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Present: Lascelles G.J. and Wood Benton *J.
CBONING v. THE ATTOBNEY-GENEBAL.
191—D. G. Badulla, 2,420,
Arbitration—Legal misconduct—Agreement between parties to refermatters in dispute to specified arbitrators—Compulsory referenceto arbitration by Court—Arbitrator's fee.
Plaintiff sued the defendant on a contract made between plaintiffand the Provincial Engineer of Uva, whereby it was agreed, interalia, that any matter in dispute should be referred to the arbitrationof the Director of Public Works. The Court ordered the mattersin dispute to be referred t6 the Director in terms of the agreement.The plaintiff, after the award was filed, moved to have it set asideon the ground that the arbitrator was guilty of. legal misconduct,inasmuch as he had approved of a letter written by the ProvincialEngineer offering to plaintiff a specified sum in settlement ~of hisclaim.
Held, that the fact that the letter was written with the authorityof the arbitrator (Director of Public'Works) did* not amount tomisconduct.
LasctUiLBS C.J.—The objection is thus to the qualification of thearbitrator, and, if raised at all, should have been made before theconclusion of the arbitration.
Wood Renton J.—An arbitrator, under such a clause of com-pulsory reference as the appellant’s contract contains, is notdisqualified merely because he has already a full knowledge of, andmust to some extent have formed an opinion upon, the facts of thecase. His-appointment cannot be objected to on the ground thatthe contract makes him in some measure judge in his own cause.It can be challenged only on the ground that there is some reasonto suspect that, at the arbitration itself, he will act unfairly, o*Will not be ready to revise in the light of argument or evidence anyopinion that he may previously have formed.
The fact that the arbitrator was a public officer was held not tohave disentitled him to his fee.
Where a submission to arbitration does not express a contraryintention, the arbitrator may include the amount of- his remunera-tion in the award.
^HE facts are stated in 14 N. L. R. 142.
H. J. G. Pereira (with him Gumstvamy), for plaintiff, appellant.
Garvin, Acting 8.-G. (with him Akbar, C.C.), for defendant,respondent.
Our. adv. vult.
April 24, 1913. Lascelles C.J.—
The circumstances in which this action was brought have alreadybeen set out more than once in the course of the action, and itis not now necessary to refer to them in detail. The plaintiffcontracted with the Provincial Engineer to construct a portion ofthe Bandarawela-Welimada road, and subsequently brought thepresent action against the Attorney-General, claiming damagesfor the wrongful determination of the contract by the ProvincialEngineer and for other relief.
Under a clause in the contract, which provided that disputeswhich might arise with regard to the execution of the contractshould be decided by the Director of Public Works, the Courtordered the matters in dispute to be referred to the Director ofPublic Works. Against this order the plaintiff appealed unsuccess-fully. Then the Director of Public Works entered on the arbitrationand published an award, which contains* a specific finding on each ofthe issues framed by the Court for the trial of 'the action. Thepresent appeal is from an order of the District Court refusing toset the award aside on the ground of legal misconduct on the partof the arbitrator.
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The objection by the Attorney-General that the application toset aside the award was not brought within the time limited bysection 27 of the Arbitration Ordinance, 1866, was not pressed.But I am of opinion that the objection could not have succeeded,inasmuch as, although the award was read in Court in the presenceof the proctors on August 7, notice was served on the plaintiff toattend on the 19th and take notice of the award. The latter date,
I think, should be taken as that on which the award was “ notifiedto the parties/*
The plaintiff endeavoured, in the first place, to establish legal'misconduct on the part of the arbitrator by means of the letter Ewritten by the Provincial Engineer .of Uva to the plaintiff onJanuary 30, 1911. This letter, which was admittedly writtenwith the knowledge of the Director of Public Works, contains anoffer to pay the plaintiff the sum of Rs. 983.86 in settlement ofall the plaintiff's claims. This sum, as explained in the letter andin the account which was filed with the letter, represents thesaving to Government which wag effected by taking the work outof the plaintiff's hands. The Provincial Engineer has been able tocomplete the work at a lower rate than that stipulated for in thecontract, with the result that the Government saved Rs. 983.86 onthe transaction. This sum was offered in full settlement of theclaim at a date when the Director of Public Works had not beenformally appointed, but was aware that he would be appointed.The offer, as is shown by the Attorney-General’s letter ofNovember 22, was made “without prejudice." How can themaking of this offer amount to legal misconduct? As I under-stand the plaintiff’s argument, it was contended that the letterproves that the arbitrator, before entering on the award, had madehimself familiar with the accounts, and had come to a more or lessdefinite conclusion on a matter connected with the reference.
