Soleimany v Soleimany, Court of Appeal - Civil Division, February 19, 1998, [1998] CLC 779,[1998] EWCA Civ 285,[1998] 3 WLR 811,[1999] QB 785,[1999] 3 All ER 847

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IN THE SUPREME COURT OF JUDICATURE QBENI 97/0882 CMSl

IN THE COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

(HIS HONOUR JUDGE LANGAN QC)

Royal Courts of Justice

Strand

London W2A 2LL

Thursday l9th February l998

B e f o r e

LORD JUSTICE MORRITT

LORD JUSTICE WALLER

SIR CHRISTOPHER STAUGHTON

ABNER SOLEIMANY Respondent

v.

SION SOLEIMANY Appellant

(Handed down transcript of

Smith Bernal Reporting Limited, l80 Fleet Street

London EC4A 2HD Tel: 0l7l 42l 4040

Official Shorthand Writers to the Court)

MR BITU BHALLA and MR JONATHAN MILLER (instructed by Messrs Nabarro Nathanson, London WlX 6NX) appeared on behalf of the Appellant (Defendant).

MR DANIEL SEROTA QC and MR COLIN MANNING (instructed by Messrs Paisner & CO, London EC4A 2DQ) appeared on behalf of the Respondent (Plaintiff).

J U D G M E N T

(As approved by the court)

©Crown Copyright

LORD JUSTICE WALLER: This is the judgment of the Court.

Introduction

Sion Soleimany and his son Abner Soleimany are Iranian Jews by origin. Until l980 Sion owned a successful business in Teheran which sold and exported valuable Persian and other Oriental carpets. In l980 Sion came to England, and as a result of upheavals in Iran has remained here ever since. Abner was a student in England, but, following his father's arrival here, returned to Iran at Sion's request to help free a consignment of carpets that had been seized by the Iranian customs authorities. In his attempts to free those carpets Abner claims to have suffered severely at the hands of the Iranian authorities. But while in Iran he concluded that there were substantial profits to be made from the export and sale of Persian carpets, but the export from Iran would (as he has always accepted) have involved contravention of Iranian Revenue laws and export controls. Between l980 and l983 Abner arranged the export of carpets from Iran and the carpets were sold by Sion in England or elsewhere outside Iran. Unfortunately disputes arose between Abner and his father. Those disputes covered many areas, but the main area related to whether Abner had received what he claimed was due to him from the proceeds of sale of the carpets that Abner alleged he had arranged to export from Iran.

Attempts were made to settle those disputes by mediation, but ultimately, on l2 December l990, Abner and Sion resolved to arbitrate their disputes before the Beth Din, and signed an agreement in the following form:

"We, the undersigned [Abner] and [Sion].... hereby agree to refer to arbitration the claim or cause which the said[Abner] alleges that he has against the said [Sion] for decision by Beth Din (Court of Chief Rabbi) according to the rules of procedure established for or customarily employed in references to arbitration before the said Beth Din.

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And we the undersigned, hereby do further agree each for himself to accept and perform the award of the said Beth Din touching the said claim or cause."

It appears from a leaflet described as "Din Torah; Information for litigants and legal advisers. (Beth Din Leaflet No.4)" that the system of law to be applied by the Beth Din is Jewish Law, albeit "sometimes other systems of law may also be relevant ... by way of the doctrine of incorporation,..." but the decision as to which law to apply "is that of the Dayanim ....".

Abner's statement of case before the Beth Din asserted in summary that Abner had arranged the purchase of the carpets in Iran, and that Sion had undertaken to act on behalf of Abner in selling the same in the West. It was asserted that Abner and Sion were not partners, and that although no specific arrangements had been made, Sion should be allowed a reasonable remuneration calculated by reference to the net profits (para 4). Abner asserted that by virtue of entrusting Sion with the responsibility to resell, Sion had assumed a duty to account and to pay Abner the net proceeds of sale. He alleged that Sion had "failed to discharge the contractual obligations which he assumed ...".

In Sion's response he made certain allegations unrelated to Abner's claim, but in relation to Abner's claim he asserted that:- l. Sion had supplied the funds for the purchase of carpets in Iran; 2. other carpets had been purchased by Abner contrary to Sion's instructions and at an overvalue so that a loss was made on re-sale; and 3. others had been purchased by Abner utilising the proceeds of sale of Sion's business in Iran. Thus it is alleged in para l2:-

"The transactions carried out by Abner ... were disastrous, inflicting substantial losses on Sion. Abner never paid anything for the price of carpets. All the funds were paid by Sion or advanced upon the undertaking of Sion. Sion had to borrow at prohibitive rates to repay the cost of these transactions and had to accept substantial losses in connection with the operation conducted by Abner."

