A contract, declared to be an English contract enforceable in and subject to the jurisdiction of the English Courts, whereby a Scottish company undertook to supply engineering plant to the Johannesburg Municipal Council, contained this clause of reference-‘In case any dispute or difference shall arise between the purchasers and the contractors . . it shall, after the complete delivery of the material, be referred to the arbitration of a single umpire or referee to be mutually agreed upon between the parties, or failing agreement, to be nominated by the president for the time being of the Institution of Civil Engineers of London, or in the case of disputes with local contractors in Johannesburg to be nominated by the Lieutenant-Governor of the Transvaal . . . and the arbitration shall be an arbitration within the meaning of the Arbitration Act of 1889 (England) and shall be conducted in all respects as therein provided.’
A supplementary contract called ‘The Running Contract’ contained this clause of reference – ‘In the event of any dispute between the contractors and the Council under this contract, the matter shall in the first place be referred to the engineers, but if either party refuses to accept the engineers’ decision the matter in dispute shall be referred to a single arbiter or umpire to be mutually agreed upon, or failing agreement to be nominated by the Lieutenant-Governor of the Transvaal, and to hold the said arbitration in Johannesburg . . . and the arbitration shall be deemed to be an arbitration within the meaning of the Transvaal Ordinance of 1904, and shall be conducted in all respects as therein provided.’
The contractors having refused to continue the tests under the ‘Running Contract,’ the Council rejected the whole material as unsatisfactory and brought an action in the Scottish Courts in which they sought to recover the payment made to account and also two separate sums as damages under the ‘Main’ and ‘Running’ contracts respectively. The Court of Session directed the parties to prepare a stated case for the opinion of the English Courts on the ground that the scope and validity of the arbitration clauses fell to be decided by these Courts, and it was necessary for the proper disposal of the case to ascertain whether the arbitration clauses covered the dispute between the parties.
Held (1) that the question whether the dispute between the parties fell within the arbitration clauses was as much a question of fact as of law; (2) that the action should therefore have gone to proof in the ordinary way in the Scottish Courts; and (3) that these Courts would, under the law of England, have the power, but would not be under necessity, should they find the dispute to be within the contract, to refer any part thereof to arbitration if that course were convenient and in accordance with Scottish practice.
Per the Lord Chancellor-‘If the cause of action which is really established be that there has been complete repudiation and breaking of this contract, then it would not be within the arbitration clauses in either of these contracts.’
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Opinion, per Lord Shaw, that the clauses of arbitration were executorial only and could not include a reference to an arbiter of the question whether a repudiation of the contract was justifiable, and further that the two contracts were so intermixed that procedure by arbitration was unworkable.
A Scottish company, by a contract which was declared to be deemed an English contract, contracted to supply certain engineering plant to a colonial municipal council. A bond, in English form, guaranteeing the fulfilment of the contract, was granted by an individual. The municipal council brought an action of damages for breach or non-fulfilment against the company and also against the guarantor, and used arrestments on the dependence against the latter.
Held: (rev. First Division) that the action as against the guarantor was not premature, and that the arrestments should not be recalled. Question whether if the law of Scotland alone had been in question the decision would have been otherwise.
Judges:
The Lord Chancellor (Loreburn), Lord James of Hereford, Lord Atkinson, Lord Gorell, and Lord Shaw of Dunfermline
Citations:
47 SLR 20, [1909] UKHL 20
Links:
Jurisdiction:
Scotland
Contract
Updated: 25 April 2022; Ref: scu.620588