Kastner v Jason and Others
| Jurisdiction | England & Wales |
| Judge | Lord Justice Rix,Lord Justice Clarke:,The Lord Chief Justice: |
| Judgment Date | 02 December 2004 |
| Neutral Citation | [2004] EWCA Civ 1599 |
| Docket Number | Case No: A3/2004/0746 |
| Court | Court of Appeal (Civil Division) |
| Date | 02 December 2004 |
[2004] EWCA Civ 1599
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM the Queen's Bench Division (Commercial Court)
Mr Justice Lightman
Royal Courts of Justice
Strand, London, WC2A 2LL
The Lord Chief Justice of England and Wales
Lord Justice Clarke and
Lord Justice Rix
Case No: A3/2004/0746
Jonathan Seitler QC (instructed by Dechert LLP) for the Appellant
Mr David Lonsdale (instructed by Mills & Reeve) for the Respondant
This appeal is about a freezing order made by arbitrators. The order restrained the respondent in the arbitration from disposing of his home without the arbitrators' written consent. With the arbitrators' permission the claimant used the order as the basis for applying for a caution to be entered against the home in the Land Registry. The respondent promised the arbitrators that he would abide by the order, but he did not. He sold his home and decamped to the United States. Unfortunately, the purchasers' solicitor did not notice the caution, otherwise the sale would never have gone ahead. It is taken for granted that the solicitors were negligent. The purchasers were innocent of any complicity in these events. In due course a final award was made against the respondent for £237,224.50. Appropriately enough, the award was in fraud. When the purchasers sought, after some delay, to register the acquisition of their home, the caution came to light and the parties have been engulfed in litigation.
Does the claimant, here the appellant, have a remedy? On his behalf, Mr Jonathan Seitler QC recognises that the case is not straightforward, but submits that the law should provide one. Mr Seitler also accepts that the freezing order by itself operated only in personam and gave no security interest in the property itself. However, he submits that the effect of the respondent's promise to abide by the arbitrators' order was to give rise to a proprietary estoppel, itself amounting to a constructive trust, in respect of the home, binding on the respondent's conscience, and that this equity was in turn binding on the purchasers by reason of the constructive notice constituted by the registered caution. The court, it is said, can give effect to that equity by requiring the home to be sold.
The matter is complicated by the fact that the arbitration took place under Jewish and not English law.
The facts
I can take the facts from the clear and helpful findings in the judgment below of Mr Justice Lightman.
The claimant in the arbitration is Mr Ernst Kastner. His respondent in the arbitration was Mr Marc Jason. Mr Jason is also a party to these proceedings but has taken no part in them. Mr Kastner invested in Mr Jason's business, and later sought to recover his investment in an arbitration before the Beth Din (literally, the House of Justice) of the Federation of Synogogues, a court of Jewish law. As strictly orthodox Jews it was Mr Kastner's and Mr Jason's duty under Jewish law to have their disputes resolved by a Jewish court and not to have recourse to the secular courts of this country. So, on 13 November 2001 they entered into a written arbitration agreement under which they agreed to refer their disputes to the arbitration of the Beth Din –
"for determination by way of Din Torah [the law of the Pentateuch] 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] and/or general principles of equity customarily employed in arbitrations before the Beth Din."
The parties agreed to accept and perform the Beth Din's award.
Mr Kastner complained that his investment in Mr Jason's business had been procured by fraud. On 27 December 2001 the Beth Din made an award in Mr Jason's favour on the basis that no fraud had been established. However, on 25 February 2002 Mr Kastner applied to reopen the award on the basis of fresh evidence and on 27 February the Beth Din acceded to this application. On both of those days the Beth Din made a freezing order (or what in English law used to be called a Mareva injunction) designed to ensure that Mr Jason's sole substantial asset should remain available for enforcement should Mr Kastner's claim ultimately succeed. The order of 25 February 2002 was as follows:
"Mr Jason is to refrain from selling his house on Holmdale Gardens until he has received written permission to do so from the Beth Din."
The order of 27 February 2002 was in these terms:
"On the application of Mr Kastner and pursuant to the powers invested in the Beth Din by virtue of Section 48 of the Arbitration Act 1996, the Beth Din hereby orders Mr Marc Jason to refrain from taking any steps altering the status quo regarding ownership of the property…until written permission is given by the Beth Din."
