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Scottish Court of Session Decisions


You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> MacDonald Estates Ltd v NCP [2009] ScotCS CSIH_79A (04 November 2009)
URL: http://www.bailii.org/scot/cases/ScotCS/2009/2009CSIH79A.html
Cite as: [2009] ScotCS CSIH_79A

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EXTRA DIVISION, INNER HOUSE, COURT OF SESSION

Lord Reed

Lord Abernethy

Sir David Edward Q.C.

[2009] CSIH 79A

OPINION OF THE COURT

delivered by LORD REED

in the petition

by

MACDONALD ESTATES PLC

Petitioners;

against

NATIONAL CAR PARKS LTD

Respondents:

_______

Act: Lake Q.C., Brodies LLP

Alt: Clark Q.C., Davies; Harper MacLeod LLP

4 November 2009

Introduction


[1] These proceedings are concerned with a decision taken by Gordon Murray, architect, in his capacity as Independent Expert acting under a contract between the petitioners, MacDonald Estates plc, and the respondents, National Car Parks Ltd. The petitioners applied for judicial review of the decision. The respondents now appeal against the Lord Ordinary's decision to grant that application.


[2] As we shall explain more fully, Mr Murray was appointed as Independent Expert to determine whether or not a suspensive condition in the contract had been purified. The contract contained a relatively tight timetable for the purification of the suspensive condition and provided that, on the expiry of the time allowed, either party could resile from the contract. The essence of the dispute between the parties is whether the agreement under which Mr Murray was acting as Independent Expert was an "agreement to refer to arbitration" within the meaning of section 3 of the Administration of Justice (Scotland) Act 1972, with the consequence that Mr Murray could be required to state a case for the opinion of this court. If the agreement fell within the scope of section 3, and Mr Murray did state a case under section 3, the timetable could not be complied with.


[3] The operative part of Mr Murray's decision, dated
27 August 2009, was in the following terms:

"(a) That in determining the dispute between the parties the Independent Expert is acting as an arbiter:

(b) That as a result as Independent Expert I may be required to state a case for the opinion of the Court of Session in accordance with Section 3(1) of the 1972 Act;

(c) That as the Independent Expert I will not take any further action regarding the issuing of any further determination, at least for a period of seven days from the date of this opinion.

(d) That as the Independent Expert I invite parties to make written representations as soon as possible as to the procedure to be adopted in accordance with Part II of Chapter 41 of the RCS [Rules of the Court of Session] in connection with the request received from the Tenant [i.e. the respondents]...to state a case for the opinion of the Court of Session."


[4] The application for judicial review was lodged on
1 September 2009 and heard on 8, 9 and 10 September 2009. On 15 September 2009 the Lord Ordinary granted the application and, in particular, granted (a)  declarator that the Independent Expert is required to determine the issue referred to him as an expert and not as an arbiter, (b)  reduction of the decision dated 27 August 2009 and (c)  decree ordaining Mr Murray to issue a determination in terms of his draft findings dated 6 August 2009 on the business day following that on which judgment is given prior to 10am.


[5] As we have explained, the respondents appealed against that decision. The time limit specified in the contract was due to expire on
26 September 2009. The respondents had however given an undertaking that they would not resile prior to the issue of Mr Murray's final determination. Three other contracts entered into by the petitioners, relating to the same development as their contract with the respondents, were also conditional upon the purification of the suspensive condition by 26 September. The petitioners accordingly applied for interim suspension of Mr Murray's decision and for an interim order under section 47(2) of the Court of Session Act 1988 ordaining Mr Murray to issue a determination. That application was opposed by the respondents and was refused on 18 September 2009, the majority of the court taking the view that the balance of convenience favoured the respondents. When the suspensive condition had not been purified by 26 September, the other parties to two of the petitioners' other contracts resiled. The other party to the third contract agreed to an extension of time until 10 November 2009. In the circumstances, the present appeal was heard as a matter of urgency.

The background

[6] The contract between the parties relates to the proposed development of a multi-storey car park on a site close to the Scottish Exhibition and Conference Centre in
Glasgow. In broad terms, once the contract becomes unconditional the petitioners are obliged to carry out the development and, following its completion, the respondents are obliged to enter into a 35 year lease of the subjects. The contract was initially concluded on 26 March 2008 (prior to the downturn in the commercial property market later that year), and was subsequently varied in relation to certain details. As we have mentioned, the petitioners also entered into three other contracts relating to the proposed development. One contract, with Scottish Exhibition Centre Ltd, was for the acquisition of a long term lease of the site. That is the contract in respect of which the time limit has been extended. The other contracts, with Wolverhampton City Council, related to the financing of the development and the onward transfer of the petitioners' interest under the long term lease of the site. As we have explained, the Council has taken the opportunity to resile from those contracts.


