Mond & Mond v Berger [2004] VSC 45

Supreme Court of Victoria|2004-02-23|Before: DODDS-STREETON J.

COMMERCIAL ARBITRATION ACT (VIC) - Arbitration agreement to refer all claims and counterclaims existing between named parties for decision by three judges of Jewish law - Arbitration agreement and award governed by law of Victoria - Misconduct determined under Victorian law - Court will set aside or decline to enforce award where breach of the fundamental requirements of natural justice, although permitted under procedure agreed to by the parties - Misconduct pursuant to s. 42 of the Commercial Arbitration Act 1984 (Vic) on basis of comments by arbitrators giving rise to reasonable apprehension of bias - right to object not lost due to failure to make application to tribunal where plaintiffs withdrew from hearing - Misconduct not established in relation to arbitrators' handling of unauthorised departure of witness - Related misstatement in award not in itself misconduct but taken in context part of a pattern or trend suggesting lack of impartiality - Misconduct of proceeding established by reason of award's inclusion of a matter not within the terms of the arbitral reference and not within jurisdiction - Misconduct established by reason of arbitrators' delegation of power to a third party - Associated failure to determine issue referred for decision constituted misconduct - Meaning of `award', `interim award', `partial award', `interlocutory award', "provisional award" considered - Award not provisional but final - Purported reservation of jurisdiction to determine or enforce future matters or disputes arising from the award ineffective - (Vic); ; ; ; ; ; ; ; ; ; ; ; ; ; ; ; No. 6362 of 1986 S.C.V. O'Bryan J, 18 October 1996; ; ; ; (1838) 8 Ad & El 291; Unreported, NSW Supreme Court, 2 September 1994; Unreported, Supreme Court of Queensland, Lee J, 29 October 1993; Supreme Court of Queensland Appeal No. 17 of 1994, 2 November 1994; ; ; ; ; ;

In this proceeding the plaintiffs seek, inter alia, to set aside an award ("The Partial Award") dated 2 November 2001 made under the Commercial Arbitration Act 1984 (Vic) ("the Act") on grounds of misconduct including bias or apprehended bias of the arbitrators, the failure of the award to determine issues referred for decision in the arbitration agreement and its determination of issues which were not referred. By amended originating motion filed 1 May 2002, the plaintiffs seek orders pursuant to ss.36, 42, 43 and 44 of the Act that:

(a) the partial award made by the first to third defendants ("the arbitrators") on 2 November 2001 be set aside on the basis of misconduct within terms of s.42 of the Act;

(b) the arbitrators be removed by reason of misconduct pursuant to s.44 of the Act;

(c) the arbitrators receive no fees in respect of the arbitration and/or the defendants pay the plaintiffs' costs of the arbitration and the proceeding pursuant to s.36 of the Act;

(d) alternatively, the issues referred to the arbitrators be remitted to them for reconsideration pursuant to s.43 of the Act.

In addition to the matter of a corporate register of members, the Partial Award deals with religious subject-matter which is in no sense commercial in nature. It was not, however, contended by any party that the Partial Award was not an award within terms of the Act.

The plaintiffs, David Mond and Barry Mond, are longstanding members of the corporate fourth defendant, Caulfield Hebrew Congregation Inc. ("CHC").

The first to third defendants, Dayan Rabbi Isaac Dov Berger, Dayan Rabbi Yehuda Katz and Dayan Rabbi Yoram Ulman are "dayanim" or judges under Jewish Law ("Halacha") who were appointed arbitrators under an arbitration agreement executed on 1 August 2001 ("the arbitration agreement") by David Mond and Barry Mond on the one part, and CHC and 20 named persons belonging to CHC's board and executive on the other part, to decide "all claims and counterclaims existing between either of the Messrs Mond and the other named parties... acting as arbitrators according to Halacha and the rules of procedure established for and customarily employed in references to arbitration before a Beth Din, a Jewish Court of Law." Pursuant to the arbitration agreement the arbitrators' decision would be "final and binding on all parties and enforceable under the Commercial Arbitration Act of Victoria."

The fourth defendant, CHC, is an incorporated association. It was incorporated on 8 July 1988 pursuant to the Associations Incorporation Act 1981 (Vic). Among other functions, it administers a property in Caulfield, Victoria which contains three synagogues and other buildings.

The fifth to twenty-fourth defendants are members of CHC's Board or Executive.

David Mond is an Orthodox member of the Jewish faith. Although certain questions of eligibility for membership of CHC remain to be determined, it is not disputed that he is and has been a member of CHC, and a worshipper at CHC's synagogue complex, for some years. David Mond also belongs to Or Chadash, a minyan (or prayer group) which uses and occupies one of three synagogues within the complex of buildings administered by CHC. David Mond is an honorary warden or "gabbai" of the Or Chadash prayer group. His duties in that capacity involve the supervision of the conduct of the religious services on certain holy days in the Or Chadash Synagogue. David Mond's wife, four children, his brother Barry Mond (the second plaintiff) and other Mond family members also worship at the CHC Synagogue. Barry Mond is also a gabbai of the Or Chadash minyan.

Or Chadash is not incorporated. It is a minority group of worshippers within the broader CHC community of worshippers. There is no evidence before the Court identifying comprehensively those CHC worshippers who currently belong to Or Chadash or who belonged to, or were affiliated with, Or Chadash at any particular date. The persons associated with Or Chadash are all members of CHC. It appears that some persons who worship at CHC attend both the Or Chadash synagogue and the main synagogue to variable extents. The spiritual leader of Or Chadash is Rabbi Krasnjanski, who is a part-time employee of CHC. Rabbi Jonathan Abraham, until his resignation in about October 2001, was the principal full-time rabbi of CHC.

The relationship between the Or Chadash group of worshippers and the main congregation of the CHC Synagogue has been a source of tension for some years. There has been conflict over the status of the Or Chadash group and the main congregation and the relative authority of Rabbi Krasnjanski and Rabbi Abraham.

According to David Mond's evidence before the rabbinical arbitral tribunal ("Din Torah"), Or Chadash was originally formed as a youth prayer group during the 1980s and developed over time. Or Chadash was a separate synagogue in relation to worship and the authority of its rabbi, but it did not have any financial or administrative autonomy. David Mond believed that the Board of CHC had formed the view that Or Chadash should not exist and that its worshippers should pray in the main synagogue. Further, David Mond asserted that Rabbi Krasnjanski was ignored or slighted by the Board.

The annual general meeting of CHC for 2000 was scheduled for 20 September 2000. As the annual general meeting approached, David Mond and nine other persons affiliated with Or Chadash, who believed themselves to be members of CHC, planned to nominate for the Board of Management of CHC.

On 4 September 2000 David Mond visited the CHC premises and requested the CHC staff to provide 200 proxy forms for the election. On 5 September 2000 he was informed that pursuant to the resolution of the Board, only one proxy form would be provided to him.

On 7 September 2000 the CHC newsletter gave notice that the annual general meeting would be held on 20 September 2000. That was the only notice of the meeting.

On 8 September 2000 David Mond received by post a single proxy form which incorrectly stated that the annual CHC general meeting would be held on 19 September 2000. On 8 September 2000 David Mond also requested nomination forms and a copy of the CHC constitution from the CHC staff.

On 10 September 2000 David Mond again attended the CHC offices. He requested a copy of the CHC constitution and was initially informed that pursuant to a Board directive, he could inspect a copy, but a copy would not be provided to him. After the President of CHC intervened, the requested copy was provided to David Mond.

On or about 11 September 2000 Mr Nathan Frydman, who was associated with Or Chadash and intended to stand for election, was informed by CHC staff that he was ineligible for election, as he was not a member of CHC. Mr Frydman regularly occupied a seat in CHC for which his son paid rental on his behalf. He had assumed that all seatholders at CHC were members of CHC.

Mr Frydman informed David Mond that his status as a member of CHC had been denied. David Mond on 11 September 2000 wrote to the secretary of CHC expressing concern about eligibility for membership.

On 13 September 2000 David Mond visited CHC's offices. He asked to inspect the CHC register of members. David Mond was not shown a register of members. According to David Mond, he was told that there was no register of members "as such".

It would appear that there was no clear indication of whether membership of CHC was based on the payment of rental for seats within the CHC synagogues or on occupation of a rented seat or on some other ground. If eligibility depended upon the payment of seat rental, many occupants of seats, who had assumed that they were members, would be disenfranchised.

Jewish law imposes a general prohibition on the issuing of proceedings by one Jew against another Jew in a secular court. A dispensation ("hetter") from the observation of that general prohibition may, in certain circumstances, be obtained from a rabbi. Further, the prohibition may not apply to certain types of applications, such as applications for interlocutory relief.

