Scottish Court of Session Decisions

On 24th June 1911 Messrs Macintyre Brothers, building contractors, Glasgow, pursuers, raised an action against Alexander Smith, Glengarnock, Ayrshire, defender, for, inter alia, the sum of £31, 10s., being one half of the sum of £63, the fee fixed by the Auditor of the Faculty of Procurators in Glasgow as suitable remuneration to the arbiter in an arbitration between the parties. The defender disputed liability on the ground that the arbiter was not entitled to any fee.

The following narrative of the facts is taken from the opinion of Lord Dewar—“In this action Macintyre Brothers, building contractors, Glasgow sue Alexander Smith, Glengarnock, Ayrshire, for £268, 4s.7d.,being the amount of the expenses incurred by the pursuers in an arbitration between parties, and found due by decreet-arbitral—together with the expenses of the clerk to the reference and half the arbiter's fee. The defender disputes liability on the ground (1) that the decree-arbitral was ultra fines compromissi and ultra vires of the arbiter, and (2) that the arbiter is not, in any event, entitled to a

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fee. Neither party asked for a proof, and the material facts upon which the parties are agreed are as follows:—By agreement dated 27th February 1903 the pursuers agreed to purchase, and the defender agreed to sell, his whole interest in Nettlehirst Limestone Quarry for the sum of £4000. By the second article of the agreement it was provided that the price should include good will; and by the sixth article the defender bound himself not to carry on, directly or indirectly, by himself or others representing him, the business of limestone merchant within a radius of twenty-five miles of Nettlehirst Quarry for a period of thirty years, without the consent of the pursuers. And by the eighth article the defender further bound himself to introduce all his customers to the pursuers and give what other assistance he could to keep up the output of the quarry purchased. And the last article provides—‘In the event of any difference arising as to the meaning of these presents, or as to any dispute, difference, matter, or thing arising in any way out of or under this agreement, or to the contracts or conditions thereof, the same shall be referred' to an arbiter named. Differences did arise, and the parties requested Mr Cook, writer, Glasgow to decide the question on which they were at variance. Mr Cook accepted office, and ordered parties to lodge their claim and answers in usual form. The pursuers lodged a statement of claim, and craved the arbiter to find that the respondent (defender) had violated and infringed the said agreement in the manner and to the effect set forth in the aforesaid statement, and to grant decree-arbitral accordingly, with the expenses of the reference.’ And in his answers the defender craved the arbiter to absolve him from the findings concluded for by the claimants (the pursuers), with the expenses of the reference.”

After the usual procedure the arbiter issued a finding in favour of the pursuers, and on or about 19th June 1911 he pursuers took up the decree-arbitral and paid the sum of sixty guineas to the arbiter as remuneration. The pursuers then called on the defender to repay them one-half of the arbiter's fee, but the defender refused on the ground that as no remuneration had been stipulated for, the arbiter must be presumed to have acted gratuitously.

The pursuer pleaded, inter alia—“(3) The defender being bound to make repayment to the pursuers of one-half of the sum paid by the pursuers to the arbiter as remuneration, decree should be granted as concluded for.”

The defender pleaded, inter alia—“(4) The said arbiter not being entitled to remuneration, the defender is not liable for any part of the payment alleged to have been made to him by the pursuers, and should be assoilzied from the conclusion therefor.”

On 20th February 1912 the Lord Ordinary ( Dewar) decerned against the defender in terms of the conclusions of the summons.

Opinion.—[ After dealing with matters with which this report is not concerned]—

“The next question is whether the defender is liable for half the arbiter's fee. The arbiter is a solicitor, and although he had not stipulated for a fee in advance, and no arrangement had been made regarding it, neither party, I understand, expected him to act gratuitously. Accordingly, after the decree-arbitral was issued and the pursuers' account of expenses had been remitted to the Auditor for taxation, the pursuers wrote to the defender on 3rd February 1911 stating that the Auditor had fixed the diet for taxation for 8th February, and suggesting that parties might agree upon a fee for the arbiter, and failing agreement the Auditor would be asked to fix it. The defender did not reply to this letter, nor did he appear before the Auditor, and the diet was adjourned. On the 8th February the pursuers again wrote to the defender stating that the diet had been adjourned until the 13th February, and on that date the Auditor would be asked to fix the arbiter's fee whether the defender was present or not. The defender did not state any objection to this course, and the Auditor accordingly fixed the arbiter's fee at sixty guineas. This fee the pursuers paid, and they now claim half thereof from the defender, and I think that in the special circumstances they are entitled to succeed. The defender does not aver on record, nor did his counsel state in debate, that he expected the arbiter to act gratuitously or that the fee fixed was unreasonable. I gather both from the defender's pleadings and the argument of his counsel that he understood from the beginning that Mr Cook was to be paid for his services, and that he would have been quite willing to pay half the fee if the decision had been in his favour; but he is so disappointed with the result that he proposes to disregard the understanding regarding payment, and now pleads that as the office of an arbiter is honorary, there is no legal obligation upon him to pay any fee at all in the absence of express stipulation. I think he is too late in taking that plea.

“No doubt the general rule is that the arbiter is presumed to act gratuitously, and unless he stipulated for remuneration he has no legal claim to enforce it. But where the circumstances show that there was an understanding that the arbiter's services should be paid for, and one of the parties has paid a reasonable fee without objection, he may, I think, recover half thereof from the other party. This was decided in the case of Henderson v. Paul, 5 Macph. 628. In that case the reference was to an accountant, and although there was no express stipulation that he should be paid, the facts showed that parties understood that he was to be remunerated, and one of them having paid the fee was held entitled to recover half thereof from the other party. The Lord Justice-Clerk said (page 632)—‘The presumption, no doubt, is that an arbiter acts without any right to remuneration; but the presumption is capable of being reargued, and I find what satisfies me, in the facts of the

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case, that the presumed condition did not hold in this case;’ and the special facts were, I think, exactly what we find here, viz.—(1) The arbiter was a professional man who rendered services to the parties of a similar kind to those for which he was paid in the exercise of his profession; (2) the payment was made in implement of an understanding which existed when the submission was entered into; and (3) the payment was made without warning or objection by the defender. (See also Edinburgh Oil Gas Light Company v. Clyne's Trustees, 13 S. 413, where it was held that a party was barred from objecting to a fee paid to an arbiter on the ground that he had failed to intimate an objection in due time; and the case of Murray v. North British Railway Company 2 F. 460, where it was questioned whether the old rule was now applicable with the same absoluteness as formerly.)

“On the whole matter I am of opinion that the pursuers are entitled to decree as concluded for, with expenses.”

The defender reclaimed, and argued—Here no special professional skill was required, and the arbiter was simply acting in a purely judicial capacity, and so the common law rule applied that, apart from agreement, an arbiter cannot demand a fee except where special knowledge is required— Murray v. North British Railway Company, January 26, 1900, 2 F. 460, 37 S.L.R. 370; Bell on Arbitration (2nd ed.), p. 312.

The pursuer was not called upon.