Royal Courts of Justice
Strand, London, WC2A 2LL
Before:
MR JUSTICE AKENHEAD
Between :
AARON YITZCHOK SCHWEBEL | Claimant |
- and - | |
WOLF SCHWEBEL | Defendant |
Justin Rushbrooke (instructed by Taylor Vinters) for the Claimant
Juliette Levy (instructed by Lorells) for the Defendant
Hearing date: 3 December 2010
JUDGMENT
Mr Justice Akenhead:
Mordechai Meir Schwebel (“MMS”) died on 10 September 2006 leaving a widow, two sons, the Claimant, Aaron Yitzchock Schwebel (“AY”), the Defendant Wolf Schwebel (“Zev”) and two daughters. MMS was very keen to avoid UK inheritance tax and over a number of years transferred a number of properties to members of his family. After his death, the two sons fell out with each other with AY claiming that various properties held or owned by Zev were held on trust for amongst others him. They agreed, by a written agreement dated 25 June 2009 to refer their disputes to the Beth Din, the Court of the Chief Rabbi, in London. Following substantive hearings towards the end of 2009, the Beth Din produced its Award dated 14 April 2010, the decision being broadly in favour of Zev but finding that in respect of one property, 26, Cross Street, London N1 AY was entitled beneficially to one sixth of it.
AY seeks permission to appeal under Section 69 of the Arbitration Act 1996 on questions of law raised on the face of the Award and also under Section 68 with regard to what is said to be serious irregularity. It might be thought by some that this is not obviously normal TCC business relating as it does to inheritance and tax matters. However, the parties entrusted the resolution of these court proceedings to the TCC as a court which is experienced in dealing with arbitration matters and with certain property disputes.
The Factual Background
The bulk of this chapter of the judgement comes from the Beth Din’s Award and does not, as such, represent findings of fact made by this Court. There were a number of properties which came to be considered by the Beth Din. These were:
(a) 26, Cross Street: MMS had acquired this property in 1969. By 1984 it was in the joint names of MMS and Zev. By January 1989, it was in the name only of Zev.
(b) 282, Station Road, Westcliff-on-Sea, Essex: this was originally owned by MMS, then transferred to Zev, and then to AY and finally back to Zev.
(c) Castlewood Road, London N16: this was next door to AY’s own home which as from 1994 was in the name of Zev.
(d) 20 and 20A Crabton Road, Bournemouth: these properties were owned by Zev but were bought by AY from him in 2008.
(e) 28, St Kilda’s Road, London N16: this was MMS’ and his wife’s matrimonial home which was transferred to Zev and there was no trust or ownership issue about this transfer before the Beth Din.
Three weeks before his death a meeting (the “Chody meeting") was held at MMS’ home on 20 August 2006. This was attended by him, his wife, his two sons and Mr Chody, who was an expert in trust and tax matters and who knew MMS well, albeit that he had never acted for MMS in a professional capacity. It has always been accepted that MMS was of sound mind at the time of the Chody meeting. There was some, probably immaterial, difference as to whether this meeting had been set up by Mrs Schwebel. Mr Chody prepared a note of the meeting which was circulated after the meeting and was intended to be signed by MMS who actually did not sign it. The note says:
“1. Mr Schwebel explained that he had disposed of all his assets in his lifetime in the hope that this would relieve his family from inheritance tax problems.
Mr Chody pointed out that in order to be effective for inheritance tax purposes all gifts must be without any benefit being retained or enjoyed by the donor from the gifted property after the transfer. [Zev] explained that the transfer of property to him had not been gifts but sales at market value. Mr Chody explained that in those circumstances we need not be concerned about any benefits obtained.
2. Mr Schwebel explained that although he had purchased properties as residences for his other children after their marriages he had not done the same for [Zev]. It was, therefore, his wish that 28, St Kilda’s Road shall go to [Zev] and not to any of the other children.
3. The property at Cross Street had been the property from which Mr Schwebel had carried on business for many years. In the last 5 or 6 years, however, there had been very little business and Mr Schwebel with the help and advice of [Zev] had been trying to turn the property into an income producing investment.
Mr Schwebel would like the property to be retained as an investment for the family and that it should be owned by Mrs Schwebel senior, [Zev] and [AY] in equal shares as beneficial joint owners subject to the following conditions:
1. All decisions relating to the property and the income derived therefrom should be by majority.
2. Mr Schwebel would like his 2 daughters to have some benefit from the income of the property but only at the discretion of the majority of the 3 owners.