On 13 September 2000 David Mond issued an ex parte application pursuant to s.14A of the Associations Incorporation Act 1991 (Vic) against CHC as defendant in the Magistrates' Court, seeking to prevent the holding of the forthcoming CHC annual general meeting, and to cause the names of all seat holders to be entered on the register of members. David Mond was of the view that according to Halacha, it was not necessary to obtain a hetter prior to seeking an interlocutory injunction, as it is not a final determination of rights, but simply maintains a holding position. Nevertheless, prior to the hearing of the application, he discussed the matter with Rabbi Krasnjanski, the rabbi of the Or Chadash Minyan, who gave him an oral hetter to proceed with the application to a secular court.

On 15 September 2000 Rabbi Krasnjanski confirmed his oral hetter in a letter to David Mond.

Prior to the hearing, there were attempts to resolve the subject matter of the Magistrates' Court application. They were unsuccessful.

On 18 September 2000, Magistrate O'Dwyer ordered that "Until the hearing and determination of this proceeding or further order of the Court, the Annual General Meeting of the defendant which had been convened to be held on 20 September 2000 is postponed until the question of eligibility for membership of the defendant has been determined by Rabbinical Arbitration or otherwise."

As a result of David Mond's application to the secular court, the Board and Executive of CHC, apparently advised by Rabbi Abraham, sought to terminate certain of his prayer rights and religious honours. There were indications of a proposal to expel or suspend David Mond's membership of CHC. Rabbi Abraham, the Board and Executive did not know, at that stage, that David Mond had obtained an oral hetter.

David Mond received hate mail and was concerned at comments allegedly made about him by CHC representatives.

David Mond, on 29 September 2002, obtained further interlocutory relief in the Melbourne Magistrates' Court restraining CHC from terminating his membership of CHC and his prayer rights and honours. The Court ordered that:

"1. Until the conclusion of the Rabbinical Arbitration referred to in the Order of 18 September 2000 or until further order, the Defendant and its servants and its agents including and without limiting the generality of the foregoing the President of the Board of Management of the Defendant and all of the Members thereof and Rabbi Yonason Abraham and Rabbi Mottel Krasnjanski and all other Officials and Officers of the Defendant (herein after referred to as `the Defendant') be restrained from proceeding with or commencing any step to suspend or expel from membership of the Caulfield Hebrew Congregation Inc. the Plaintiff.

2. That until the conclusion of the Rabbinical Arbitration referred to in the Order of 18 September 2000 or until further order, the Defendant be restrained from taking or proceeding with any step the effect of which would be to preclude or inhibit the full and free exercise and performance by the Plaintiff of any religious entitlements or functions which he was entitled to exercise or perform prior to 18 September 2000.

3. That the Defendant be directed to revoke forthwith the direction to its employee Rabbi Krasnjanski, the Minister of the Or Hadash synagogue, in relation to that synagogue to the effect that the Plaintiff was not to be permitted to perform any public religious functions (including Blowing of the Rams Horn on the Jewish New Year or Leading the Prayers over the Jewish High Holy Days) and was not to be accorded any religious honours (Kibbudim) and the Defendant be directed not to make any further direction or take any other step to that or like effect in relation to the synagogues conducted by it until the conclusion of the Rabbinical Arbitration referred to in the Orders made on 18 September 2000 or until further Order".

After 29 September 2000 and during 2001, negotiations to resolve the disputes between David Mond and CHC continued. David Mond's brother, Barry Mond, also became a party to the dispute in relation to a claim that CHC had wrongly issued invoices to him.

Throughout this time, CHC was unable to hold its annual general meeting due to the Magistrates' Court injunction.

The parties ultimately decided to proceed to refer their disputes to a rabbinical arbitration (Din Torah) conducted by three dayanim, or judges of Jewish Law. The Din Torah took the form of a tribunal of three dayanim, known as a zabla. A zabla requires each party to appoint one dayan (or judge), who is known as a borer and the two borerim together select a third judge (the "shalish"). The arbitration agreement does not refer to a zabla. The Partial Award states that the reference to the arbitrators is "a conventional reference to three arbitators". However, the evidence indicates that each group of disputants appointed a borer and the two borerim jointly selected a third judge.

David and Barry Mond appointed Rabbi Ulman of Sydney as their borer. CHC and its representatives appointed Rabbi Berger of Manchester as their borer. Rabbi Berger and Rabbi Ulman selected Rabbi Katz of Melbourne as the third dayan.

The Messrs Mond had a number of complaints and claims which they wished the arbitrators to determine. CHC and the persons who (subject to any challenges due to non-compliance with the Associations Incorporation Act) comprised the Board and Executive of CHC, also had claims against the Messrs Mond which they wished the arbitrators to determine. A number of drafts of arbitration agreements were exchanged by the legal representatives of the parties.

CHC sought to refer for determination certain claims, including whether David Mond was, in all the circumstances, entitled according to Jewish Law to issue the application to the secular court and whether the behaviour of David Mond towards certain employees and members of CHC was, in all the circumstances, proper. It also sought to have determined its rights to declaratory relief against the Or Chadash Minyan and Rabbi Krasnjanski.

The Messrs Mond did not agree that the Or Chadash issue was a dispute between the parties which should be referred for determination by the Beth Din. CHC insisted that the issue should be referred for determination. Due to the parties' inability to agree on the specific issues for decision, the arbitration agreement ultimately executed by them expressed the subject matter of the reference in very general terms, discussed in detail below.

The arbitration agreement dated 1 August 2001, executed by Messrs David and Barry Mond on the one part, and CHC and certain members of the CHC Board of Management and Executive on the other part, is set out in full:

"ARBITRATION AGREEMENT WE the undersigned; David Mond and Mr Barry Mond of 91 Orrong Crescent, Caulfield North, 3161 of the first part and; The Caulfield Hebrew Congregation Inc; The representatives of the Caulfield Hebrew Congregation The President, Mr Schneier; Mr A Moss, Treasurer; The Secretary, Mr Fleischmann; The Vice Presidents, Mr L. Gescheit and Mr A. Weimann; The Chairman, Mr D. Landau; The immediate past President, Mr Heimann; Rabbi Y Abraham; Rabbi S Gutnick; Rabbi Y Gutnick; All members of the Board of Management of the Caulfield Hebrew Congregation, Inc. at the relevant times (with the exception of Messrs, Weil, Rothschild and Frenkel.) and Mr S. Apfelbaum of the other part; hereby agree to refer all the claims or counterclaims existing between either of Messrs Mond and the other named parties (the relevancy of which for this arbitration will be determined by the arbitrators)-: ALL for decision by Rabbi Y Ulman of 25 O'Brien Street, Bondi NSW 2026 and Dayan Isaac Dov Berger of 17 Craven Walk, London N166BS ("the arbitrators") acting as arbitrators according to Jewish law and rules of procedure established for and customarily employed in references to arbitration before a Beth Din, a Jewish Court of Law; and we confirm and agree that the said arbitrators have appointed to join them Rabbi Katz of Congregation Adass Israel Congregation, Melbourne as the third arbitrator. WE SUBMIT to the exclusive jurisdiction of the said arbitrators and accept that their decision shall be final and binding on all parties and enforceable under the relevant Commercial Arbitration Act of Victoria. We further expressly AGREE that the said arbitrators are hereby empowered to make both inter partes and ex parte orders as well as orders as to costs. WE the undersigned do AGREE to accept and perform the award of the said arbitrators concerning the said claims and counterclaims and other orders. [Dated: 01/08/01]"

The arbitration took place at the CHC Synagogue in Caulfield between 24 October 2001 to 2 November 2001. The proceedings were held in public and were conducted in English. However, some comments were spoken in Yiddish or Hebrew. The Messrs Mond were represented by Mr Heath of counsel. The fourth to twenty-fourth defendants were represented by Mr Havin of counsel.

At the commencement of the hearing on 24 October 2001 David Mond made an opening address in which he identified a considerable number of issues for determination. Those issues included the membership of CHC, alleged irregularities in CHC, the process of calling and administering a lawfully convened annual general meeting, the conduct of a number of CHC office bearers and rabbanim, the propriety of David Mond's conduct in obtaining the Magistrates' Court injunctions and various persons' responses to that conduct.

David Mond's opening address did not raise as an issue for determination the status of Or Chadash or its relationship to other worship groups within CHC. At trial he testified that Or Chadash was not an "issue that was raised by me and in fact at the outset of the proceeding my counsel and I repeatedly objected to Or Chadash being made a party to the arbitration".

David Mond further stated that when, at a meeting with the dayanim on 31 October 2001, the dayanim focussed on Or Chadash and its relocation, he "again reiterated that Or Chadash was not an issue to be dealt with and that I had no authority to decide on the future of Or Chadash."

At trial, Barry Mond testified that in response to Rabbi Berger's proposal for the relocation of Or Chadash at the meeting on 31 October 2001, David Mond responded that Or Chadash was not an issue for determination nor a party to the dispute. Mr Lewis Janover, solicitor for the plaintiffs, also gave evidence that at the meeting David Mond responded that Or Chadash was not a matter which was before the arbitrators and that he did not, in any event, speak for Or Chadash.