The objection is thus to the qualification of the arbitrator, and,if raised at all, should have been made before the conclusion of thearbitration. The fact that the letter E was written with theauthority of the Director of Public Works clearly does not amountto legal misconduct on his part, and no authority has been cited tous which gives any countenance to such a proposition.
It is well settled that in contracts of this nature the parties haveno right to expect that the engineer to whom they have agreed torefer their disputes should come to the arbitration with a mindentirely clear from preconceived opinions. The contractor in suchcases is well aware that the. engineer, by reason of his position, isconversant with the subject-matter of the dispute, and, beinghuman, he may have formed or expressed opinions as to the meritsof the dispute; what the contractor has a right to expect is that theengineer should give a fair consideration to the facts and argumentsand give a fair decision on them; that he should not have made up
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his mind so as not to be open to change it on argument. InJackson v. Barry Railway Company,1 the engineer, both beforeand after the dispute was referred to him, had expressed a decidedview with regard to the matter in dispute, yet the Court, on theprinciple which I have endeavoured to state, refused to stay theCompany from proceeding with the arbitration. Thus, even if theletter E can be regarded as an expression of opinion with regardto a matter in dispute in the arbitration, which certainly is not thecase, it would not be fatal to the validity of the award.
The other ground of legal misconduct suggested is the arbitrator’somission to notice an admission, which is stated in the plaintiff’saffidavit of February 20, 1918, to have been made by Crown CounselAkbar to the effect that the sum of Bs. 710, which is claimed by thedefendant as a penally, was not rightly imposed, and ought to beremitted. Mr. Akbar has explained what actually occurred withregard to this sum, and I entirely accept his explanation. Thequestion was one of cumulative penalties, and Mr. Akbar’s statementwas to the effect that if the two sums of Bs. 1,100 and Bs. 8,098.86were forfeited, it was immaterial whether the further penalty ofBs. 710 was wrongly claimed. It is clear that no question of legalmisconduct arises in respect of this matter, and it is not suggestedthat the award should be remitted to the arbitrator for furtheradjudication in this respect.
With regard to. the arbitrator’s fee, it is not contended that theamount is otherwise than reasonable, but it is contended that,inasmuch as the arbitrator is a public officer, it was his duty to givehis services as arbitrator in contracts of this nature without charge.I see no reason for departing from the general rule that, where thesubmission does not express a contrary intention, the arbitrator mayinclude the amount of his remuneration in the award.
The appeal, therefore, entirely fails and should be dismissed,and I do not understand the Crown to press for the costs of theappeal.
•Wood Benton J.—
A preliminary objection to the hearing of this appeal was raisedby the Acting Solicitor-General. He contended that the appellant’sapplication to set aside the award had not been made, as requiredby section 27 of the Arbitration Ordinance, 1866 (No. 15 of 1866),within ten days after it had been submitted to the Court and notifiedto the parties. This objection is, in my opinion, untenable, andthe Solicitor-General abandoned it in argument. The journalentries show that while the award was read in open Court in thepresence of the parties on both sides on August 7, the proctors andthe Court itself considered that notification to the plaintiff-appellant
i (1893) 1 Chan. 238.
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was necessary. The appellant was, in fact, notified to appear inCourt and hear the award on August 28. The application to setaside the award was made on August 20. It is not necessary todecide whether, under section 27 of_, Ordinance No. 15 of I860,communication of an award to the proctor of a party is sufficient.The appellant here was entitled to assume from the action of theCourt itself that he would have ten days from the date of thenotification for August 28 to consider whether or not the awardshould be impeached.
The merits of the present appeal may be dealt with very briefly.We are not here concerned with the question whether the award ofthe arbitrator is right on the evidence. The only point for deter-mination is whether he has been guilty of “ misconduct ” in thesense in which the term is used in the law of arbitration. Theappellant relies on two grounds of alleged “ misconduct first,that by sanctioning the offer contained in Mr. Emerson’s letter E,the arbitrator had prejudiced the appellant’s case to such an extentas to disqualify himself for conducting the arbitration; and in thenext place, that he had not given judgment in the appellant’sfavour for the sum of Rs. 983.36, which it waB alleged had beenadmitted in the letter E to be due to him, and the further sum ofRs. 710, which Mr. Akbar, who appeared as counsel for the Crownat the hearing of the arbitration, had considered ought not to havebeen charged as liquidated damages.