3. The disposal of property should only take place with the agreement of all 3 owners. Similarly no individual owner should be able to dispose of his or her share in the property except with the agreement of the other two owners.
I hereby confirm that the above correctly sets out the discussion at the above mentioned meeting and correctly represents my wishes.”
Following the demise of MMS, and the two brothers having fallen out in respect at least of the first four properties listed above, the matter was referred to arbitration at the Beth Din.
The Arbitration Agreement
The Beth Din is a rabbinical court to which people of the Jewish faith can have access for the resolution of certain types of dispute. It is not part of the Courts system of England and Wales but parties who use the Beth Din can sign an arbitration agreement to which the Arbitration Act 1996 applies. In this case both AY and Zev signed such an agreement and relevant terms of it are:
“1. The Beth Din will consist of three Dayanim [judges], unless the parties agree to the substitution of a single Dayan;
2. The Beth Din’s rules of procedure are those of Jewish law;
9. The Beth Din shall decide the matter under Jewish law, or incorporating such other laws as Jewish law deems appropriate.”
The Arbitration and the Award
There were three hearings, the first being essentially a procedural hearing on 25 June 2009. There is some controversy between the parties as to what may have been said or done but that seems to me to be immaterial to the issues which I have to decide.
There were two hearing days on 18 November and 10 December 2009. Each party was represented by a Rabbinical Advocate who each summarised his client’s case and a number of witnesses were called including Mrs Schwebel (the parties’ mother), AY and Zev, Mr Chody, the two sisters and their husbands. It is clear that they were questioned, sometimes closely by the Advocates and also by the tribunal. The transcripts of these two days’ hearings exceed 500 pages, albeit in large type on more than double spacing. There has been no suggestion that the parties were prevented from putting their case. Following these hearings, the Beth Din invited the parties to send in written submissions. Zev’s Advocate, Mr Tesler, did send in such submissions and in his witness statement said that AY’s Advocate, Mr Strom, did not; that was not challenged by any witness statement before this Court, but I was told orally that Mr Strom did produce submissions. Again, nothing turns on that since both parties were clearly given the opportunity to present any final submissions which they wanted. It would be by all accounts an understatement to say that the hearings were "keenly" contested; there were allegations in particular by AY that in effect or in reality Zev was lying and that he and MMS had engaged in what might possibly be inheritance tax evasion.
The Award dated 14 April 2010 and signed by the three “Dayanim” runs to nine pages. In Paragraph 2, they summarise the general contentions, namely AY’s to the effect that MMS transferred all his assets (cash, shares and real property) into Zev’s name intending that he should hold them for his parents and that he should make payments from these assets at MMS’ direction, and Zev’s contentions that he held nothing for his father, that the transfers to him were all gifts or were purchased for good consideration, that MMS did not trust AY and his sisters and their husbands due to a history of them squandering investments and of inter-family business disputes and that he had had to inject cash sums frequently into his father’s business. AY was supported by his sisters and Zev by his mother. The Dayanim noted that under the Jewish Religious Law "any statement made at the hearing by Mrs Schwebel, her sons, daughters and sons-in-law are not regarded as evidence.” They go on to review and make certain findings about the Chody meeting, confirming in Paragraph 5 that with regard to the matrimonial home MMS explains at that meeting that he had purchased residential properties for his other children after their marriages but had not done the same for Zev and it was his wish that “it should go to Zev”; they record that this was not challenged by AY. Paragraph 6 makes certain findings:
“However, with regard to Cross Street, the Deceased apparently acknowledged that his business had hardly functioned for the last five or six years and that with the help of his son, Zev, he was trying to turn the property into an income producing investment. He expressed the wish that this property should be retained as an investment for the family, to be owned jointly by his wife, Zev and AY in equal shares as beneficial joint owners. He also expressed the wish that his two daughters should have "some benefit from the income of the property but only at the discretion of the majority of the three owners."
They then go on in Paragraph 7:
“The main dispute in this action arises, because Cross Street is registered entirely in Zev’s name and he denies that his father was in a position to express any testamentary wishes about that property at the Chody meeting, given that it was entirely owned by Zev. When questioned as to how his father could have made the aforementioned statements about Cross Street if he himself knew that he did not own it, Zev replied that his father was simply playing along to please the family and that subsequent to the meeting, his father had admitted to him that all he had said about Cross Street was "rubbish". Moreover, he supports this contention by the fact that his father had patently refused to sign the note of the meeting prepared by Mr Chody, although invited to do so.”
