Anthony Wayne Elkerton and Ronald John Dean Willcocks in their capacity as Administrators of South Head and District Synagogue (Sydney) (In Liquidation) (Controllers Appointed) v Rabbi Benzion Milecki

[2018] NSWCA 141

Court of Appeal

Supreme Court

New South Wales

• Summary available

Medium Neutral Citation:

Anthony Wayne Elkerton and Ronald John Dean Willcocks in their capacity as Administrators of South Head & District Synagogue (Sydney) (In Liquidation) (Controllers Appointed) v Rabbi Benzion Milecki [2018] NSWCA 141

Hearing dates:

20 March 2018

Date of orders:

27 June 2018

Decision date:

27 June 2018

Before:

Bathurst CJ at [1];
Macfarlan JA at [2];
Meagher JA at [3]

Decision:

1. Time for filing and serving the notice of appeal extended until 28 September 2017.
2. Appeal allowed with costs.
3. Orders 1, 2 and 3 made on 22 June 2017 set aside.
4. Declare it was not a term of the respondent’s contract of engagement with the second appellant that his appointment as Rabbi could not be terminated otherwise than in accordance with the Halachic or Orthodox Jewish legal principle of Hazakah.
5. Order that the respondent pay the appellants’ costs of the proceedings below.

Catchwords:

CONTRACT – contractual interpretation – where written contract recording terms of engagement between Rabbi and company controlled by congregation – where contract provides that “relationship between the Rabbi and the congregation shall be defined in accordance with Halacha” – whether “congregation” means company – whether the principle of Orthodox Jewish law providing the Rabbi with life tenure expressly incorporated as a term of contract with company – whether such a term to be implied – term providing life tenure not incorporated or implied

Legislation Cited:

Corporations Act 2001 (Cth), ss 436A, 439C

Cases Cited:

BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266
Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153
Byrne v Australian Airlines Ltd (1995) 185 CLR 410; [1995] HCA 24
Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd (1986) 160 CLR 226; [1986] HCA 14
Crawford Fitting Co v Sydney Valve & Fittings Pty Ltd (1988) 14 NSWLR 438
Engel v Adelaide Hebrew Congregation (2007) 98 SASR 402
Ermogenous v Greek Orthodox Community of SA Inc (2002) 209 CLR 95; [2002] HCA 8
Halpern v Halpern [2008] QB 195
Maggbury Pty Ltd v Hafele Australia Pty Ltd (2001) 210 CLR 181; [2001] HCA 70
McClelland v Northern Ireland General Health Services Board [1957] 1 WLR 594
NSW Cancer Council v Sarfaty (1992) 28 NSWLR 68
Romero v Farstad Shipping (Indian Pacific) Pty Ltd (2014) 315 ALR 243; [2014] FCAFC 177
Shamil Bank of Bahrain EC v Beximco Pharmaceuticals Ltd [2004] EWCA Civ 19; [2004] 1 WLR 1784
Liverpool City Council v Irwin [1977] AC 239
Giliberto v Kenny (1983) 48 ALR 620

Category:

Principal judgment

Parties:

Anthony Wayne Elkerton and Ronald John Dean Willcocks in their capacity as Administrators of South Head & District Synagogue (Sydney) (In Liquidation) (Controllers Appointed) (First Appellant)

 

South Head & District Synagogue (Sydney) (In Liquidation) (Controllers Appointed) (Second Appellant)

  Rabbi Benzion Milecki (Respondent)

Representation:

Counsel:

 

AS Bell SC with V Whittaker (Appellants)
I Neil SC with L Menzies (Respondent)

 

Solicitors:

  Henry William Lawyers (Appellants)
Pikes & Verekers Lawyers (Respondent)

File Number(s):

2017/203555

 Decision under appeal 

Court or tribunal:

Supreme Court of New South Wales

Jurisdiction:

Equity

Citation:

[2017] NSWSC 823

Date of Decision:

22 June 2017

Before:

Brereton J

File Number(s):

2017/146998

HEADNOTE

[This headnote is not to be read as part of the judgment]

Rabbi Milecki was appointed Chief Rabbi of the South Head & District Synagogue in 1985. In 1999, a document titled “Contractual Terms of Engagement between Rabbi Benzion Milecki and the South Head & District Synagogue” was executed by South Head & District Synagogue (Sydney) Ltd (“the Company”) and signed by the Rabbi.

Clause 1 provided, “…As certain material changes have been made in the contractual arrangements between the Rabbi and the congregation it has been decided by both parties to set out those arrangements in writing for the mutual benefit of both parties.” Clause 2 provided, “The relationship between the Rabbi and the congregation shall be defined in accordance with Halacha.” Other clauses dealt with the spiritual and pastoral relationship between the Rabbi and congregation. Clause 7 provided that “the synagogue shall pay” certain amounts.

