Fiji Builders Ltd v Tip Top Ice Cream Co (Fiji) Ltd [1966] FijiLawRp 29; [1966] 12 FLR 65 (18 March 1966)

[1966] 12 FLR 65

SUPREME COURT OF FIJI

Civil Jurisdiction

FIJI BUILDERS LTD.

v.

TIP TOP ICE CREAM CO. (FIJI) LTD

[SUPREME COURT, 1966 (Mills-Owens C.J.) 18th March, 6th April)

Arbitration-dispute within arbitration clause in contract-application to stay action-construction of arbitration clause-whether engineer thereby appointed arbitrator.

Arbitration-engineer agent of one party to contract-whether competent to act as arbitrator.

Action-arbitration clause in contract-application for stay-whether engineer appointed arbitrator by arbitration clause-engineer agent of one party to contract-discretion of court.

The plaintiff company contracted with the defendant company to construct certain road, site and drainage works. The Engineer, who was the agent of the defendant company, allowed extras in the sums of £600 and £767-12-0 which were incorporated in his final certificate, the amount of which the present action was brought to recover. The defendant company applied to stay the action on the ground that the extras were in dispute and that clause 66 of the General Conditions of Contract of the Institution of Civil Engineers (set out in full in the judgment) which was incorporated in the contract, required the dispute to be referred to arbitration.

The application was resisted by the plaintiff company on the ground that clause 66 required the Engineer to act as arbitrator and if he were to hold in favour of the defendant company he would be impeaching his own certificate; also as arbitrator he would be in the position of a witness and a judge in the dispute.

Held: 1. That in general, if parties agree on an arbitrator such as the engineer or architect employed by one of the parties they must abide by their agreement.

2. That the case was not one [such as Bristol Corporation v. John Aird & Co.] which involved the virtual necessity of the engineer-arbitrator giving evidence of the terms of an oral agreement, but moreover

3. The provisions of clause 66 did not place the Engineer in the position of an arbitrator and the requirement that disputes were to be first referred for his decision was no more than a step in invoking the procedure of arbitration before an agreed or nominated arbitrator.

4. The action would be stayed.

Case referred to: Bristol Corporation v. Aird (John) & Co. [1913] AC 241; 29 TLR 360.

Summons in chambers to stay action in the Supreme Court on contract containing arbitration clause; reported by direction.

G. M. G. Johnson for the plaintiff company.

R. L. Munro and C. D. Singh for the defendant company.

MILLS-OWENS C.J.: [6th April 1966]-

This is a summons to stay the action on the ground that the subject-matter thereof should be referred to arbitration.

By a contract dated the 27th April, 1964, the plaintiff company undertook to construct certain road, site and drainage works for the defendant company. The contract price was £5,744 and the Engineer was the agent of the defendant company. According to the affidavit of Mr. Mackinnon, a director of the plaintiff company, disagreement arose over the road work, during the course of the work, between the plaintiff company and the Engineer. The plaintiff company maintained that the specifications were inadequate, and that the method of construction directed by the Engineer was unsatisfactory. As a result of the Engineer's insistence on his method being adhered to, the plaintiff company says, the amount of metal and stone fill provided for by the schedule of quantities proved insufficient. Whatever the merits of the dispute as to the mode of construction, additional material was in fact used and the Engineer allowed the sum of £600 as an extra on account thereof. Further, according to the affidavit, the surface area of the finished earthworks proved to be greater than the area contemplated by the Engineer's design with the consequence that extra material and work was required on that account also; additional extras in a sum of £767-12-0 were therefore allowed by the Engineer. The only other item of extras, a sum of £20, does not appear to be material for present purposes. The extras of £600 were allowed in May 1965 and the extras of £767-12-0 were allowed, according to an "Amended Statement of Account" signed by the Engineer, on the 12th July, 1965. Also on the 12th July, 1965, according to Mr. Mackinnon's affidavit, the Engineer said in a letter to the plaintiff company:

"It is my considered opinion that Fiji Builders Ltd. have underestimated the importance of proper and complete consolidation of filling required, and the only alleviating factor which I consider can be taken into account is that the Tip Top Ice Cream Co (Fiji) Ltd. required this work completed by a given date necessitating your working in adverse weather conditions."

It was apparently on this basis that the extras were allowed by the Engineer.

Without going too closely into the dispute, it appears that the plaintiff company's view was that owing to the waterlogged condition of the ground it was impossible to produce, with the quantity and type of metal fill provided for by the contract, a compacted, consolidated area by the method insisted upon by the Engineer; being directed to proceed according to the Engineer's method, the plaintiff company says, the poor results which the company had anticipated in fact occurred and hence the occasion for the extras of £600; the extras of £767-12-0 were the result of inadequacy of the specifications and of the method of construction directed by the Engineer. The proper method to adopt, the plaintiff company maintains, having regard to the waterlogged and plastic nature of the ground, was to rip out the area to a depth of 18" and to lay and roll a foundation upon which the roadway should be relaid.

The action is brought to recover the sum of £1,246-3-0 representing the amount of the Engineer's final certificate which takes into account extras in the aggregate sum of £1,387-12-0 (being the £600, £20 and £767-12-0 referred to above).

The contract incorporates the General Conditions of Contract etc. of the Institution of Civil Engineers (3rd Edn. -March 1951). Clause 66 of these Conditions is as follows-