There was no reliance by Sion at this stage on any illegal activity in Iran as having any bearing on the obligations of either party.

In Abner's reply there was a reference to the fact that the carpets belonging to Sion which had been seized by the authorities, were seized because they were being smuggled out of Iran and to the fact that it was intended, in order to free those carpets, that Abner would bribe the Revolutionary Guards. There was no reference to other forms of illegal activity in Iran.

However, in his statement before the Beth Din Abner described how he had found a way of making money by agreeing with diplomats that they would "take carpets outside Iran for me, using their diplomatic immunity ...". Before the Beth Din there was no dispute that, as Abner now states in his affidavit, the carpets with which Abner's claim was concerned were smuggled out of Iran in breach of Iranian Revenue Controls and export controls.

By the award made by the Beth Din on 23 March l993, it is recited that "Abner purchased quantities of carpets and exported them, illegally (our emphasis), out of Iran". There is further recognition of the illegal activities in Iran in other parts of the award. For example, in relation to quantum it is recognised that "By the very nature of the illicit enterprise, few records were kept ..." (page 2 second paragraph). In assessing profits the award disallows the full sum claimed by Abner on the basis inter alia that no allowance has been made for "smugglers' fees" (see page 5 category B).

The award was in favour of Abner, but not on the basis put forward by him that he was the owner of the carpets and that Sion had merely been acting as Abner's agent. As the award states:

"This line was subsequently abandoned since it was felt to be only of academic interest. The respective parties were entitled to a share of the profits by virtue of their contribution to the enterprise regardless as to who actually owned the carpets at the time. Indeed both parties conceded as much. The issue at stake is merely that of the percentage which each party ought to have."

The award assesses each party's contribution as follows:

"Abner's role was as follows

(a) To obtain local currency with which to purchase the carpets or to obtain the carpets on credit.

(b) To purchase the carpets (some with the assistance of Yossuf [a brother])

(c) To arrange for transportation out of Iran at considerable risk to himself [no doubt we interject, a further recognition of the illegal activity in Iran].

Sion's role was as follows:

(a) To pay foreign currency into various European or American Bank accounts, at Abner's instructions;

(b) To provide storage facilities in Europe;

(c) To sell the carpets."

The award then assessed Abner's share of the profits on all carpets, other than those originating from Sion's shop in Iran, as 50%; and on the those originating from the shop as 35%. The Dayan then assessed quantum by reference to individual categories of carpets and awarded Abner £576,574 and his costs.

The proceedings to enforce

Abner then applied ex parte under Section 26 of the Arbitration Act l950 to register the award as a judgment. That application was supported by an affidavit exhibiting the arbitration agreement and the award. It stated that (l) a dispute in connection with the profits arising from the sale of certain carpets imported from Iran had been referred to arbitration; (2) the award had been made; and (3) Sion had failed to comply with the award.

On 4 May l993 Master Gowers made an order granting leave to enter judgment for the sum of £576,574, and giving leave to enforce the award, but granting Sion liberty to apply within l4 days after service of the order to set the order aside, the order not to be enforced during that l4 days or final disposal of any application. The order was served on l6 June l993 and Sion applied by summons dated 28 June l993 issued in the Chancery Division to set aside the order. That application was supported by an affidavit of Mr Nadav Zohar sworn 6 July l993. That affidavit resisted enforcement on the grounds that faced with the extensive evidence of "the illegality which was at the root of the enterprise on which [Abner's] claim was founded, and which the Beth Din clearly recognised was there, it was the obligation of the Beth Din or an arbitral tribunal to consider whether or not illegality rendered the plaintiff's claim void or unenforceable. This the Beth Din failed to do. In any event, it is [Sion's] case that the illegality rendered [Abner's] claim void or unenforceable in an English court, and that it would be contrary to public policy for an award founded on an illegal agreement or transaction to be enforced as a judgment of the High Court pursuant to section 26 of the Arbitration Act l950".

The affidavit also refers to the fact that independent of the point on illegality, it was the intention...

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