Scottish Court of Session Decisions

This was an action at the instance of Goodwins, Jardine, & Company, Limited, mechanical engineers, registered under the Companies Acts 1862 to 1886, and having their registered office at 19 St Swithin's Lane, London, and James Watson Stewart, C.A., Glasgow, the liquidator thereof, against Charles Brand & Son, contractors, 172 Buchanan Street, Glasgow, in which they sued for certain sums of money.

On 20th June 1890 the defenders Charles Brand & Son (who had contracted with the Caledonian Railway Company for the formation of part of the Glasgow Central Railway under two contracts called the Bridgeton contract and the Trongate contract) made a sub-contract with the pursuers, Messrs Goodwins, Jardine, & Company, Limited, for the supply of the girder work required for these two contracts.

The contract between the pursuers and defenders was constituted by an offer and acceptance. The offer had been lost, but the acceptance was contained in a letter written by the defenders to Goodwins, Jardine, & Company, which was as follows:—“20 th June 1890.

“ Glasgow Central Railway.

“ Contracts Nos 1 and 2.

“Dear Sirs,—We hereby accept your tender for all the girder work on these contracts, as per schedule sent by you, and at the prices therein stated, less 2½ (say, two and a half) per cent. Should we elect to take delivery of any portion of these girders at the station, and erect the same, a reduction is to be made by you of 20s. (say twenty shillings) per ton. The whole work to be executed to the satisfaction of the engineers of the railway company, and according to plans and specifications, and to be finished within the period mentioned in the specification. We shall furnish you within four weeks with copies of all the contract drawings of iron work, and will from time to time give you drawings or instructions of any alterations that may be ordered, and also instructions with reference to our requirements from time to time, it being understood that you will supply us with the iron as the works proceed. A formal minute of agreement to be entered into containing all usual and necessary clauses.—We remain, Yours truly, Charles Brand & Son.”

The principal schedules referred to in the above letter had disappeared, but the following is an excerpt from one of the copy schedules produced:—

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“ Bridgeton Contract.

Ironwork.

Description of Work.	Quantity.	Rate.	Amount.	Total Amount
Retaining Walls. No 1 .—South of Strathclyde Street on east side of Railway. Cast-iron standards similar to those on adjoining retaining wall.	No. 25	6/	£ 7 10
Wrot. iron tubing 2″dia. and £” thick, screwed at joints	lin. ft. 304	1/6	22 16 0
No 2.— North of Strathclyde Street on east side of Railway. Cast-iron standards as above	No. 22	6/	6 12 0
Wrot.-iron tubing 2″dia. as above	lin. ft. 260	1/6	19 10 0
				£56 8 0”

Appended to the copy schedule relative to the Bridgeton contract was a docquet in the following terms:—“Twenty-four thousand and eighty-one pounds and eightpence stg. net, erected complete, in conformity with drawings, specification, and conditions, 11/6/90.”

Appended to the copy schedule relative to the Trongate contract was a docquet in these terms—“Fifty-three thousand one hundred and sixty-eight pounds two shillings and ninepence stg. net, erected complete, in conformity with drawings, specification, and general conditions, 11/6/90.”

The pursuers did not admit, however, that they had written these docquets on the principal schedules, or that they were appended thereto, and no satisfactory evidence was adduced at the proof to establish the defenders' contention that they were so appended.

Under their contract with the Railway Company the defenders were paid by instalments as the work advanced and was certified, and in like manner the defenders made payments to Goodwins, Jardine, & Company. At the date of the liquidation of the pursuers their part of the contract had been only partly fulfilled, but they continued to implement the contract as required. The sums now sued for were the balances which they alleged to be due to them by the defenders.

