false. This the defender did, after naming himself as arbiter between himself and the pursuer in the conditions, corruptly and solely for the purpose of lending colour to the award which he intended to issue after the pursuer had completed his work. Further, that the defender as the work proceeded repeatedly refused to give pursuer payments to account, well knowing that the pursuer was entitled to the same, and that with the intention of paying the pursuer only such a sum as would induce him to finish the work, and of thereafter issuing an award finding nothing further due to the pursuer; and further, and generally, that the defender acted towards the pursuer subsequent to said 29th September 1899 with animus and hostility, whereby he is disqualified from acting as arbiter between himself and pursuer and from issuing any award. … Said pretended award is ultra vires, the defender having decerned therein in his own favour for the following sums of damages, viz.:—

t1. In respect of defective workmanship in the erection of south gable of the southmost house, whereby the said gable is considerably off the plumb,	£30	0	0
2. In respect of defective workmanship in the fronts of both houses, whereby the door, lintels, window-sills, belt-course, and rustic work are considerably off the level,	45	0	0
and 3. In respect of pursuer's failure to complete the work by the 1st day of April,	50	0	0
Making in all the sum of	£125	0	0

Morrison, for pursuer, accordingly moved the Court to find that the defender is disqualified from issuing said pretended award, and in any event that said award is ultra vires, and thereafter to fix a diet of proof for the disposal of the cause, or to do otherwise in the cause as to the Court shall seem proper,”

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The defender lodged the following answers—The pursuer's averments as contained in said minute are denied and are irrelevant, and further, it is not competent for the Court to consider the merits of the award. The Sheriff-Substitute, by interlocutor dated 11th March 1901, held that the pursuer is bound by the conditions of contract, and especially by the 15th condition thereof containing the clause of reference to defender as sole arbiter. Pursuer's averments, in so far as intended to contest the validity of this condition and the other clauses of reference to defender contained in the said conditions of contract, and also of the award following thereon, are irrelevant in respect that the reduction of the award in this process is incompetent; and further, in respect that there are no facts averred to support the allegations of corruption, falsehood, animus, and hostility made by pursuer against defender in said minute. Defender has not throughout the contract or submission done anything as arbiter to invalidate the award, and it was pronounced by him bona fide and in obedience to the orders of the Court. The copy correspondence, to which express reference is hereby made, shows that defender as employer was perfectly justified in paying to the pursuer no larger instalments than have actually been paid. The items of £30 and £45, to which pursuer takes exception in the said minute, are not treated by the arbiter in his award as damages (although the reference clause is Sufficiently comprehensive to entitle him to assess and award damages), but as deductions or allowances in the ordinary course in respect of defective workmanship on the part of pursuer. With reference to the arbiter's decerniture against pursuer for £50 in respect of the non-timeous completion of his contract, the award bears that such decerniture is pronounced under and in virtue of the 16th article or condition of the said conditions of contract, which confer express power on the arbiter to that effect. The motion made in said minute should accordingly be refused, and no sum having been found due by defender to pursuer under the award, which is valid and binding, the action should be dismissed, with expenses to defender.”

On 14th June the Sheriff-Substitute issued the following interlocutor—“Refuses the crave of said minute, and, under reference to the interlocutor of 11th March last, and the note annexed hereto, dismisses the action: Finds the defender entitled to expenses,” &c.

Note.—I must say I was considerably impressed by the argument of the defender's agent that I had no jurisdiction to consider these objections. The case of Forbes v. Underwood, January 22, 1886, 12 R. 465, while not exactly in point, makes it, to my mind at least, doubtful whether it is competent for me to consider the validity of an arbiter's award. But the same procedure which is proposed in this case has had the sanction of the Second Division of the Court of Session in a former case in which the defender here was defender, and where practically identical questions were raised as are raised by the minute of objections in this case ( Robb v. Melville, November 1898); and there is also the authority of Lord Lee in Nivison v. Howat, November 22, 1883, 11 R. 189, for holding that an arbiter's award is a document which can be competently challenged in the Sheriff Court by way of exception in terms of section 11 of the Sheriff Court Act of 1877. Apart from these authorities I fancy I am precluded by my former interlocutor of 11th May from considering the question of jurisdiction.

There remains, however, the question of whether the objections made are relevant to go to proof, and whether in the present case they ought to be allowed to go to proof.

