Insurance Contract

HCJ 5492/07

HCJ 7677/07

HCJ 4820/08

 

Petitioner in 5492/07:                     Smadar Boaron

Petitioner in 7677/07:                     Noah Kariv

Petitioners in 4820/08:                                                   1. Malka Stier

                                                                                2. Shulamit Gabay Galoni

                                                                                3. Cheli Juliet

 

v.

National Labour Court

National Insurance Institute       

 

The Supreme Court sitting as the High Court of Justice

[21 July 2009]

 

Before President D. Beinisch, Deputy President E. Rivlin, and Justices A. Procaccia, E. Levy, E. Arbel, E. Hayut, H. Melcer

 

Petitions for an order ¬nisi and for an interim order.

 

Facts: Four widows who had each been receiving either a dependents allowance or a survivors allowance in accordance with the provisions of the National Insurance Law [Consolidated Version], 5755-1995, received notices from the National Insurance Institute indicating that their allowances had been discontinued — as of the time that the Institute had determined that each had begun living together with a new partner in a common-law marriage.  After the relevant regional labour courts ruled in favor of the petitioners, the National Labour Court upheld the discontinuation of the allowances for all of them.

Held: The National Labour Court’s decision involved no substantive legal error requiring the intervention of the High Court of Justice. Sections 255 and 262 of the National Insurance Law refer to the discontinuation of a survivor’s allowance to a widow who has remarried; s. 135 refers to the discontinuation of a dependents allowance to a widow who has remarried. Neither section refers specifically to remarriage in the context of a common-law relationship. However, the statute’s definitional section specifically defines a wife as including a common-law wife, and it is this definition that entitles a woman whose common-law husband has died in either a work accident or of natural causes to receive the relevant type of allowance on the same ground that an “official” widow receives such an allowance. The question to be decided, therefore, is whether the provisions relating to the discontinuation of the allowance upon remarriage, as outlined in the above-mentioned sections, apply to widows or widowers who have entered into common-law relationships as well as to those who have officially remarried.

The statute must be interpreted in light of its purpose and in light of its specific language. The purpose of both allowances is to provide financial support to a person after the death of his or her partner whose income had provided support; this support is discontinued at the time of a remarriage under the assumption that the new couple will be pooling income and sharing expenses and that the support from the National Insurance Institute is no longer necessary. This is also why the allowance is generally renewed if the second marriage ends within a certain period of time. This purpose supports the cancellation of benefits to widows and widowers who have entered into common-law relationships, as they too are benefiting from the financial aspects of a shared household, given that the existence of such a shared household is a prerequisite for a determination that a relationship reaches the level of a common-law marriage.

The petitioners had argued that common-law relationships and official marriages should not be deemed comparable in terms of the level of support provided, due to the relative instability of a common-law relationship which has not been formalized through a wedding ceremony. This argument fails because the statutory provisions regarding the renewal of allowances upon the conclusion of a remarriage would also apply to the termination of a common-law relationship, so that the supposed relative instability of the latter form of relationship is not a relevant consideration.

The statutory language also supports the determination that a common-law wife should lose her entitlement to a survivors or dependents allowance. The definition of a wife in the definitional section expressly refers to a common-law wife, and nothing else in the text of the statute contradicts the inclusion of a common-law relationship within the definition of remarriage. The fact that the provisions pertaining to the cancellation of a right to an allowance refer to specific dates such as the date of a marriage or of the dissolution of a marriage does not conflict with this interpretation; the National Insurance Institute is able to make determinations regarding the beginning and ending of a common-law relationship as well, albeit not as easily as in the case of an official marriage.

Petitions denied.

Legislation cited:

 

Basic Law: Human Dignity and Liberty.

Civil Wrongs Ordinance [New Version], 5728-1968.

Families of Soldiers Killed in Action Law (Pensions and Rehabilitation), 5710-1950.

Income Support Law, 5741-1980.

Inheritance Law, 5725-1965.

Interpretation Law, 5741-1981, s. 2.

Names Law, 5716-1956.

National Insurance Law [Consolidated Version], 5755-1995, ss. 1, 130(b), 135(a)-(c), 238, 255(b)-(d), 262.

National Insurance Regulations (Dependents allowance for Remarried Widows), 5737-1976.

Public Service Law (Pensions) [Consolidated Version], 5730-1970.

Israeli Supreme Court cases cited:

[1] HCJ 6522/06 Kochavi v. the Jerusalem Labour Court (2009) (not yet reported).

[2] HCJ 8929/08 Ben Nun v. National Labour Court (2009) (not yet reported).

[3] HCJ 525/84 Hatib v. National Labour Court [1986] IsrSC 40(1) 673.

[4] HCJ 840/03 Israel Professional Firefighters Union — Firefighters Committee v. Jerusalem Labour Court [2003] IsrSC 57(6) 810.

[5] HCJ 5666/03 Kav LaOved Organization v. National Labour Court (2007) (not yet reported).

[6] MApp 67/84 Hadad v. Paz [1985] IsrSC 39(1) 667.

[7] CA 2000/97 Lindorn v. Kranit Fund for Compensation of Road Accident Victims [1999] IsrSC 55(1) 12.

[8] CA 8569/06 Director of Land Taxation, Haifa Office v. Polity (2008) (not yet reported).

[9] CA 3622/96 Hacham v. Kupat Holim “Maccabi” [1998] IsrSC 52(2) 638.

[10] FH 40/80 Kenig v. Cohen, [1982] IsrSC 36(3) 701.

[11] LCA 3899/04 State of Israel v. Even Zohar (2006) (unreported).

