England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

		Royal Courts of Justice Strand, London, WC2A 2LL
		23rd March 2004

Mr Justice Lightman:

INTRODUCTION

1. At the trial of the two actions before me I had to consider the effect in English law of a decision and of an award made by a Beth Din (a Jewish Court) appointed as arbitrator to determine according to Jewish substantive and procedural law all disputes and differences between the Claimant in the arbitration, Mr Kastner, and the Defendant in the arbitration, Mr Jason. The allegation in the arbitration by Mr Kastner was that Mr Jason had defrauded him. The decision was the interlocutory grant to Mr Kastner of a "freezing" direction prohibiting Mr Jason from dealing with or disposing of his home without the permission of the Beth Din pending the making and satisfaction of the final award in the arbitration. The award was the final award by the Beth Din of £237,224.50 as damages for fraud to Mr Kastner against Mr Jason. Notwithstanding the direction prior to the award Mr Jason sold the property to Mr and Mrs Sherman. The issue before me is whether the direction (protected by registration of a caution against the title to the home) or the award created in favour of Mr Kastner a lien or charge on Mr Jason's home securing the award of damages and (if either did so) whether that lien or charge bound Mr and Mrs Sherman.
2. The parties to the two actions are in the first action ("the Kastner action") Mr Kastner as claimant and Mr Jason and Mr and Mrs Sherman as defendants, and in the second action ("the Sherman action") Mr and Mrs Sherman as the claimants and Mr Kastner as the defendant. Mr Kastner was represented by Mr Seitler and Mr and Mrs Sherman by Mr Lonsdale. Both Counsel gave me every assistance. Mr Jason was not represented and did not take any part in the proceedings.
3. Mr Kastner in the arbitration before the Beth Din (the court) of the Federation of Synagogues ("the Beth Din"), obtained an interlocutory direction ("the Direction") that Mr Jason should not deal with or dispose of his home, 10 Holmdale Gardens Hendon ("the Property"), without the written permission of the Beth Din. Mr Kastner with the permission of the Beth Din protected the Direction by registration of a caution at HM Land Registry against Mr Jason's title to the Property ("the Caution") and Mr Jason also orally agreed to comply with the Direction ("the Agreement").
4. In flagrant breach of the Direction and Agreement, Mr Jason entered into a contract for sale and (save for registration) completed a sale of the Property to Mr and Mrs Sherman. Subsequently, after the Beth Din had made an award of damages in his favour, Mr Kastner obtained an interim charging order against the Property to secure the sum awarded to him. In the Kastner action Mr Kastner seeks an order making the charging order absolute. In the Sherman action Mr and Mrs Sharman seek an order vacating the Caution and declaring that the registration of themselves as proprietors of the Property should proceed. At issue is whether the right of Mr and Mrs Sharman as purchasers of the Property to complete their purchase by registration as proprietors is subject to a charge or lien in favour of Mr Kastner securing payment of the award of damages by reason of the facts that: (1) they entered into the contract of purchase and paid the full purchase price notwithstanding the fact that they had constructive notice of the Direction and notwithstanding the existence of the Agreement; and (2) the claim in fraud by Mr Kastner against Mr Jason was upheld by the Beth Din which awarded damages for that fraud.

FACTS

5. Mr Jason fraudulently induced Mr Kastner to invest in Mr Jason's company. Mr Kastner discovered the fraud and decided to take action to recover his loss. Since both Mr Jason and Mr Kastner were strictly orthodox Jews and it was their duty under Jewish law to have their disputes resolved by a Beth Din and not to have recourse to the secular courts of this country, on the 13^th November 2001 they entered into a written arbitration agreement ("the Arbitration Agreement") under which they agreed to refer to the arbitration and final decisions of the Beth Din all disputes and differences between them and all claims which either party alleged that he had against the other party(

"for determination by way of Din Torah [the Five Books of Moses and the oral law which accompanies them] according to the rules of procedure customarily employed in arbitrations before the Beth Din, and according to principles of halachah [the Code of Jewish Law derived from the foregoing] and/or general principles of equity customarily employed in arbitrations before the Beth Din."