The next three paragraphs review arguments and evidence and make some findings of fact in relation to Cross Street:
“8. The Deceased purchased the Cross Street property in 1969 and in 1984 the Proprietorship Register was altered to show that the property was owned by the Deceased and Zev jointly. This was as a result of a Trust Deed dated 30th October 1984 recording that he held the property on trust for himself and Zev. Subsequently in 1989, Zev was shown as the sole proprietor of the property. Zev insists that the transfer of Cross Street into his name, reflects the fact that he sent large sums of money to his father which were the profits of his fur trading in Russia and he therefore purchased the property for good consideration. AY argues that the property was transferred to Zev purely for avoidance of UK tax and that although the property was now in Zev’s name, it remained his father’s property and that this was the position at the time of his father’s death.
9. Although Zev maintains that Cross Street belongs entirely to him, he wrote a letter to AY on 6th December 2007 acknowledging that while he had purchased 50% of the property for good consideration, the remaining 50% representing his father’s share of the property, was put into his name "for known family reasons." It states that what his father had said in the presence of Mr Chody about the disposition of Cross Street only related to his father’s 50% share acknowledging that it was "quite clear that Daddy’s wish was to divide his jerusha, namely his 50% share in Cross Street into three parts, one third mummy, one third for you and one third for me and to jointly generate an income on this basis." This was slightly contradicted by a further letter written by him to AY on 30th May 2008 when he referred to his father having made him buy his share in 1989…therefore anything daddy…said in the presence of Mr Chody concerns only his so-called share." This second letter appears to state that he purchased his father’s share but because the price was "a good price" he accepted his father’s instructions as to what should happen after his father’s death.
10. When challenged at the hearing on the aforementioned letters and on a draft letter he himself had prepared for AY to sign stating "I hereby declare that 50% of 26 Cross Street is owned by Zev, therefore daddy’s [Hebrew word] that he said in the presence of Mr Chody only applies to his shares (50%) of the property" Zev responded he was merely trying to reflect in his letter, what his father had said at the Chody meeting even though he knew that it was meaningless. At the time, he was trying to settle the matter without recourse to a Din Torah”.
From Paragraphs 11 to 14, the Dayanim reviewed what each party said about the four properties in issue in the proceedings. The "Decision" part of the Award starts at Paragraph 15:
“15. It is clear from all that we have seen, that the late Mr Schwebel went to great lengths to divest himself of his assets during his lifetime, so that he should not have any liability to UK tax on his death. Even the matrimonial home in which he resided with his wife, was not registered in his or her name and indeed, at the time of his death, he had no known assets in the UK.
16. AY’s contention is that although their father transferred cash, stocks and properties into Zev’s name, it was with the intention that these assets should continue to be owned by him and the sole purpose of these transfers, was to avoid UK tax both in his lifetime and on his death. Thus, on his death, these assets fell into the estate, either to be divided in accordance with the Torah laws of inheritance or (so far as Cross Street is concerned) in accordance with the directions of the late Mr Schwebel given at the Chody meeting.
17. Zev maintains that any properties transferred to him were purchased by him for good consideration and belonged to him both legally and beneficially. He further maintains that he held no monies or other assets, on his father's behalf at the time of his father’s death.
18. There is a third possibility which neither party claimed; namely that the late Mr Schwebel made transfers to Zev with the intention that Zev would use his discretion from time to time, to look after Mrs Schwebel and other members of the family, as and when they needed financial assistance. In this latter scenario, the assets would belong to Zev and no claim can be made against them, although there was an expectation on the part of his father, that he would act as a responsible older brother and would look after the other members of the family.
19. The Chody meeting presented the late Mr Schwebel with an ideal opportunity to ensure that in the event that Zev was in possession of assets, which although registered in his own name, were actually the property of Mr Schwebel, he could identify those assets and give instructions for their disposition, on his death. We find it greatly significant, that Mr Schwebel failed to name any properties other than those to which we refer in paragraph 4 above [Cross Street and the matrimonial home] and also failed to mention any other assets in Switzerland.
20. Furthermore, apart from the statement about Cross Street made by the late Mr Schwebel at the Chody meeting, and written representations made by Zev after his father’s death about Cross Street, there is no evidence whatsoever to suggest that any of the assets registered in Zev’s name are not owned by him both legally and beneficially.
