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SACKS v. MUSSARY AND OTHERS
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In the Supreme Court sitting as a Court of Civil Appeal
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SilbergJ., Sussman J. andCohn J.
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Arbitration— Setting aside ofsubmission by reason ofintention to conceal
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Applicant himselfparty to intention to conceal—In pari delicto— Arbitration Ordinance, sec. 3.
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criminal offence— Distinction between civil and criminal aspects— P
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The appellant and the respondents carried on business in partnership, and differences
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having arisen between them a submission to arbitration was signed in which the arbitrators
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appellant) is to pay to the partnership”, this being an amount “which Mr. Edgar Sacks has
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were invited “to investigate, consider and decide the amount which Mr. Edgar Sacks (the to refund to the partnership on account of damages and losses caused by him.” The District Court found that the subject matter of the arbitration was in fact joint property which the
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appellant was alleged to have stolen, and that the parties, in submitting the dispute to
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arbitration, intended and agreed to conceal a felony and refrain from disclosing the matter
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ground of the above intention and agreement of the parties was refused, and an appeal was
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to the Police. Nevertheless an application by the appellant to set aside the submission on the
lodged.
Held, dismissing the appeal:
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Per Sussman J.
1.If, incidental to the signing of a submission to arbitration relating to a criminal
matter, the parties should also agree to suppress the criminal aspect, even by implication only, the submission to arbitration will become an illegal transaction which the court
will not enforce.
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2.The civil and criminal aspects of the case are two distinct matters, and while the
criminal charge may not serve as the subject matter of an arbitration, the parties may
submit the civil dispute to the decision of an arbitrator.
3.The evidence in the present case merely shows that the appellant was interested
“that the matter should not be publicised”, and that does not necessarily imply an agree-
ment to suppress a prosecution and cover up a criminal matter.
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Per Silberg J.
Even if the factual contentions of counsel for the appellant had been proved, his
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application could not succeed, for the parties were not at least in pari delicto, and in fact the
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“turpitude” was on the part of the appellant himself.
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Per Cohn J.
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There was abundant evidence to support the conclusion of the District Court, but
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as the appellant did not come to court with clean hands and in fact initiated the whole
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matter, his application must fail. |
Israel cases referred to: (E.S.D.) Ltd. and others v. Moshe Sapir (1958) (1) C.A.11/56—Egged
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(2) 12 P.D. 739. (3)
C.A.94/50—A4.B. v. C.D. (1950) 4 P.D. 791. C.A.110/53—Harry Jacobs v. Ya’akov Kartoz (1955) 9 P.D. 1401.
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English cases referred to:
(4)
Russell v. Russell [1880] Ch. D. 471.
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(5) Jones v. The Merionethshire Permanent Benefit Building Society,
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(6) Flower [1892] 1andCh.others 173. v. Sadler [1882] 10 Q.B.D. 572.
(7) (8)
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Williams v. Bayley [1886] L.R.1 H.L. 200. Ward v. Lloyd [1843] 64 R.R. 847.
Sharf for the appellants. Gitzelter for the respondents.
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SUSSMAN J. The four parties to this action were in partnership in the business of fruit and vegetable merchants. At the end of 1955
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differences of opinion arose among them, which they submitted for decision by two arbitrators in the following terms:
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“Whereas we, the undersigned, Edgar Sacks, Dov Lederman, Moshe Brick and David Mussary, are partners in a supermarket for fruit and vegetables under the name of
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“Rassco Market” situated in the Rassco district in North
Tel Aviv.
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And whereas it has become necessary to ascertain the amount which Mr. Edgar Sacks has to refund to the partnership on account of damages and losses caused by him. And whereas all parties agree to submit to arbitration the ascertainment of such sums as hereinafter provided.
Now therefore all the undersigned parties hereby agree to submit to arbitration by two arbitrators, Yehudah Goldenberg Advocate and Joseph Ronnen, the accountant of the said business, to investigate, consider and decide the
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amount which Mr. Edgar Sacks is to pay to the partnership,
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taking into account the above circumstances, in his [sic]
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absolute discretion, and it shall be within his [sic] authority
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to make a compromise award without needing to give
reasons for their [sic] award.
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The arbitrators shall not be bound by any rules of award”.
procedure and shall not be limited as to time for making the
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The arbitration proceedings dragged on for close on three years
and at the end of 1958 the appellant who was the defendant before
the arbitrators made it known that he was dissatisfied. He requested a stay of the arbitration proceedings and made application to order the arbitrators to state a special case to the court. Pending the hearing
of this application by the court, the parties agreed that instead of this
application, the court should consider another application which had
been made earlier, namely, the appellant’s application for leave to set
aside the arbitration, in accordance with section 3 of the Arbitration
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Ordinance.* The learned judge refused this application with leave to
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2.tionbeforeThemain argument fortheappellant is that thearbitraagreement beofcounsel invalidated by toagreeing proceed arbitratorsshould the parties had in effectsince agreed concealtoa criminal
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appeal to thiscourt. Hence this appeal.
offence. It appears that the respondents had accused the appellant of stealing joint property and at first wished to state this expressly in the
arbitration but afterwards agreed to give the agreement aagreement more neutral form and therefore merely saidarbitration that the appellant had caused damage to the partners, which he was called upon to make good.