6. The parties went on to agree "to accept and perform the Award … of the Beth Din touching all disputes, differences and claims between the parties".
7. The same day the parties made submissions to the Beth Din which was a panel of three judges, one of whom was Dayan Lichtenstein. There was then a break until a resumed hearing on the 26^th November 2001 when both parties called witnesses. On the 27^th December 2001 the Beth Din made an award in favour of Mr Jason holding that on the evidence adduced no fraud on his part was established.
8. On the 25^th February 2002 Mr Kastner applied to the Beth Din to reopen the award in the light of the fact that fresh evidence of fraud on the part of Mr Jason had come to hand. It is common ground that this course was open to the Beth Din under Jewish Law. On the 27^th February 2002 the Beth Din acceded to this application.
9. The only known asset of Mr Jason was the Property which he was in the process of trying to sell. This fact combined with the fact that Mr Jason stated that he intended to emigrate to the USA reasonably led Mr Kastner to fear that, unless urgent action was taken, Mr Jason would so arrange his affairs that he would have no assets (and certainly no assets within the UK) to satisfy any award by the Beth Din and accordingly he applied in writing to the Beth Din for a direction restraining Mr Jason from selling or disposing of the Property without the written consent of the Beth Din. The Beth Din gave the Direction by letter dated the 25^th February 2001 and gave permission to Mr Kastner to register the Caution. On the 27^th February 2002, at the same time as it reopened the earlier award, the Beth Din repeated the Direction.
10. On the 1^st March 2002 Mr Kastner made an application to HM Land Registry to register the Caution against dealings with the Property in which he stated that the interest which he was applying to protect by the registration was that arising under the Direction. The Caution was duly registered on the 5^th March 2002.
11. Meanwhile on the 4^th March 2002 Mr Jason entered into the Agreement.
12. Further hearings proceeded before the Beth Din on the 4^th and 14^th March 2002 and the 25^th May 2002. The lengthy delay in concluding the hearings between the 14^th March and the 25^th May 2002 was the occasion for further dishonesty by Mr Jason.
13. On the 11^th April 2002 in flagrant breach of the Direction and Agreement Mr Jason entered into a contract with Mr and Mrs Sherman for the sale to them of the Property. Mr and Mrs Sherman's solicitor, Mr Brian Gordon ("Mr Gordon") of Farmer Millar Rabin Gordon, appears to have taken the whole conveyancing transaction and the proof of title by Mr Jason extremely lightly. This inference is to be drawn from his correspondence and the otherwise inexplicable fact that, when he carried out his Land Registry search, he did not read or take notice of the entry of the Caution. Accordingly in total ignorance of the Caution (but with constructive notice of it arising from registration of the Caution) Mr and Mrs Sherman proceeded to complete the purchase on the 20^th May 2002. Mr and Mrs Sherman paid the full purchase price and Mr Jason executed the transfer to them of the Property. Part of the purchase price was provided by HSBC on the security of a mortgage executed by Mr and Mrs Sherman. Part of the net purchase price was applied in discharging two existing mortgages on the Property and the balance was paid over to Mr Jason. There followed a five month unexplained and inexplicable delay on the part of Mr Gordon in applying for registration of the transfer and mortgage. The priority period in favour of Mr and Mrs Sherman and HSBC expired on the 27^th June 2002. The application for registration of Mr and Mrs Sherman as proprietors and HSBC as mortgagee was lodged on the 23^rd October 2002.
14. Mr Jason only informed the Beth Din of the sale by a letter dated the 22^nd May 2002 but in fact sent on the 5^th June 2002. Mr Kastner for the first time learnt of the sale on the 28^th October 2002, by which time the net proceeds had been paid to Mr Jason and he had emigrated to the USA.
15. There was a very lengthy delay between the conclusion of the hearings on the 25^th May 2002 and the first judgment of the Beth Din on the issue of liability. On the 12^th November 2002 the Beth Din made a Supplementary Award which found that Mr Jason had been fraudulent and made secret profits. On the 26^th March 2003 the Beth Din made a further award quantifying the damages payable at £237,224.50 ("the Award"). In the absence of evidence to the contrary it is to be inferred that the quantum of the damages payable was uncertain until that date.