[7] The parties' contract is contained in detailed legal missives extending, with their schedule, to 643 pages. The missives comprise, among other things, an agreement to lease the site as a multi-storey car park. Appended to the missives and incorporated into them are several documents, including a draft Lease, a draft Car Parking Agreement and a draft Licence for Works. The conditions in the principal missives are concerned with the steps which the parties require to take in order to develop the site and equip the car park before entering into the Lease and Car Parking Agreement. They are set out in a letter dated
21 March 2008, and envisage a sequence of events which can be summarised as follows. First, the Suspensive Conditions require to be purified (condition 2), and the petitioners require to obtain the necessary Consents (condition 3). Secondly, the petitioners then require to carry out the Developer's Works by preparing Detailed Drawings and commencing those works within three months after the purification of the Suspensive Conditions (conditions 1.1.83 and 4). Thirdly, when the Developer's Works are sufficiently completed to allow the respondents access to the development in order to proceed with the Tenant's Works, the missives provide for the issue of an Access Certificate and subsequently a Certificate of Practical Completion (condition 8). Fourthly, the respondents are required to commence the Tenant's Works as soon as practicable after the Completion Date (conditions 1.1.20 and 13). They are entitled, but not obliged, to take access earlier, at any time after an Access Certificate has been issued (condition 13.2). The Tenant's Works are to be carried out in terms of the Licence for Works (conditions 13.1 and Schedule, Part V). Condition 14 provides a mechanism for the calculation of the rent payable under the Lease. The Lease (Schedule, Part IV) and the Car Parking Agreement (Schedule, Part XIV) are to commence on the date of entry, which is defined by reference to the issue of the Certificate of Practical Completion (conditions 1.1.20, 1.1.23 and 15). The term of the Lease and the Car Parking Agreement is 35 years.


[8] The missives contain several provisions for the resolution of disputes. Some involve the Independent Expert and others, such as condition 18 (which concerns the identification of all rights reasonably necessary for the operation and use of the let subjects), involve an independent surveyor. The Lease provides for arbitration (clause 18), and expressly excludes the provisions of section 3(1) of the 1972 Act:

"18. Arbitration

...

18.2 Save as otherwise provided in this Lease any difference or dispute between the parties as to the interpretation of this Lease or as to the fulfilment or otherwise by either party of their respective obligations under this Lease or as to any matters connected therewith shall, failing agreement, be referred to as a single arbiter to be nominated failing agreement by the president for the time being of the Law Society of Scotland on the application of either party and the award of such arbiter shall be final and binding on the parties, and the expenses of any arbitration shall be borne as directed by the arbiter.

...

18.4 The provisions of section 3(1) of the Administration of Justice (Scotland) Act 1972 shall not apply to any submission to arbitration made in accordance with this Clause 18."

A similar provision for arbitration, with a similar express exclusion of section 3(1), is contained in the Licence for Works (clause 8).

The role of the Independent Expert

[9] The first role which the missives give the Independent Expert, and the one with which these proceedings are concerned, is to determine whether the petitioners have obtained a Satisfactory Planning Permission for the Developer's Works. In that regard, condition 2 of the missives provides:

"2.1 The Missives shall be are (sic) essentially and suspensively conditional upon:-

2.1.1 the Developer obtaining a Satisfactory Planning Permission for the Developer's Works;

2.1.2 the Developer entering into a contract or contracts for the purchase of the Let Subjects and any such land as may be required for the purposes of the Developer's Works and any suspensive conditions therein being purified or waived or otherwise satisfied in full.

2.2 The Developer shall use all reasonable endeavours to purify the Suspensive Conditions by the Longstop Date (Conditions).

2.3 The condition contained in Condition 2.1.1 is conceived for the benefit of both the Developer and the Tenant.

2.4 The condition contained in Condition 2.1.2 is conceived solely for the benefit of the Developer and it shall be in the absolute and subjective discretion of the Developer whether any part of Condition 2.1.2 which requires it to be satisfied or find anything acceptable has been complied with or fulfilled.

2.5 Condition 2.1.1 shall only be purified when either (i) both the Developer and Tenant notify each other that a Planning Permission is a Satisfactory Planning Permission under Conditions 2.11.1 and 2.11.2 or 2.14.1 and 2.14.2 (or are deemed to have done so) or (ii) the Independent Expert determines that the Planning Permission is a Satisfactory Planning Permission under Condition 2.11.3 or 2.14.3.

2.6 Condition 2.1.2 shall be purified by the Developer serving written notice of purification on the Tenant.

2.7 In the event that the Suspensive Conditions have not been purified in full prior to the Longstop Date (Conditions) then subject to Condition 2.8 the Developer or the Tenant may at any time thereafter (but prior to purification of the last of the Suspensive Conditions) resile from the Missives and that by written notice to the other party to that effect and that without any costs or damages being due to or by either party save in respect of any antecedent breach of the terms of the Missives.

2.8 Notwithstanding any other provision of the Missives, if a decision is awaited or (sic) an application for Planning Permission or the Developer or a third party institutes Appeal Proceedings, the Longstop Date (Conditions) shall be deemed to be extended so that the same shall be the earlier of (1) the date occurring 4 weeks after the decision of the Scottish Ministers or the relevant court has been issued and (2) the Final Longstop Date (Conditions)."

The Longstop Date (Conditions) is defined in condition 1.1.48 as the date occurring eighteen months after the conclusion of the missives, namely 26 September 2009. Satisfactory Planning Permission is defined in condition 1.1.65 as meaning a Planning Permission which is free from Onerous Conditions. The latter expression is in turn defined in condition 1.1.54 as meaning a condition or conditions as set out in Part IX of the Schedule. Part IX specifies, inter alia:

"1. Any condition which ...:-

...

1.3 prevents the initiation, commencement or use of the development before a specified date or event where same is not within the reasonable control or influence of the Developer;

1.4 purports to materially alter the design or layout of the development as shown on the planning application;

1.5 In relation to the Let Subjects:

...

1.5.3 materially restricts in any other way its use or operation;

...

1.7 prevents the completion of the development without the agreement or co-operation of a third party where such agreement or co operation is not within the reasonable control of the Developer;

1.8 is otherwise materially detrimental to the use, operation or economic viability of the development;

1.9 fails to comply with the guidance contained in the Scottish Office Development Department Circular 4/1998 entitled 'The Use of Conditions in Planning Permission' or the legal restrictions imposed on the use of planning conditions."