Mr. Sharf for the appellant argued forcefully that according to the the parties in submitting the matter to arbitration was to conceal it from the police, and if that were so, there was an agreement for concealing a criminal charge which the court will not enforce.
finding of the trial judge at p. 6 of his judgment, the real intention of
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3.I have not found in the evidence before the judge any support
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shows that the appellant was interested *“‘that the matter should not be
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for his from conclusion that the the matter parties toagreed conceal felony and to refrain disclosing the to police. The aevidence merely
publicized.” The appellant’s desire that the matter should not become a contrary intention is expressed therein, shall be irrevocable + “3 A submission, unless
except by leave of the court or agreement of the parties, and shall have the same effect
in all respects as ifithad been made an order ofcourt.” 142
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public knowledge does not necessarily imply an agreement to suppress
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a prosecution and to cover up a criminal matter. In the well-known
case of Russell v. Russell (4), the court said that if two persons enter into an arbitration agreement and one of them in breach of the agreement sues the other, the court will not exercise its discretion to stay the action in order to enable the arbitrators to proceed, if the plaintiff has been
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accused of a criminal offence or of some other dishonourable conduct,
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and therefore desires to clear his name in public and not in the private
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the arbitrators were to consider the claim, the matter would not be
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sessions of the arbitrators. Here the intention certainly was not that if
disclosed to the police. When one person steals something from another
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The civil and criminal aspects of the case are two distinct matters. The criminal charge certainly cannot serve as the subject matter of an arbitration, but the parties may submit the civil dispute to the decision of an arbitrator. As Mr. Sharf said, an arbitration agreement is in the nature
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a criminal offence has been committed, but the thief is also obliged to return the stolen article and make good the loss he caused the other.
of a compromise, but why should not the injured party compromise with the thief his civil claim?
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It is true that if, incidentally to the signing of the submission to
arbitration, the parties should also agree to suppress the criminal aspect, even by implication only, the submission to arbitration would then become an illegal transaction which the court will not enforce.
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4.Mr. Sharf sought support for his submission from Egged v. Sapir (1) where this court decided that the “internal” tribunal of a cooperative
society is not competent to deal with an “indictment” preferred against one of the members of the society. From the very expression “indictment” used in that case, it is clear that in bringing the matter before the tribunal of the society the directors of the society intended to assume powers which were not theirs, and to deal with matters in the competence of the Attorney-General and the police. But in the case before us the civil matter alone was submitted to the arbitrators. I do not see what there is to
prevent a person who has suffered an injury to claim compensation either in court or before an arbitrator, even where the act amounts to a criminal offence.
5.
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Mr. Sharf drew our attention to sec. 67 of the Civil Wrongs
Ordinance, 1944, which requires the courts to see that the police receive information of the facts of an action if those facts support a criminal charge. I find nothing to prevent an arbitrator as well from observing the mandate of the section, nor have I found in the Ordinance any 143
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intimation whatevereventhat ifanit arbitrator not that competent with isa claim for damages appears tois him one oftothedeal parties
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case, the respondents can also rely upon the partnership agreement
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6.I have said that even if a civil matter is submitted to the award of an arbitrator, the arbitration agreement will—like any other agreement—be tainted iftheparties to frustrate theadministration of justice by agreeing to coverhaveagreed up an offence. Mr. Sharf argues rightly
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Society (5). The facts were that the agreement was made not with the
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suspected of a criminal offence, particularly where, as in the present
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and are not confined to the provisions ofthe Ordinance.
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that such an agreement to conceal an indictable offence need not be made expressly but it is sufficient ifit is made by implication: In support, he cited the judgment in Jones v. T.he Merionethshire Permanent Building
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relatives, andthecourtinferred,asanimplied term, thatinconsideration for the promise of those relatives to compensate the injured party the
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debtor himself who had been accused of stealing money but with his
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latter agreed to keep silent about the criminal aspect ofthe matter.
But when the agreement is made- between the creditor and the
debtor himself, we follow the rule established in Flower v. Sadler (6), upon
which the judge in the present case also relied: see also A.B. v. C.D. (2).