The expert evidence was that an aspect of Halacha (Orthodox Jewish law) is Hazakah, which provides that a Rabbi’s appointment is for life, and cannot be terminated except by agreement or pursuant to a decision of a Beth Din; and that the only grounds for removal would require a fundamental failure by the Rabbi to perform his Rabbinical duties.

The administrators of the Company purported to terminate the contract. The Rabbi claimed that Hazakah was a term of the contract, prohibiting the purported termination. The primary judge found that Hazakah was incorporated, or alternatively to be implied, as a term of the contract.

The issues on appeal were:

(i)    Whether the term “congregation” in clause 2 should be construed as referring to the Company;

(ii)    Whether clause 2 was effective to incorporate expressly Hazakah into the contract;

(iii)    Whether a term in the nature of Hazakah should be implied into the contract, as either necessary or by custom.

Held (Meagher JA, Bathurst CJ and Macfarlan JA agreeing), allowing the appeal:

In relation to (i) and (ii):

1.    The reference to “congregation” in clause 2 is not to be construed as a reference to the Company. The clause is in the nature of a recital, acknowledging the religious subject matter of a relationship, the performance of which it is not intended be secured by contract: at [34] - [35].

2.   Even if clause 2 is construed as referring to the company, the clause was not effective to incorporate Hazakah because the subject matter of the incorporation was not sufficiently described to enable the relevant laws and principles to be identified and their content ascertained.

Whitlock v Brew (1968) 118 CLR 445; Trustees Executors and Agency Company Limited v Peters (1960) 102 CLR 537; Halpern v Halpern [2008] QB 195; Shamil Bank of Bahrain EC v Beximco Pharmaceuticals Ltd [2004] EWCA Civ 19; [2004] 1 WLR 1784; Engel v Adelaide Hebrew Congregation (2007) 98 SASR 402, considered.

In relation to (iii):

3.    Hazakah should not be implied as a term of the contract from custom or usage, as there was no evidence of any custom or usage that contracts made in Australia between an Orthodox Jewish Rabbi and his congregation, or any legal entity controlled by that congregation, would include such a term: at [42] – [44].

Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd (1986) 160 CLR 226; Byrne v Australian Airlines Ltd (1995) 185 CLR 410, considered.

4. The term is not to be implied to give the contract business efficacy. Such a term is not necessary, the contract being terminable on reasonable notice in the absence of an express provision as to its duration. Nor is it obvious that such a religious obligation would be made the subject of a contract or that the resulting onerous financial obligation would thereby be undertaken: at [45].

BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266; NSW Cancer Council v Sarfaty (1992) 28 NSWLR 68; McClelland v Northern Ireland General Health Services Board [1957] 1 WLR 594, considered.

Judgment

1. BATHURST CJ: I agree with the orders proposed by Meagher JA and with his Honour’s reasons.

2. MACFARLAN JA: I agree with Meagher JA.

3. MEAGHER JA:

Overview

4. The respondent, Rabbi Benzion Milecki, was appointed Chief Rabbi of the South Head & District Synagogue in 1985. The first appellants were the administrators (and are now the liquidators) of the second appellant, South Head & District Synagogue (Sydney) Ltd (the Company), a public company limited by guarantee, and first registered on 24 December 1954. The members of the Company were the members of the Orthodox Jewish congregation that worshipped at the synagogue owned by the Company at 662-666 Old South Head Road, Dover Heights. The Company’s objects included “to establish and conduct a congregation and synagogue wherein will be practised the customs and observances of Orthodox Judaism”. Its general management was vested in a Board of Management, elected by and from its members. As at June 2017, there were approximately 960 fee-paying members.

5. The administrators were appointed by a resolution of the Board on 26 April 2017, under Corporations Act 2001 (Cth), s 436A. Having formed the view that there were insufficient funds to make ongoing payments due to the Rabbi under the terms of his employment, the administrators by letter dated 27 April 2017 purported to terminate that employment for redundancy effective from 26 April 2017. On 28 April 2017 solicitors acting for the respondent advised that he did not accept there had been any valid termination of his employment. The administrator’s notice was said to be impermissibly retrospective and, more significantly, it was said that the Rabbi’s engagement could not be terminated “unless and until a properly constituted Din Torah has first determined in accordance with Orthodox Jewish Law that the termination … is justified on a ground recognised by the usages, customs, practices and traditions of Judaism”.

6. The administrators commenced proceedings to have that dispute decided. The primary judge (Brereton J) upheld the position contended for by the respondent: In the matter of South Head & District Synagogue (Sydney) (Administrators appointed) [2017] NSWSC 823.