At the commencement of the hearing, Mr Heath, counsel for the Messrs Mond, handed up a typed list of issues in dispute. The list of issues referred to the failure of CHC to keep and maintain a list of members, the consequent invalidity of elections and office holders, the Messrs Monds' conduct, defamation and costs. The list did not refer to Or Chadash.

The defendants' counsel, Mr Havin, also made an opening address in which, inter alia, he submitted that there was no uncertainty about eligibility for membership of CHC, as all seatholders were members.

Mr Havin stated that "the Dayanim will be told much about the various constituent parts of the Congregation in general, and in particular, the question of the relationship between Or Chadash and the main Hebrew Congregation, CHC, as well as the relationship between Rabbi Abraham and Rabbi Krasnjanski".

Mr Havin further stated that a difference over two questions "had been a festering sore" - "first of all that the Rabbi of the Congregation, his ministerial fiat runs over the entirety of the premises; of all the Minyanim [prayer groups] here, and secondly, that although Or Chadash has a degree of autonomy, it is not an independent Congregation, but part of the CHC".

Mr Heath, counsel for the plaintiffs, responded that "Or Chadash is not a party to the dispute and is not a party to the arbitration agreement. ... it has no standing, it has no identity".

Mr Havin stated that "in the process of drawing up the Shtar Borerut, the Deed of Submission, the Congregation made it clear that it had, as well as defences and counterclaims to Mr Mond and to his brother, Mr Benzion Mond, ... third party claims against Or Chadash and Rabbi Krasnjanski. Those were declarations about their true relationships; what the proper nature is of the relationship between Rabbi Abraham personally and that office and Rabbi Krasnjanski and the Or Chadash and the Congregation".

Following the opening statements by David Mond and Mr Havin and the handing up of a list of issues by counsel for the plaintiffs, David Mond gave evidence. On Thursday, 25 October 2001, Friday, 26 October 2001 and Sunday, 28 October 2001, Rabbi Krasnjanski gave evidence. On Sunday, 28 October 2001 and Monday, 29 October 2001 Rabbi Abraham gave evidence. At the conclusion of the hearing on Monday, 29 October 2001 Mr Heath's cross-examination of Rabbi Abraham was not completed. The resumption of the cross-examination was scheduled for Tuesday, 30 October 2001.

On Tuesday, 30 October 2001 the hearing did not resume as scheduled. The Messrs Mond made an open offer to settle the dispute, on the basis that CHC pay them the sum of $85,000 in respect of costs and upon certain conditions, which included: agreement that the dayanim should make certain declarations and determinations, including that all parties acted with the intention of avoiding any resort to disputation; that Mr David Mond was a sincere person who acted with a hetter from the rev ("rabbi") and acted in accordance with Halacha; that in the context of the dispute, any statements made against Mr David Mond were incorrect; that Mr Mond undertook to help form a committee to establish a new permanent Beth Din of Victoria; that there were irregularities and difficulties in the maintenance of the register of CHC which should be addressed by the preparation of a new up-to-date register of members to include all relevant details of the persons who are, on the principles of fairness and equity and in the spirit of the CHC constitution, entitled to the rights and privileges and [of] members of CHC.

The register was to be prepared in accordance with the procedure determined by a suitable person on whom the parties agreed; an annual general meeting was to be held as soon as possible, pursuant to a procedure for the election of officers to be determined by the agreed person.

The Monds' open offer was made available to the dayanim at about 2.00 pm on Tuesday, 30 October 2001 and to the fourth to twenty-fourth defendants at about 3.15 pm on that day.

The arbitration hearing resumed at 8.15 pm on 30 October 2001. Mr Heath of counsel spoke to the plaintiff's settlement proposal. He stated that there was a deadline of 9.00 am on Wednesday, 31 October 2001 for the acceptance of the settlement proposal. Mr Mond then made a speech.

"Choshuveh Dayanim [Esteemed Judges] at the outset of this arbitration, I stated a number of objectives and sought various rulings. They included a number of rulings, for example, concerning the actions of Board members and other parties to the dispute. I feel it's important at any given moment of time to consider where one stands. We have spent a week in this Honourable court. We have been privileged to see the workings of a Din Torah and we hope that, God willing, there won't be disputes, but if there are, such a forum will be available in the future. The reasons why this offer has been put primarily is because, and there is correspondence relating to it over a period of time, I have always been concerned about two things. One, that I be given an opportunity to have my name cleared and two, that we obtain a lawful register of members so that people can exercise their democratic right to vote, however that may be ... Well right now, there's been a number of people that have called witnesses and I am personally satisfied that my name in my view has been cleared. Some may disagree, some may always hold a view to the contrary. That's their right, but I'm personally satisfied. I'm also satisfied that we have investigated the whole issue of register of members and there needs to be a major change to the way this place runs, and we've exposed very sad inefficiencies ... ... I thank the honourable Dayanim, the Choshuveh Dayanim for everything they've done and for giving us the opportunity to air our views and our grievances ..."

At the conclusion of his speech David Mond sought that the cross-examination of Rabbi Abraham be resumed. Rabbi Berger did not accede to the request as it was about the usual time to adjourn. He closed the hearing for the day.

A meeting of the Board of CHC was held at 8.00 am on the morning of Wednesday 31 October 2001 to consider the plaintiffs' settlement offer. The Board voted against the acceptance of the plaintiffs' offer and put a counter-offer.

Rabbi Abraham, whose cross-examination had not been concluded, briefly attended the 8.00 am Board meeting. Rabbi Abraham had resigned from CHC and had accepted a new position in London. He had made it known that he was scheduled to leave Australia at some time during the day. At the 8.00am meeting he took his leave of some of the Board members who were present.

The hearing resumed at 11.30 am. Rabbi Abraham did not appear in order to complete his cross-examination. There was a short adjournment to ascertain his whereabouts. Inquiries revealed that he had already left for the airport to take a flight to London. When the hearing resumed, Mr Heath of counsel expressed concern over the absence of Rabbi Abraham. The plaintiffs' claims in relation to Rabbi Abraham are dealt with in detail below.

As Rabbi Abraham was not available, other witnesses gave evidence on 31 October 2001. There was an adjournment for dinner between 5.30pm and 7.00pm. Rabbi Berger shared a meal with Rabbi Krasnjanski. He put to Rabbi Krasnjanski a proposal for settlement with Or Chadash which was similar or identical to that subsequently discussed with the Messrs Mond and ultimately included in the Partial Award. According to Rabbi Berger, Rabbi Krasnjanski was uncooperative. He did not support the proposal. Rabbi Berger testified that he told Rabbi Krasnjanski that if the proposed settlement were not accepted and the arbitration ran its course, there was a possibility of ruling in favour of David Mond's expulsion.

Mr Weil, who was associated with Or Chadash, gave evidence during the course of the evening hearing on 31 October 2001. Mr Weil's evidence was not completed when the evening hearing concluded at about 9.00 pm on 31 October 2001.

Almost immediately after the conclusion of the hearing that evening, a meeting took place in an upstairs room of the synagogue. The three dayanim, the Messrs Mond, their solicitor, Mr Janover and their counsel, Mr Heath, attended. There is a conflict of evidence on what happened, and what was said, at the meeting, which lasted between 15 to 20 minutes according to the Messrs Mond and lasted for about 30 minutes, according to Rabbi Ulman and Rabbi Berger. The meeting, which is the basis of several of the plaintiffs' claims of misconduct, is discussed in detail below.

Following their meeting with the dayanim at the synagogue, the Messrs Mond, Mr Janover, Mr Heath and Rabbi Ulman had a further meeting that evening in Rabbi Ulman's hotel room ("the hotel meeting").

David Mond's evidence, confirmed by Barry Mond and Mr Janover, was that in the course of the hotel meeting he stated that he would not proceed with the arbitration and dismissed Rabbi Ulman as his borer.

David Mond deposed that he informed Rabbi Ulman at that meeting, that he viewed Rabbi Katz and Rabbi Berger as "corrupt and false judges" and that he "would not deal with blackmailers". He testified that he reiterated his position on Or Chadash and told Rabbi Ulman to return to Sydney to his wife and family. David Mond asserted that Rabbi Ulman asked for more time to negotiate a settlement. He agreed to give Rabbi Ulman until 6.00 p.m. the following day to negotiate on his behalf.

In his evidence, Rabbi Ulman recollected that the general atmosphere of the hotel meeting was positive. He could not recall David Mond's alleged comments. Rabbi Ulman's evidence is discussed in more detail below. Due to his vagueness and poor recollection he was not an impressive witness. In the case of a conflict, I prefer the evidence of the Messrs Mond and Mr Janover.