16. By letter dated the 13^th January 2003 the Assistant Land Registrar refused the application by Mr and Mrs Sherman for registration as proprietors of the Property by reason of the Caution. By that letter and a further letter dated the 3^rd February 2003 the Assistant Land Registrar warned Mr and Mrs Sherman that (in effect), unless they took action to have the Caution vacated, the application for registration would be cancelled, and it was duly cancelled on the 10^th February 2003.
17. By an agreement dated the 12^th June 2003 Mr Kastner agreed with Mr Jason to accept £25,000 in full and final satisfaction of the personal liability of Mr Jason, but without prejudice to Mr Kastner's full entitlement to all or any interest that he might have in respect of the Property. Mr Kastner entered into this agreement as a salvage operation because it was clear that no greater sum could ever be recovered from Mr Jason.
18. On the 7^th April 2003 in the Kastner action David Steel J made an order pursuant to section 66(1) of the Arbitration Act 1996 that Mr Kastner could enforce the Award as a judgment, and on the 2^nd May 2003 pursuant to that order an interim charging order was made charging Mr Jason's interest in the Property with payment of the Award. Mr Kastner entered a second caution at HM Land Registry protecting this interim charging order. The fate of this second caution must for the purposes of these proceedings be the same as the fate of the Caution and requires no independent consideration. The issues in Mr Kastner's action is whether Mr Kastner is entitled to a final charging order and whether Mr and Mrs Sherman are entitled to have the interim charging order discharged.
19. About the same time in the Sherman action Mr and Mrs Sherman claimed entitlement to registration as proprietor of the Property and vacation of the Caution. The trial of both actions took place together before me.
20. The hearing commenced before me on the 30^th January 2004. No expert evidence as to Jewish law was adduced by either party though references were made to Jewish law in the evidence. Mr Seitler opened his case on behalf of Mr Kastner and took me to the evidence served by the parties. This included a witness statement by Mr Kastner. Mr Lonsdale then addressed me in answer on behalf of Mr and Mrs Sherman. Both Counsel at that stage properly proceeded on the basis that the issues must be resolved according to English law. But in the course of his reply Mr Seitler asked me to infer from the evidence before me the legal position under Jewish law and apply that law. I made clear to Mr Seitler that, in the absence of expert evidence of Jewish law, I could not accede to that request. Mr Seitler thereupon applied for an adjournment to enable him to put before the court expert evidence as to Jewish law. Mr Lonsdale opposed the application.
21. I was reluctant to accede to this very late application because it involved a change in the rules of engagement at a very late stage and might be seen as a last minute effort to salvage a claim facing imminent defeat by raising new issues. But it was clear that the parties had agreed that the arbitration should be governed by Jewish law and there appeared to have been a misunderstanding on the part of Mr Kastner's legal representatives that the relevant Jewish law could be deduced without expert evidence from the existing evidence before the court. It was also clear that expert evidence on the relevant issues of Jewish law could be obtained very quickly and that the issues of Jewish law could be determined very shortly. In the circumstances, in the absence of any serious suggestion that the course would occasion any injustice to Mr and Mrs Sherman or any substantial delay or other prejudice, in accordance with the overriding principle laid down in Civil Procedure Rule 1, with some hesitation and on terms as to costs, I granted the indulgence. It was limited to permitting the parties to serve expert reports as to the relevant Jewish law on the facts established by the existing evidence. I gave directions for the exchange of expert reports followed by preparation by the experts of a joint report setting out the propositions of Jewish law agreed and the facts in issue and the respective contentions of the parties' experts on the propositions in issue.
22. Mr Kastner thereafter served an expert report by Rabbi Lieberman, Rabbi of Edgware Adath Yisroel congregation, and Mr and Mrs Sherman served an expert report by Dayan (Judge) Ehrentreu, Senior Judge of the London Beth Din (the Court of the Chief Rabbi) since 1984. The differences between Rabbi Lieberman and Dayan Ehrentreu apparently ran so deep that, despite my order, they could not even agree any form of joint report. They both attended to give evidence on Monday the 15^th March 2004.