21. With regard to 50% of the freehold in Cross Street, we have referred in paragraph 9 above to Zev’s admissions after his father’s death that this 50% belonged to his father whose wish it was to divide this "jerusha” into three parts. We do not accept Zev’s aforementioned explanation of the letter and on the basis of this admission we find that with regard to 50% of the Cross Street property, Zev held this property on behalf of his father at the date of his father’s death.
22. Accordingly, the 50% is subject to the laws of [ Hebrew word meaning inheritance] and given the fact that Zev is a [Hebrew word meaning first born], Zev is entitled to two thirds of this 50% interest and AY to one third of the interest. Zev must therefore take immediate steps to register AY as a proprietor of Cross Street with a one sixth interest in the property. AY’s entitlement to a one sixth share of Cross Street dates back to September 2006 and in the event of a sale of the property or the buy-out by one brother of the other’s share there must be taken into account any charges against the property which had been created or increased by Zev after the date of their father’s death. Zev must also account to AY for one sixth of the net income derived from Cross Street since the said death.
23. [This dealt with Mrs Schwebel’s position and involves a discussion of Jewish Law]
24. With regard to the counterclaim concerning Crabton Close, given the absence of any evidence that this property was ever owned beneficially by AY, we find that AY is obligated to pay forthwith, the sum of £250,000 to Zev in consideration of the sale to him of that property.
25. Finally, we wish to point out that we have already referred above in paragraphs 15 to 18 to the unusual circumstances in which Mr Schwebel died without any assets in his name at the time of his death and to the alternative, possible explanations to this. The late Mr Schwebel did not leave any written explanation for his actions which might have given us guidance in this matter. As a result, we have reached the decision outlined above. The one person who knows the true position as to his father’s intentions is Zev and he declares, as noted in paragraph 17, that he purchased all assets for good consideration. If Zev is aware that this (or part of this) is not true, then he is retaining assets unlawfully, which fall into his late father’s estate for distribution under the laws of [Hebrew word]. We can do no more than leave this to his conscience.
The Appeal pursuant to Section 69
The material parts of Section 69 are:
“(1) Unless otherwise agreed by the parties, a party to arbitral proceedings may (upon notice to the other parties and to the tribunal) appeal to the court on a question of law arising out of an award made in the proceedings…
(2)An appeal shall not be brought under this section except—
(a)with the agreement of all the other parties to the proceedings, or
(b)with the leave of the court.
(4)An application for leave to appeal under this section shall identify the question of law to be determined and state the grounds on which it is alleged that leave to appeal should be granted.”
Section 82(1)(a) of the Act defines "question of law" as meaning “for a court of law in England and Wales, a question of the law of England and Wales". In the case of Reliance Industry Ltd v Enron Oil & Gas Ltd [2002] 1 LL Rep 645, the Commercial Court held that, if no question of English law arises, there is no power in the English court to grant leave to appeal under Section 69(1). It follows that this Court can not entertain an appeal under the Arbitration Act on a question of law, where the law being applied by the arbitrator(s) is a law other than the law of England and Wales. It is clear from the arbitration agreement between the parties in this case and the text of the award itself that the arbitrators (or Dayanim in this case) have applied Jewish Law, as they were bound to do under the arbitration agreement. There is a good policy reason why the English Courts will not entertain appeals in relation to foreign law. That is because the English courts dispense English law and could only rule on foreign laws on the basis of evidence advanced before the Court. I leave over the question of what a court would do if the parties had agreed expressly that there could be a right of appeal to the English courts on a question of foreign law. That is not the case here however.
Mr Rushbrooke argued that it was still open to AY to seek to appeal on a question of law if the law, albeit Jewish Law, was set out on the face of the award and the arbitrators then sought to apply the law obviously wrongly. The argument is not unlike the old practice under the 1950 Arbitration Act of arguing that there was "an error of law on the face of the award”. This approach is in principle misguided because it is still a question of Jewish Law which is being sought to be appealed, whether it is wrong on the face of the award or not. In any event it is not borne out in fact on the face of this award. Mr Rushbrooke pointed to Paragraph 16 (set out above) but that paragraph simply sets out what AY argued and did not contain a definitive statement of what Jewish law was. In any event, the finding at Paragraph 22 (also set out above) is not obviously inconsistent with what is asserted in Paragraph 16. What the Beth Din was saying was that the laws of inheritance did apply but only to the property which MMS actually had a beneficial interest in. If that is inconsistent, it matters not because the Court can not and can not be expected to determine whether the Beth Din was wrong as a matter of Jewish Law.