7. His Honour summarised the respective positions of the parties at Judgment [18]:

The two competing positions are that the contract was terminable on reasonable notice (as was ultimately submitted by the administrators, having eschewed the proposition that it could be terminated for “redundancy”), that being the usual position in the absence of contrary provision; or that the Rabbi has life tenure, subject only to dismissal pursuant to an adjudgment by a Din Torah (as the Rabbi submitted), as a result of the incorporation, or alternatively implication, into the contract of relevant principles of Halacha, referred to in clause 2.

8. The primary judge concluded at Judgment [45] that the respondent’s contract included Hazakah, the Orthodox Jewish legal principle which gives the Rabbi appointed by a community life tenure, “by implication if not by incorporation” and accordingly that the Company “was not entitled to terminate the Rabbi’s employment, for redundancy or otherwise, in the absence of a finding of a Din Torah that there were grounds for termination”. Whether such grounds existed was to be determined in accordance with Halacha, the body of Jewish religious laws based on the Written and Oral Tradition – the former comprising the Five Books of Moses, the Bible and The Book of the Prophets, and the latter the Mishnah Talmud and their commentaries.

9. That decision turns on the construction of the document evidencing the terms of the respondent’s engagement as Rabbi, and whether as the primary judge held such a term was expressly incorporated, or to be implied, and sufficiently certain to be enforceable under Australian law.

10. On 27 July 2017 the Company’s creditors resolved that it be wound up pursuant to Corporations Act, s 439C. It is accepted that the winding up operated as a notice of dismissal to all employees of the Company, including the Rabbi, and brought his contract under Australian law to an end. Because the respondent claims his dismissal was wrongful, whether it was terminable on reasonable notice, or only in the circumstances permitted by Hazakah, remains a live issue and relevant to the assessment of any claim to damages which he presses in the winding up.

The terms of engagement

11. The terms of the respondent’s engagement were recorded in a document dated 29 May 1999 and headed:

Contractual Terms of Engagement

between

Rabbi Benzion Milecki

and the

South Head & District Synagogue

12. There followed nine numbered paragraphs at the end of which the document was executed by the Company under common seal and signed by Rabbi Milecki. Clauses 1 to 5, and 9 provided:

1.    Rabbi Milecki commenced his services with the Synagogue on Tuesday, 22nd Tevet, 4745 (15th January, 1985). As certain material changes have been made in the contractual arrangements between the Rabbi and the congregation it has been decided by both parties to set out those arrangements in writing for the mutual benefit of both parties.

2.    The relationship between the Rabbi and the congregation shall be defined in accordance with Halacha.

3.    The Synagogue accepts Rabbi Milecki as the Moroh D’Asroh, the sole decisor of all Halachik and spiritual matters pertaining to the Synagogue and the Rabbi undertakes to faithfully and diligently serve the Synagogue and its members. It is his responsibility to supply the spiritual guidance for the development of the congregation as a whole as well as that of its individual members and others associated with the synagogue. In order to facilitate the accomplishment of this task, the Rabbi may be invited to attend all Executive and Board Meetings of the congregation.

4.    The Rabbi shall carry out all leadership and pastoral duties normally expected of a Rabbi in relation to his congregation. He will guide the congregation through the deliverance of sermons on Shabbat and holidays; through shiurim and lectures, through the publication of a regular newsletter, through ensuring, in cooperation with the Board of Management, that the synagogue is in possession of the latest and most up-to-date Torah education material, etc. He will answer all questions of Jewish law put to him by his congregants and will do all necessary research in order to supply those answers. He will also act as a mentor to all those seeking his guidance in their spiritual, religious and material affairs. He will assist and guide people at the time of their simchas as at the time of their distress.

5.    The Nusach and the halachikly sanctioned Minhagim of the synagogue shall not be changed without prior discussion between the Rabbi and the Board of Management.

[…]

9.    Any irreconcilable disputes between Rabbi and congregation shall be decided according to Halacha. The Dayanim are to be decided by the Chief Rabbinate of Israel or by mutual agreement between the Rabbi and the Board of Management.

13. By clause 6 it was agreed that the Rabbi “shall not accept any appointment or position for reward [or] otherwise on a regular basis, without the approval of the Board of Management”. Clause 7 dealt with the amounts that the Rabbi was entitled to receive by way of annual base salary and provided that the “synagogue shall pay” expenses including for telephone, gas and electricity, motor vehicle, hospitality, travel, housekeeping, children’s education, and certain outgoings including life assurance premiums, mortgage repayments and superannuation contributions. Detailed provisions were made in subparagraphs 7(a) to (i) for each of these entitlements. Clause 8 separately dealt with the Rabbi’s annual leave entitlements.