The expression "the Independent Expert" is defined in condition 1.1.42:

"1.1.42 'the Independent Expert' shall mean any person appointed in terms of the Missives to act in any determination of any dispute to be referred to the Independent Expert hereunder, such person to be a partner or director of a Scottish based architectural practice and experienced in works similar insofar as practicable to the Developer's Works, such person to be agreed upon by the parties or in the event of their failing so to agree within 2 Working Days of the requirement for the Independent Expert arising, then to be appointed on the application of either the Developer or the Tenant by the President or other senior official for the time being of The Royal Institute of British Architects".

The task of the Independent Expert in relation to the suspensive condition in condition 2.1.1 is set out in condition 2.11:

"2.11.1 Within 10 Working Days of a Planning Decision in relation to the Planning Application the Developer shall send a copy to the Tenant notifying the Tenant in writing of whether or not any Planning Decision is a Satisfactory Planning Permission so far as the Developer is concerned and if it is not the reasons why.

2.11.2 Within 10 Working Days of receipt of such written confirmation from the Developer the Tenant shall intimate to the Developer in writing of whether or not any Planning Decision is a Satisfactory Planning Permission so far as the Tenant is concerned and if it is not the reasons why. The Tenant shall be deemed to accept the Planning Permission is a Satisfactory Planning Permission if such notification is not given to the Landlord within the said timeframe.

2.11.3 In the event of a dispute or disagreement arising as to whether or not a Planning Decision is a Satisfactory Planning Permission the issue shall be referred to the Independent Expert to be determined in accordance with Condition 24".


[10] Each party thus has an opportunity to state whether the planning permission is a Satisfactory Planning Permission and, if not, why not. In the event of a disagreement on that issue, it is to be determined by the Independent Expert in accordance with condition 24. That condition provides:

"24 Expert Determination

Without prejudice to any specific provisions in the Missives concerning resolution of any disputes which may arise between the Developer and the Tenant, in the event of any dispute or disagreement arising as to the interpretation of the Missives or as to any matter as to be agreed between the Developer and Tenant hereunder, the same shall be referred at the instance of either party to the decision of an independent surveyor (acting as an expert) to be mutually agreed between the Developer and the Tenant for that purpose or failing such agreement to be appointed at the request of either party by the Chairman or senior officeholder for the time being of the Scottish branch of the Royal Institution of Chartered Surveyors, and the independent surveyor shall issue his proposed determination in draft at least fourteen days before giving his final decision, but whose eventual decision shall be final and binding on the Developer and the Tenant, in respect of all matters referred to him hereunder (save in the case of manifest error). The fees of such independent surveyor shall be payable by the Developer and Tenant in such proportions as the independent surveyor shall determine or in default of such determination, equally between the Developer and the Tenant. If any person appointed as an independent surveyor shall relinquish his appointment or die or if it shall become apparent that for any reason he will be unable to complete his duties hereunder or if the person appointed as an independent surveyor fails to reach a decision within three months of the date of his appointment, the Developer or the Tenant may apply to the aforesaid Chairman or other senior office holder for a substitute to be appointed in his place, which procedure may be repeated as many times as necessary. If the dispute relates to the legal interpretation of the Missives or as to any matter as to be agreed between the Developer and Tenant hereunder, the said independent surveyor will take appropriate independent legal advice before issuing their determination."


[11] The missives also make provision for an appeal by the petitioners against the refusal of the planning application or its grant subject to Onerous Conditions. In the event that planning consent is granted on appeal, the missives again make provision (in condition 2.14) for the parties to agree, which failing for the Independent Expert to determine, in accordance with condition 24, whether the consent is a Satisfactory Planning Permission:

"2.14.1 If detailed planning consent is granted following such appeal the Developer shall forward a copy of such detailed planning consent to the Tenant within 5 Working Days following receipt thereof together with written confirmation as to whether or not they are satisfied with such detailed planning consent such that the same constitutes a Satisfactory Planning Permission so far as the Developer is concerned and if it is not the reasons why.

2.14.2 Within 10 Working Days of receipt of such detailed planning consent and written confirmation from the Developer the Tenant shall intimate to the Developer in writing of whether or not any Planning Decision is a Satisfactory Planning Permission so far as the Tenant is concerned and if it is not the reasons why.

2.14.3 In the event of a dispute or disagreement arising as to whether or not such detailed planning consent is a Satisfactory Planning Permission the issue shall be referred to the Independent Expert to be determined in accordance with Condition 24."

As we have explained, condition 2.8 extends the Longstop Date (Conditions) in the event of an appeal, but only to a date four weeks after the determination of the appeal. There is therefore very little time for implementing the condition 2.14 procedure: if the parties were to take 15 working days to notify each other of their views on the planning permission, as permitted by conditions 2.14.1 and 2.14.2, and then failed to agree on the identity of the Independent Expert within the two working days permitted by condition 1.1.42, that would leave only three working days (out of the twenty working days in four weeks) for the Independent Expert to carry out his work.


[12] The Independent Expert also has a role to play if there are disputes between the parties concerning the completion of the Developer's Works. First, condition 8.6 provides that, if there is a dispute as to whether the Access Certificate can be issued or as to the further works which may be required before it can be issued, the respondents may request reference of the dispute to the Independent Expert. In that event condition 8.7 applies. It provides:

"8.7 If the Tenant requests reference to the Independent Expert, as provided for in Clause 8.6, then the dispute shall be referred on the application of the Developer or the Tenant to the Independent Expert. The remit to the Independent Expert will require him to inspect the Developer's Works and issue his written determination within five Working Days of written request to do so by the Developer or the Tenant. The Independent Expert shall determine the matter in dispute as an expert and not as an arbiter, and in particular shall give reasons for his decision and shall determine either (a) whether, at the date of his inspection, it was appropriate (having regard to the terms of the Missives and the Building Contract) for the Access Certificate to be issued; or (b)  what outstanding matters should be attended to before the Access Certificate may be issued. The Independent Expert shall attend a joint site inspection with the parties at such time as he shall specify (within said 5 Working Days timescale) and hear the representations of each party (if they attend) in the presence of the others. The Independent Expert's decision shall be final and binding on the Developer and the Tenant and his expenses shall be borne as directed by him, or which failing, equally between the parties."