On 1 November 2001, the Messrs Mond and their legal representatives did not appear at the arbitration. The hearing proceeded in their absence on 1 November 2001 and 2 November 2001.

On 1 November 2001, Mr Havin announced CHC's counter-offer, the terms of which included the relocation of Or Chadash with rental assistance, the resignation of Or Chadash's members and the resignation of Rabbi Krasnjanski as an employee of CHC.

Barry Mond testified that on 1 November 2001, Rabbi Ulman telephoned him, as David Mond was not taking calls. Barry Mond testified that he confirmed to Rabbi Ulman that David Mond would no longer be participating in the arbitration and had terminated Rabbi Ulman's appointment as his borer. He told Rabbi Ulman that there was a conspiracy against David Mond and that he should pack his bags and go back to his wife and family.

Rabbi Ulman testified that during the telephone conversation Barry Mond was very agitated. He could recall him saying that there was a conspiracy against David Mond, that Rabbi Berger was a "master planner" and that Rabbi Ulman had been "used" and should pack his bags. At trial, Rabbi Ulman could neither recall nor deny the evidence given by Barry Mond in relation to the details of the conversation.

Messrs Yosef Yitzchak Gutnick and Osher Levin gave evidence on the final day of the arbitration. The hearing concluded before midday on 2 November 2001. The concluding remarks, made by Rabbi Berger, were:

"We have got a lot more work. We still sat last night and debated the issues. We've got a lot of time to do, quite a lot of drafting still to do. It may well be that we will not, it's anyway going to be a partial award for a variety of reasons. The award once completed and signed is going to be lodged with Rabbi Katz as the Shalish [third Dayan] and it will be released as is normal pending the payment of the arbitration costs by all parties. ...".

The arbitrators completed and signed a Partial Award dated 2 November 2001.

David Mond did not pay Rabbi Ulman's fee or his share of Rabbi Katz's fees. CHC ultimately paid those fees.

Upon payment of the arbitrators' fees, on 16 November 2001, the arbitrators handed down a Partial Award dated 2 November 2001.

The plaintiffs commenced the proceeding by originating motion dated 21 December 2001. An amended originating motion was filed on 1 May 2002. By order of Balmford J. made 27 August 2002, the arbitrators were restrained from conducting any further hearing.

The Partial Award is set out in full. It states:

"PARTIAL AWARD In the case of Mond v Caulfield Hebrew Congregation We the undersigned have been appointed arbitrators, pursuant to an Arbitration Agreement duly executed, to adjudicate on all claims that the parties have against each other. The Agreement requires us to decide the matter according to Jewish law and rules of procedure established for and customarily employed in references to arbitration before a Beth Din, a Jewish Court of Law. For the avoidance of doubt, the reference to us the undersigned is a conventional reference to three arbitrators and not a reference to arbitrators/advocates pursuant to s.12 of the Domestic Arbitration Act or s.8 of the British Arbitration Act (1950). The aforementioned rules of procedure are intended to ensure that:

II. Each party is given full opportunity to be present at the hearing together with his advisers and witnesses so as to present his case by addressing argument and presenting witnesses and evidence in support of his own case.

III. Each party is given the opportunity to hear his opponent's case and is given the opportunity to test and rebut it by cross-examining his witnesses, presenting rebutting evidence and addressing oral argument.

IV. Unless otherwise agreed, the hearing is the only occasion on which the parties present the whole of their argument and evidence.

It ought to be pointed out that, unusually; the hearings were open to the public. The Plaintiff and his legal team withdrew from the proceeding at the conclusion of the hearing on 31st October. They had been notified of the hearing on the evening of 1st November and were given reasonable opportunity to attend but failed to do so. Hearings took place on 24, 25, 26, 28, 29, 31 October, 1 and 2 November. We heard the testimony of Rabbis Krasnjansky and Abraham and Messrs D. Mond, R. Weil, G. Heimann, S. Schneier Y Gutnick and O Levine. We, by majority, find as follows Précis of The Facts

1. CHC (herein under the Defendant) was founded in the early forties. It had two previous Constitutions; it is now governed by the 1988 Constitution that had been adopted following incorporation pursuant to the Association Incorporation Act (1981).

2. Its purpose is inter alia to provide facilities for Orthodox Jewish religious worship and to arrange and conduct religious services, to aid and support the elderly the sick and the needy, and the preservation of the identity of the Jewish people through the fostering of Jewish education.

3. Its Rabbi at all relevant times had been Rabbi Y Abraham. He, in fact, relinquished his position in the course of the arbitration to take up an office as Dayan at the London Beth Din.

4. There exists a small synagogue within the Defendant's complex that is home to a Minyan (prayer group) that meets on Shabbath mornings and on festivals and is known as Or Chadash. The Minyan is the progeny of an earlier youth service and functions now as an alternative Minyan. Members may elect to have seats allocated to them in either of the synagogues. Its Rabbi is Rabbi M. Krasnjansky who was appointed in 1984. The status of Or Chadash and its Rabbi relative to the main congregation, although not formally part of the Plaintiff's case, is, in our judgement, intrinsically linked to it.

5. Mr D. Mond The Plaintiff joined the congregation in 1990 and has chosen to attend the Or Chadash services where his elder brother is Gabbay (warden).

6. On 4th September 2000 the Plaintiff telephoned Mr Gutnick, an elected member of the Board as well as salaried Manager of the Congregation asking for 200 proxy forms for the forthcoming Annual General Meeting. On the following day Mr Gutnick responded that the Board had determined the previous evening that only one proxy form would be issued per member. (It is now common ground that the Constitution does not require the proxy form to have emanated from the Congregation.) One proxy form subsequently arrived in the post on 8th September but had been made up for a meeting on the 19th September rather than the 20th.

7. On 7th September the Plaintiff received notice by way of a small advertisement in the Congregation's newsletter that the Annual General Meeting was to be held on 20th September.

8. On 8th September Mr Mond attended the Congregation's office seeking nomination forms. The matter was of some urgency as the Constitution required nominations to be lodged 7 days prior to the Annual General Meeting. Mr Mond subsequently received the nomination forms Mond [sic] on 10th September when he attended the Congregation's office. At that visit to the Congregation's office Mr Mond also asked for a copy of the Congregation's Constitution. He was told by the secretariat that by order of the Board the Constitution was not [sic] be handed out, he was however free to examine the Constitution at the office. Subsequently the president and another Board member denied the existence of such Board order and the Constitution had subsequently been provided.

9. On 11th September a Mr Nathan Frydman, a prospective contender for the office had been informed that he was ineligible to stand for election, as he was not considered a member of the Congregation. He had been told that since his son paid for his seat, only his son was recorded as a member. Such a scheme, if applied, would disenfranchise result [sic] in a considerable body of the congregation.

10. On 13th September Mr Mond attempted to inspect the Register of Members and was allegedly told that there was no such register. In any event the Register had not been produced for inspection.

11. On that day Mr Mond applied to [sic] Magistrates' Court to restrain the Defendant from holding the AGM convened to be held on the 20th September and to cause to enter into the Register of Members the names of each person to whom a seat has been allotted. The aforementioned Court ordered the Defendant on 18th September that the AGM be postponed until the question of the eligibility for membership of the Defendant has been determined by Rabbinical Arbitration or otherwise.

12. Subsequently the Board, after consulting Rabbi Abraham, had decreed that the Plaintiff not be permitted to blow the Shofar or to lead the prayers. Additionally he was not to be accorded any Kibbudim at the OC Minyan. The decision was communicated to Rabbi Krasnjansky. At the same time the Plaintiff was concerned about moves to expel him from the Congregation. Accordingly he applied to the said Court on 20th September for an order restraining the Defendant, until the conclusion of the Rabbinical Arbitration, from, inter alia, proceeding along the lines set out above. The Application was granted on 29th September.

13. Throughout the period numerous attempts had been made to mediate the dispute and/or bring about a binding reference to Rabbinical Arbitration, the failure of which is ascribed by each party to actions or lack of action of the other. We shall refer to the relevant events below.

As a consequence of the above the Plaintiff seeks:

i. Damages from the individual respondents for defamation.

ii. Order requiring the resignation of the individual respondents.

iii. Order for costs of and incidental to these proceedings.

It is not our function to decide which one of the respective Rabbinic rulings is accurate and scholarly divergence is quite common. For that reason, we assume, for the purpose of this award, that both Rabbanim were perfectly entitled to arrive at their respective conclusions.