The issues in this appeal

14. Under Australian common law, if a contract of employment makes no provision as to the circumstances in which it may be brought to an end, ordinarily a term will be implied to the effect that it is terminable by either party upon reasonable notice to the other: NSW Cancer Council v Sarfaty (1992) 28 NSWLR 68 at 74 (Gleeson CJ and Handley JA). There is no provision in the Rabbi’s terms of engagement which in express terms deals with the duration of his engagement, or the circumstances in which it might be brought to an end.

15. The respondent’s case, accepted by the primary judge, is that under Australian law specific provisions of another system of law, including a non-national system such as Orthodox Jewish law, may be incorporated as a term or terms of a contract, provided there is “certainty about what is being incorporated”: Engel v Adelaide Hebrew Congregation (2007) 98 SASR 402 at [36] (Doyle CJ, Bleby and Vanstone JJ agreeing) citing Halpern v Halpern [2008] QB 195 at [33], [35] (Waller LJ, Sedley and Carnwath LJJ relevantly agreeing) and Shamil Bank of Bahrain EC v Beximco Pharmaceuticals Ltd [2004] EWCA Civ 19; [2004] 1 WLR 1784 at [50] (Potter LJ, Laws and Arden LJJ agreeing).

16. In Shamil Bank the relevant financing agreements contained a governing law clause which stated that “Subject to the principles of the Glorious Sharia’a, this agreement shall be governed by and construed in accordance with the laws of England”. That clause, it was argued by the borrowers, was sufficient to incorporate the principles of Sharia into the agreement. In rejecting that argument, Potter LJ reasoned:

[51]    …The doctrine of incorporation can only sensibly operate where the parties have by the terms of their contract sufficiently identified specific “black letter” provisions of a foreign law or an international code or set of rules apt to be incorporated as terms of the relevant contract such as a particular article or articles of the French Civil Code or the Hague Rules. By that method, English law is applied as the governing law to a contract into which the foreign rules have been incorporated…

[52]    The general reference to principles of Sharia in this case affords no reference to, or identification of, those aspects of Sharia law which are intended to be incorporated into the contract, let alone the terms in which they are framed. It is plainly insufficient for the defendants to contend that the basic rules of the Sharia applicable in this case are not controversial. Such “basic rules” are neither referred to nor identified. Thus the reference to the “principles of … Sharia” stands unqualified as a reference to the body of Sharia law generally. As such they are inevitably repugnant to the choice of English law as the law of the contract and render the clause self-contradictory and therefore meaningless.

17. The last conclusion followed, the borrowers having conceded that English law alone was and remained the governing law of the contract (at [42], [53]). Likewise, in this case, the respondent does not contend that clause 2 operates as a choice of law clause which purports to select Orthodox Jewish law — Halacha — as the governing law of the contract; and it is accepted that the governing law is Australian law.

18. The appellants make three challenges to the primary judge’s acceptance of the respondent’s case. First, it is submitted that the reference in clause 2 to “the congregation” is not to be construed as being to the Company, the relevant party to the agreement: cf Judgment [23]. The respondent’s argument to this Court accepts that this construction of clause 2 was necessary for his Honour’s conclusion as to the express incorporation of Hazakah (Judgment [27], [32]). However, it is contended that construction was not necessary for his Honour’s conclusion that such a term was to be implied (Judgment [33]).

19. Secondly, and assuming that reference to be to the Company, it is submitted that clause 2 is not effective to incorporate Hazakah as a term of the Rabbi’s terms of engagement. This argument has different aspects. Clause 2 makes no reference to the principles of Hazakah, and in its terms purports to make the relationship of the parties subject to Halacha. As such, the Clause is said to be invalid as impermissibly seeking to incorporate a non-national, and religious, system of laws as the governing law of the contract. (It is not submitted that to do so would necessarily be inconsistent with Australian law being the governing law of the contract). It is also said that clause 2 is not effective to incorporate Hazakah “as a subset of Halacha” because there is no certainty or clarity either as to the provisions or part of Halacha intended to be incorporated, or as to the terms in which those provisions are to be formulated. Additionally, it is said that if clause 2 is effective to incorporate Hazakah, that principle being sufficiently certain, it is nevertheless void as contrary to public policy because it requires that any dispute as to the Rabbi’s termination be determined by a Beth Din, and accordingly ousts the jurisdiction of this Court.

17. Thirdly, the appellants submit that no such term can be implied either as necessary or by custom. Implication is not necessary to give the contract business efficacy; and there is no evidence that in 1999 such a term was customary in contracts between a Rabbi and his community, or any entity representing it.

18. In an Australian court, the content of Orthodox Jewish law is a question of fact which must be proved. Before addressing the issues raised by these arguments, it is necessary to summarise the expert evidence as to that law. That evidence was in the form of a letter responding to specific questions asked by the respondent’s solicitors. The answers were not challenged by cross-examination.