The Application for an Adjournment
Mr Rushbrooke applied on behalf of his client for an adjournment. I refused that application and gave some reasons, indicating that I would set out those reasons in full in this judgement. The real reason is that AY and his solicitors only received the full transcript of the substantive hearings about two clear days before the hearing and they wish to have time to analyse those transcripts to see if there was anything else which would support AY’s case before this Court. These proceedings were issued on 13 May 2010 and there have already been two adjournments. AY having served his evidence and that of Mr Strom earlier it was ordered by consent that Zev should serve his evidence by 15 November 2010, which he did by way of his statement and that of Mr Tesler. AY was required to serve its responsive evidence by 23 November 2010 but failed to do so. He did serve a statement dated 2 December 2010, the day before the hearing.
AY’s solicitor received the CD of the transcript on 11 November 2010 but no arrangements were made to have it transcribed until 15 November 2010. Misguidedly, the solicitor tried to have it transcribed within its offices. It is unclear when the decision was finally made to have it transcribed by Merrills, the independent transcribing service. The transcript arrived, I was told, two clear days before the hearing and Mr Rushbrooke and his solicitor had therefore two days to examine it. There are some entries on the transcript which are described as "inaudible" and others refer to spoken Hebrew, which have not been translated or set out. I made it clear that I was prepared to look at any part of the transcript which either party wished me to look at. In fact I was referred to only one or two parts of it.
I refused the adjournment for a number of reasons:
(a) This case involving an Arbitration Claim is already stale having been issued seven months ago and the hearing having been adjourned twice. It is important for the administration of justice and so that parties to arbitration know where they stand as soon as is reasonably practicable for these types of Claim to be brought on promptly.
(b) AY and his legal team appeared to have had some problem securing the relevant CD from the Beth Din but had it on 11 November 2010. No adequate arrangements were made thereafter to have the transcription effected promptly. There are a large number of competent transcribing agencies who could and indeed would have turned this around within a week.
(c) AY and his legal team had two clear days to analyse the transcript which if it was reduced to single spacing would have been about 150-200 pages’ worth of material to consider. Two days should have been more than enough to examine it and form views as to whether any of it relevantly could be put before this Court.
(d) An examination of the evidence would not reveal whether there was a material question of law for consideration; that would come from an examination of the Award.
(e) The challenge under Section 68 is primarily based on an assertion that the Beth Din failed to take into account the totality of the evidence. Mr Strom, the Rabbinical Advocate retained by AY at the hearing produced an articulate and comprehensive witness statement, supported by two witness statements from AY as to the evidence which it is said was not taken into account adequately or at all. There is no suggestion that Mr Strom did not keep adequate notes of the hearings, as any competent advocate would do. There was no material prejudice to AY in the matter proceeding without an adjournment and it was purely speculative to think that yet further examination of the available transcript would or might reveal something extra to that averted to by AY and his Advocate in their statements to this Court.
The Section 68 Application-“Serious Irregularity”
Section 68 of the Arbitration Act 1996, materially, states:
“(1) A party to arbitral proceedings may (upon notice to the other parties and to the tribunal) apply to the court challenging an award in the proceedings on the ground of serious irregularity affecting the tribunal, the proceedings or the award.
A party may lose the right to object (see section 73) and the right to apply is subject to the restrictions in section 70(2) and (3).
(2)Serious irregularity means an irregularity of one or more of the following kinds which the court considers has caused or will cause substantial injustice to the applicant—
(a) failure by the tribunal to comply with section 33 (general duty of tribunal);
(b) the tribunal exceeding its powers (otherwise than by exceeding its substantive jurisdiction: see section 67);
(c) failure by the tribunal to conduct the proceedings in accordance with the procedure agreed by the parties;
(d) failure by the tribunal to deal with all the issues that were put to it…
(g) the award being obtained by fraud or the award or the way in which it was procured being contrary to public policy...”
