Kohn v Sheva Wagschal & 2 Ors

An arbitral award is not unenforceable on public-policy grounds merely because evidence considered by the arbitrators disclosed an attempted tax fraud. Enforcement is permissible where the claimant relies on statutory rights or title to property, rather than on an illegal transaction. An alleged subsequent compromise will supersede an award only if, properly construed, it creates binding obligations and replaces recourse to the award. Jurisdictional objections must be raised within the statutory framework and applicable time limits. Where the parties voluntarily submitted the dispute to arbitration and the award determines matters within that submission, the court may enforce it under the Arbitration Act 1996.

The claimant and three of the defendants agreed to submit disputes concerning an intestate estate and company shareholdings to a Beth Din for binding arbitration under Jewish law and the applicable Arbitration Acts. The arbitrators concluded that share transfers placed in the daughters’ names had not been intended as gifts and that the shares remained part of the deceased’s estate.

Colman J ordered enforcement of the awards. The defendants applied to set that order aside, alleging illegality, a subsequent binding settlement, excess of jurisdiction, incomplete implementation of the award and material non-disclosure. The central questions were whether the award could lawfully be enforced and whether any of the objections prevented enforcement.

1. Application dismissed. Subject to amendments and the claimant’s undertaking to distribute the required share of the estate, the order enforcing the Beth Din awards was maintained.
2. The illegality objection failed. Per Morison J, the claimant was not enforcing an illegal contract or relying on an illegal acquisition of property. He was enforcing statutory rights under section 66 of the Arbitration Act 1996 and relying on title derived from his status as heir. The circumstances in which the share documents were created were relevant evidence of the deceased’s intention. The case was therefore distinguishable from Soleimany v Soleimany, where enforcement involved an illegal export contract, and was a fortiori within the principle identified in Tinsley v Milligan [1994] AC 340.
3. The court expressed doubt whether the defendants could raise the evidential complaint at the enforcement stage because of section 73(1). In any event, the arbitrators had exposed and brought to an end the attempted tax fraud rather than enforced it.
4. The January 2006 document contained settlement proposals, not binding commitments which superseded the awards. Its terms were vague, neither party had implemented them, and the document was consistent with an intended mechanism for implementing the award. Even if binding, repudiation and the parties’ apparent intention left recourse to the legal rights under the award.
5. The jurisdiction objection failed both procedurally and substantively. Sections 30–32, 67 and 70 of the Arbitration Act 1996 governed jurisdictional challenges, including the requirement to raise objections before the arbitrators and the relevant time limits. The arbitrators had determined matters submitted by the parties, and the absence of certain non-parties did not invalidate the award.
6. The order was amended to reflect the supplemental awards, including exclusion of a specified 25 per cent shareholding and deletion of a trust fund mistakenly described as a company. The claimant’s formal undertaking concerning distribution to the sisters was attached to and made part of the order.