Having carefully considered all the relevant matters and in particular the admission that Mr Mond has neither sought nor received any Rabbinic guidance before commencing Court proceedings we conclude that Mr Mond has, separately from the propriety of the application to Court to intervene, conducted himself over a course of a considerable period in a manner that was overtly confrontational and that the community could not reasonably be expected to tolerate his conduct. As for the application to Court to restraining [sic] the Synagogue, that was an appalling step, causing as it did a Chilul Hashem, and is contrary to every Jew's instinct. Furthermore; as noted above, at the time he had not yet received Rabbi Krasnjansky's Hetter. We therefore order that Mr Mond apologises to CHC in writing for having [sic] the anguish and pain that he has caused them. We further rule that should Mr Mond persist henceforth in the abovementioned manner, the Board would be entitled to proceed to terminate his membership in the Congregation under the powers conferred to it in the Constitution.

Rabbi Abraham testified before us Monday 29th October. The hearing terminated before Mr Mond's counsel had concluded the cross-examination and had consequently indicated that he required Rabbi Abraham for a short time [sic] next day. The following day was largely devoted to an attempt to settle the dispute. Rabbi Abraham attended and was told that he was not required then and would be informed when he would be require [sic]. Mr Mond's counsel called for him on Wednesday 31 October at 11:30 AM. Rabbi Abraham was scheduled to depart to England on that day. Indeed he had previously agreed at the request of the Beth Din to delay his departure by two days. Furthermore Mr Mond's counsel was urged to allow Rabbi Abraham to testify earlier in the proceedings. That offer was rejected on the basis that the change would seriously impede their presentation of the case. In the circumstances the Dayanim, by a majority, ruled, having [sic] into account all circumstances, that it would be unjust to delay his departure. The Beth Din had offered, if required, to arrange for him to testify in England as provided for in Halacha and law. Nonetheless we feel confident to proceed to issue this partial award. As for the sanctions imposed on Mr Mond, it has now been established that shortly after the commencement of the Court proceedings and before the matter came up for a hearing he had had Rabbi Krasnjansky's Hetter. Rabbi Abraham admitted that, had he known about this, he would have reconsidered the matter and would have sought Halachic guidance. In the circumstances therefore Rabbi Abraham ought to apologise to Mr Mond for the hurt caused to him as a result of the aforementioned ban.

We find that the Board's resolutions passed at the special meeting held on 13th December 1982 are lawful, valid and binding. The two that are germane to this dispute are the claimed autonomy of the Minyan and Rabbi Krasnjansky [sic] extent of authority. Resolution 2 expressly denies such autonomy and resolution 6 limits the authority of the Miyan's [sic] Rabbi. Accordingly, Rabbi Krasnjansky, having been appointed subsequent to the passing of those resolutions, is subject to rule 6 thereof, namely, that on matters of interpretation of Jewish law to be observed within all premises, only the Rabbi of the CHC may give rulings. This of course does not private[sic] Shaalot or Halachic issues that, in the view of the Rabbi of CHC, are limited to Or Chadash. It going [sic] without saying, that the [sic] it is incumbent upon the Gabboim of Or Chadash to endeavour to collect all donations and to pass them on to CHC. Should the Board at any time in the future wish to use the Minyan's location for other purposes they may do so on either terms agreed with Rabbi Krasnjansky and the Mispalelim or in accordance with the ruling of this Beth Din. Regrettably, it appears that the relationship between Or Chadash significantly deteriorated and that it would be in the interest of both parties to amicably agree on terms of relocation. If the Rabbi and members of Or Chadash wish to leave and establish a separate congregation, it would be fair for CHC to pay a sum of AUS $150,000 over the period of 4 years and allow then reasonable time (at least 6 months) to find a suitable venue.

The Dayanim find that the current system of recording members is flawed and does not comply with the provision of constitution [sic]. At the same time there is no evidence of real prejudice. We record the agreement of CHC to appoint Mr A. Paluch of Guests Accounting, certified practising accountants of 234 Balaclava Rd Caulfield North to supervise the compilation of a new Register of Members in compliance with the Constitution and the Act and to supervise the preparation and conduct of the next AGM. He should look to the Daynim [sic] to enforce his decision if necessary. As for the issue of the antenna, since it is a matter somewhat extraordinary, the whole Board (not merely the Executive) should decide on the matter.

Under Halacha, with a few exceptions each party pays its own costs. In our judgement this should be followed in this case. Accordingly, both parties are hereby restrained from enforcing any cost order made in court. This Award does not address all issues between the parties, hence its heading Partial Award. The issues left over are:

3. Any issues connected with or arising out of this Award and particularly the abovementioned proposal for settlement with Or Chadash.

The Messrs Mond seek to have the Partial Award set aside or remitted on the grounds of misconduct within terms of s.42 of the Act.

It is well established that the court's legitimate role in reviewing awards is circumscribed. The possibility of curial review on the ground of misconduct should not operate to permit the use of an arbitration as a mere "dry-run" prior to litigation[1]. On the other hand, the agreement of the parties, which justifies the narrow role of the court in relation to review, cannot be taken as consent to be bound by "an award made by an arbitrator who has exceeded his or her powers or has otherwise acted unlawfully, or has failed to accord natural justice to the parties"[2].

"Misconduct" in the context of arbitration legislation is a potentially misleading term which comprehends a broad diversity of conduct both in relation to the arbitral hearing and the making of the award.

"`Misconduct' includes corruption, fraud, partiality, bias and a breach of the rules of natural justice."

In addition to conduct which involves moral turpitude, "misconduct" comprehends irregularities in the conduct of the proceeding (as s. 42 (1)(a) expressly recognises) and extends to breaches of duty associated with the making of the award. If the arbitrator fails to decide the issues referred for decision, or decides issues not referred for decision, it will amount to misconduct[3]. Section 42 (2) recognises that the making of an award in respect of matters not referred for decision constitutes "misconduct of the proceeding". If the arbitrator delegates his or her decision making power, it will constitute misconduct.

The Act confers upon the court a discretion to set aside the award in whole or in part where misconduct is established.

"Power to set aside award (1) Where - (a) there has been misconduct on the part of an arbitrator or umpire or an arbitrator or umpire has misconducted the proceedings; or (b) the arbitration or award has been improperly procured - the Court may, on the application of a party to the arbitration agreement, set the award aside either wholly or in part. (2) Where the arbitrator or umpire has misconducted the proceedings by making an award partly in respect of a matter not referred to arbitration pursuant to the arbitration agreement, the Court may set aside that part of the award if it can do so without materially affecting the remaining part of the award. (3) Where an application is made under this section to set aside an award, the Court may order that any money made payable by the award shall be paid into Court or otherwise secured pending the determination of the application".

"Court may remit matter for reconsideration Subject to section 38(1), the Court may remit any matter referred to arbitration by an arbitration agreement together with any directions it thinks proper to the arbitrator or umpire for reconsideration or, where a new arbitrator or umpire has been appointed, to that arbitrator or umpire for consideration".

"Removal of arbitrator or umpire Where the Court is satisfied that - (a) there has been misconduct on the part of an arbitrator or umpire or an arbitrator or umpire has misconducted the proceedings; (b) undue influence has been exercised in relation to an arbitrator or umpire; or (c) an arbitrator or umpire is incompetent or unsuitable to deal with the particular dispute - the Court may, on the application of a party to the arbitration agreement, remove the arbitrator or umpire".

"Subject to this Act and to the arbitration agreement, the arbitrator or umpire may conduct proceedings under that agreement in such manner as the arbitrator or umpire thinks fit."

In London Export Corporations Ltd v Jubilee Coffee Roasting Co Ltd,[4] Diplock J. observed:

"The use of the expression `misconduct' with its suggestion of moral values, includes the kind of alleged irregularity in procedure with which the case is concerned tends to misunderstanding . . . The first task of the court is to construe the arbitration agreement - that is to ascertain to what procedure the parties have agreed - . . . Where the award has been made by the arbitrator in breach of the agreed procedure, the applicant is entitled to have it set aside, not because there has been necessarily any breach of the rules of natural justice, but simply because the parties have not agreed to be bound by an award made by the procedure in fact adopted . . . When the arbitration agreement has been construed and no breach of the agreed procedure found there may nevertheless arise a second and quite separate question, that is, whether, as a matter of public policy, a particular award, made pursuant to that agreed procedure, ought not to be enforced and ought, therefore, to be set aside; for an arbitrator's award, unless set aside, entitles the beneficiary to call upon the executive power of the State to enforce it and it is the function of the court to see that the executive power is not abused. It is in relation to this second and separate question that the rules of what is so often called natural justice may arise directly. There may be a variety of grounds of public policy on which an award may be set aside. That it has sought to oust the statutory jurisdiction of the court to direct a special case to be stated is one example . . . That its effect is to enforce an illegal contract is perhaps another, . . . and I apprehend that an award obtained in violation of the rules of natural justice even where there was no breach of the agreed procedure would be set aside on grounds of public policy: as, for instance, where an arbitrator manifested obvious bias too late for an application for his removal to be effective before he made his award ..." [5]

In Williams v Wallis and Cox[6] Lush J. observed:

"Misconduct is not necessarily personal misconduct. If an arbitrator for some reason which he thinks good declines to adjudicate upon the real issue before him, or rejects evidence which, if he had rightly appreciated it, would have been seen by him to be vital, that is within the meaning of the expression `misconduct' in the hearing of the matter which he has to decide, and misconduct which entitled the person against whom the award is made to have it set aside."[7]

Atkin J., in a well known observation, remarked that the expression "misconduct":

"Does not necessarily involve personal turpitude on the part of the arbitrator . . . The term does not really amount to much more than such a mishandling of the arbitration as is likely to amount to some substantial miscarriage of justice . . . "[8]

Bias is expressly recognised in s.4(1) of the Act as a species of misconduct.