Time and time again the English courts have emphasised that Section 68 should not be used, let alone applied, to challenge factual findings made in arbitration awards. Some general remarks were made by the House of Lords in Lesotho Highlands Development Authority v Impregilo SpA [2005] UKHL 43:
“27. The legislative technique adopted to achieve this purpose was spelled out explicitly in the Report on the Arbitration Bill and in particular in discussion of clause 68, which became section 68 of the 1996 Act. The DAC observed about clause 68 that it "is really designed as a long stop, only available in extreme cases where the tribunal has gone so wrong in its conduct of the arbitration that justice calls out for it to be corrected": p 58, para 280. On the other hand, the DAC recommended adoption of "the internationally accepted view that the court should be able to correct serious failure to comply with the 'due process' of arbitral proceedings: cf article 34 of the Model Law:" p 59, para 282. The ethos of the DAC report was that parties are entitled to a fair hearing leading to an impartial adjudication. But the idea that section 68 contemplated an adjudication which arrives at the "right" conclusion would have been wholly out of place in these recommendations. The DAC report was the matrix of the Parliamentary debates…
28.It is now necessary to examine section 68 in its textual setting. For this purpose it is necessary to set out section 68 more fully than I have done earlier in this judgment. Section 68 reads as follows…
This is a mandatory provision. The policy in favour of party autonomy does not permit derogation from the provisions of section 68. A number of preliminary observations about section 68 are pertinent. First, unlike the position under the old law, intervention under section 68 is only permissible after an award has been made. Secondly, the requirement is a serious irregularity. It is a new concept in English arbitration law. Plainly a high threshold must be satisfied. Thirdly, it must be established that the irregularity caused or will cause substantial injustice to the applicant. This is designed to eliminate technical and unmeritorious challenges. It is also a new requirement in English arbitration law. Fourthly, the irregularity must fall within the closed list of categories set out in paragraphs (a) to (i).
It will be observed that the list of irregularities under section 68 may be divided into those which affect the arbitral procedure, and those which affect the award. But nowhere in section 68 is there any hint that a failure by the tribunal to arrive at the "correct decision" could afford a ground for challenge under section 68….” (Lord Steyn)
As to how the Court addresses serious irregularity assertions based on alleged failures to deal with evidence, Mr Justice Jackson in Claire & Co Ltd v Thames Water Utilities Ltd [2005] BLR 366 said:
“45. (2) The weight to be attached to each piece of evidence was entirely a matter for the arbitrator (see Section 34 of the 1996 Act). Furthermore, the arbitrator was entitled to draw upon his own expert knowledge and experience when assessing matters such as the appropriate profit margin. This is what the arbitrator did, as explained in his witness statement…
(3) Even if I am wrong in my conclusions so far, the claimant's challenge must still fail. Even if the arbitrator fell into error in his assessment of the evidence relating to profit margin, that error would be neither a breach of Section 33 nor an irregularity within the meaning of Section 68 of the 1996 Act. It is not permissible to use Sections 33 and 68 as a device to mount an appeal against the decision of an arbitrator on a question of fact.”
Mr Justice Coleman said in World Trade Corp Ltd v Czarnikow Sugar Ltd [2005] 1 LL Rep 422:
“31. These criticisms are essentially to the effect that the arbitrators failed to take into account evidence that was to be found in the witness statements and documents put before them and accorded undue weight to other evidence before them. The question that the arbitrators had to decide was what was the market price of the sugar at the relevant time. The dispute on the facts was as to whether and if so to what extent Czarnikow had proved that the market price was below the contract price. That went to the issue whether Czarnikow had suffered any loss caused by WTC's repudiatory breach of contract. In order to resolve that issue the arbitrators had to decide whether in selling the two parcels of sugar at the prices obtained, Czarnikow had failed to mitigate its loss and had sold below the true market price. However, whether the arbitrators accorded to any particular evidence more weight or less weight or no weight at all was not an "issue" within the meaning of section 68(2)(d). It was merely the process of resolving the issue of what loss, if any, had been suffered by Czarnikow…
45. On analysis, these criticisms are all directed to asserting that the arbitrators misdirected themselves on the facts or drew from the primary facts unjustified inferences. Those facts are said to be material to an "issue", namely what were the terms of the oral agreement. However, each stage of the evidential analysis directed to the resolution of that issue was not an "issue" within Section 68(2)(d). It was merely a step in the evaluation of the evidence. That the arbitrators failed to take into account evidence or a document said to be relevant to that issue is not properly to be regarded as a failure to deal with an issue. It is, in truth, a criticism which goes no further than asserting that the arbitrators made mistakes in their findings of primary fact or drew from the primary facts unsustainable inferences.”
I draw from these cases and from Section 68 itself the following general conclusions:
(a) Arbitrators and awards can not be criticised simply because they do not address each and every item of contentious or even non-contentious evidence. Omission to address particular items of evidence is not necessarily in itself a serious irregularity, let alone one which will give rise to serious injustice.
(b) Arbitrators who are required to give reasons in their awards do not have to list all the arguments or items of evidence as advanced which they accept and which they reject. They should identify usually the primary evidence which they do find compelling where the case depends upon factual findings because that will be part of the reasoning.
