Dispute Resolution Partner, Tom Griffith reviews a recent decision of the Supreme Court of Victoria (Horesh v Sephardi Association of Victoria & Ors) concerning the naming rights to a synagogue in Melbourne. The case is one of the latest in a long line where Courts have considered the question of whether, and in what circumstances, silence may constitute unconscionable conduct.

The Sephardi Association of Victoria (SAV) owned land and established a synagogue to cater for the religious needs of the SAV congregation, first at East Malvern and then at St Kilda. The synagogue at East Malvern was named “The Sassoon Yehuda Synagogue”. Sassoon Yehuda’s son Albert Yehuda (Mr Yehuda) entered into a series of agreements in respect of the name of the synagogue pursuant to which Mr Yehuda provided various financial benefits to the synagogue.

A proposal was put forward in 2002 to extend and redevelop the premises on which the synagogue was located and to erect a hall adjacent to the synagogue. A fundraising initiative was launched for the proposed new building, and a brochure was prepared. Included in the brochure were proposals whereby in exchange for donating funds, donors could obtain the naming rights to specific parts of the new building. Mr Yehuda passed away on 4 July 2007. Mr Yehuda’s executor considered that Mr Yehuda had secured rights of exclusivity to name certain parts of the premises on which the synagogue was located.

A dispute arose in mid-2009 when Mr Yehuda’s executor Mr Dan Horesh, a solicitor and Mr Yehuda’s nephew, became aware that the words “Lyndi and Rodney Adler Shepardi Centre” were inscribed over the front entrance to the extended premises. Mr Horesh sued for breach of contract.

The Court dismissed the contractual claim. As part of the case, however, Mr Horesh alleged that there had been a wilful misrepresentation by silence in respect of the naming rights.

The Court summarised the law as follows:

“In an action of deceit the plaintiff must establish actual fraud and because fraud is such a serious allegation the need to satisfy each element has always been strictly enforced.

Clear or cogent proof is necessary reflecting a judicial approach that a Court should not lightly make a finding that, on the balance of probabilities, a party to civil litigation has been guilty of such conduct.

Further, the Courts require accurate specification by the plaintiff of representations said to be false…

While the actions of the defendant, not just his or her words, may convey a representation capable of sustaining a claim for deceit, mere silence, however morally wrong, will not give rise to the tort of deceit unless there is a legal or equitable duty to speak and disclose the true facts…

The general law approach is that between parties dealing at arm’s length, the failure by one party to disclose to the other that the transaction is not as the other would believe in the circumstances does not give rise to a representation capable of founding an action in deceit. In an arm’s length transaction in a commercial situation, it is recognised that the parties will have conflicting interests. However, an exception is where the misapprehension is caused by the false utterances of the other party where that party does not take steps to correct the misapprehension before it is relied upon by the other party.”

The Court decided that in order for a claim for deceit based on representation by silence to succeed, Mr Horesh would have needed to have established that officers of the SAV made the representations alleged against them and that they knew Mr Horesh had relied upon them. Mere silence, however morally wrong, would not support an action for deceit unless there was a legal or equitable duty to speak and to disclose the true facts. In the circumstances of the case the Court found that the plaintiff had failed to make out the allegation. The Court concluded first that the plaintiff failed to establish that the officers of the SAV made the relevant representation and secondly the plaintiff failed to prove that the SAV’s intention changed in any material respect prior to the statements that its officers had made being materially relied upon by Mr Horesh.