Secondly, condition 8.16 provides that, if there is a dispute as to whether the Certificate of Practical Completion has been properly issued or as to the further works which may be required before it can be issued, the respondents may request reference of the dispute to the Independent Expert. In that event condition 8.17 applies. It provides:

"8.17 If the Tenant requests reference to the Independent Expert, as provided for in Clause 8.167 (sic), then the dispute shall be referred on the application of the Developer or the Tenant to the Independent Expert. The remit to the Independent Expert will require him to inspect the Developer's Works and issue his written determination within five Working Days of written request to do so by the Developer or the Tenant. The Independent Expert shall determine the matter in dispute as an expert and not as an arbiter, and in particular shall give reasons for his decision and shall determine either (a) whether, at the date of his inspection, it was appropriate (having regard to the terms of the Missives and the Building Contract) for the Certificate of Practical Completion to have been issued; or (b)  what outstanding matters should be attended to before the Certificate of Practical Completion should (having regard as aforesaid) be issued. The Independent Expert shall attend a joint site inspection with the parties at such time as he shall specify (within said 5 Working Days timescale) and hear the representations of each party (if they attend) in the presence of the others. The Independent Expert's decision shall be final and binding on the Developer and the Tenant and his expenses shall be borne as directed by him, or which failing, equally between the parties."

The relevant events


[13] The petitioners applied for planning permission and negotiated an agreement with the planning authority under section 75 of the Town and Country Planning (
Scotland) Act 1997. The planning authority granted an outline planning permission and concluded the section 75 agreement with the petitioners on 18 April 2008. The petitioners then worked on a reserved matters application, which they submitted on 17 December 2008. The planning authority granted that application on 26 May 2009. That left four months for the purification of the suspensive conditions. On 28 May 2009 the petitioners notified the respondents that they considered the planning consent to be a Satisfactory Planning Permission. On 11 June 2009 the respondents notified the petitioners that they did not, and gave their reasons for so saying. The parties did not reach agreement on the identity of the person to be appointed as the Independent Expert within the time allowed by condition 1.1.42. On 19 June 2009 the petitioners applied to the Royal Institute of British Architects (RIBA) for the appointment of a suitably experienced architect as the Independent Expert to determine the dispute or disagreement which had arisen under condition 2.11.3. On 1 July 2009 the President of the RIBA appointed Mr Murray, the form of his appointment bearing to be "as an expert".


[14] Both parties then sent Mr Murray written submissions on the issue which he had to determine. The respondents' submissions also raised objections to Mr Murray's appointment and his jurisdiction. Mr Murray engaged counsel to provide him with independent legal advice, in accordance with condition 24, and held an oral hearing on
27 July 2009. On 6 August 2009 Mr Murray rejected the respondents' preliminary objections and issued his proposed determination in draft. In the draft determination, he found that the planning permission was a Satisfactory Planning Permission because the conditions were not Onerous Conditions as defined. On 13 August 2009 the respondents requested Mr Murray to state a case for the opinion of the court under section 3 of the 1972 Act, identifying ten questions of law which were said to arise in relation to paragraphs 1.3, 1.4, 1.5.3, 1.7, 1.8 and 1.9 of Part IX of the Schedule. The petitioners disputed Mr Murray's ability to state a case, asserting that he was not an arbiter. Mr Murray sought the advice of counsel, who concluded that he was an arbiter and could be asked to state a case. Relying on that advice, Mr Murray made the decision which the petitioners now challenge.

The relevant legislation


[15] Section 3 of the 1972 Act provides as follows:

"Power of arbiter to state case to Court of Session

3. - (1) Subject to express provision to the contrary in an agreement to refer to arbitration, the arbiter or oversman may, on the application of a party to the arbitration, and shall, if the Court of Session on such an application so directs, at any stage in the arbitration state a case for the opinion of that court on any question of law arising in the arbitration.

   (2)  This section shall not apply to an arbitration under any enactment which confers a power to appeal to or state a case for the opinion of a court or tribunal in relation to that arbitration.

...

   (4)  This section shall not apply in relation to an agreement to refer to arbitration made before the commencement of this Act."

Section 3(4) reflects the fact that, prior to the 1972 Act, there was no general right under Scots law to require an arbiter to state a case. Such a right existed only in respect of certain statutory arbitrations, such as those relating to agricultural holdings. As a consequence, there was in general no possibility of an application to the court prior to the issue of an award. Once the arbiter had made his award, reduction could be sought on certain grounds, such as that the arbiter had acted ultra vires or in a manner which was procedurally unfair.

"An agreement to refer to arbitration"


[16] In determining whether section 3(1) is applicable in the present case, the first question that arises is whether the parties' contract contains "an agreement to refer to arbitration" a dispute or disagreement of the kind which has arisen. The answer to that question turns, first, on the interpretation of the statutory language in order to understand what is meant by "an agreement to refer to arbitration", and secondly, on the interpretation of the parties' contract in order to decide whether it contains such an agreement.