PRELIMINARY ISSUE

23. On the 9^th February 2004 an application came before me for further directions relating to the expert evidence. The same day Mr Kastner served a supplementary witness statement intended to bolster the case which he intended to make on Jewish law. Its principal purpose was to record Mr Kastner's account of a telephone conversation between Mr Kastner and Dayan Lichtenstein about the deliberations that took place between the panel of judges at the Beth Din when Mr Kastner requested the Direction, the (unstated) reasons for making it and the (unstated) purpose of allowing registration of the Caution. It would be remarkable for one of a panel of three arbitrators to disclose such information in the course of a conversation with one of the parties to the arbitration. The witness statement does not say whether Dayan Lichtenstein was told that what he said to Mr Kastner would be used and quoted by Mr Kastner as evidence in support of his case in the proceedings before me. It would be doubly remarkable if Dayan Lichtenstein agreed to this course. It is however unnecessary to explore these questions for, when Mr Kastner applied for the first time for permission to adduce this evidence at the resumed hearing on the 15^th March 2004 and the application was opposed by Mr and Mrs Sherman, I refused the application for four reasons. The first was that the evidence was complete and the hearing practically complete when I granted Mr Kastner the indulgence of permitting the service of expert reports. It was unjust and unfair to Mr and Mrs Sherman for Mr Kastner to seek to use the period allowed for this purpose to re-open issues of fact or open new issues of fact and thereby bolster his case on the issues on which his expert evidence focussed. Secondly, if I gave the permission sought, I would have had to grant Mr and Mrs Sherman a substantial adjournment to investigate and answer the new allegations made, occasioning substantial further delay and costs. Thirdly the evidence adduced of what Dayan Lichtenstein had said was not admissible in the absence of any Civil Evidence Act notice. Fourthly it did not seem to me that the evidence so adduced was admissible or (even if admissible) of substantial (if any) evidential value on the issue of the legal effect of the Direction.

ISSUES

24. The dispute between the parties raised a series of issues as to the effect in law of the Direction, Agreement, Caution and Award and I shall consider each of them in turn. The exercise which I must undertake requires examination of the powers of the Beth Din as arbitrators and the substantive effect of the Direction, Agreement, Caution and Award law under both English and Jewish law.

a. Jurisdiction of Beth Din

25. The first issue is whether the Beth Din had jurisdiction to make the Direction. The starting point must be the powers granted to arbitrators under the provisions of the Arbitration Act 1996. Section 49(1) (which is headed "Remedies") provides that the parties are free to agree on the powers exercisable by the arbitrators as regards remedies. But unless otherwise agreed the arbitrator's powers are limited to those there specified. Section 49(5) reads as follows:

"The [arbitrator] has the same powers as the court...

(a) to order a party to do or refrain from doing anything;

(b) to order specific performance of a contract (other than a contract relating to land;

(c) to order rectification, setting aside or cancellation of a deed or other document."

26. Section 49 is concerned with the powers of arbitrators in regard to the grant of remedies on the occasion of the making of a final award. The powers of arbitrators on the making of provisional or interlocutory awards are the subject of section 39 to which I must shortly turn. Section 105 defines "the court" as meaning the High Court and the County Court.
27. Section 49(1) in my judgment is sufficiently wide to enable the parties to confer on arbitrators the power by the final award to make freezing directions pending satisfaction or securing the final award. The criterion for jurisdiction is that the relief is granted by the final award, not the final or interim character of the relief: consider Russell on Arbitration 22^nd ed paragraph 6.020 footnote 63 but see Mustill & Boyd, Commercial Arbitration 2^nd ed 2001 Companion p.330-1. Section 49 is not directly applicable in this case because the Direction was contained in a provisional award. Accordingly Mr Seitler cannot (as he initially sought) invoke the power conferred by section 49(5)(a) because the powers there stated are not implied in the case of the making of provisional awards. There is a further reason why section 49(5)(a) cannot apply. Section 49(5)(b) confers on the arbitrator (in the absence of express conferment by the Arbitration Agreement of a greater or wider power) "the same powers as the court" to order a person to do or refrain from doing anything, and "the court" is defined in section 105 as including the High Court and the County Court. Only the High Court and designated County Court judges have jurisdiction to grant freezing orders. In the context of section 49 the expression "the same powers as the court" must mean the generality of powers conferred on both courts and not include powers conferred on some, but not others, or on the High Court, but not the county Court. The formula is hardly apposite to confer on arbitrators (in default of express provision in the arbitration agreement) powers the legislature has not thought fit to confer on county courts.
28. In the alternative Mr Seitler submitted that jurisdiction was conferred on the Beth Din by section 39 of the Arbitration Act 1996. Section 39(1) provides that the parties are free to agree that the arbitrator shall have power to order on a provisional basis any relief which it would have power to grant in a final award. Section 39(4) goes on to provide that, unless the parties agree to confer such a power on the arbitrator, the arbitrator has no such power. I have already expressed the view that the parties could agree that the Beth Din should have jurisdiction to grant a freezing direction in a final award. The Arbitration Agreement does not expressly grant to the Beth Din jurisdiction to grant a freezing direction in its final award. The critical issue is accordingly whether the grant of such a power is implicit in the provision of the Arbitration Agreement that the Beth Din shall apply Jewish procedural and substantive law.
29. The issue raised is whether under Jewish law a Beth Din has jurisdiction to grant such an "ikul" or injunction. It is provided in the Shulchan Aruch, Chosen Mishpat chapter 73.10:

"Where there is an outstanding debt that is not yet at term, but the lender appears before the Beth Din claiming that the borrower is running down his assets and I will not have from what to collect my debt … it is a requirement of the Beth Din to hold the funds until time for the repayment comes …. The same applies if the borrower intends to travel overseas."

The Rema, the major commentator on the Shulchan Aruch, in its gloss on this provision adds:

"This applies in every similar situation."

The Aruch Ha Shulchan chapter 73.16 states:

"If the local Beth Din suspects that the defendant will not listen to his local court they must seize his local assets."

30. In the light of this authority it is clear that the Beth Din had the jurisdiction in this case to make the Direction. This accords with the views of both experts. It is also clear that under Jewish law a breach of the Direction may be viewed very seriously and give rise to the imposition of severe personal sanctions against the party in breach.

b. Creation of Lien or Charge by the Direction

31. The second question accordingly arises as to legal effect of the Direction. The critical issue is whether the Direction conferred on Mr Kastner any proprietary interest in the nature of a charge or lien on the Property. Under English law the answer is quite clear. Without more neither a freezing order by the court or a freezing direction by an arbitrator operates to create any form of charge over the subject matter of the order or direction. This is made plain (if previously it could have been in doubt) by the decision of the Court of Appeal in Flightline v. Edwards [2003] 1 WLR 1200. The reason is that a freezing order or direction merely prevents misapplication of the frozen assets by the prospective or actual debtor. To give rise to a security interest an order or direction must go beyond this and vest in the creditor the right, or impose on the debtor the obligation, to satisfy the debt out of those assets. As a matter of English law on the facts of this case there is no basis for finding the creation of any such right or the imposition of any such obligation by the Direction.
32. In support of the contention that such an obligation should be implied, Mr Seitler prays in aid the following: (a) passages in the witness statement of Mr Kastner stating that the sole purpose of the Direction was to ensure that he would be able to enforce any award by the Beth Din against the Property. But the purpose and legal effect of an order or direction must be determined by reference to the terms of the order or direction. A statement of the purpose by a party to the action (or anyone else) is no substitute for an indication of the purpose in the terms of the order or direction itself. In any event the statement by Mr Kastner goes no further than saying that the object was to ensure that Mr Jason retained the Property so that it would continue to be available for execution of any award, the purpose of all freezing orders and directions. It goes no way to establishing the necessary grant of a lien or charge; (b) the fact that, when the Direction was made, a prima facie case of fraud by Mr Jason had been established which was the basis for the grant of the Direction. But the fact that Mr Kastner had good prospects of success in the arbitration cannot change the character of the Direction; (c) Mr Kastner in the arbitration proceedings claimed that a substantial part of the money of which he was defrauded was applied by Mr Jason in extensive renovation of the Property. But no claim was made in the proceedings before the Beth Din that this gave rise to any lien or charge on the Property, and the Beth Din did not make any finding on this claim or award any charge or lien. Indeed before me there is a mere claim that part of the money was so applied, but the claim is totally unparticularised and there is no evidence in support; and (d) Mr Jason had no assets other than the Property. But that fact is entirely consistent with the ordinary freezing direction.
33. The Agreement as a matter of English law can carry the matter no further. An agreement to comply with the Direction can create no proprietary interest if the Direction itself does not do so. Not only is there absent any intention to be inferred from the terms of the Agreement that a charge should be created but, even if such an intention was disclosed, such an intention could not be given effect because the agreement was not in writing as required by the Law of Property (Miscellaneous Provisions) Act 1989.
34. The registration of the Caution and the permission of the Beth Din to register the Caution do not carry the matter further. A caution against dealings can only be registered to protect some form of interest in land: see Elias v. Mitchell [1972] Ch 652 at 659. A caution cannot be registered to protect a freezing order or direction which is merely ancillary to the claimant's pecuniary claims against the defendant: see Megarry & Wade, The Law of Real Property, 6^th ed p.254. Unless the Direction did create a charge in favour of Mr Kastner, the Caution protected no interest in land and accordingly ought never to have been registered and had no legal effect. The fact that the Beth Din may have thought, when giving permission to protect the Direction by a caution, that it could be so protected does not change the character of the Direction.
35. The question then arises whether the Direction created any lien or charge under Jewish law. The position under Jewish law in this regard is quite clear. A freezing injunction or direction (or "ikul") operates "in personam" and not "in rem" and does not create any lien or other interest in favour of the party who obtains the order over or in respect of the assets of the party against whom it is made and does not entitle to any priority over other creditors. Dayan Ehrentreu's evidence to this effect is fully supported by the authorities he refers to.