The evidence of Orthodox Jewish law

22. The evidence concerning Halacha was summarised by the primary judge at Judgment [19]:

(1)    “Halacha” denotes orthodox Jewish law and jurisprudence, constituting a divine or divinely inspired 'code of law that regulates every facet of human life, including laws that regulate relations between mankind', obedience to which 'in every aspect of life is an inviolable religious obligation'.

(2)    It includes ‘laws that regulate the legal relationship between a Rabbi and a Synagogue’, one of which provides that any dispute between a synagogue and its Rabbi, unless resolved by agreement, must be adjudicated before a Beth Din (which is a court of Jewish law).

(3)    Another aspect, compendiously known as 'Hazakah', is that a Rabbi who has been appointed by a congregation, however constituted, has life tenure, in that he is entitled to be and remain employed in the position, with all its rights, privileges and benefits, for the rest of his life, and cannot have his appointment terminated, except by agreement, or pursuant to a decision of a properly constituted Din Torah (that is, a hearing or adjudication of a dispute conducted in accordance with Halacha by persons who, by agreement or standing, are qualified to determine the dispute as a Beth Din) in accordance with Halacha that the termination of the Rabbi's appointment is justified on a ground recognised in Halacha, the only such grounds relating to fundamental failure by the Rabbi to perform his Rabbinical duties. Redundancy is not such a ground. [Italics added]

23. Whilst noting that Halacha is a “code of law that regulates every facet of human life”, and that one aspect of that code regulates the relationship between a Rabbi and synagogue or worshipping congregation, the evidence with one exception does not more specifically describe or identify any laws which might answer that description, or the particular aspects of that relationship which they address. That exception is Hazakah. However, the evidence does not suggest that is the only Halachic law regulating their relationship.

24. The evidence also makes clear that obedience to that “divine” law is paramount, and that civil or state courts have no role in its enforcement or in resolving disputes between observant Jews, including between them as members of a congregation and their Rabbi. Those disputes must be adjudicated before a Beth Din. That is because Orthodox Jewish law does not accept the authority of a secular court. The explanation in the evidence for this included:

Among the explanations is that judicial systems express authority. Accepting a secular authority over a Divine is a desecration of Hashem’s [God’s] name, even if a particular law happens to be identical. Furthermore, each judicial system draws from the philosophical underpinnings of its origin. Thus, civil law draws from philosophical bases that are often at odds with the Divine, fundamental principles espoused and advocated by Jewish law.

The meaning of “congregation” in clause 2

25. The first question raised by the appellants’ argument is whether the reference to “congregation” in clause 2 is to be read as a reference to the Company. A related question is whether clause 2 was intended to have any contractual force; or is in the nature of a recital recording a fundamental proposition concerning the relationship between an Orthodox Jewish Rabbi and the members of his congregation, in a contract which addresses the financial and some related property aspects of that relationship.

26. Before the primary judge, the administrators submitted that the descriptions “congregation” and “Synagogue” were used in a rational and consistent way – the former (at least when dealing with the Rabbi’s spiritual obligations) referring to the community worshipping at the South Head synagogue and the latter (concerning financial obligations relevant to his employment) referring to the Company. The primary judge rejected this textual analysis, concluding at Judgment [23]:

Contrary to the administrators’ submission, I do not find in the natural reading of the words in the context of the contract, any indication that “Synagogue” and “congregation” are deliberately used to mean different things. Rather, the term “synagogue” is used to refer variously to the company, the physical place of worship, and the congregation of people who worship there. Used in the context of what is essentially an incorporated congregation, “congregation” refers to the incorporated entity.

27. It is not controversial that the ascertainment of the meaning of the document and whether the parties intended that particular provisions should have contractual effect are to be determined objectively having regard to its language, context and surrounding circumstances. As to the meaning of the document, see Maggbury Pty Ltd v Hafele Australia Pty Ltd (2001) 210 CLR 181; [2001] HCA 70 at [11] (Gleeson CJ, Gummow and Hayne JJ); and as to the intention to create legal relations, see Ermogenous v Greek Orthodox Community of SA Inc (2002) 209 CLR 95; [2002] HCA 8 at [24], [25] (Gaudron, McHugh, Hayne and Callinan JJ).

28. Nor is it in dispute that the document records payment obligations and entitlements as between the Rabbi and the Company that were intended to be legally enforceable under Australian law. However, the identity of the parties, language and context suggest that not all clauses of the document record obligations intended to be contractually binding as between the Rabbi and the Company.

29. The members of the Company constituted most, if not all, of the congregation worshipping at the South Head synagogue. The individuals who made up the Board of Management were part of that congregation and, having regard to the objects of the Company (see [3] above), were the nominated representatives of the congregation in relation to all spiritual and religious matters including in their dealings with the Rabbi.