In Webb v The Queen,[9] Mason C.J. and McHugh J. stated:[10]

"When it is alleged that a judge has been or might be actuated by bias, this Court has held that the proper test is whether fair-minded people might reasonably apprehend or suspect that the judge has prejudged or might prejudge the case. ... The Court has specifically rejected the real likelihood of bias test. The principle behind the reasonable apprehension or suspicion test is that it is of `fundamental importance that justice should not only be done, but should manifestly and undoubtedly be seen to be done'."[11]

In Livesey v New South Wales Bar Association,[12] the High Court stated:

"It was common ground between the parties to the present appeal that the principle to be applied in a case such as the present is that laid down in the majority judgment in Reg. v Watson; Ex parte Armstrong [(1976) [1976] HCA 39; 136 C.L.R. 248 at pp.258-263]. That principle is that a judge should not sit to hear a case if in all the circumstances the parties or the public might entertain a reasonable apprehension that he might not bring an impartial and unprejudiced mind to the resolution of the question involved in it.[13]"

In Grassby v The Queen[14], Dawson J. observed that the test is:

" ... whether in all the circumstances the parties or the public might entertain a reasonable apprehension that the judge might not bring an impartial and unprejudiced mind to the resolution of the matter before him. See Livesey v New South Wales Bar Association [1983] HCA 17; (1983) 151 C.L.R. 288; Reg v Watson; Ex parte Armstrong [1976] HCA 39; (1976) 136 C.L.R. 248."

As recognised by Toohey J. in Webb v The Queen[15], "the underlying principle is the same, whether judges, jurors or members of a tribunal are concerned, though naturally its application will differ in those cases."[16]

In Gascor v Ellicott[17] the Court of Appeal upheld the trial judge's rejection of an application to remove an arbitrator for misconduct pursuant to s. 44 of the Act.

The appellant sought to remove the arbitrator appointed to determine a payment due by the appellant to the respondent under an agreement for the purchase of natural gas. The appellant alleged that the arbitrator had previously acted as counsel for the producers of the gas product in an earlier arbitration involving some similar issues and had cross-examined expert witnesses whom the appellant intended to call; had acted as an arbitrator in another arbitration and had rejected evidence of persons to be called as expert witnesses for the appellant; and had not disclosed those matters. It alleged that the arbitrator's conduct gave rise to a reasonable apprehension of bias.

"There is no suggestion in this case of actual bias. The question of apprehended bias as a disqualification from adjudication in a court of law was most recently considered by this court in Rozenes v Kelly [1996] VicRp 20; [1996] 1 V.R. 320. As it was there stated at 329 the essential issue in such a case is whether in all the circumstances, a fair-minded lay observer with knowledge of the material objective facts might entertain a reasonable apprehension that the judge might not bring an impartial and unprejudiced mind to the resolution of the matters before him."[18]

"Although the criterion of apprehension of partiality or prejudice is [sic] possibility, not likelihood, a reasonable apprehension is to be established to the court's satisfaction: it is a reasonable and not a fanciful or fantastic apprehension that is to be established; and the apprehension is to be attributed to an observer who is `fair-minded' - which means `reasonable.'. . . ... Moreover, it is for the court to determine what knowledge the fair-minded or reasonable lay observer is to apply to an appraisal of the situation."[19]

He referred to Laws v Australian Broadcasting Tribunal[20] where Mason C.J. and Brennan J. said:

"In assessing what the hypothetical reaction of a fair-minded observer would be, we must attribute to him or her knowledge of the actual circumstances of the case[21]."

Tadgell J.A. also referred to Webb v The Queen[22] where Deane J. considered that the hypothetical figure should have :

"A broad knowledge of the material objective facts as ascertained by the appellate court[23]."

"However one describes the knowledge, the observer whose view the court is to seek is in my opinion to be fastened with sufficient knowledge to enable a rational and reasonable view - not just a perfunctory or superficial view - to be formed. Of course that is really to say no more than that there must be attributed to the fair-minded observer knowledge which would afford an opportunity to consider all the relevant circumstances of the case . . . "[24]

In Gas & Fuel Corporation of Victoria v Wood Hall Ltd & Leonard Pipeline Contractors Ltd[25] Marks J. affirmed that the fundamental requirements of natural justice must be fulfilled in a valid arbitration. He stated:

"Thus it can be seen that from early reported cases the courts have insisted that principles, if not of natural justice, then those akin thereto, were to be observed by arbitrators simpliciter. In In re Badger (1819), 2 B. & Ald. 689; 106 E.R. 517 Abbott, C.J. said: `If an arbitrator acts contrary to a general rule of law it is undoubtedly the duty of the court to set aside his determination. But there is a material distinction between those rules which are founded on the immutable principles of justice, from which neither the court nor an arbitrator can be allowed to depart, and those which depend on the practice of the court ... ` See also Re an arbitration between Camillo Eitzen & Jewson & Sons (1896), 40 Sol. Jo. 438 in which the court comprising Pollock, B. and Bruce, J. said: `Whether the arbitration was conducted on the footing that it was a mercantile or a legal arbitration, the first principles of justice must be equally applied in every case. Whatever, therefore, were the terms agreed to the arbitrator had acted wrongly, and the award must be set aside[26].' Marks J. further stated that: "...[S]ubject to the overriding principles of natural justice, arbitrators clearly have a discretion as to the way in which they conduct arbitrations ... The proceeding before the arbitrator is still nonetheless judicial; ... The proceeding being judicial or quasi-judicial in nature, the arbitrator was bound, unless expressly absolved from so doing, to observe the ordinary rules which are laid down for the administration of justice...[27]"

His Honour recognised that while the express or implied agreement of the parties could operate to exempt the arbitrators from the obligation to apply ordinary court procedures, it could not exclude the overriding requirement that the fundamental principles of natural justice must be observed.

He characterised the fundamental requirements of natural justice as follows: "There are two rules or principles of natural justice (d_e Smith: Judicial Review of Administrative Action_ 3rd ed. p.135; Fairness and Natural Justice, by G.D.S. Taylor (1977), 3 Monash Law Review 191 at p.202). The first is that an adjudicator must be disinterested and unbiased. This is expressed in the Latin maxim - nemo judex in causa sua. The second principle is that the parties must be given adequate notice and opportunity to be heard. This in turn is expressed in the familiar Latin maxim - audi alteram partem. In considering the evidence in this case, it is important to bear in mind that each of the two principles may be said to have sub-branches or amplifications. One amplification of the first rule is that justice must not only be done but appear to be done; (Lord Hewart, C.J. in R. v. Sussex Justices; ex parte McCarthy, [1924] 1 K.B. 256 at p.259; [1923] All E.R. Rep. 233). Sub-branches of the second principle are that each party must be given a fair hearing and a fair opportunity to present its case. Transcending both principles are the notions of fairness and judgment only after a full and fair hearing given to all parties. [28]"

At the outset of trial, Mr Magee QC, senior counsel for the plaintiffs, reduced the original grounds of complaint to six principal matters. Those matters are:

1. The comments made by Rabbi Berger regarding "hate mail" sent to David Mond, which are said to give rise to a reasonable apprehension of bias.

2. The alleged comment made by Rabbi Berger at the meeting on 31 October 2001 that if David Mond did not accept the Or Chadash settlement proposal, Rabbi Berger would expel him from CHC. That alleged comment is submitted to give rise to a reasonable apprehension of bias or to constitute actual bias.

3. The alleged comment by Rabbi Katz at the meeting on 31 October 2001 that "You can't fight City Hall", which is also said to give rise to a reasonable apprehension of bias.

4. The arbitrators' conduct in continuing the arbitration on 31 October 2001 when Rabbi Abraham departed for England without completing his evidence, and their subsequent treatment of that matter in the Partial Award. In particular, the plaintiffs submit that the reference in the Partial Award to a "ruling" that it would be unjust to delay Rabbi Abraham's departure further, amounts to misconduct in circumstances where no such ruling was made.

5. The failure of the Partial Award to determine the issue of eligibility for membership of CHC referred to the arbitrators for determination; further and alternatively, the delegation of their arbitral function in relation to that matter to a third party, Mr Paluch.