(c) Creation of Lien or Charge by Award

36. The third question raised is the effect of the Award and whether it retrospectively created a lien or charge in favour of Mr Kastner over the Property. On this question I first look at the position under Jewish law and then consider whether any lien or charge arising under Jewish law is binding in English law on Mr and Mrs Sherman.
37. The experts are in disagreement whether under Jewish law the Award retrospectively created a lien or charge over the Property in favour of Mr Kastner binding Mr and Mrs Sherman. They agreed that for all relevant purposes Jewish law draws no distinction between a fraudster and a thief.
38. Rabbi Lieberman expressed the view that under Jewish law: (1) a fraudster such as Mr Jason is fixed with a "Shibud", (that is to say an obligation to repay the victim of the fraud out of any and all property belonging to him) from the time that the fraud was perpetrated; (2) at the date that the Beth Din makes the finding of fraud, all the fraudster's real property retrospectively becomes charged in favour of the victim from the time the fraud was perpetrated; and (3) the charge binds any person who purchases any of the fraudster's real property between the dates of the fraud and the finding of the Beth Din if it would generally be known to the community that such a mortgage had arisen. He goes on to say that registration of the Caution would for this purpose be sufficient to alert the community to the fraud.
39. On the other hand Dayan Ehrentreu expressed the view that: (1) where a case has been brought against a fraudster and the Beth Din has found the fraudster liable and the amount of his liability in damages is known for certain by reason of assessment by the Beth Din or otherwise, a "Shihud" or charge or lien arises charging all the fraudster's property with payment of that certain sum; and (2) this charge or lien binds any purchaser of real property from the fraudster if the purchase is made after (but not before) the decision of the Beth Din. The likely publicity attendant on and surrounding the decision of the Beth Din will be sufficient for the community to become aware of the finding of fraud and accordingly of the charge or lien. He emphasised and explained the critical importance of the requirement for a judgment of the Beth Din, for: (a) until judgment there is merely a charge and the person charged may be innocent; and (b) unless and until the sum due is certain or rendered certain, the amount owed by the fraudster by way of restitution is wholly unknown and a purchaser cannot know the quantum of any charge which may bind him if he proceeds with his purchase.
40. Before I turn to the question which of the expert views I should accept, there are two preliminary observations which require to be made. The first is that Rabbi Lieberman in his evidence fairly and properly accepted that he did not have the experience or expertise in Jewish law possessed by Dayan Ehrentreu. This fact was apparent when the experts gave their evidence and answered questions as to Jewish law. The second is that, whilst Dayan Ehrentreu clearly knew the detailed law in the field in question like the back of his hand even before he was instructed as an expert in this case, Rabbi Lieberman had no detailed knowledge until he studied the subject, and regretfully because of time constraints he did not study the subject until after he gave his expert report and indeed until the Friday preceding the resumed hearing on Monday the 15^th March 2004. He did not disclose this fact in his report or indeed at all until he was in the witness box. An expert ought not to give a report where because of time constraints or otherwise he has not been able to do the necessary preliminary study and research to produce a fully considered, thorough and reliable report, at any rate unless the report contains the clearest statement to this effect. The expert fails to comply with his duty to the court if any such shortcoming in the report is left to be disclosed if and when the expert is called to give evidence. It is the duty of a party's solicitors to ensure that the expert knows and (so far as it is within their power) complies with his duty in this regard.
41. In consequence of the haste and lack of attention, Rabbi Lieberman's report was seriously deficient. First of all there was a serious error in his report which again he first disclosed in the witness box. Secondly, when he gave his evidence, he relied on new authorities which (he said) supported his view but which he had not previously known and accordingly he had not previously referred to. This was most unsatisfactory and indeed unfair, for in consequence Dayan Ehrentreu had no proper opportunity to consider them and research into them before he gave his evidence the same day. He did however proffer convincing explanations of them. I shall have to say more about this later.
42. In his report and in his evidence Dayan Ehrentreu quoted a variety of authoritative sources (including the Talmud, Maimonides and the Shulchan Aruch) which on their face upheld his view that a lien or charge arose on a fraudster's property after the making of a decision by the Beth Din that the defendant was guilty of fraud and (where the amount of the award was as yet uncertain) a decision assessing the compensation, but not before.
43. In his report Rabbi Lieberman quoted as a relevant authority on the question supporting his contrary view a passage in Shulchan Aruch Chosen Mishpat 372.1 which stated:

"If the case was heard and the thief was found liable and then the thief sold his property, all the assets were mortgaged."

The passage, far from supporting his view, entirely accords with and supports the view of Dayan Ehrentreu that no mortgage can arise until after the thief has been found liable. Property sold by the thief prior to the finding of liability is unaffected. Accordingly no mortgage could arise in this case until the 23^rd March 2003 when the Beth Din quantified the damages payable. Long before this date the sale to Mr and Mrs Sherman had been completed save for the formality of registration which was being delayed by the (wrongful) registration of the Caution by Mr Kastner and his (wrongful) refusal to vacate the Caution.

44. Rabbi Lieberman however in his oral evidence sprang two surprises producing for the first time, like rabbits out of a hat, authorities which (he said) supported the view of the law which he was advancing, but which Dayan Ehrentreu had no opportunity to consider beforehand. The springing of surprises and ambushes, once a prevalent practice in these courts, is contrary to the letter and spirit of the Civil Procedure Rules and to be deplored. It was open to me, if justice so required, on this ground to refuse to admit this evidence or grant an adjournment (and order Mr Kastner to pay the costs thrown away) to enable Dayan Ehrentreu to prepare a considered and reasoned response. Justice however did not so require since Dayan Ehrentreu was able to respond right away.
45. The first was a comment of the 18^th century Vilna Gaon referred in note 35 of the Artcroll Talmud Baba Metzia 14b which, (Rabbi Liebereman said), qualified the passage from the Shulchan Aruch. In that passage, the meaning and significance of which (at least in the translation provided) are not immediately obvious, there is discussion of the position where there has been a theft of land on which the produce is fully grown and the Vilna Gaon is quoted as saying that the victim of the theft may in that situation recover the value of the produce from a subsequent purchaser from the fraudster of the land. Rabbi Lieberman argued that this comment establishes that the victim of theft or fraud may recover his loss from any subsequent purchaser of property from the fraudster. But Dayan Ehrentreu clearly established by reference to authority to my satisfaction that the comment by the Vilna Gaon proceeded on the assumption that the sale by the thief took place after the judgment of the Beth Din on liability and the quantification of damages.
46. The second was a passage from the Shulchan Aruch Chosen Mishpat 99.6.8. The meaning and significance of the passage in the translation furnished are again not immediately obvious. It reads:

"Someone who owes money but gives it all away to uproot [repayment of] his debt, his trickery will not help and the creditor should collect his debt (from the property) even if it was a verbal loan (which would not usually be collectable from sold properties) from the recipient …."