(c) Great care and circumspection should be exercised by the Court to identify cases which genuinely give rise to a serious irregularity and those which essentially reflect a losing party’s upset that its evidence was not accepted or that inferences were made against it or for the other party. There will be no serious irregularity simply because the Claimant in the Court proceedings considers that the tribunal failed to arrive at the right decision, factual or legal.
(d) It is wrong for the Court to allow a party to use Section 68 to challenge the decision on a question of fact.
(e) It will be a very rare and exceptional case for the Court to interfere pursuant to Section 68 on the grounds that the arbitrator reached the wrong findings of fact, should have reached different factual conclusions, given greater weight to some evidence or failed to explain why weight or importance was not given to some evidence. It will be an even rarer case for the Court to find that even if there was some serious irregularity with regard to a failure to take into account evidence that there was substantial injustice, which is of course a precondition to the involvement of the court under Section 68, along with the need for there to be a serious irregularity.
Mr Rushbrooke identified a number of pieces of evidence which the tribunal in this case is said to have failed to take into account. He was at pains to accept, properly, however that it would be difficult to found a case on Section 68 on any one individual such piece of evidence. Fundamentally, he relies upon Paragraph 20 of the Award to demonstrate that the Tribunal overlooked or ignored what he argues was important evidence. Paragraph 20, set out above, does say, that apart from evidence relating to Cross Street, "there is no evidence whatsoever to suggest that any of the assets registered in Zev’s name are not owned by him both legally and beneficially.” One needs to look at that in the light of Paragraph 2 which says that "any statement made at the hearing by Mrs Schwebel, her sons, daughters and sons-in-law are not regarded as evidence in Halocho [Jewish Religious Law]”. From everything which has been put before this Court, it has not been demonstrated that the statement in Paragraph 20 is wrong, if one is applying Jewish Law and Jewish Procedure or indeed otherwise. There was no doubt, and indeed it does not appear to have been challenged, that Zev was the legal owner of all the relevant properties, in that it was his name which was on the title deeds. I do not see that there was any direct evidence either that Zev did not own all these properties, apart from Cross Street, beneficially:
(a) The Chody meeting represented a key opportunity for the late Mr Schwebel to mention to his family and to Mr Chody that he retained some beneficial interest in the other properties. The Dayanim found in Paragraph 19 of the Award that it was “greatly significant” that he did not mention the other properties or any other assets at that meeting.
(b) There was no evidence put before the tribunal or before this Court, apart from Cross Street, to the effect that either the late Mr Schwebel or Zev had ever said or hinted that property in Zev’s name was in some way held beneficially by him for other members of the family. In English terms there had been no declaration of trust.
(c) The main evidence was that the late Mr Schwebel was very keen and possibly obsessed with the idea of avoiding UK tax, presumably inheritance tax, and that when he died there were no assets left in his name. These facts in themselves do not give rise to any necessary or obvious inference that when he transferred to his children various assets they were anything other than gifts or transfers for consideration.
(d) Those respects in which the tribunal rejected Zev’s evidence in relation to Cross Street similarly do not obviously give rise to an inference that other properties in his name were held on trust for other family members or that he must have misled the tribunal on other matters.
(e) The fact that the Westcliff property was initially transferred to Zev, then to AY and then back to Zev again does not suggest necessarily that this was a property which was truly owned by the deceased. When one couples the transfers with the unchallenged evidence that Zev bought the property with his own money and later invested some £200,000 in the property, the various transfers are in themselves not evidence which "suggests that [this property was]…not owned by him both legally and beneficially.”
(f) So far as 33 Castlewood Road is concerned, all that AY relied upon apparently was that he had identified the property, next door to his home, as one which was available for sale. The property then went into Zev’s name using funds from Switzerland where Zev lived and worked. The fact that AY received a fee for managing the property (which was apparently let out) is consistent only with him being paid for management activities.
(g) As for the Crabton Close property, this was transferred by Zev to AY for apparently good consideration, £250,000. Again, apart from apparent assertions by AY otherwise, there does not appear as such to have been any real evidence to support AY.