6. The inclusion in the Partial Award of the findings on Or Chadash, which the plaintiffs contend was not a matter properly within the reference and hence, the arbitrator's jurisdiction.

Mr Hammond QC, senior counsel for the fourth to twenty-fourth defendants, contended that:

(a) Any application to the Court in relation to the Partial Award itself was premature, because the Partial Award was both partial and interlocutory, in the sense that it dealt with only some of the matters referred for determination and dealt with those matters only provisionally. Thus the appropriate course at this stage was to submit any complaints to the arbitrators.

(b) Rabbi Berger's comments about the hate mail did not create a reasonable apprehension of bias.

(c) Rabbi Berger did not state that David Mond would be expelled if he did not accept the Or Chadash settlement proposal. Rather, he stated that the arbitrators had an application to penalise David Mond, which included expulsion, which CHC expected to be determined, one way or the other, unless the necessity were averted by David Mond's acceptance of the Or Chadash settlement proposal.

(d) Neither the version of Rabbi Berger's comment alleged by the plaintiffs nor the version alleged by the fourth to twenty-fourth defendants constitutes bias at common law or under Halacha.

(e) Rabbi Katz did not state "You can't fight City Hall." Rather, he said words to the effect that "There is a saying in the US, never take on City Hall unless you can afford it," in the context of a discussion on costs.

(f) Neither the version of Rabbi Katz's comment alleged by the plaintiffs nor the version alleged by the fourth to twenty-fourth defendants gives rise to an appearance of bias or constitutes bias at common law or under Halacha.

(g) Under the arbitration agreement, Jewish arbitration procedure was to apply. Jewish procedure permits partiality in a "borer" (an appointed dayan) in a zabla in relation to the arbitral hearing and in settlement negotiations prior to the making of the award. Jewish procedure also permits a borer to communicate privately with his appointor. The "shalish" (the third judge selected by the two appointed judges) is not in that position.

(h) None of the matters complained of amounted to misconduct, either individually or collectively.

(i) If the Or Chadash issue or any other issue dealt with in the Partial Award is found to be outside the arbitral reference and beyond the arbitrator's jurisdiction, the appropriate remedy would be to set aside only that part of the Partial Award and to remit the Partial Award to the arbitrators.

ARBITRATION AGREEMENT AND AWARD GOVERNED BY VICTORIAN LAW

The arbitration agreement expressly states that the decision of the arbitrators "shall be final and binding on all parties and enforceable under the relevant Commercial Arbitration Act of Victoria".

The arbitration agreement also provides for the conduct of the arbitration "according to Jewish law and the rules of procedure established for and customarily employed in references to arbitration before a Beth Din, a Jewish Court of Law".

The plaintiffs submit that, properly construed, the agreement does not provide that Jewish law is the substantive law to be applied to the determination of the claims. They contend that the terms of the arbitration agreement do not expressly so provide, and that questions of compliance with the Associations Incorporation Act 1981 would necessarily require determination in accordance with Victorian law.

In my opinion, the terms of the arbitration agreement on the better view, provide that the claims be determined in accordance with Jewish law. In so far as Jewish law itself requires conformity with, or the application of, local law ( at least where the parties so agree ) claims arising pursuant to a Victorian statute may be determined. Agreement to decide issues determinable only under a Victorian statute pursuant to a Victorian law may be implied. Further, the claims and counterclaims in dispute included matters, such as the propriety of an application by a Jew to a secular court, which would necessarily require determination under Jewish law. In Soleimany v Soleimany[29] the Court of Appeal proceeded on the basis that an arbitral reference expressed in almost identical terms to that in the present case provided for the application of Jewish law, albeit other systems of law could be applied by way of the doctrine of incorporation.

In my opinion in the present proceeding, "misconduct" must be determined in accordance with Victorian law, although particular requirements of conformity with natural justice may be modified by reference to the procedure selected by the parties, provided that the fundamental requirements of natural justice are satisfied.

This is so whether the arbitration agreement, properly construed, provides for determination of the claims in accordance with substantive Jewish law or whether it merely adopts Jewish arbitration law and procedure.

In Soleimany v Soleimany[30], partners conducting a carpet export business from Iran agreed to refer their dispute over the division of the proceeds of sale to a Beth Din for determination according to Jewish law. The Beth Din found that the export of the carpets from Iran was illegal but under Jewish law the illegality of the enterprise did not preclude the enforcement of the plaintiff's claim to a share of the proceeds of sale. The plaintiff sought unsuccessfully to enforce the award in England.

The Court of Appeal held that the judgment of a foreign court, recognising and enforcing a contract entered into with the object of committing an illegal act in a foreign and friendly state, would not be recognised by an English court, on the grounds of public policy. An award recognising such a contract would be in the same position.

Their Lordships[31] referred to London Export Coporation Ltd v Jubilee Coffee Roasting Co Ltd[32] where Diplock J. stated:

"When the arbitration agreement has been construed and no breach of the agreed procedure found there may nevertheless arise a second and separate question: that is, whether, as a matter of public policy, a particular award, made pursuant to that agreed procedure, ought not to be enforced and ought, therefore, to be set aside, for an arbitrator's award, unless set aside; entitles the beneficiary to call upon the executive power of the state to enforce it, and it is the function of the court to see that the executive power is not abused."[33]

They further relied[34] on McNair J's recognition in James Laing, Son & Co (M/C) Ltd v Eastcheap Dried Fruit Co (No. 2)[35] that:

"An English court exercises control over the enforcement of the arbitral award as part of the lex fori, whatever the proper law of the arbitration agreement or the place where the arbitration is conducted. If a claimant wishes to invoke the executive power in this country to enforce an award in his favour, he can only do so subject to our law."[36]

McNair J. further observed that the then current English arbitration legislation in effect provided that the enforcement of awards would be governed by English law, even if it were not otherwise the law applicable to the arbitration. Although there was no express provision in the preceding arbitration legislation, which governed the dispute before him, he considered that the same conclusion applied. He concluded:

"It follows that an award, whether domestic or foreign, will not be enforced by an English court if enforcement would be contrary to the public policy of this country."[37]

In Soleimany v Soleimany[38] the Court of Appeal concluded that English courts declined to enforce illegal contracts not for the sake of the individual parties but in order to preserve the integrity of the court's process and to see that it was not abused. Morritt and Waller L.JJ and Sir Christopher Staughton observed: "The parties cannot override that concern by private agreement. They cannot by procuring an arbitration conceal that they, or rather one of them, is seeking to enforce an illegal contract. Public policy will not allow it. In the present case the parties were, it would seem, entitled to agree to an arbitration before the Beth Din. It may be that they expected that the award, whatever it would turn out to be, would be honoured without further argument. It may be that the plaintiff can enforce it in some place outside England and Wales. But enforcement here is governed by the public policy of the lex fori".[39]

In my opinion, the same position applies under the Act. It follows that in the present case the arbitration agreement, the requirements of an award and the enforcement of the award, are governed by, and must conform to, the law of Victoria.

Although this is an application to set aside the Partial Award rather than an application to enforce it, the above principles apply equally. As Diplock J. recognised, if an award is not set aside, it may be enforced. Section 33 of the Act provides that an award may be enforced by leave of the court, in the same manner as a judgment or order of the court, and judgment may be entered in terms of the award.

In summary, if the arbitration or the making of the Partial Award involved conduct which amounted to misconduct within terms of the Act, then although it was permitted under Jewish law or procedure, as in Soleimany, the Partial Award will not be enforced, and is liable to be set aside, by a Victorian court.

The fourth to twenty-fourth defendants contend that certain procedures and practices which could constitute bias or a breach of the rules of natural justice pursuant to common law, and standard curial procedure, or "misconduct of the proceedings" in terms of the Act, are permissible pursuant to Jewish law and the procedure customarily employed in reference to arbitration before a Beth Din, to which the parties agreed.

(a) That the arbitral tribunal constituted a zabla, pursuant to Jewish law, in which a borer (the dayan appointed by one party) may advise and freely communicate with the appointor both prior to and during the Din Torah and may properly be "partial" and act in the interests of the client both prior to and during the hearing, although he must ultimately decide the dispute honestly and in an unbiased way.

(b) That a borer in a supervised mediation where the parties' goal is settlement may properly put what he perceives to be the outcome of a Din Torah.

(c) That a Din Torah may make a Partial Award.

(d) That a Din Torah may make an award which affects the rights of, and is enforceable against, strangers to the arbitration agreement if they are members of a corporate congregation which itself is party to the arbitration agreement.

The fourth to twenty-fourth defendants bear the onus of establishing the status and provisions of Halacha as foreign law by expert evidence. The assumption that Halacha constitutes foreign law was uncontested. The fourth to twenty-fourth defendants rely upon the evidence of Professor Broyde, set out in his affidavit affirmed on 1 December 2003.