[17] In relation to the meaning of the statutory language, it was submitted on behalf of the respondents that the word "arbitration" was not defined in the 1972 Act, and must therefore be given the meaning generally attributed to it in Scots law. That meaning was wide in scope and encompassed any agreement to refer a matter to the determination of a third party. No distinction was drawn by Scots law between arbitration and expert determination: on the contrary, expert determination was a form of arbitration. That approach was said to be supported by the cases of Morrison v Aberdeen Market Co (1847) 9D 910, Orrell v Orrell (1859) 21D 554, Calder v Mackay (1860) 22D 741, Forbes v Underwood (1886) 13R 465, Logan v Leadbetter (1887) 15R 115, Graham v Mill (1904) 6F 886 and Gardiners v Stewart's Trustees 1908 SC 985, and by the article on Arbitration contributed by Lord Hope of Craighead to the Stair Memorial Encyclopaedia of the Laws of Scotland (1999), at paragraph 7. Furthermore, that wide meaning had been attributed to the term "arbitration" where it was used in earlier legislation, in Stewart v Williamson 1909 SC 1254 (and, in the House of Lords, 1910 SC (HL) 47; more fully reported at [1910] AC 455), and should therefore be taken to have been intended by Parliament when it used the same term in the 1972 Act.


[18] We are unable to accept this submission. It is true that, in the older cases cited, the terminology of arbitration was used by the court in relation to agreements (in most of the cases, agricultural leases) under which questions of valuation were referred to a valuer for determination on the basis of his own inspection of the subjects and the use of his own expertise (although the cases also contain dicta distinguishing between such references and "arbitration proper": e.g. Calder v Mackay at page 742 per Lord Kinloch, Forbes v Underwood at page 471 per Lord Shand and Graham v Mill at page 892 per Lord Trayner). In each case, however, the parties' agreement expressly used the language of arbitration; and the court did not attempt to define the concept of arbitration in Scots law.


[19] The case of Stewart v Williamson, on which counsel for the respondents principally relied, similarly concerned an agricultural lease under which a question of valuation was referred to a form of determination which both parties regarded as arbitration. The pursuer's action sought to have the defender ordered to appoint an arbiter to act jointly with the arbiter appointed by the pursuer, in accordance with the lease. The action was defended on the basis that a single arbiter should be nominated by the Board of Agriculture in accordance with section 11 of the Agricultural Holdings (Scotland) Act 1908, which applied to "all questions which....under the lease are referred to arbitration". The issue was whether, as the pursuer argued, the Act should be construed strictly so as to minimise its interference with pre-existing leases, and should therefore be interpreted as applying only to arbitration in a strict sense, excluding valuations. In that regard, the court was referred to English authorities distinguishing between arbitration and valuation, such as Collins v Collins (1858) 26 Beav 306 and In re Hopper (1867) LR 2 QB 367. In construing section 11, however, the court focused upon the current usage of the term "arbitration" in Scottish legal practice. Lord President Dunedin observed that the language used in the lease showed that an arbitration was intended, and continued (at page 1258):

"....decisions on the question whether a case did or not fall under the English Common Law Procedure Act of 1854 cannot be authoritative in regard to the interpretation of an Act of Parliament dealing with Scottish agriculture in 1908. Taking the words in their ordinary meaning I have not the least doubt that they apply".

In the House of Lords, Lord Loreburn LC stated (at pages 461-462):

"If this were an English case the authorities decided on the Common Law Procedure Act, 1854, draw a marked distinction between arbitration and valuation.....But we are not concerned with English law or English

usages.

What we really have to decide is whether the word 'arbitration' in section 11 of the Act covers such a reference as that in the present lease according to the Scottish legal terminology".

On that question the Lord Chancellor deferred to the First Division, noting the wide usage given to the word "arbitration" in the authorities cited.


[20] It is clear from that case, and from the earlier authorities, that a question of valuation could form the subject-matter of arbitration, and that the term "arbitration" was commonly used in connection with references of such questions to a valuer, particularly under agricultural leases. We are not, however, persuaded on the basis of these authorities that any reference to expert determination is, as a matter of law, necessarily a reference to arbitration; nor is that proposition supported by the passage in Lord Hope's article to which we were referred. The passage is concerned with the question "whether, and if so to what extent, Scots law recognises a distinction between an arbitration proper...and a reference to a valuer". It concludes that the distinction appears to be tenuous, although "the same strictness of procedure is not required in a reference to a man of skill in matters of valuation relating to agricultural leases as is necessary in a formal reference to arbitration". What is said there is consistent with the authorities which we have discussed.


[21] Quite apart from the question whether the respondents' contention is vouched by the authorities cited, however, there are more fundamental reasons for rejecting it. Scottish legal terminology and practice have not stood still since the period before the First World War. The law relating to arbitration has developed, with new legal incidents attaching to it (including, in particular, the right to apply for a stated case, introduced to Scots law by section 3 of the 1972 Act). Understanding of the nature of arbitration and of its legal consequences has also developed, under the influence particularly of the decisions of the House of Lords in Sutcliffe v Thackrah [1974] AC 727 and Arenson v Arenson [1977] AC 405. As it has become apparent that the legal incidents of arbitration may not meet the needs of the parties in all the situations in which commercial disputes arise, other forms of alternative dispute resolution have developed, such as mediation, conciliation, early neutral evaluation, adjudication and expert determination. Expert determination, in particular, can be broadly distinguished from arbitration in not being judicial in character. What expert determination involves in any particular case will depend on the parties' agreement, and may differ according to the context. Nevertheless, although the use of the word "expert" is not conclusive, phrases such as "acting as an expert and not as an arbiter" denote a concept which is clear in its general effect. A person who sits in a judicial or quasi-judicial capacity, as an arbiter ordinarily does, decides matters on the basis of submissions and evidence put before him, whereas an expert, subject to the provisions of his remit, is entitled to carry out his own investigations and come to his own conclusion regardless of any submissions or evidence adduced by the parties themselves. Furthermore, since section 3 of the 1972 Act is applicable only to arbitrations, an expert determination cannot be appealed against by stated case; and, where such a right of appeal exists, the avoidance of stated case procedure may in practice be one of the principal reasons for agreeing on expert determination rather than arbitration (as was noted by Megaw LJ in Baber v Kenwood Manufacturing Co Ltd [1978] 1 Lloyds Rep 175 at page 179).


