England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE QUEEN'S BENCH DIVISION
COMMERCIAL COURT
(MR JUSTICE BURTON)

		Royal Courts of Justice Strand, London, WC2A 2LL
		9th June 2009

Lord Justice Aikens:

1. This is a renewed application for permission to appeal an order of Burton J made on 4 February 2009, whereby he refused to set aside the order of Field J made on 27 November 2008. That order had granted permission to the current respondent, Henry Konig, pursuant to section 66 of the Arbitration Act 1996, to enforce as a judgment an arbitral award of the Beth Din made on 9 July 2008. Burton J had refused permission to appeal and so also had Jacob LJ on paper.
2. There is a long history to this dispute which I am not going to set out in full in this judgment. The main parties to the arbitration are all Orthodox Jews, but there are other legal entities that are party to the arbitration as well. I need not be concerned with those other entities for the present. The dispute started in 2003. It arises in connection with the affairs of a company called Centrals Ltd ("Centrals"), which formerly owned property on an industrial estate in Derby. Mr Zwiebel was the sole director of Centrals and Mrs Zwiebel was its secretary. Between them they owned all the shares in that company.
3. Mr Konig contended that Centrals held a portion of its assets in trust for a Jewish educational charity based in Israel. That fact is not now in dispute. The contentious issue arises out of whether and to what extent Centrals is indebted to its creditors, in particular the Zwiebels. They have contended that they advanced substantial sums to the company which they said they are entitled to have back.
4. In March 2003 the parties agreed to refer the dispute that was then outstanding to the Beth Din, to be decided according to Jewish law. A tribunal was appointed and it made an award in April 2003. In July 2003, the tribunal, of its own motion, made a revised award. Mr Konig applied to the Commercial Court to enforce that award under section 66 of the 1996 Act. The Zwiebels made counter-applications. Those issues were settled in a compromise embodied in a Court Consent Order dated 30 March 2004.
5. Amongst the provisions of that order was one whereby each party had to notify the other of claims which the Zwiebels might have against Centrals and vice versa. Paragraph 9 of the order stated that if those claims could not be resolved then they were to be determined by two Rabbis, who were identified as Rabbi Padwa and Rabbi Feldman. They were to act as arbitrators and were to apply Jewish law. That same paragraph also said that the Tribunal could appoint an independent expert accountant to assist it.
6. The Tribunal, thus constituted, appointed Mr Dover of BDO to assist it. He produced a draft report in May 2007.
7. There was a further issue between the parties as to the scope of the reference made to the arbitrators. That was referred once again to the Commercial Court. It was the subject of a further Consent Order of 15 April 2005. That order recorded the parties' agreement to submit to the jurisdiction of the tribunal the disputes identified at paragraphs 3 and 4 of that 2005 order. The applicants claimed that this order was made without their authority. Recently an attempt was made to set aside that order, which was determined by Flaux J on paper. His ruling is dated 10 March 2009. He held that it was far too late to attempt to set aside that order, although one of his reasons for saying that it was too late was that before Burton J there had been no challenge to the consent order of 15 April 2005.
8. I must proceed with this application on the basis that the consent order of April 2005 was valid and will remain valid until challenged. There is no present challenge to it. Nor, so far as I can see, is there any prospect of that order being challenged now, some four years after it was made by the court.
9. In the subsequent arbitration following the 2005 order, the applicants asserted that the independent accountants were straying beyond matters referred to the tribunal by the consent order of April 2005. In July 2007 the tribunal invited written submissions from the parties on the scope of its jurisdiction and, in December 2007, the applicants sent their submissions.
10. The tribunal then instructed Mr Richard Smith of Allen & Overy to advise it on the question of its jurisdiction and the issues that had been raised by the applicants' submissions of December 2007. Mr Smith advised in March 2008. He concluded that the tribunal was acting within the scope of its jurisdiction and that Mr Dover was acting within the scope of his mandate.
11. BDO produced its final report to the tribunal in March 2008. That concluded that none of the liabilities shown on the accounts of Centrals were valid credit items and that no money was due to the applicants.
12. An accountant acting for the applicants, Mr Weissbraun, continued to raise the issue of the validity of the Consent Order of April 2005. He requested of the arbitrators a hearing to deal with that issue. Allen & Overy were instructed again. This produced a further letter of advice of 7 May 2008. The advice was that the 2005 order was valid unless and until set aside.
13. On 27 May 2008 the tribunal produced an award. That consisted of a single paragraph. That paragraph subsequently became paragraph A of the award of 9 July 2008.
14. There was an oral hearing before the tribunal on 2 July 2008, at the request of the applicants. At that hearing there were further submissions on the validity of the 2005 consent order.
15. On 9 July 2008 the tribunal produced its further award. That award consisted of two paragraphs A and B. It was signed by the two learned Rabbonim.
16. The award (or Psak, to give its proper name) is in Hebrew. There is, I understand, a dispute about the English translation of that award. However, for present purposes, the applicants are prepared to use the translation prepared by Mr Konig.
17. The award provides as follows:

"In the dispute between Rabbi Menachem Arieh Tzvibel (hereinafter: "The First Party") and the Belz Chassidic Institutions in Tel Aviv (hereinafter: "The Second Party") concerning the "Centrals" Company, in which we the undersigned were selected to serve as Arbitrators in all disputes regarding the company's property and debts, and after hearing arguments of the first party, in the presence of the second party, on Wednesday, the 30^th day of Sivan 5768 (02/07/2008), we hereby inform.

A. Based on Messrs Dover Hipps and Smith's opinion and having been appointed by us to examine the company's property and debts, we have reached the following conclusion:

The company's property consists of: Funds that have been deposited in the hands of both parties lawyers, with an additional three hundred thousand pounds (£300,000) dilapidation fee, all of which both constitute the company's property.

