Konig & Anor v Zwiebel & Anor

This is an appeal from the order of Burton J, who refused to set aside an order of Field J, made without notice, giving leave to enforce an arbitration award made by two rabbis appointed by the Beth Din to resolve disputes between the parties. The reason why it is said that the award is unenforceable is that it is unclear, or at any rate ambiguous, whether the arbitrator was intending to make an award enforceable by the claimants against the defendants or only an award which the respondent could honour if he chose to do so. That raises a question of construction of the award, on which permission to appeal has been granted on a renewed oral application after an April refusal by Jacob LJ.

The body of the award is in these terms, and I must recite it, the first party referred to being the defendants in the application to Field J and the appellants in this court,

“…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 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 on 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.”

Unfortunately, peace and tranquillity and goodness have not broken out because that award has given rise to considerable litigation ending up in this court. The appellants argue that the second part of the award contradicts the first because it states that the appellants can, if they wish, choose not to be bound by the declaration as to the assets of the company which was the subject matter of the arbitration. Alternatively, they say it was ambiguous and, until clarified, that it is no valid and enforceable award. These arguments can only be understood against a brief account of the somewhat lengthy history of the dispute, which related to the control of and the assets of a company called Central. That company owned a property in Derby which the claimants in the arbitration alleged belonged to an Israeli charitable institution, whereas the respondents in the arbitration (and now the appellants to this court) alleged a personal entitlement to that property. The property has in fact now been sold, and the arbitration came therefore to be mainly about the entitlement to the proceeds of sale. The dispute was referred to the Beth Din, and two awards were made, substantially in the claimants’ favour. The respondents did not honour these awards and the claimants had to take steps to enforce under section 66 of the Arbitration Act 1996 (“the 1996 Act”).

Those proceedings were compromised by a Tomlin order approved by Cooke J of 30 March 2004, which provided for the sale of the property, which I have already mentioned, and for the parties to notify any claims they might have on the proceeds; such claims to be determined by two named rabbis, Rabbi Padwa and Rabbi Feldman, to be assisted if they wished by an independent chartered accountant as per clause 9 of the agreement schedule to the Tomlin order. This mechanism for the notification and resolution of claims proved controversial, and the claimants had to make a yet further application to the court for directions. A further consent order was made on 15 April 2005 setting out what claims each of the parties had on the funds representing the sale of the property. The appellants have alleged that they did not in fact agree that second consent order. They say they did not sign it and apparently that it was “delivered by an emissary without consent”, and that is the agreement referred to in paragraph B of the award of 9 July 2008.

In the light of the history of the matter, which I have felt it shortly necessary to recount, it seems tolerably clear to me that paragraph B of the award of 9 July 2008 is doing no more than recognising: (1) that the accountants retained by the arbitrators for the purpose of making their award have proceeded under the provisions of the second consent order, since they did not feel able to do their work pursuant to the terms of the first consent order; and (2) that the respondents in the arbitration were contending that the second consent order had no validity since they never authorised or agreed to it, so that an award based on that order would, if the respondents’ contention was factually correct, be challengeable for want of jurisdiction pursuant to section 67 of the 1996 Act.

In those circumstances, in the absence of any challenge to the jurisdiction of the arbitrators being made within 28 days of the publication of the award (see sections 67, 70(3) and section 73 of the 1996 Act) paragraph A of the award would take effect. There was in fact no such application made until, some days after Burton J’s order, an application to the effect that the second consent order was not binding was made to Flaux J, who quite correctly dismissed it as being brought much too late. In my view, that is really the end of this appeal. That is the true construction of the award which I have set out and there is no uncertainty or ambiguity about it. The argument that it was performable only at the option of the respondents appears not to have been made as such to Burton J but it was made to Aikens LJ, who gave permission to appeal, but, for the reasons I have given, I would reject it.

It is fair to say that Burton J, while not dealing with that particular argument, did say in paragraph 34 of his judgment that, had it not been for the subsequent clarification that was made, he would “probably” have held that the award was uncertain and, for that reason, could not be summarily enforced pursuant to section 66 of the 1996 Act. But it is also fair to say that Burton J was not invited to go into the history of the matter leading up to that award in the way that I have felt necessary to do. He did, however, proceed to hold that any uncertainty or ambiguity in the award had been clarified because the arbitrators had, subsequent to publication of the award, made it clear that the award was intended to be enforced and indeed to be understood in the way that I have described. Curiously, it was in fact the claimants’ solicitors who were troubled by the question of the certainty of the award and it was they who suggested that the arbitrators seek advice from Messrs Allen & Overy, who had been advising the tribunal throughout the dispute as to the validity of the award.

Allen & Overy responded to that request, among others, by saying this, in a letter of 26 September 2008:

“…it is our view that, unless the Second Consent Order dated 15 April 2005 had been set aside by the Commercial Court and the Learned Rabbonim were furnished with proof of this in the form of a further sealed Order from the Court to that effect it was the Second Consent Order which recorded the agreement of the parties with respect of the matters to be decided by you (including the dilapidations question).

For these reasons if, as envisaged by paragraph B of your decision, Mr Zweibel does continue to refuse to accept the validity of the Second Consent Order (and fails to implement the agreed settlement contained in the schedule to the First Consent Order) Mr Konig will indeed have to exercise his liberty to apply to the Commercial Court, as paragraph B of your decision also envisages.”

That confirms the view that I anyway reach, as a matter of construction of the award. Burton J held in paragraph 25 of his judgment that that letter, as adopted by the arbitrators, was supplied to the defendants as well as to the claimants, at the latest, it is suggested, on 30 October. Miss O’Sullivan, for the appellants, says that is, as a matter of fact, wrong because the arbitrators never themselves confirmed directly to the appellants that that was the clarification of the award that they intended to make. She points to a written clarification that was undoubtedly made by the arbitrators in relation to the identity of the parties and submits that they could not have intended, at any rate in October or November of 2008, to have made the clarification as found by Burton J.

I, for my part, am very doubtful that this is a point open to Miss O’Sullivan on this appeal because Aikens LJ gave permission to appeal on, as he put it, the point of construction, but even if it is open to Miss O’Sullivan, it seems to me that all that is necessary for any clarification to occur is for the arbitrators to make it clear, whether directly or indirectly, what that clarification is and even if, as Miss O’Sullivan asserts, as a matter of fact the appellants only received the letter of Allen & Overy from the respondents, nevertheless it is perfectly clear, having regard to the good sense of the matter, that that is what the arbitrators were intending to say.

All this only matters, as far as I can see, because Miss O’Sullivan wishes to assert that no clarification was in fact issued until, recently, on 22 June 2009, before this appeal was heard, the arbitrators did issue a clarification saying that they intended to adopt Allen & Overy’s letter. The purpose, as I understand it, of the argument that there was no clarification until 22 June is that the appellants would like the 28-day period for challenging the arbitrator’s jurisdiction to start on 22 June 2009. In my judgment that is an impossible argument, because the judge had found as a fact, in paragraph 25 of his judgment, that the letter was supplied to the defendants by, at the latest, 30 October and any time for challenging would have run from then.

All that is, however, obiter because it seems to me that the award on its face is a valid and enforceable award. Field J has made an order enforcing it as a judgment of this court. That was notified to the appellants, but the appellants challenged that before Burton J. Burton J correctly held that that challenge failed and I would dismiss this appeal.

I agree.

I also agree.