[22] It may be, as counsel for the respondents submitted, that expert determination originated in English practice, and that it has developed from the distinction drawn between arbitration and valuation in the English case law of the nineteenth century. Nevertheless, expert determination, understood as an alternative to arbitration, has taken root in Scottish legal practice, as a consequence of its attractiveness to the commercial community as a relatively quick and informal means of resolving matters of disagreement or potential disagreement. It is now a well-recognised means of resolving disputes in almost any area of commercial life, and owes its success to the fact that it generally works well and is found to be commercially useful. The difference between the role of an expert and that of an arbiter has become well understood in general terms, although the boundary between them can sometimes, in particular circumstances, be difficult to draw. There has been a corresponding development in the language in which commercial contracts are drafted. Phrases such as "acting as an expert and not as an arbiter", and clauses in broadly similar terms to condition 24 of the missives in the present case, have become standard legal terminology, employed in countless commercial contracts.


[23] What has not changed is that arbitration remains a jurisdiction based on the parties' agreement; and whether they have agreed to refer a matter to arbitration depends on their intentions, as inferred from the terms of their agreement. In that regard, it is relevant to note that section 3(1) applies where there is "an agreement to refer to arbitration". Those words direct attention to the terms and intention of the agreement between the parties in the particular case under consideration. That exercise of contractual interpretation has to be carried out in the context of current legal practice and terminology, not the practice and terminology of a hundred years ago. If the intention of the parties was to refer their dispute not to arbitration but to expert determination, the law will give effect to that intention. As Lord Guthrie observed in R & J Dempster Ltd v Motherwell Bridge Engineering Co Ltd 1964 SC 308 at page 332:

"The object of our law of contract is to facilitate the transactions of commercial men, and not to create obstacles in the way of solving practical problems arising out of the circumstances confronting them, or to expose them to unnecessary pitfalls."


[24] We note that this approach is consistent with that adopted in the recent decision of this court in Holland House Investments Ltd v Crabbe and Edment 2008 SC 619. The issue in that case was whether a surveyor who had been appointed to determine the fair market rent of premises, in accordance with a provision in a commercial lease, had failed to act fairly: an issue which was agreed to depend on whether he had been appointed as an arbiter. The court stated (at paragraph 19):

"The distinction between a person who has an expertise in valuation matters, exercising the role of an independent expert on the one hand, and a quasi-judicial role, on the other hand, is now well recognised, whatever might have been the position in the past. It is a distinction which carries with it different legal consequences. As to into which category a particular individual falls, in any particular case, depends on what the parties who have invited him to carry out a task for them intended his function to be. This, in turn, is to be gleaned from the agreement between them, as the result of which he assumed his task".

The court in that case concluded that the rent review clause in question was not an agreement to refer to arbitration: the parties' intention had been "to arrive at the appropriate level of rent by a relatively speedy and informal means".


[25] Section 3 of the 1972 Act is not therefore to be interpreted as applying to any agreement to refer a matter to the determination of a third party. Arbitration is a form of dispute resolution which, at least in modern practice, can be distinguished from other forms of dispute resolution, such as expert determination. It is a form of jurisdiction which is based on agreement. Whether a given contract contains "an agreement to refer to arbitration", or an agreement upon some other form of procedure, depends on the parties' intentions, which must be ascertained by interpreting their contract in the context of all the relevant circumstances.

The interpretation of the contract

[26] Turning then, to the contract with which the present case is concerned, it appears to us to be clear that the parties had no intention to refer any dispute or disagreement under condition 2.11.3 to arbitration, and that the procedure on which they had agreed was one of expert determination. In that regard, we note first the express wording of the missives. Condition 2.11.3 states that the issue whether or not a Planning Decision is a Satisfactory Planning Permission is to be referred to the Independent Expert to be determined in accordance with condition 24. The description of the decision-maker as "the Independent Expert" is a pointer toward the parties' intentions, although not necessarily of great significance in itself. Condition 1.1.42 requires that person to be "experienced in works similar insofar as practicable to the Developer's Works": again, not necessarily of great significance in itself, but consistent with the parties' wish to have expert input into the determination of the issue. Condition 24 is headed "Expert Determination", and provides that certain matters are to be referred to the decision of "an independent surveyor (acting as an expert)". The words "acting as an expert" are normally used in legal practice in contradistinction to the words "acting as an arbiter". They signify that the decision-maker is to base his decision on his own expertise, rather than adjudicating between competing contentions and bodies of evidence: that is to say, he is to make an expert determination rather than to conduct an arbitration. We are unable to accept the submission on behalf of the respondents that the requirement in condition 2.11.3, that the issue must be determined in accordance with condition 24, refers only to the latter parts of that condition, and not to the words "acting as an expert". Condition 24 is referred to as a whole, although it has to be read subject to certain necessary alterations (e.g. the references to a surveyor, and to the Chairman of the Scottish branch of the Royal Institution of Chartered Surveyors, must be understood as if they referred to an architect and to the President of the RIBA respectively). That the decision-maker is to act as an expert (and, therefore, not as an arbiter) is also consistent with three other aspects of condition 24. First, the decision of the Independent Expert is to be final and binding "save in the case of manifest error". That is another provision commonly found in references to expert determination, and not in submissions to arbitration. Secondly, condition 24 provides that, if the dispute relates to the legal interpretation of the missives or (as in the present case) to any matter to be agreed between the parties, the Independent Expert is required to "take appropriate independent legal advice". That is another provision which would be unusual in a submission to arbitration, but it makes sense in the context of a reference to expert determination, where the protection of the stated case procedure would be absent. Thirdly, condition 24 imposes no requirement on the Independent Expert to hear representations or to give reasons for his decision (differing, in each of these respects, from conditions 8.7 and 8.17). It might be argued, on the other hand, that the requirement in condition 24 to issue a draft determination would be consistent with an arbitration, as it would enable an application to be made for a stated case; but it is also consistent with the parties wishing prior notice of an expert determination before it becomes final and binding, with a view to considering whether it might be open to challenge.


