The Rhodesian Railways Ltd v Mackintosh

• Jurisdiction: South Africa
• Citation: 1932 AD 359

The Rhodesian Railways Ltd Appellant v Mackintosh Respondent
1932 AD 359

1932 AD p359

Citation	1932 AD 359
Court	Appellate Division
Judge	Wessels ACJ, Curlewis JA, Stratford JA and Roos JA
Heard	September 13, 1932; September 14, 1932
Judgment	September 29, 1932

Flynote : Sleutelwoorde

Arbitration — Defence that action barred by agreement to submit to arbitration — How to be taken — Effect of section 6 of Act 8 of 1928 (S.R.) — Discretion of Court under common law to refuse reference to arbitration — Construction of contract to build line of railway — Dispute to be settled by Resident Engineer.

Headnote : Kopnota

The provisions of section 6 of Act 8 of 1928 (E.R.), which provide that any party to a submission to arbitration may at any time after he has entered appearance and before delivering any pleadings or taking other Steps in the proceedings, make an application to the Court to stay proceedings, are permissive, and the defence that there has been an agreement to submit to arbitration can be raised at any time by way of a special plea or a defence under the common law.

The effect of a submission to arbitration is not to oust the jurisdiction of the Court, but merely to delay it and the Court has a discretion to refuse a reference to arbitration. If the facts are such that the arbitrator is not to be trusted to give a fair decision, then an Appeal Court will not interfere with a lower court's discretion in refusing a stay of proceedings.

If a contractor clearly and specifically agrees that the resident engineer employed by the one party is to act as arbitrator between the parties, then, even though he is virtually a judge in his own cause, the Court must give effect to such a provision in the contract (per WESSELS, A.C.J.).

In an action by a contractor for certain sums of money alleged to be due in terms of a written agreement for the construction of a line of railway, the defendant pleaded that the disputes were due to defective description or ambiguity in the contract or else they were with regard to the rates to be followed and the amounts to be paid under the contract and relied on

1932 AD p360

certain clauses of the contract contending that by virtue of these clauses the decision with regard to all the disputes rested with the resident engineer. Of the clauses relied on, clause 10 provided: "In cases where there is a discrepancy between the specification, the detailed quantities and the plans or between any or either of them, or between any parts of the specifications and detailed quantities and in all cases of defective description or ambiguity, the explanation given by the engineer is to be considered as correct and shall be binding upon the contractor." Clause 68 provided: . . . "The decision of the resident engineer shall be final in the event of any dispute arising with regard to the rates to be followed or amounts to be paid, or the disposal of spoil . . . ." Clause 38 was as follows: "Provided always that in case of any dispute or difference arising between the company and the contractor either during the progress of the works or after the determination or abandonment or breach of the contract or as to concerning the meaning or effect of the contract or anything done or to be done thereunder (except as to the matters left to the sole discretion of the engineer or as to the withholding by the engineer of any certificate to which the contractor may claim to be entitled) then either party shall forthwith give to the other notice of such dispute or difference which shall then be referred to an arbitrator . . . ."

Held, that clause 10 of the contract dealt exclusively with the power of the engineer to decide discrepancies which might arise out of a conflict between the plans, specifications and detailed quantities, that the engineer was not an arbitrator, that all the authority he had been given by clause 68 of the contract was the right during the period that the works were being carried out to decide upon a dispute with regard to what rate had to be followed in a particular case or what amount had to be paid or how the spoil had to be disposed of; that the engineer's decision was binding only in matters of detail which in large engineering works like the construction of a railway line or a dock have to be settled, as the work proceeds, between the contractor and the engineer of the railway company or harbour, but that the contract did not entitle the engineer to give a conclusive interpretation of the contract and so to determine finally the correct legal meaning or effect of the contract and the amount to be paid under it. The decision of the High Court of Southern Rhodesia in Mackintosh v Rhodesia Railways, Ltd., reversed in part.

Case Information

Appeal from a decision of the High Court of Southern Rhodesia (RUSSELL, J.).

The facts appear from the judgment of WESSELS, A.C.J.

R. B. Howes, K.C. (with him R. C. Tredgold), for the appellant: If the decision of the Court below were correct, an arbitration clause could always be avoided by making a tender.

