Scottish Court of Session Decisions

By-contract dated 19th March 1788 Zacharias Anderson disponed to Robert Gray and the other partners of the Westmuir Coal Company, and their disponees whomsoever, the whole coal of all and whole that small park or enclosure lying near the east end of the town of Airdrie, consisting of about three acres, but under certain obligations which were thereby appointed to be engrossed in subsequent conveyances of the coal under pain of nullity. One of the obligations was in the following terms:—“And further, the said Robert Gray binds and obliges him and his said partners and their foresaids to satisfy and pay the annual damages to be done to the surface of the said lands, and the damages to be done to any houses, buildings, dykes, or fences upon the same by the sinking and working the said pit and erecting the necessary machinery, forming of coal-hills, ginways, roads, and ways, or by any other means employed in working, raising, and carrying of the said coal in consequence of the rights and liberties before granted, which damages shall be paid to the said Zacharias Anderson or his foresaids, as the same shall be ascertained by neutral persons to be mutually chosen.” The property was acquired and held by James M'Laren, who disponed it to his son ‘William Sinclair M'Laren, who in turn disponed it to Andrew Ramsay, by disposition, dated 9th December 1881, which expressly conveyed to him all right to damages, so far as the same might be due by the Westmuir Coal Company by their mineral operations in terms of the foresaid contract between Zacharias Anderson and Robert Gray and the other partners of the Coal Company. Hugh Strain had at the date of this action the sole right to work the coal under the 3 acres, but under the obligations originally incumbent on the Westmuir Coal Company.

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In this action Ramsay claimed from Strain the sum of £500 as compensation for damage done to certain houses of his erected on the said piece of ground, and which damage he averred had been caused by subsidence of the surface attributable to the defender's working of the coal.

The defender averred that the pursuer's buildings were erected in 1839, and his author was from 30 to 40 years ago paid by the then proprietors of the minerals for the whole damage done or to be done to the property and buildings referred to in this action by the workings of the minerals, and that no further damage had arisen for which he was responsible. He had offered to refer the claim to arbitration

The pursuer pleaded—“(2) The pursuer, in virtue of his titles to the surface and the assignations therein contained, is entitled to recover damages for the whole period of the defender's possession of the minerals. (3) No arbiters being named in the contract of 1788, the reference clause is ineffectual; and separatim, it is inapplicable to the circumstances out of which the present action has arisen.”

The defender pleaded—“(2) The action is excluded by the provision for arbitration in the contract founded on, or otherwise, and in any event, the amount for which the defender is liable (if any) falls to be determined by arbitration, and decree can only be pronounced in terms of the arbiter's award. (6) Separatim, the pursuer has no title to sue for any damage done to his property or buildings except for damage done arising from workings carried on since he acquired the property; and the defender is not liable for any workings other than those carried on by himself.”

The Lord Ordinary ( kinnear) found that in terms of the contract the damages sought to be recovered in this action fell to be ascertained by neutral persons to be mutually chosen by the parties, and found that the pursuer was bound to concur with the defender in choosing persons of skill in order that the claim for damages might be determined by them in terms of the said contract.

“ Opinion.—The pursuer maintains that the clause of reference in the contract upon which he sues is ineffectual because it contains no nomination of arbiters, and that he is therefore entitled to a proof. But the obligation upon which his claim for damages is based expressly provides that ‘such damages shall be paid as the same shall be ascertained by neutral persons to be mutually chosen.’ The case therefore falls within the well-established rule, of which Smith v. Wharton Duff, 5 D. 750, is an illustration, that a reference which is requisite to liquidate an obligation will be good although to persons not named.

The pursuer relied upon Hendry's Trustees v. Renton, 13 D. 1001. But the doctrine in question was expressly recognised in that decision. It was held that a general submission to arbiters not named of all disputes and differences which might arise between the parties to a mineral lease could not be sustained. But besides the general clause, there was a special arbitration clause with reference to surface damage which it was declared should be awarded by two neutral ‘men to be chosen;’ and there was a similar obligation that at the termination of the lease the machinery should be offered to the landlord at a price to be fixed by two ‘neutral men to be mutually chosen.’ The distinction between such clauses as these and the general clause of submission, which alone the Court was asked to enforce, is pointed out by the Judges, none of whom entertained any doubt that where, as in the instances cited, a reference for the purpose of extricating a special stipulation in a contract is made part of the stipulation itself, it will be effectual even although the arbiters are not named.”

The pursuer reclaimed, and argued—The whole question here was whether any damage had been done for which the defender could be made liable, and was a dispute in the strictest sense of the word. It was, then, a question purely for a proof, and not a question for the valuator under the arbitration clause in the contract. The arbiter was only to assess the damage if it was due; the case fell under the general rule that a clause of reference which contained no nomination of arbiters was ineffectual. The only exceptions to this general rule were cases where the subject referred to the arbiter were the assessment of damages due or the fixing of a price.

Authorities— Merry & Cuninghame v. Brown, July 15, 1859, 21 D. 1137, Lord President's opinion; Campbell v. Shams Water Company, June 2, 1864, 2 Macph. 1130; Howden & Company v. Dobie & Company, March 16, 1882, 9 R. 75.

The defender replied—The arbitration clause was quite effectual, and the general rule did not apply. What was here referred to the arbiter was merely the fixing of a sum to be paid under the contract for physical injury to the surface.

At advising—