[27] It is true that conditions 8.7 and 8.17 state expressly that the Independent Expert is to act "as an expert and not as an arbiter", and that the words "and not as an arbiter" do not appear in condition 24. Counsel for the respondents submitted that it should therefore be inferred that the Independent Expert acting under condition 24 was intended to act as an arbiter: otherwise, the presence of those words in conditions 8.7 and 8.17 would be otiose. We do not accept this submission. Although the phrase "acting as an expert and not as an arbiter" is more emphatic (and is more commonly encountered in practice), we cannot see that it makes any difference if the words "and not as an arbiter" are omitted: it is probably due to caution that they are included by most draftsmen. The fact that those words appear in one condition and not in another does not appear to us to imply that a different meaning was intended, as it is difficult to attach a meaning to the words "acting as an expert", which the parties might have intended, that is different from the meaning of the words "acting as an expert and not as an arbiter". In those circumstances, and bearing in mind the length and complexity of the missives (and the presence of other examples of inelegant draftsmanship), we do not regard the difference in wording as pointing towards an intended difference in meaning.


[28] This interpretation is fortified by the contrast between the provision in the missives for the determination of disputes by the Independent Expert and the provision for arbitration in the draft Lease and draft Licence for Works attached to the missives and incorporated into them. Condition 24 bears no resemblance to clause 18 of the draft Lease or clause 8 of the Licence for Works, each of which makes clear provision for arbitration (and expressly excludes the application of section 3 of the 1972 Act).


[29] In ascertaining the parties' intentions it is also necessary to have regard to the timetable within which any issue arising under condition 2.11 must be determined. As we have explained, the missives allow the petitioners eighteen months to obtain a planning consent and to have it agreed by both parties or, failing agreement, determined by the Independent Expert to be a Satisfactory Planning Permission. It is common ground that only an outline planning consent had been obtained at the time when the missives were concluded. Given the nature and scale of the proposed development, and its location adjacent to the SECC in the centre of Glasgow, it will have been readily foreseeable to the parties that, by the time detailed planning permission had been obtained, there might be only a relatively short period of time left for them to consider its terms against the criteria in Part IX of the Schedule and, if necessary, to obtain the determination of the Independent Expert. That consideration is reflected in the fact that condition 2.11 imposes tight time-limits on the parties to reach a view on the issue (ten working days each), and deems the respondents to accept the planning permission if they do not give notice within that time. In the event that the parties are not in agreement, condition 1.1.42 requires them to agree to the appointment of the Independent Expert within two working days.


[30] In that context, the appointment of the Independent Expert to act as an expert is consistent with the timetable to which the parties have agreed, since it is a means of achieving a speedy determination of the issue in question. His appointment to act as an arbiter, on the other hand, would make little sense in that context (unless, possibly, the right to apply for a stated case under section 3 of the 1972 Act were excluded). Although it is possible for an arbitration to be conducted quickly, it is usually a slower process than expert determination. Even if the arbiter issues his draft determination promptly, an application for a stated case can delay considerably the issue of a final determination. It is noteworthy that condition 2.8 allows for an extension of the timetable in the event of an appeal to the court against a decision on the planning application, but that there is no provision for an extension in the event of an application for a stated case. We also note that, if the Independent Expert were dealing with a dispute under condition 2.14.3, he might have as little as three working days to issue his decision, making it impossible that an arbitration can have been intended. There is nothing in the missives to indicate that the role of the Independent Expert under condition 2.11.3 is intended to be of a different nature.


[31] As against these considerations, counsel for the respondents submitted that the parties would not have sacrificed quality of decision-making and rights of review simply for speed. That is however merely an assertion. The parties plainly had a commercial interest in the quality of any decision which might be taken on such an important matter as whether the planning permission contained unacceptably onerous conditions, but, equally plainly, they also had a commercial interest in having the contract proceed in compliance with the timetable on which they had agreed. The commercial attractiveness and viability of a contract of this nature can be greatly affected by delays, not least because rentals, interest rates, construction costs and other variables affecting such a project are liable to change. Our approach to interpretation must be based not on any assumption that one consideration must have been prioritised over the other (or on the assumption, implicit in counsel's submission, that a decision reached by expert determination is inferior in quality to one reached by arbitration), but on the parties' intentions as evinced by the terms of their contract.


[32] Counsel for the respondents however submitted that, whatever language the parties might have used in the missives, the Independent Expert was in substance an arbiter, since the indicia of arbitration identified by Lord Wheatley in Arenson v Arenson were present. Although counsel did not cite it, his argument could be encapsulated in Lord Templeman's observation in Street v Mountford [1985] AC 809 at page 819:

"The manufacture of a five-pronged implement for manual digging results in a fork even if the manufacturer, unfamiliar with the English language, insists that he intended to make and has made a spade."