47. Before I make any comments on this passage, it should be explained that under Jewish law a written and witnessed contract of loan creates in favour of the lender a charge over the whole of the debtor's property, but this is not the case if the loan agreement is oral. The formalities attending the execution of the written and witnessed contract are deemed sufficient to give notice to the community of the transaction and the charge which it creates. The formalities and notice are absent in the case of an oral agreement. Dayan Ehrentreu explained this somewhat cryptic dictum as applicable only in cases of gifts, as opposed to sales, by tricksters. I am fully convinced by this explanation and that dictum in no way qualifies the statements in the authorities on which Dayan Ehrentreu relief for the propositions which he advances in respect of sales by tricksters/debtors. The recipient of a gift in fraud of creditors is in a very different position from a purchaser for value.
48. In summary, on the issue of Jewish law I unhesitatingly prefer the evidence of Dayan Ehrentreu to that of Rabbi Lieberman and I hold that under Jewish law Mr Kastner obtained no lien or charge over the Property binding on Mr and Mrs Sherman, for it was sold by Mr Jason to Mr and Mrs Sherman prior to the Award.
49. I should however add that, if I had held that under Jewish law Mr Kastner did have a charge or lien binding on Mr and Mrs Sherman, that would not have entitled Mr Kastner under English law to a charge or lien on the Property for two reasons.
50. The first is that by the Arbitration Agreement Mr Kastner and Mr Jason agreed that the arbitration should be conducted in accordance with Jewish law, and that authorised the Beth Din to declare that the Property was subject to a charge if that was the position under Jewish law. The Beth Din was not requested to make any such declaration and did not do so, and indeed by reason of sale to Mr and Mrs Sherman as a matter of Jewish law it could not have done so. Jewish law only applied in determining their rights and obligations so far as the Arbitration Agreement authorised the Beth Din to determine the dispute according to Jewish law and so far as the Beth Din did so. Save only to that limited extent the rights of the parties continued to be regulated by English law. Accordingly since the Beth Din did not declare the existence of a lien or charge under Jewish law, any rights of Mr Kastner under Jewish law to a charge or lien are of no effect under English law.
51. The second relates to the position of Mr and Mrs Sherman. Mr and Mrs Sherman, though orthodox Jews, were not parties to the Arbitration Agreement and have never agreed with Mr Kastner that their rights should be determined by Jewish law. Accordingly the existence of such rights in Jewish law could not affect them under English law. The only way that a right of Mr Kastner to a charge or lien under Jewish law could have affected them would have been if pursuant to the Arbitration Agreement the Award had recognised or granted a charge or lien. Such a charge or lien as a matter of English law would have been a valid equitable charge or lien granted by Mr Jason to Mr Kastner pursuant to the Arbitration Agreement, would have dated (for purposes of priority) from the date of the Award and would (like any other equitable charge) have required protection by registration. The Award in this case however (as I have already said) neither recognised nor granted any such charge: it was not even asked to do so, and again (as I have said) on the facts of this case, in the light of the expert evidence of Jewish law, it could not have done so.

CONCLUSION

52. I accordingly hold that: (a) in the Sherman action Mr and Mrs Sherman are entitled to the declaration which they seek that they are entitled to registration as proprietors of the Property free from any charge or lien in favour of Mr Kastner and vacation of the Caution; and (b) in the Kastner action the interim charging order is of no effect since it is quite clear that after completion of the contract for sale (and in particular payment of the full purchase price) Mr Jason ceased to have any interest other than bare legal title to the Property which he held as trustee for Mr and Mrs Sherman. Mr Jason could only have a beneficial interest in the Property if the sale were set aside, and there are no grounds for doing so. I must therefore discharge the interim order and refuse the application for the final charging order.
53. I reach the conclusion without any enthusiasm. Mr Kastner has acted throughout in a highly principled fashion in accordance with Jewish law. He is the victim of double deceit by Mr Jason who first deceived him in securing his investment in his business and then deceived him again in removing his assets from the jurisdiction and rendering the Award practically valueless. He is also the victim of Mr Gordon's negligence and breach of duty to his clients Mr and Mrs Sherman (in respect of which Mr Kastner has no recourse) in failing to note the existence of the Caution. If he had noted it and warned Mr and Mrs Sherman (though it should never had been registered), there can be no doubt that Mr and Mrs Sherman would not have proceeded with their purchase unless and until Mr Kastner was properly protected. The consequence of the deceit and negligence is that Mr Jason succeeded in selling the Property, in removing his assets from the jurisdiction and avoiding payment of the Award. But for the reasons which I have given, I cannot afford Mr Kastner any relief.