30. The title to the document announces its content as contractual terms of engagement between the Rabbi and the Company. It is executed only by those entities, as the named parties. Clause 1 first refers to “certain material changes [having] been made to the contractual arrangements between the Rabbi and the congregation”. Those previously unrecorded contractual arrangements are identified as set out in writing “for the mutual benefit” of the parties. At least some of those “changes” appear in clause 7 which records various dates before the date of execution of the document from which the “synagogue” was to pay an increased amount by way of salary, reimbursement of annual recurring expenses, superannuation contribution, expenses for hosting home functions or telephone rental and usage expenses. Clause 7 also provides for further adjustments to be made to existing payment obligations on dates after the execution of the document. All of these arrangements address financial matters relating to the Rabbi’s engagement.

31. The subject matter of clauses 2, 3, 4 and 5 is the religious, spiritual and pastoral relationship between the Rabbi and the congregation. As the primary judge observes, the term “synagogue” (sometimes commencing with a capital “S”) is used in clauses 1, 3, 4 and 5 to refer variously to the Company, the physical place of worship, or the congregation of people who worship in the South Head synagogue: Judgment [23]. Clauses 3 and 4 acknowledge the religious authority of the Rabbi and record in general terms his responsibilities in that capacity.

32. Addressing the meaning of “congregation” in clause 2, at Judgment [22], the primary judge identified two “telling indications” in favour of its being taken to mean the Company:

…Clause 1, as well as describing the Rabbi as having “commenced his services with the Synagogue”, also refers to “the contractual arrangements between the Rabbi and the congregation”, treating “the congregation” as synonymous with the company. It is notable that this is immediately followed by clause 2, which is central to the present issue, and refers in strikingly similar terms to “the relationship between the Rabbi and the congregation”. The last sentence of clause 3 refers to "Executive and Board Meetings of the congregation"; however, the Executive and Board are organs of the company.

33. On the basis that clause 2 was concerned with the relationship between the Rabbi and the Company as his employer, the primary judge considered it “inconceivable – in the light of the objects of the company, the purpose and terms of the contract, and the evidence that Halacha regulates inter alia the legal relationship between a Rabbi and a synagogue and that obedience to it is an inviolable religious obligation – that the parties … did not intend that Hazakah (life tenure) be a term of the contract”: Judgment [27].

34. I have reached the opposite view to that of the primary judge in relation to the construction of clause 2, and its reference to “the congregation”. My view proceeds from a different reading of the language of clauses 1 and 3, and an assessment that, determined objectively, the parties are not to be taken to have intended that the breadth of religious obligations arising from the relationship between the congregation and its Rabbi under Orthodox Jewish law should also be enforceable under the contract.

35. In ordinary language, a congregation describes the community of people worshipping at a particular synagogue or church. Here, there was also an incorporated entity, controlled by members of that community, which was responsible for conducting the “congregation and synagogue”. In that context, the “contractual arrangements between the Rabbi and the congregation” described in clause 1 included the financial arrangements between the Rabbi and the Company. That was not because the Company and the congregation were to be regarded in law as the same entity, but because the Company was owned and controlled by the congregation and had been interposed between them, at least for the purpose of making contractual arrangements concerning financial matters that were likely to ensure benefits under Australian taxation laws for one or both of them. It follows that it is not necessary to give a strained meaning to the word “congregation” as used in clause 1 in order to make sense of the reference to it in that clause. The same may be said of the last sentence of clause 3, and its reference to “Executive and Board Meetings of the congregation”. The meetings were of those representative members of the congregation who comprised those bodies.

36. Understood as a statement of the relationship between the Rabbi and his congregation, clause 2 expresses a fundamental proposition as to the role of Halacha. As described in evidence, that law does not separately regulate relations between corporations or other artificial entities interposed between a congregation and its Rabbi. Rather the evidence shows that the Orthodox Jewish law principles which may indirectly apply to the “conduct” of such entities do so because they regulate the natural persons who control them. These considerations indicate that clause 2 is in the nature of a recital, recording the position as between the Rabbi and his congregation, but not in a way intended to give rise to legal obligations. As the Full Court (Allsop CJ, Rares and McKerracher JJ) observed in Romero v Farstad Shipping (Indian Pacific) Pty Ltd [2014] FCAFC 177; (2014) 315 ALR 243, in a different context (the enforceability of a workplace harassment and discrimination policy said to be part of an employment contract) at [58]:

…Many enforceable contracts contain provisions that can be described as aspirational. These often include recitals or other terms, that are not of themselves individual expressions of discrete rights or obligations, but record, as part of the contractual terms, agreed positions that are available to inform the proper construction of the contract as a whole … the precise effect of every provision, including a recital, in a contract or deed will depend on the circumstances of the individual case.