[33] The case of Arenson, like the earlier case of Sutcliffe v Thackrah, was concerned with the scope of the immunity from liability in negligence which public policy confers on persons exercising a judicial function. The question arose in relation to auditors who had been appointed to value shares "acting as experts and not as arbitrators". Proceedings which were brought against them in negligence were struck out as disclosing no reasonable cause of action, on the basis that their function was sufficiently analogous to arbitration for them to benefit from the same immunity from suit. It is to be noted that the contention advanced on behalf of the auditors was not that they were arbitrators, but that their role had an essential characteristic, for the purposes of judicial immunity, akin to that of an arbitrator. The House of Lords allowed an appeal against the striking out of the claim, but expressed differing views as to the appropriate boundary of judicial immunity.


[34] Lord Simon of Glaisdale considered that the essence of a judicial decision, from which the immunity arose, was that it determined a formulated dispute:

"There may well be other indicia that a valuer is acting in a judicial role, such as the reception of rival contentions or of evidence, or the giving of a reasoned judgment. But in my view the essential pre-requisite for him to claim immunity as an arbitrator is that, by the time the matter is submitted to him for decision, there should be a formulated dispute between at least two parties which his decision is required to resolve. It is not enough that parties who may be affected by the decision have opposed interests - still less that the decision is on a matter which is not agreed between them" (at page 424).

When his Lordship referred in that passage to a valuer claiming immunity "as an arbitrator", we do not understand him to have meant that a valuer who determined a dispute was to be held to be conducting an arbitration, but that such a valuer would be in the same position as an arbitrator in relation to immunity from suit.


[35] Lord Wheatley began his analysis (at page 425) by considering (i) what the auditors were called upon to do, (ii) what were their legal obligations in that regard and (iii) whether if they failed to perform those obligations they were protected from a legal claim for damages by immunity. He considered the speeches in Sutcliffe v Thackrah and then, recognising that there was no all-embracing formula which could be used to decide on the existence of immunity in every case, identified indicia to serve as guidelines in addressing that question. He stated (at page 428):

"The indicia are as follows: (a) there is a dispute or a difference between the parties which has been formulated in some way or another; (b) the dispute or difference has been remitted by the parties to the person to resolve in such a manner that he is called upon to exercise a judicial function; (c) where appropriate, the parties must have been provided with an opportunity to present evidence and/or submissions in support of their respective claims in the dispute; and (d) the parties have agreed to accept his decision."


[36] Lord Salmon's approach was broadly similar:

"...a valuer enjoys the immunity of a judge or arbitrator only if what he does assumes the character of a judicial inquiry, for example, by the parties submitting their dispute to the valuer for adjudication and the valuer listening to or reading the contentions made by or on behalf of the parties and to any evidence which they may put before him and then publishing a decision which is final and binding save for any appeal which the law allows..." (page 439)

His Lordship also expressed reservations (at page 440) as to whether formal appointment as an arbitrator would confer immunity if the person was not required to hear or read submissions, and was "performing no function even remotely resembling the judicial function save that he finally decides a dispute or difference which has arisen between the parties".


[37] The remaining members of the House adopted different approaches. Lord Kilbrandon did not accept that arbitrators enjoyed any immunity. Lord Fraser of Tullybelton, like Lord Kilbrandon, found it difficult to identify a satisfactory rationale for distinguishing between arbitrators and valuers so far as immunity was concerned, but concluded that no sufficient reason had been shown for treating valuers as an exception to the general rule of liability for negligence.


[38] In the present case, counsel for the respondents sought to argue that all of the indicia listed by Lord Wheatley were present. The inference sought to be drawn, however, was not that the Independent Expert consequently enjoyed an immunity from liability, but that he was an arbiter. This is a non sequitur: Lord Wheatley was not listing the indicia of arbitration. Most of the indicia of a judicial function appear to us in any event to be absent from the role of the Independent Expert under the missives. Although there requires to be a dispute between the parties in the sense that they disagree as to whether the planning consent is a Satisfactory Planning Permission, it is not a dispute in which each is required to formulate a view which is then placed for decision before the Independent Expert: only the party who considers the consent not to be a Satisfactory Planning Permission is required to state the reasons why (under conditions 2.11.1 and 2.11.2), and there is no requirement that those reasons be submitted to the Independent Expert. We should add that the presence of a formulated dispute would not in any event preclude expert determination. Nor is the Independent Expert required to resolve the dispute in such a manner that he is called upon to exercise a judicial function. Nor do the missives require that the parties be provided with an opportunity to present evidence or submissions in support of their respective claims. The only one of the indicia listed by Lord Wheatley which is present is that the parties have agreed to accept the Independent Expert's decision; and that feature, which is common to any binding form of dispute resolution, does not entail that the parties agreed to arbitration, contrary to the intention apparent from their agreement.


[39] Some reference was made by counsel for the respondents to the fact that written submissions were in fact presented to the Independent Expert, and that he held an oral hearing at which further submissions were made. Counsel however eschewed any suggestion that these actings were relevant to the interpretation of the missives, or that they demonstrated a variation of the parties' agreement. In those circumstances, the parties' subsequent actings cannot be regarded as warranting an inference that they had agreed to submit their disagreement to arbitration.

Conclusion

[40] In the circumstances we are satisfied that the missives do not contain an agreement to refer to arbitration a dispute arising under condition 2.11.3. It follows that section 3 of the 1972 Act does not apply to the Independent Expert when determining such a dispute, and that he therefore cannot state a case for the opinion of this court.


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