Divine intervention

A recent decision of the New South Wales Supreme Court involving administrators’ termination of a rabbi’s employment, In the matter of South Head & District Synagogue (Sydney) (Administrators appointed),[1] indicates courts may uphold religious law where imported into a contract in terms sufficiently specific and precise to create a distinct right capable of being recognized in common law and equity.

The first plaintiffs, Anthony Wayne Elkerton and Ronald John Dean-Willcocks (Administrators), had been appointed as joint and several voluntary administrators of the second plaintiff, a synagogue incorporated as a public company limited by guarantee. The defendant, Benzion Milecki, was the Chief Rabbi of the synagogue who had held the position for over thirty years.

The terms of the rabbi’s contract of employment with the synagogue included:

• Dates calculated under the Hebrew calendar;
• Terms purporting to incorporate orthodox Jewish law known as “Halacha” into the contract; and
• A requirement that, in accordance with the relevant doctrines of Halacha, a rabbinical court administering Jewish law preside over any irreconcilable disputes between the rabbi and the congregation.

The synagogue had paid the rabbi between $600,000.00 and $900,000.00 in what the Court termed “minister’s costs” for the three financial years preceding the synagogue’s administration, constituting the bulk of his entitlements as an employee.

The Administrators in the course of their administration concluded that there were insufficient funds to meet the payments due to the rabbi under his contract of employment. As a result, the Administrators purported to terminate the rabbi’s employment on the basis of redundancy and sought to pay out his entitlements. The rabbi challenged this termination as invalid, because it had not been considered or effected under the relevant principles of Halacha.

In the resulting proceedings, the Administrators sought:

• a declaration that Halacha is not the law of the contract and the principles of Halacha were not incorporated into the contract;
• a consequential declaration that the rabbi’s employment was validly terminated by the administrators;
• an ancillary direction to the effect that the administrators are justified in disregarding the rules and customs of the Jewish religion when adjudicating on any proof of debt.

The rabbi by cross-summons sought:

• a declaration his purported termination was invalid and of no effect;
• a declaration his contract of employment remained in force; and
• an injunction against his termination until it had been considered by a rabbinical court under Halacha, orthodox Jewish law and custom.

To this end, the rabbi contended his contract remained on foot, and that under a sub-set of Halacha principle known as “Hazakah”, the rabbi’s tenure could only be terminated if the rabbinical council was satisfied the rabbi had fundamentally failed to perform his rabbinical duties to the congregation. The relevant terms provided:

“The relationship between the Rabbi and the congregation shall be defined in accordance with Halacha…

…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.”

• the Administrators contested in response that (among other grounds) the corpus of Jewish religious and cultural law the rabbi relied on was too vague to be incorporated or implied in the contract. in this regard, they sought to rely on a principle in Shamil Bank of Bahrain EC v Beximco Pharmaceuticals (Shamil),[2] where the English Court of Appeal held a clause subjecting a contract to the “principles of the glorious Sharia” under Islamic religious law was too nebulous and ill-defined to incorporate Sharia, Islamic religious law, into a contract.

In response, the rabbi contended:

• under the Australian common law of contract, the content of the contract by implication or incorporation applied Halacha to make Hazakah a contractual term; and
• rather than merely being a choice of law provision, the relevant clause incorporating Halacha actually imported Jewish jurisprudence governing the behavior of rabbis into the construction and operation of the contract

Brereton J distinguished the rabbi’s position under his contract of employment from that under the contract in Shamil on the basis that in Shamil, importation of the relevant Sharia principles concerning the transaction in dispute would have wholly defeated the commercial purpose of the contact.[3] Further, his Honour observed the “unqualified” clause referring to Sharia law was too general to import any particular principle and “inevitably repugnant” to the English law governing contract, distinguishing the case from the facts before the court.[4]

In contrast, Brereton J found the rabbi’s contract of employment with the synagogue through specific clauses or by necessary implication in the alternative imported discrete principles of Jewish law governing the relationship between a rabbi and their congregation and the circumstances in which a rabbi’s tenure could be terminated:

“Had the officious bystander observed, when the contract was being made, that it contained no provision about duration, he or she would have been testily suppressed with an “of course, the Rabbi has Hazakah, as an aspect of Halacha”. It needs to be borne in mind that any other arrangement would have been antithetical to the Orthodox Jewish life to which the company, the Rabbi and the congregation all subscribed.”[5]

On this basis, his Honour found the applicable doctrines of Halacha were sufficiently precise to by incorporation through the relevant clauses or implication import Jewish law, custom and procedure into the contract.[6] Interestingly, his Honour did not in his judgment expressly consider the implications or consequences that recognising cultural or religious law with binding legal force may have for the common law of Australia.

Brereton J found that the relevant principles of Jewish law governing the relationship of rabbi and congregation were sufficiently precise to create a right – namely, a procedural right analogous to natural justice under common law requiring his termination to be heard under Jewish custom and law before a properly constituted rabbinical court.[7] Brereton J further found this right was capable of being protected under the doctrines of equity, and granted an injunction restraining the Administrators’ termination of the rabbi until the matter was considered before a rabbinical court.[8] His Honour held the Administrators’ decision to terminate the rabbi was void, ordered the Administrators to pay the Rabbi’s costs, and the rabbi consented to waiving his right to remuneration until the rabbinical court made a determination on the termination of his employment.

Lavan comment

In the court’s recognition and application of a distinct body of cultural and religious law, In the matter of South Head & District Synagogue (Sydney) (Administrators appointed) presents an interesting development in the common law’s recognition of multicultural society in Australia: the case indicates that courts may recognize and uphold religious and cultural customs and laws such as orthodox Jewish law with binding legal force, at least where those customs are incorporated or implied under the common law governing contract. External administrators appointed to a company can find themselves facing a wide range of unique and idiosyncratic obligations, including contracts of employment with provisions as complex as those in this case.  Prompt and effective legal advice before a decision is made to terminate an employee can help mitigate an administrator’s exposure to an unfair dismissal claim, particularly where a contract may grant unique or wide-ranging rights to employees.