The defenders denied that the sums sued for were due, and averred—“(Stat. 6) In their tenders, dated 11th June 1890, attached to the schedules filled up by them, the pursuers offered to complete the works ‘in conformity with drawings, specifications, and general conditions.’ The defenders accepted said tenders by letter dated 20th June 1890, and in said letter stipulated that the work should be executed ‘according to plans and specifications.’ The drawings, specifications, and conditions so referred to were those applicable to the contracts between the defenders and the Caledonian Railway Company above mentioned. Previous to the pursuers tendering to the defenders for said work, they had before them the said drawings, specifications, and conditions of said railway contracts, including the general specification of works. Said conditions and others were intended to and did form part of the contract made as aforesaid between the pursuers and defenders, and the pursuers tender and the defenders' acceptance was made and given on the footing that said conditions and others were incorporated in the contract between them. By article 180 of the said general specification it is provided as follows:—‘Should any disputes arise as to the true intent and meaning of this specification, and the relative plans, sections, drawings, detailed estimate and special specification, and the contract to follow thereon, or as to the extent of the works intended to be performed thereunder, as to the works having been duly and properly completed, or as to the expense of any additional work, or deduction from that specified, or any alteration which may be more or less expensive than the work specified, or as to the measurements of the works as executed, or as to any extension of time for the completion of the works beyond the date or dates mentioned in the special specification, or as to the liquidated and ascertained compensation payable by the contractor, in the event of delay in completing the works, or as to any claim of damages at the instance of the contractors against the company, or as to any notice or plans requiring to be served or delivered by the company in compliance with the said Acts, or as to any other matter, claim, demand, or obligation whatever arising out of or in connection with the contract, or as to any other matter specially referred to the arbiter in this or in the special specification, the same shall, subject to the provisions as to arbitration contained in the foresaid sections of the Special Act, be referred to John Wolfe Barry, civil engineer, Westminster, whom failing to Benjamin Baker, civil engineer, Westminster, whom failing to Sir Douglas Fox, civil engineer, Westminster, notwithstanding that they are or may be holders of shares in the stock of the company, or hold or may have been or may be appointed to any situation or employment under the company, and the decision, interim or final, of the said arbiter shall be finally binding and conclusive upon both parties, and the arbiter is hereby authorised and empowered to decern for such sum or sums, interim or final, as he may find to be due by the contractor to the company or by the company to the contractor, and also to decide all questions of expenses, interim or final, and to decern therefor.’ In terms of the said clause of submission, all disputes and differences between the pursuers and defenders arising out of the contract between them fall to be determined by Sir John Wolfe Barry, whom failing Benjamin Baker, whom failing Sir Douglas Fox, and the defenders are willing and hereby offer to refer the pursuers' claims accordingly.”

They pleaded, inter alia—“(1) In respect that the pursuers' claims in the present action fall within the clause of submission which forms part of the contract between the said pursuers and defenders, the action should be sisted until the arbiter therein named has given his decision thereon.”

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On 30th January 1904 the Lord Ordinary ( Kincairney) pronounced this interlocutor—“Finds (1) that the clause of arbitration in the 180th section of the general specification of the works undertaken by the defenders in their contract with the Caledonian Railway Company … has been incorporated in the contract between the pursuers and the defenders; (2) that the questions between the pursuers and the defenders in this action fall within the said clause of arbitration; therefore sustains the first plea-in-law for the defenders, and sists the cause that the record may be submitted to one of the arbiters nominated in said general specification.”…

Opinion.—“This is an action on a subcontract by which the pursuers undertook to perform a part of the work for which the defenders had contracted with the Caledonian Railway Company. It is a contract carved, so to speak, out of that larger contract. At a former stage of this case I decided that a supplementary summons, by which it was endeavoured to enlarge the conclusions of the action, was incompetent. That judgment is now final, and that supplementary action is out of Court, and I have now been asked to decide the question raised by the defenders' first plea, which is that the pursuers' claims fall under a clause of reference. The contract with the Railway Company contains a very wide and careful clause of reference, and indeed it seems clear that neither that original contract nor the contract between the pursuers and defenders to which this action relates could be worked out without great inconvenience and expense without the aid of a clause of reference. Now, there is no clause of reference in the contract between the pursuers and defenders. But the defenders contend that the clause of reference in the contract between the defenders and the Railway Company must be held to be incorporated in the contract between the present parties. There are certainly difficulties, but I think that that contention should be supported.