Thisrule isto the effect that even if the creditor has threatened the debtor
with criminal proceedings to make him pay the debt, this does not amount to coercion or duress in respect of which a court of Equity
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would hold the agreement invalid, had it been made with a third party:
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deal with him as scrupulously as it does when enquiring into the conduct of a person who binds himself contractually with a third party who “volunteers” to pay the debt of another in order to impose upon him responsibility for making good the damage caused him by that other
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see Bayleya debt (7). Theowedreason forthethisdebtor, distinction is thatdoes whenota manWilliams seeks to v.collect him by the court
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person. Prima facie it may be contended that whenever a creditor has threatened a debtor to institute criminal proceedings, it may generally be inferred that if the debtor yields and pays the debts, the creditor
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weret o goasf a r astohold t i n every suchcaset h e r e wasanimplied agreement to suppress a crime,thathey would in effect frustrate the principles established in Flower v. Sandler (6), and more than a century before that
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ment entered into between the creditor and the debtor himself—as
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will refrain from turning the matter over to the police, on the principle
that “a positive may be deduced from a negative.”But if the courts
in Ward v. Lloyd (8). I do not lay down that even in the case of an agree-
distinet from an agreement between the creditor and a third party who 144
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pays the debt on behalf of the debtor—such a condition to suppress acedent crimewhich is inconceivable, but- Mr. Sharf has not referred us to any predeals with this matter, and in the Jones case (5), as stated,
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the agreement was not made with the debtor himself. 7. The conclusion which I have reached may be tested in this way. Suppose that for one reason or another the respondents had informed the police of the crime which was committed. Would they have thereby broken the agreement with the appellant? They certainly would not
have broken an express term and I see no reason for concluding that they would have broken an implied term. The respondents have agreed not to take legal action against the appellant, but I have not found that they agreed to keep the matter secret from the police. )
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8.Since I have reached this conclusion, I see no need to express an opinion concerning the question raised before us, whether the appellant,
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the person charged with theft and desirous that the matter should not be
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For these reasons I would dismiss the appeal and affirm thejudgment
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"made public, is at all entitled to the assistance of the court.
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of the District Court.
SILBERG J. I concur in the judgment of my learned colleague, Sussman J., since I am also of the opinion that the factual contentions of counsel for the appellant have not been proved. My concurrencé is not, however, to be construed as acquiescing in the view that if “an agreement for suppression” among the parties had been established, we would have had to allow the appeal. It seems to me that even in such a case the appellant would have gone away empty-handed, because then the rule ex turpi causa non oritur actio would apply. In Jacobs v. Kartoz (3), it was held that where the parties are in pari delicto the plaintiff cannot rely upon the illegal contract to affirm it, nor upon its illegality to avoid it. The applicant in the present case was the appellant who sought to have the arbitration agreement set aside. Without deciding positively whether , the appellant himself—as distinct from the opposing side—would indeed have been guilty of an offence under sec. 129 of the Criminal Code Ordinance®*, the turpitude in the matter was certainly not borne equally by both sides—on the contrary, it was greater on the part of the appellant. For this reason alone the appellant cannot persuade the court to grant his application. * “129. Any person who asks, receives or obtains, or agrees or attempts to receive or obtain...benefit of any kind for himself...upon any agreement of understanding that he
will...or will abstain from...prosecution for...a felony,...is guilty of a misdemeanour.” .
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COHNthatJ.“ItThewas the learnedintention judge inof thethe parties Districtthat,Courtinstead established as a fact of bringing
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was abundant evidence before thenotcourt on which itfindings could make suchof findings, and this court should interfere with of fact a court of first instance. For myself I accept Mr. Sharf’s argument
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from these facts in holding that there was here no offence under
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beforeto the arbitrators”, further that intention in theplace matter attentionandofthe authorities,“the true proceedings shouldmaking take the arbitration agreement was to settle the matter in a form that would
not involve proceedings before a criminal court.” In my opinion there
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thatsec. 129the ofthe learnedCriminal judge erred in the conclusion of law which he drew Code Ordinance. 1936. Imyselfhavenodoubt that in view ofthe findings offact ofthe learnedjudge there is no escaping the conclusion that, at least prima facie, an offence under sec. 129
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does, of the stifling of the prosecution. This section is satisfied if the
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was proved. This section does not speak, as English law apparently
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compounding is expressed by the grant of any benefit whatever, or by
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theprosecuting concealment of a crime from the authorities, or even by delay in the charge or withholding evidence in connection thereherewith.
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as to whether there was such or not—Mr. Sharf is right in his argument
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indicated, that the arbitration between them should take the place
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Ifthere was no actual compounding here—and I express no opinion
that there was at least some delay and since the parties intended, as
of a criminal action, the conditions set out in sec. 129 have been met.
Nevertheless, I agree with my learned colleagues that this appeal
should be dismissed. My reason is that this appellant does not come
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with handsoffenders. any moreNotthanonlythedidrespondents whoassist,underbysec.counsel129 are theclean principal the appellant
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cealing it from the criminal court but, according to the evidence which
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in argument as if he were not the prime mover.
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and deed, in submitting the relevant matter to arbitration and con-
reached the court, it was he who initiated the whole matter, even if
only for the purpose of avoiding publicity; and he cannot now be heard
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Appeal dismissed.
Judgment given on November 7, 1960.
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