Professor Broyde affirmed two affidavits in the proceeding on 15 April 2003 and 4 November 2003. He affirmed a third affidavit on 17 November 2003. Professor Broyde was scheduled to give evidence by video link on 2 December 2003. On 19 November 2003 the plaintiffs foreshadowed that they might object to the admission of his evidence. On the morning of 21 November 2003 the fourth to twenty-fourth defendants applied for a direction that the plaintiffs state any objections by noon on 21 November 2003 in order to prepare their response. Mr Magee QC, senior counsel for the plaintiffs, had not yet determined his response. Whilst encouraging notice of objections prior to the calling of witnesses where possible, I had not previously directed that prior notice be given. I therefore declined to direct that the plaintiffs give notice of any objections by the proposed deadline.

Ultimately, the plaintiffs objected to substantial portions of Professor Broyde's affidavits on a number of grounds set out in a written submission dated 24 November 2003. They required the fourth to twenty-fourth defendants to make formal application for leave to rely on the affidavit affirmed on 17 November 2003. Mr Magee QC submitted that the Broyde affidavit of 17 November 2003 constituted a "running commentary" produced at a late stage of the trial which amounted to advocacy or submissions on behalf of the defendants. There was no indication that the deponent understood the duties of an expert witness to the court, no indication of the instructions given to the witness and no indication of what questions had been asked.

Mr Magee QC contended that in such circumstances, there could be no confidence in the expert's independence. The Broyde affidavit circumvented the purpose of rule 44 of the Supreme Court Rules and introduced new material after the closure of the plaintiffs' case. He did not oppose the receipt of the affidavit save for some specific objections. In my opinion, there was force in the plaintiffs' contentions. The fourth to twenty-fourth defendants sought, and were granted, a day's adjournment in order to address the plaintiffs' objections. During the course of that day, a new compendious affidavit of Professor Broyde ultimately affirmed on 1 December 2003, ("the fourth Broyde affidavit") was prepared, which incorporated much of the material included in his three previous affidavits. In addition to the objections raised by the plaintiffs in their written submissions, the fourth Broyde affidavit sought to meet a further fundamental objection to the previous Broyde affidavits, which in many instances appeared to breach the principle that an expert must not usurp the function of the court by purporting to determine the facts of the particular case and to apply the foreign law (as testified to by the expert) to those facts[40].

The fourth Broyde affidavit adopted the technique of assuming a particular fact of this case and proceeding (without any express nexus) to state a general proposition of Jewish law which appeared to be relevant to, and determinative of, the legal significance of the assumed fact.

The value of expert evidence on foreign law depends upon the stated assumptions of fact. Where incomplete facts were assumed, rather than a complex web of facts in context, little weight could be attributed to Professor Broyde's evidence. Further, his affidavit in many instances failed to expose the basis of the expert's conclusions for critical assessment by the court. It frequently failed to define key terms with sufficient precision to allow the court to ascertain the relevance of any conclusion to the disputed issues before it.

Professor Broyde's evidence on the partiality permitted to a borer, partial awards, the position of non-parties to the arbitration agreement (Or Chadash) and the jurisdiction of arbitrators to determine matters not expressly referred for decision under Halacha, appeared too general to be of much assistance.

Leave was granted to file and serve the fourth Broyde affidavit, the majority of which was admitted, with the caveat that in relation to certain issues, it would be of little assistance to the court.

The plaintiffs complain that the arbitrators' handling of Rabbi Abraham's departure prior to the completion of his cross-examination, the reference to a "ruling" on that issue in the Partial Award and the publication of the Partial Award without the completion of Rabbi Abraham's evidence, amount to misconduct. A number of distinct species of misconduct are allegedly involved.

First, the plaintiffs submit that one or more of the arbitrators had foreknowledge of Rabbi Abraham's departure and feigned surprise when he failed to appear at the hearing on the morning of 31 October 2001.

Secondly, the plaintiffs submit that the making of the Partial Award, (including findings on Rabbi Abraham's conduct) without the plaintiffs having the opportunity to complete Rabbi Abraham's cross-examination was a breach of the rules of natural justice.

Thirdly, the plaintiffs submit that the reference in the Partial Award to a "ruling" was not only inaccurate but was deliberately calculated to convey a false impression that Rabbi Abraham's departure had been formally dealt with, and ruled on, in the course of the open arbitration hearing.

" Rabbi Abraham Rabbi Abraham testified before us Monday 29th October. The hearing terminated before Mr Mond's counsel had concluded the cross-examination and had consequently indicated that he required Rabbi Abraham for a short time [sic] next day. The following day was largely devoted to an attempt to settle the dispute. Rabbi Abraham attended and was told that he was not required then and would be informed when he would be require [sic]. Mr Mond's counsel called for him on Wednesday 31 October at 11.30 AM. Rabbi Abraham was scheduled to depart to England on that day. Indeed, he had previously agreed, at the request of the Beth Din, to delay his departure by two days. Furthermore, Mr Mond's counsel was urged to allow Rabbi Abraham to testify earlier in the proceedings. That offer was rejected on the basis that that change would seriously impede their presentation of the case. In the circumstances, the Dayanim, by a majority, ruled, having [sic] into account all circumstances, that it would be unjust to delay his departure. The Beth Din had offered, if required, to arrange for him to testify in England as provided for in Halacha and law. Nevertheless, we feel confident to proceed to issue this partial award."

When the hearing concluded on the evening of Monday, 29 October 2001 Rabbi Abraham had not completed his cross-examination. It was intended to resume the following day. Instead, on Tuesday, 30 October 2001 the plaintiffs made an open offer of settlement and negotiations occupied most of the day.

Rabbi Abraham returned to the CHC premises and met with the dayanim at about 2.45p.m. on 30 October 2001, while they were looking at the plaintiffs' settlement offer, intending to complete his cross-examination. The dayanim told him that there was no need to remain, as the parties were still negotiating.

In cross-examination at trial, Rabbi Ulman agreed that Rabbi Abraham was in "a high state of agitation, was crying at one stage during his meeting with the dayanim on 30 October, and was complaining about the way that Mr Heath had cross-examined him." His lack of composure was such that Rabbi Ulman had no expectation that he would reappear to continue giving evidence on 31 October 2001. Similarly, Mr Romer, the solicitor responsible for organising the fourth to twenty-fourth defendants' witnesses, was not surprised by his non-attendance.

Both Rabbi Berger and Rabbi Ulman deposed that they did not communicate with Rabbi Abraham except for during the above meeting , and while he was giving his evidence at the hearing.

Rabbi Abraham was still in Melbourne on the morning of 31 October 2001. The dayanim were not at the CHC Board meeting on the morning of 31 October 2001 which Rabbi Abraham attended briefly to take leave of certain persons present.

It was known by all relevant parties from the outset of the arbitration that Rabbi Abraham was anxious to take up a new position in London. By 30 October 2001, he had already delayed his originally scheduled departure but was due to leave at some time during 31 October 2001. The plaintiffs regarded him as an important witness and Mr Heath of counsel was anxious to complete the cross-examination within the time that Rabbi Abraham was available. Both parties had suggested various courses to facilitate that. The fourth to twenty-fourth defendants had suggested that Rabbi Abraham precede Rabbi Krasnjanski, but Mr Heath rejected that proposal.

There was no application made by or on behalf of Rabbi Abraham for leave to depart prior to the completion of his cross-examination. The dayanim did not give Rabbi Abraham leave to depart, either publicly or privately. In the ordinary course he would have been expected to resume his evidence on 30 October 2001. The plaintiffs clearly expected that he would be present.

The hearing resumed at 11.30 am on 31 October 2001. Rabbi Abraham did not appear. The rejection of the plaintiffs' offer of settlement having been advised, Mr Heath of counsel sought to proceed with the hearing of the matter. He noted that there was one practical concern. He stated:

"It's the fact that at some stage this afternoon Rabbi Abraham, whose cross-examination I have not completed, is scheduled to board a plane destined for London, the wife and children are also scheduled to board that plane at a time of which I'm not aware. I sought a number of undertakings yesterday that he would be available for cross-examination, for further cross-examination, and I thought the matter was clear, it's not a matter for submissions as to whether he needs to come along and to subject himself to further cross-examination. The fact of the matter is that I have further questions which I wish to put to him."

Mr Heath further stated that natural justice required that he be given an opportunity to complete his cross-examination of Rabbi Abraham. He adverted to the possibility of a subpoena.

Rabbi Berger, in response, stated "My suggestion is, let's try and see what his position is, and we'll deal with it accordingly. Let's see, maybe he's all packed and ready to come. Let's try and get hold of him".

Rabbi Berger repeated comments to similar effect and proposed an attempt to contact Rabbi Abraham. There was a short adjournment, during which there was an unsuccessful attempt to contact Rabbi Abraham.

At a glance

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Before

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Judgment (501 paragraphs)

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Legislation Cited (8)

Cases Cited (1)