37. Furthermore, I do not agree with his Honour’s conclusion at Judgment [27] that it was “inconceivable” that the Rabbi and the Company did not intend by the language of clause 2 that Hazakah be a part of their contractual relationship. First, for the reasons appearing above the reference to the “congregation” is to be understood as being to the community of worshippers. Secondly, the language of that clause makes no mention of Hazakah, or to the contractual or financial arrangements between the Rabbi and the Company. Thirdly, the general statement that the relationship between the Rabbi and his congregation “shall be defined in accordance with Halacha” implicitly acknowledges the subject matter of that relationship as religious practices and obligations the performance of which it is not permissible (see [23] above) or necessary to secure by legally enforceable contractual relations.

Life tenure by a term incorporated by reference

38. The respondent accepts that if the reference to “congregation” in clause 2 is not construed as being to the Company, the primary judge’s conclusion that clause 2 incorporates Hazakah as a term of the contract cannot stand. That makes it unnecessary to consider, other than briefly, the remaining steps in that analysis.

39. Before this Court it was submitted that even if clause 2 is understood as referring to the Company, it nevertheless records a binding agreement by the Company that the relationship between the Rabbi and the congregation will be defined by Halacha, which includes Hazakah. The immediate difficulty for this argument is the conclusion that clause 2 is in the nature of a recital recording the position as between the Rabbi and his congregation, but not in a way intended to give rise to legal obligations.

Life tenure by an implied term

40. It remains to consider whether Hazakah was an implied term of the contract. As has already been observed, the respondent’s argument as made in this Court does not depend on clause 2 being read as referring to the Company. In this respect it may depart from the basis on which the primary judge found that Hazakah is an implied term of the contract: Judgment [33].

41. The primary judge concluded that implication arose “from the express terms (including clause 2 and clause 9), from the absence of any other provision as to duration, and from custom”: Judgment [33]. The respondent submits that this reasoning is supported by each of the four ways in which terms may be implied (see Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153 at [28] (Heydon JA)). The first is from the express words of the contract; the second from the “nature of the contract itself”; the third from custom or usage; and the fourth from considerations of “business efficacy”.

42. The Hazakah implied term does not arise from the express words of clause 2. Nor is it a term implied into contracts between a Rabbi and his congregation as a matter of Australian law. The often cited example of such a term is the landlord’s obligation to maintain means of access in a reasonable state of repair which was implied in Liverpool City Council v Irwin [1977] AC 239. See generally the discussion in Byrne v Australian Airlines Ltd (1995) 185 CLR 410 at 450-452; [1995] HCA 24 (McHugh and Gummow JJ).

43. The third basis relied upon is implication from custom or usage. Referring to the joint judgment in Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd (1986) 160 CLR 226 at 236-238; [1986] HCA 14, McHugh and Gummow JJ in Byrne v Australia Airlines at 440, summarised the reasoning underlying the implication:

The question is always whether the general notoriety of the custom makes it reasonable to assume that the parties contracted with reference to the custom so that it is therefore reasonable to import such a term into the contract. Where there is such an established usage, "the courts are spelling out what both parties know and would, if asked, unhesitatingly agree to be part of the bargain". Because the importation of the term rests on the presumed intention of the parties, it must yield to the actual intention embodied in express terms of the contract, whether the contract be written or oral.

44. Con-Stan Industries v Norwich Winterthur makes clear (at 236-237) that the “existence” of a custom or usage that will justify the implication is a question of fact and that there must be evidence that the “custom relied on is so well known and acquiesced in that everyone making a contract in that situation can reasonably be presumed to have imported that term into the contract”.

45. Here, there is no evidence of a religious custom or usage that contracts made in Australia between an Orthodox Jewish Rabbi and his congregation, or a legal entity controlled by that congregation, are taken to provide as part of that bargain that the Rabbi have life tenure. In the absence of such evidence, there was no sound basis for implying the Hazakah term from custom or usage.

46. Finally, the term is not to be implied to give the contract business efficacy. One of the criteria identified in BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 at 283 for the implication of a term on this basis is that its implication is necessary to produce that outcome. Another is that its implication is so obvious that it “goes without saying”. In addressing the latter, the primary judge formulated the officious bystander’s response to an inquiry as to whether the contract should include such a term –“of course, the Rabbi has Hazakah, as an aspect of Halacha” (Judgment [33]). That is no doubt a correct statement of the position under Orthodox Jewish law. However, the relevant inquiry is whether a provision giving the Rabbi life tenure is to be included in a contract with the Company enforceable under Australian law. In my view it is not obvious that such an onerous and unusual financial obligation would be included (see McClelland v Northern Ireland General Health Services Board [1957] 1 WLR 594, especially at 604 (Lord Tucker), 609 (Lord Keith) (each dissenting in the result which turned on the construction of the express terms of the employment)). Nor is it necessary to imply such a term to give the contract efficacy where, in the absence of any other provision as to its duration, it would be terminable on reasonable notice: Sarfaty at 74; with the reasonableness of that notice period to depend on the circumstances existing when it is given: Crawford Fitting Co v Sydney Valve & Fittings Pty Ltd (1988) 14 NSWLR 438 at 444 (McHugh JA, Priestley JA agreeing) and 454 (Clarke JA).