I have considered these questions with care, and, to take the second point first, have come to be of opinion that it is inadvisable to allow them to go to proof in this action. My reasons are these—(1) To go to proof now would practically mean beginning an entirely new action, involving in the event of the pursuer's success in all probability a third proof, or at least a reference as to the character of the work done. (2) To go to proof and judgment on these objections would not necessarily dispose of the whole question between the parties. If the objections are repelled the action will fall merely to be dismissed. There will remain a large claim at defender's instance against pursuer, for which no doubt defender will require to raise action. (3) There is no hint in the pursuer's condescendence of this objection to defender acting as arbiter on the ground of his having disqualified himself by showing bias and acting unfairly and corruptly, though pursuer has a plea that defender is barred from acting on account of interest. This ground of objection ( i.e., that defender acted falsely and corruptly) was quite as open to pursuer when the condescendence was framed as at the time of the lodging of the minute, but the sole question raised and fought was whether pursuer was bound by the conditions of contract.

In these circumstances I see no good reason for allowing this action to proceed further, especially in view of the fact that the competency of the proposed procedure is challenged. I shall dismiss the action on the ground that my jurisdiction is excluded by the terms of the conditions of contract and that defender's award brings out no sum due to pursuer, and if pursuer thinks right he can bring a reduction of the award.

Apart from the view I have taken, I question the relevancy of the averments made in the minute.

I hardly see the possibility of proving that the falseness and corruption alleged were more than the natural desire of a man to look after his own interests, combined with mistakes in opinion or even of fact, which afforded no ground for altering an arbiter's award. Then with reference to the other objection, while it is quite true that an arbiter has no power to award damages unless expressly given him, it is

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difficult to say that the fixing a sum to be deducted in respect of the defective condition of the walls fell outside of what an arbiter in such a reference was intended to do, while article 16 of the conditions of contract might quite well be construed as giving the arbiter the power which he exercised in fixing £50 on account of delay.”

The pursuer appealed and argued—(1) The alleged conditions of contract were no part of the contract, or at least article 15 was not. They were not referred to in the offer, and though the letter of acceptance referred to signing conditions of contract, it was in the usual way.” That meant the ordinary conditions of a building contract, not a condition like article 15, which entirely altered the contract. The signing not at the date of the contract but two months subsequently was merely for the purpose of identification, and not as signifying acceptance of what was in the document. (2) Article 15 could not receive effect, because it was one the Court would not enforce as being contrary to the first essential of arbitration, i.e., having an impartial person as arbiter— M'Dougall v. Laird & Sons, November 16, 1894, 22 R. 71, at p. 74, 32 S.L.R. 52. A party could not be judge in his own cause— Smith v. Liverpool, London, & Globe Insurance Company, July 15, 1887, 14 R. 931, 24 S.L.R. 672. The case of E. Montrose v. Scot, March 13, 1639, M. 14,155, only decided that once a definite dispute had arisen parties might agree to settle it in any way they chose. (3) Even if article 15 stood, the defender had disqualified himself from acting as arbiter by having adopted the position of party to the dispute— M'Dougall v. Laird & Sons, cit. sup.; M'Lauchlan & Brown v. Morrison, December 1, 1900, 8 S.L.T. 226, p. 279; Dickson v. Grant, February 17, 1870, 8 Macph. 566, 7 S.L.R. 317.

Argued for the respondent—(1) These conditions were a material part of the contract, for the acceptance was conditional on their being signed, and the pursuer must be held to have known their contents as he had ample opportunity of making himself conversant therewith. The date of signing was of no moment. (2) Article 15 was good. Two parties might refer to one of them the matter in dispute—Bell on Arbitration, 2nd ed., p. 137— E. Montrose v. Scot, cit. sup. They could also refer all questions which might arise to one who it was known must have an interest, and the only requisite was that his interest should be known at the time of choice— Johnston v. Cheape, July 8, 1817, 5 Dow, 247. This was also the law in England— Ives & Barker v. Willans (1894), 2 Ch. 478, at p. 491; Jackson v. Barry Railway Company (1893), 1 Ch. 238. (3) The defender had not disqualified himself by adopting the position of a party to the dispute. He was already a party when he was chosen, and of necessity he would have to take a part and give evidence in any action. An arbiter was not disqualified because he having another duty to perform had performed it— Scott v. Parochial Board of Carluke, February 1, 1879, 6 R. 616, 16 S.L.R. 435. What did disqualify was when an arbiter did something not contemplated and so altered his position— Jackson v. Barry Railway Company, cit. sup.; Nuttall v. Mayor of Manchester (1892), 8 T.L.R. 513.

At advising—