In my judgement, it is simply impossible to say either that the Dayanim were wrong to conclude as they did in relation to the absence of real evidence, admissible under Jewish Law and procedure, in relation to Zev not owning legally or beneficially the properties which were in issue, other than the Cross Street property or that, even if they were arguably wrong, there has been any serious irregularity. There undoubtedly was evidence in relation to Cross Street and the tribunal was in effect faced with a choice on the evidence which ranged between whether Zev owned the property outright or held it beneficially as to 100% or 50% for himself, his mother and AY. There was clear evidence on the one hand that the deceased may have believed that he owned 100% of it beneficially in that at the Chody meeting he gave the impression that he did so believe, and on the other hand that Zev owned it legally and beneficially to the tune of 100% or 50%. This Court is simply not in a position to begin to infer that the Beth Din was in some way guilty of any irregularity, let alone a serious one, in its process of reaching its decision. One really can not criticise the tribunal for failing to take every piece of evidence or assertion put forward by AY, analyse it and address its impact or lack of impact on the conclusions made by the tribunal. To borrow from what Mr Justice Colman said in the World Trade case, all the tribunal was doing was according to any particular evidence more weight or less weight or no weight; the weighting or lack of weighting of evidence was not an "issue" within the meaning of Section 68(2)(d); the tribunal was merely going about the process of resolving the issue.
Specific evidence was relied upon by AY’s Counsel to support the assertion that the tribunal overlooked relevant material:
(a) A letter (not mentioned by the tribunal in its award) from a Mr Hager who was, apparently, an accountant to MMS for many years prior to his death said shortly that it was his "clear understanding, on the basis of conversations with [MMS] that assets in the name of his son [Zev] were for the purpose of avoiding inheritance tax liabilities.” Apart from the generality of the statement and the non-identification of the assets in question, the one sure way of avoiding inheritance tax, subject to the seven year reservation, is and was by way of gift. MMS would not avoid such tax by reserving a beneficial interest.
(b) Another statement dated 26th November 2009 from a Mr Merel refers to a conversation after MMS’ death between him and Mrs Schwebel in which she complained that Zev “was constantly denying access to her own money for which she and her late husband had worked over 50 years. He was treating the money as if it was his…” Again, this is not obviously proof that Zev did not own the real property in his own right or that any money was as such held in trust. It does not begin to establish that Zev was withholding property on trust for his brother.
(c) There is some historical correspondence between solicitors, Mortimer Rabin & Co and Mr and Mrs Schwebel about the partnership agreement relating to Mr Schwebel’s business and to Cross Street but it is not inconsistent, obviously or at all, with Zev’s case that he became a partner and paid for or towards the Cross Street property at which the business was carried out.
Comment was made by AY’s Counsel about Paragraph 25 of the Award (set out above) to the effect that this demonstrates that the tribunal was itself of two minds (at least) on the basis that it was unnecessary otherwise for it to say what it did. One needs to look at this paragraph in the context that the tribunal had raised in Paragraph 18 a third possibility to the two rival contentions, namely that MMS may have transferred assets to Zev on some sort of discretionary trust. However, the discretionary trust was not argued by either side and, indeed, it would not have suited AY because he would have had no right, as such, to anything. The discretionary trust, if it existed, might well have been effective to avoid (legitimately) inheritance tax. Paragraph 25 must be looked at in that context and also in the context of a very difficult and unpleasant dispute between siblings. It was unnecessary for the tribunal to say what it did but it is understandable in circumstances in which it might have been sympathetic to a claim based on a discretionary trust, albeit that it could not properly make any such finding when neither party sought to argue it.
I have formed a very clear view that that AY has sought to argue a case on the basis of Section 68 in effect because he is dissatisfied and upset with the factual findings. I do not consider that the tribunal can properly be criticised. There is no supportable suggestion that it failed to conduct the proceedings or the hearings fairly or otherwise in accordance with Section 33 of the Arbitration Act. It dealt with the essential issues put before it. It acted within its jurisdiction. It has not been demonstrated in any way that it failed to follow appropriate or proper procedures. It has been argued that the way in which the award was procured is in some way contrary to public policy, as referred to in Section 68(2)(g), in that, it is suggested, Zev misled the tribunal such that he has perpetrated either a fraud or an evasion of inheritance tax. Such a serious charge has not begun to be made out; this was simply a dispute between brothers as to what their father may or may not have intended. Undoubtedly, the burden of proof was on AY who brought the case and, as held by the tribunal, simply failed to prove his case. There is nothing contrary to public policy about the way in which the award was procured. There is no irregularity and no injustice.
Decision
AY’s claim is, consequently, dismissed. No appeal can be made pursuant to Section 69 as there is no question of English law which arises in connection with the award. AY has not established any or any properly arguable case for serious irregularity under Section 68. AY will pay the costs of and occasioned by the Claim and the hearings.