No authority was cited to us, nor am I aware of any, which would •entitle us to hold that the subject-matter of these allegations, evenif established as facts, would amount to “ misconduct ” in the eye ofthe law. If the arbitrator had displayed such a bias as wouldincapacitate him from acting, the appellant should have moved theCourt to revoke the order of reference. If he failed to deal in hisaward with matters falling within its scope, there ought to havebeen a motion to the Court to refer the award to him for further con-sideration. But the evidence does not, in my opinion, substantiateeither of the allegations in question as matter of fact. The arbitratorin the present case is the Director of Public Works. Letter E wasnot written by him personally. It was a letter by Mr. Emerson, theProvincial Engineer, The District Judge stated that it wasauthorized by the Director of Public Works. But there is nothingin the evidence to show that be conducted any personal examinationinto the Btate of the accounts as between the Government and theappellant, or did more than sanction an offer of compromise made byhis subordinate. Moreover, at the time the letter E was written,while the District Court and the Supreme Court in appeal had'decided that there must be a reference under the contract to theDirector of Public Works, the latter had not in fact been appointedarbitrator by the Court. There was nothing illegal or improperin his approving of an offer of compromise which, if accepted,
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would have rendered the arbitration unnecessary. The position ofarbitrators under contracts of; this character has been well settledby a series of decisk>nsY of which one of the latest and the mostinteresting is Ives & Barker v, Williams* The principle wasthere in effect laid down that an arbitrator, under such a clause ofcompulsory reference as the appellant’s contract contains, is notdisqualified merely because he has already a full knowledge of, andmust to some extent have formed an opinion upon, the facts of thecase. His appointment cannot be objected to on the ground thatthe contract makes him in some measure judge in his own cause.It can be challenged only on the ground that there is some reason tosuspect that, at the arbitration itself, he will act unfairly, or will notbe ready to revise in the light of argument or evidence any opinionthat he may previously have formed. In Ives & Barker v. Williams 1Lindley L.J. thus explains the grounds on which contractors submitto be bound by such stringent provisions of compulsory reference,as we find in this case, to an engineer or other officer of the partywith whom the contract is made:—
The explanation of it is to be found in two circumstances. First ofall, competition for this kind of work is very keen, and contractors com*pete with each other; and in the second place, it has been ascertainedby long experience that engineers of the highest character may betrusted, and, when a contractor enters into such a very stringent provi-sion as this, he knows the man he has to deal with If he had
not confidence, he would not submit to it; but knowing the engineershe does submit to it, because he has confidence in them, and knows thatthey can be trusted, even although it is their duty to look after the workof the contractor, to deal''fairly with him in case of a dispute whichis in substance, although not in form, a dispute between the contractorand themselves.
It is obvious that the appellant cannot draw from letter E anysuggestion of bias which would amount to disqualification within themeaning of the law as I have just endeavoured to explain it.
The subsequent correspondence between the parties, coupled withthe statement made to us by Mr. Akbar from the Bar as to what hisown attitude had been to the question of the allowance of the sumsof Bs. 983.36 and Bs. 710 at the hearing, and with the issuesaccepted by both sides and founded on the appellant’s plaint, showsbeyond all doubt that the defendant-respondent did not waive thecontention of the Crown that the appellant had forfeited, by thenon-fulfilment of his contract, sufficient amounts in the way ofsecurity money and retention money to absorb these allowances.Letter E was clearly written, and was understood by the appellantto have been written, as an offer without prejudice. The arbitrator'was therefore in no way bound, nor indeed was he entitled, in viewof the course which the case took at the hearing before him, toallow these items in the appellant’s favour, and the issues themselves
i (1694) 9 Ch. 476.
– Craning v.Attorney-General
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compel him to deal with the question whether the security and theretention money had been forfeited. Even if, therefore, an im-proper failure to deal with such matters would have amounted-to“ misconduct,” the evidence is wholly insufficient to show that anysuch failure took place. The objection to the arbitrator’s fee wasscarcely pressed, and is untenable.
The appeal must, in my opinion, be dismissed. I would dismissit without costs, for which I understand that the Crown does notpress.
CRONING v.THE ATTONEY – GENERAL