On 1 March 2002 Mr Kastner made an application to the Land Registry to register a caution against dealings with the home. The application was made on a prescribed form "CT2"under which Mr Kastner, as the "cautioner", made a statutory declaration that he was "interested in the property" in question and went on to describe the nature of that interest by reciting the terms of the Beth Din's two orders in his favour. The caution was registered on 5 March.
On the previous day, 4 March, the parties had appeared before the Beth Din. On that day Mr Jason had confirmed to the Beth Din that he would abide by the order made against him on 27 February. There was apparently discussion about the caution for which Mr Kastner had applied. It may be that Mr Jason had suggested that he would exercise asserted rights under the Land Registry Act 1925 to have the caution removed (see Mr Jason's letter to the Beth Din dated 22 May 2002), but in the end Mr Jason acknowledged that he would not do so. As the Beth Din said, in a letter to the Registry dated 14 November 2002, "Following the order made by the Beth Din on 27 th February, the Beth Din allowed the Claimant to register a caution in his name against the title of the Respondent's Property."
On 11 April 2002 in flagrant breach of the Beth Din's order and of his agreement to comply with it Mr Jason sold his home to Mr and Mrs Sherman, the respondents to this appeal. The Shermans' solicitor, Mr Brian Gordon of Farmer Millar Rabin Gordon, inexplicably failed, when he carried out his Land Registry search, to read the caution. Accordingly, in total ignorance of the caution, but with constructive notice of it, the Shermans proceeded to complete the purchase on 20 May 2002. They paid the full purchase price and Mr Jason executed the transfer to them of the home. The Shermans financed the purchase in part with a mortgage from HSBC. The balance of the purchase price, after two prior mortgages were discharged, was paid to Mr Jason. By a letter dated 22 May but in fact sent on 5 June 2002 Mr Jason informed the Beth Din of the sale. However, Mr Kastner does not appear to have learned of the sale until 28 October 2002, by which time Mr Jason had emigrated to the USA.
On 12 November 2002 the Beth Din made an award in favour of Mr Kastner in which Mr Jason was found to have been fraudulent and to have made secret profits. On 26 March 2003 a further award quantified damages payable to Mr Kastner in the sum of £237,224.50.
In the meantime the Shermans as proprietors and HSBC as mortgagee applied to the Land Registry on 23 October 2002 for registration of their title. On 13 January 2003 the assistant Land Registrar replied refusing their application on the ground of Mr Kastner's caution. In the absence of any further action on their part at that time the application was cancelled.
On 2 April 2003 Mr Kastner commenced proceedings against Mr Jason (the "Kastner action") to enforce the final arbitration award of the Beth Din as a judgment of the court. Having obtained an order giving him leave to enforce the award, on 7 May 2003 he obtained an interim charging order over the home. On 11 July 2003 the Shermans (a) applied to be joined to the Kastner action for the purpose of seeking the discharge of that interim charging order; and (b) commenced their own action (the "Sherman action") to vacate Mr Kastner's caution and to have their claim to be entitled to register their title as proprietors of the home recognised. The two actions were consolidated and the issues were tried by Lightman J on 30 January 2004.
It was only at a late stage of the submissions before the judge that Mr Seitler made an application on behalf of Mr Kastner to adjourn the proceedings to enable evidence on Jewish law to be prepared. The immediate catalyst appears to have been the realisation that there was a danger that English law by itself would not support, in the absence of an express agreement by the parties, the grant of a freezing order by the Beth Din as a provisional measure in the arbitral proceedings before it: see section 39(4) of the Arbitration Act 1996, discussed below. Moreover, whereas English law considered that a freezing order acted only in personam, Mr Seitler wished to argue on behalf of Mr Kastner that the effect of the Beth Din's order under Jewish law was to give Mr Kastner an interest in the home itself.
The Beth Din considered that they were acting under section 48 of the Arbitration Act 1996, to which they made specific reference in their order of 27 February 2002. Section 48(5) does indeed state that the arbitral tribunal "has the same powers as the court…to order a party to do or refrain...
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