“There is in the process a letter by the defenders to the pursuers, dated 20th June 1890, which bears to be an acceptance by the defenders of the pursuers' tender, about which acceptance no difficulty has been raised. It bears—‘The whole work to be executed to the satisfaction of the engineers of the Railway Company, and according to plans and specifications, and to he finished within the period mentioned in the specification.’

“There is no mention in this letter of a clause of reference nor even of conditions in the specification. The reference is to the specification generally, but I think that that reference to the whole specification is, in the circumstances, sufficient to incorporate its clauses regarding the contract under consideration as truly a part of the general contract.

“The defenders aver that ‘in their tenders, dated 11th June 1890, attached to the schedules filled up by them, the pursuers offered to complete the works in conformity with drawings, specifications, and general conditions.’ The reference here to the general specification is closer than in the defenders' letter, but the difficulty seems that the tenders or tender cannot be found, and nothing but alleged copies are produced. These are not very satisfactory copies, and I could not act on them without some inquiry, but I have come to think that that would be an unnecessary expense, and that I may proceed on the letter of the defenders, and may hold that the reference in that letter to the specification is, in the circumstances, sufficient to incorporate the clause of arbitration. I suppose that the difficulty about the production of the tenders may yet be overcome.

“Counsel for the defenders quoted the case of Weir v. Pirie & Company (No. 1), 24th May 1898, 3 Com. Cases 263, which appears to give very important support to his argument.”

The pursuers reclaimed, and on 2nd July 1904 their Lordships of the First Division pronounced this interlocutor—“The Lords, having heard counsel for the parties on the motion of the defenders, and it having been admitted by counsel for the pursuers that the principal document, containing the tenders made by the pursuers, referred to in the defenders' letter of acceptance,… has been lost and cannot be found, before answer allow the defenders a proof of their averments as to the terms of the pursuers' tenders, mentioned in statement 6 of the statement of facts, embodied in their defences,… and to the defenders a conjunct probation; appoint the proof to proceed before Lord M'Laren on a day to be afterwards fixed by his Lordship.”

A proof was accordingly taken, which, however, need not be here referred to, as in the opinion of the Court it left matters precisely as they had been. ( Vide opinion of the Lord President, infra).

Argued for the reclaimers—There was no agreement on the part of the pursuers to refer disputes to arbitration. The arbitration clause was not imported into the contract between the pursuers and defenders. The reference in the letter to “specifications” did not import general conditions like an arbitration clause. The reference clause applied only to the principal contract, and was only binding on the parties thereto. The defenders had made an independent contract with the pursuers. They made their own profit and paid the pursuers at agreed-upon rates— Hamilton & Company v. Mackie & Sons, July 17, 1889, 5 Times L.R. 677; Runciman & Company v. Smyth & Company, June 30, 1904, 20 Times L.R. 625. The case of Weir v. Pirie & Company, cited by the respondents, was inapplicable, as in that case the contract in question was between the same parties. Here there was a contract and a sub-contract, and the parties to each were different. It was clear from the specification as a whole that “contractor” did not include “sub contractor.” An agreement to abide by the results of an incidental arbitration might be implied, but that was quite different from a general consent to arbitration. Quoad clauses dealing solely with

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and inseparable from the execution of the work, the pursuers might be bound by an arbiter's decision, but that was altogether different from a consent on their part to refer to arbitration all disputes that might arise between themselves and defenders, e.g., the present dispute as to prices.

Argued for the respondents—The Lord Ordinary was right. The question really turned on the terms of the letter of 20th June, and of the docquets. The docquets had been appended by the pursuers, but even if not they only differed from the letter by the addition of the words “and conditions.” The whole specification was imported into the sub-contract, and not merely the rates and quantities. The arbitration clause could not be limited to the mere execution and sufficiency of the works, for without the arbitration clause many of the clauses of the specification would be meaningless— Weir v. Pirie & Company, May 24, 1898, 3 Com. Cases, 263.

At advising—