The issue of the validity or otherwise of the tender does not arise on the special plea. But even if the question of the tender arises and it is not subject to arbitration, the action should still be

1932 AD p361

stayed until the other issues have been referred to arbitration. See Ives and Barker v Williams (1894, 2 Ch. 478); Rowe Bros. Ltd, v Crossley Bros Ltd. (108, L.T.R. 11) and Bristol Corporation v John Aird & Co. (1913, A.C. 241 at pp. 250, 261).

In any case the issue raised as to the validity of the tender has been authoritatively settled. See Hurwitz v Rhodesian Railways Ltd. (1912 AD 8); Odendaal v du Plessis (1918 AD 470 at pp. 477-8, 479-481); Harks v Pieters (1920 AD 644 at pp. 648-9, 650), and Burt N.O. v National Bank (1921 AD 59 at p. 62).

The onus is on the person alleging that a matter should not go to arbitration to show good cause. See Skinner v Uzielli Co. (24, T.L.R. 266) and British & Empire Digest (Vol. 2, p. 366, case 340).

The mere fact that a point of law is involved will not justify the refusal of a stay of action. See Lock v Army, Navy and General Assurance Association Ltd. (31, T.L.R. 297).

As the construction of the agreement is not straightforward, involving as it does the elucidation of ambiguity by extrinsic evidence and the explanation of technical terms requiring technical knowledge, the Court will not refuse a stay. See East Rand Prop. Mines Ltd v Cinderella G.M. Ltd. (1922, W.L.D. 122 at p. 125); Metropolitan Tunnel and Public Works Ltd v London Electric Railway Co. (1926, Ch. 371 at pp. 385-8 and 391) which is set out as the authority on the subject in Redman on Arbitrations and Awards (5th ed pp. 48-49).

There was a plea over by reason of the intimation that it was necessary in the case of Marks & Co v S.A.N.T.A.M. (1932 CPD Sep.).

Sec. 24 of Act 8 of 1928 contemplates that, quite apart from the agreement of the parties, the Courts should refer technical matters to those conversant with them.

If the arbitration clause is not a condition precedent, the Court may refuse to stay an action. The principle that a stay of proceedings is necessary and that the arbitration clause cannot be set up as a defence only applies when the arbitration clause is not a condition precedent. The Courts will never refuse to stay an action when the case must go to arbitration. See Smith, Coney and Barrett v Becker Gray & Co. (1916, 2 Ch. 86 at p. 101). Our Courts have held that an arbitration clause is always a condition precedent. See King v Harris (1909, T.S. 292 at p. 300). The English law has almost come round to the same point of view. See Redman on Arbitration and Awards, pp. 34, 35.

1932 AD p362

I. L. Horwitz, for the respondent: The parties could never have intended to give the resident engineer the power to decide the amount due in view of other clauses in the contract.

The circumstances under which a contract of this kind is to be performed must be born in mind. The sole discretion given to the resident engineer refers to decisions which have to be made promptly during the course of the work, and not to matters of final payment.

The contract must be read as a whole and the provision for arbitration in the event of dispute destroys the finality of the decision of the resident engineer. See Robins v Goddard (1905, 1 K.B. 294) referred to in Bothwell v Union Government (1917, A.D at p. 265), but this point was not decided since a decision was unnecessary in the circumstances. See p. 292 of the report. See also Piggott v Townsend (1926, 27 R.N.S.W. 25 and 44 N.S. W.W.N. 26 (Australia)), and Johns & Son v Webster & Tonks (1916, 35 N.Z.L.R. 1020 (New Zealand)).

The making of a tender is a step in the legal proceedings manifesting the consent of the party tendering to plaintiff's recourse to legal proceedings instead of arbitration. A tender therefore embodies an implied agreement to refrain from arbitration and to proceed with the litigation.

The only issue on all the claims is the interpretation of the contract. Therefore the Court is the proper forum. See Bristol Corporation v John Aird & Co. (supra at p. 261). The Metropolitan Tunnel case (supra) is distinguishable because there the dispute was in the course of the work.

The Legislature obviously intended to alter the common law when it enacted sec. 6 (1) of Act 8 of 1928 except perhaps in matters of procedure. Under that section the onus is on appellants to show that the claims are covered by the arbitration clause. See Emdon and Another v Margau (1926, W.L.D. 159). The dictum of Eve, J., in Skinner's case (supra) is incorrect. See Thomson v Tasmanian Fire Insurance Co. (11 V.L.R. 54 - Australia).

The decision whether proceedings should be stayed is in the discretion of the Court of first instance and an Appeal Court should not disturb a decision arrived at...