Regarding debts: the Company has no payable debts, with the exception of Messrs Dover, Hipps and Smith's fees.

B. If the first party is not prepared to accept Messrs Dover, Hipps and Smith's opinion, arguing that according to him, the opinion is based on an agreement from 05 to which the first party was not a signatory and which was delivered by an emissary without his consent; in which case we the rabbis are prevented from serving as arbitrators in matters of accounts, because according to Article 9 of the agreement from 04, we must receive an opinion from a neutral accountant, and he stated that without being based upon the 05 agreement, he is not able to provide an opinion. Therefore the second party has recourse to civil courts.

After the parties having conducted discussions, we hope and request to find some peace and that each party respect the other and that there will be no slanderous talk about each other, God forbid and that there should be only peace and tranquillity and goodness.

To this we hereby sign on Wednesday, the 7^th day of Tammuz (09/07/2008)"

18. After the award was issued, DKLM, the applicants' solicitors, wrote to the tribunal asking it to acknowledge that the award of 9 July 2008 should not be regarded as a final award. Then, on 19 August 2008, Teacher Stern LLP, the solicitors for Mr Konig, wrote to him expressing concerns about the enforceability of the award. A copy of that letter was sent to the applicants upon the order of the tribunal. Teacher Stern's letter noted that there were parties missing from the award; it did not even name Mr Konig personally nor identify Mrs Zwiebel. The letter also expressed concern about the effect of paragraph B of the award, which it said might nullify the effects of paragraph A. The letter suggested that the tribunal be invited to review its award.
19. It appears -- although there is now some doubt about this -- that the tribunal asked Allen & Overy for yet further advice. There is no doubt that Allen & Overy produced a letter dated 26 September 2008. Amongst other things the letter gave Allen & Overy's construction of the award of 9 July 2008. That view on construction was that the tribunal had made a declaratory award in paragraph A which was a final award. However (the letter argued), in paragraph B, the tribunal had recorded the possibility of Mr Zwiebel continuing to reject the opinions of BDO and also those of Allen & Overy, based on arguments as to the invalidity of the 2005 Consent Order. Allen & Overy's letter indicated that the final sentence of that paragraph recorded what Mr Konig, referred to as "the second party" in the award, would do: ie go back to court, if Mr Zwiebel continued to challenge the validity of the award and if Mr Konig wished to enforce it.
20. By 30 October 2008 at the latest, DKLM had a copy of the Allen & Overy letter of 26 September.
21. On 3 November 2008 the tribunal sent a fax to the parties. That fax referred to the Psak of 9 July 2008. It said that:

"We [that is the arbitration tribunal] should have stated that the parties before us in the dispute should have been shown, as detailed in the agreement dated 30 March 2004, as follows:"

Seven parties are then identified, including Mr Konig and Mr and Mrs Zwiebel and two other persons and two other entities. There was nothing else in the body of that fax but, as I have said, it was signed by the two arbitrators.

22. On 13 November 2008 Mr Konig issued his application under section 66 to enforce the award of 9 July 2008 as a judgment. As I have already said, Field J made an order to that effect.
23. The applicants applied to set that order aside on 9 December 2008. They raised various grounds, which were said to constitute serious irregularities in the arbitral process within section 68 of the Arbitration Act 1996. No application had in fact been made to set aside the award of 9 July 2008 pursuant to section 68 and, as I understand it, none has been made thereafter.
24. Burton J gave his judgment immediately following the hearing on 4 February 2009. At paragraph 34 of his judgment he said, in relation to the award of 9 July:

"I can see the force of a case that, without the clarification that has been given, para (B) of the award would have rendered para (A) questionable. Para A, I have no doubt whatever, is quite clear and justifies the order made by Field J in its entirety. The question is whether para (B) casts sufficient doubt upon para (A) to render the entire award uncertain. But for the clarification I would have concluded (as did Mr Rabinowitz) [that is one of the lawyers involved] that it probably did. However, with the clarification, I am satisfied that the award is plainly valid and enforceable and, indeed, that para (B) positively recommends and encourages recourse to the civil courts for enforcement, if there is no voluntary compliance with the arbitrators' award, as they otherwise expected."

He therefore rejected the application to set aside Field J's order.

25. Before me this morning Miss O'Sullivan, in presenting her oral argument, accepts that if the award of 9 July 2008 had simply consisted of paragraph A, then it would have been a valid and enforceable award. Her submission is that paragraph B is a problem in the way that Burton J identified in paragraph 34 of his judgment, which I have also read out. She then goes on to point out that there was in fact no further "clarification" by the arbitral tribunal at all. The only "clarification" that it gave was that set out in the fax of 3 November which I have also read out. It is the case that there is nothing else in the form of a supplementary award or a further written clarification that was sent to the parties which stipulates in any way what the tribunal intended to be the relationship between paragraph A and paragraph B of the award of 2008. Therefore, Miss O'Sullivan submits, it must be reasonably arguable that the award as it stands, with the fax of 3 November 2008, is not a valid and enforceable award. That, as Miss O'Sullivan submits, is a pure question of construction of the award. Her argument is that, as Burton J accepted, that was a point of construction which would indicate that the award on its own was not valid and enforceable. That must (she says) remain the case if there is in fact no "clarification".
26. She says that Burton J was wrong in assuming that there had somehow been some further "clarification" and in fact there has not. I accept that there is a real prospect of success in demonstrating to the Court of Appeal that the view that she has expressed in argument is the correct one.
27. This case, in the course of its long history, has gathered a large number of other possible issues. These to my mind entirely obfuscate the one issue that is reasonably arguable in this case. That is the "construction" point that I have outlined. I am therefore going to grant permission to appeal on that issue only.

Order: Application granted