47. In the result, the appellants’ challenge to his Honour’s finding that Hazakah was an implied term of the contract must be upheld.

Remaining issues

48. The issues raised by the appellants’ second challenge to the primary judge’s conclusion do not arise. In the respondent’s case those issues only fall to be considered if “congregation” in clause 2 refers to the Company. Finding that to be so, the primary judge then construed the reference to the “relationship between the Rabbi” and the Company as being to their “legal [employment] relationship” under Australian law. His Honour considered that clause 2 sufficiently identified the aspects of Halacha that were intended to be incorporated, so as to govern that relationship. They were “that subset of Halacha that regulates the legal relationship between a Rabbi and a synagogue, which includes, relevantly, Hazakah”: Judgment [32].

48. This reasoning relies on the statement in the expert evidence that one aspect of Halacha is the “laws that regulate the legal relationship between a Rabbi and a Synagogue” (see [21] above). In that context the “legal relationship” referred to is that arising under Orthodox Jewish law. Accordingly, the laws intended to be incorporated and enforceable under Australian law are those Orthodox Jewish laws that regulate any part of the relationship under those laws between the Rabbi and his congregation. In other words, the incorporation is of everything in Halacha that governs the relationship between the Rabbi and his community. Whilst the expert evidence establishes that one such law is Hazakah, it does not other than in very general terms refer to or identify the other rules or principles to be incorporated.

49. Whether the subject matter of the express incorporation is sufficiently clear and certain must be determined first. Once that subject matter is identified it must then be construed as part of the contract into which it is incorporated. The result of doing so may be that some parts of what is incorporated are rejected as having no possible application, or as being inconsistent with other more specific provisions; and that others are permissibly modified so as to make sense in their new context. See, for example, Trustees Executors and Agency Company Limited v Peters (1960) 102 CLR 537 at 548 (Kitto J); 555, 558 (Menzies J); Whitlock v Brew (1968) 118 CLR 445 at 456 (Kitto J), 460-461 (Taylor, Menzies and Owen JJ); Giliberto v Kenny (1983) 48 ALR 620 at 623-624 (Gibbs CJ, Wilson, Brennan, Deane and Dawson JJ agreeing); Tradigrain SA v King Diamond Shipping SA [2000] 2 Lloyd’s Law Reports 319 at [78] – [79] (Rix LJ, Brooke and Henry LJJ agreeing); Halpern v Halpern at [33]; and Engel v Adelaide Hebrew Congregation at [36].

50. Here, the critical question is whether the subject matter of the incorporation is sufficiently described to enable the relevant rules or principles to be identified and their content ascertained. The primary judge held that it was, there being no evidence as to any such controversy concerning the certainty of the content of the relevant “subset of Jewish law” (Judgment [32]). However, that conclusion assumes that it is for the party challenging the efficacy of the incorporation to establish to the contrary. In my view, the respondent had to establish with sufficient certainty the subject matter of the incorporation: Whitlock v Brew at 456, 460-461. In the absence of expert evidence that there was no controversy as to the Orthodox Jewish legal rules or principles to be incorporated, and as to the basis on which they could be ascertained, I am not prepared to conclude, as the primary judge did, that the purported incorporation was effective. It is not made clear, and is not otherwise obvious, how in relation to a code of law that regulates all aspects of “relations between mankind”, a distinction is to be drawn between laws and principles which provide definition to the “relationship between the Rabbi and the congregation” and those which do not. Accordingly, if it were necessary to decide this question, I would also uphold the challenge on this ground.

Conclusion

52. In the result, I propose that the following orders be made:

1. Time for filing and serving the notice of appeal extended until 28 September 2017;

2. Appeal allowed with costs;

3. Orders 1, 2 and 3 made on 22 June 2017 set aside;

4. Declare that it was not a term of the respondent’s contract of engagement with the second appellant that his appointment as Rabbi could not be terminated otherwise than in accordance with the Halachic or Orthodox Jewish legal principle of Hazakah;

5. Order the respondent pay the appellants’ costs of the proceedings below.

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Decision last updated: 27 June 2018