[12] HCJ 6247/04 Gorodetzki v. Minister of Interior [12],(2010) (not yet reported).

[13] AAA 4614/05  State of Israel v. Oren (2006) (unreported).

[14] CA 1966/07 Ariel v. Egged Members Pension Fund Ltd (2010) (unreported).

[15] HCJ 2316/05 A v. National Labour Court (2005) (unreported).

[16] HCJ 4193/04 Gartner-Goldschmidt v. National Labour Court (2010) (not yet reported).

[17] HCJ 953/87 Poraz v. Mayor of Tel Aviv Shlomo Lahat [1988]  IsrSC42(2) 309.

[18] HCJ 6427/02 Movement for Quality Government v. Knesset (2006) (unreported).

[19] HCJ 4124/00 Yekutieli v. Minister of Religion (2010) (not yet reported).

[20] HCJFH 4191/97 Recanat v. National Labour Court [2000] IsrSC 54(5) 330.

[21] CrimA 4341/99 Vidal v. State of Israel [1999] IsrSC 54(3) 329.

[22] CA 2622/01 Director of Land Appreciation Tax v. Levanon [2002] IsrSC 57(5) 309.

[23] CA 165/82 Kibbutz Hatzor v. Rehovot Assessment Officer [1985] IsrSC 39(2) 70.

[24] CA 1186/93 State of Israel, Minister of Justice v. Israel Discount Bank Ltd [1994] IsrSC 48(5) 353.

[25] HCJ 5304/02 Israel Association of Victims of Work Accidents and Widows of Victims of Work Accidents v. State of Israel, Knesset [2004] IsrSC 59(2) 134.

[26] HCJ 8487/03 IDF Disabled Veterans Organization v. Minister of Defense (2006) (unreported).

[27] HCJ 9863/06 Karan - Society of Combat Veteran Quadriplegics v. State of Israel - Minister of Health (2008) (not yet reported).

[28] HCJ 693/91 Efrat v. Director of the Population Registry [1993] IsrSC 47(1) 749.

[29] HCJ 6304/09 Lahav v. Attorney General (2010) (not yet reported).

[30] CA 233/98 Katz v. Keren Makefet [2000] IsrSC 54(5) 493.

 

Labour Court cases cited:

[31] NLC 54/85-0 Ornan v. National Insurance Institute [1994] ILC 27 400.

[32] NIIApp1407/04 NII v. Friman (2006) (not yet reported).

[33] NIIApp 731/07 Kirshner v. NII (2009) (not yet reported).

[34] NIIApp 1212/04 Apter v. NII  [2005] ILC 40 461.

[35] NLC 30/19-0 NII v. Mano [1970] ILC 2 (1) 72.

[36] NLC 52/69-0 Leon v. NII [1992] ILC 24(1) 458.

[37] NLC 53/6-7 Batar v. Central Pension Fund of Histradrut Workers, Ltd [1994] ILC 27(1) 135.

[38] NLC 57/6-2 Central Pension Fund of Histradrut Workers, Ltd v. Kochavi (1997) (unreported).

[39] NIIApp 1169/01 Avital v. NII (2004) (unreported).

[40] NIIApp 779/06 NII v. Wolkowitz (2008) (not yet reported).

[41] NLC 56/255-0 Atar v. NII [1997] ILC 32 385.

 

For the petitioner in HCJ 5492/07 — T. Shilo.

For the petitioner in HCJ 7677/07 — N. Ashar; N. Weinberg-Eyal.

For the petitioners in HCJ 4820/08 — Y. Sirota; O Turner-Sternberg.

For respondent 2 — O. Rosen-Amir; T. Kazari.

 

 

JUDGMENT

Justice E. Hayut

Is a widow, who has not officially remarried but who is living as a common-law wife, to be treated as a widow who has remarried and is therefore no longer entitled to a survivors or a dependents allowance? This is the main question we face in the petitions that have been joined here for the purpose of deliberation.

The petitioners

1.            The petitioner in HCJ 5492/07, Ms. Smadar Boaron (hereinafter: “Boaron”), was widowed on 27 October 1996 and began receiving a dependents allowance from respondent 2 (hereinafter: “the NII” or “the Institute”). In 1998, Boaron began to live with her current partner, Mr. Tzachi Fink (hereinafter: “Fink”), first in a rented apartment and later in an apartment that the two purchased together in Rishon LeZion. Boaron and Fink never married (Boaron has stated that she did not feel confident regarding a marriage to Fink because he is five years younger than she is), but approximately eight years ago, she attached the name Fink to her family name. Two children were born to the couple — a son on 14 July 1999, and a daughter on 21 August 2003. On 16 May 2004, the NII informed Boaron that in light of information it received regarding her case, it considered her to be a “married woman” as of 14 July 1999 (the date on which the couple’s son was born), that her entitlement to a dependents allowance had therefore expired and that she was instead entitled to a one-time grant. After delivering this notice, the NII stopped paying Boaron a dependents allowance, and it deducted, from the one-time grant it paid to her, the amount of the allowances paid to her since the day as of which, as stated, the NII considered her to be a married woman.

2.            The petitioner in HCJ 7677/07, Ms. Noah Kariv (hereinafter: “Kariv”), was widowed on 15 July 1998 and began receiving a survivors allowance from the NII. Kariv lives with her life partner, Mr. Eliezer Lavie (hereinafter: “Lavie”), in his home on Kibbutz Ein Hashofet (hereinafter: “the Kibbutz”). On 1 August 2002, in order to arrange the mutual rights and obligations resulting from Kariv’s residence on the Kibbutz, the couple signed an agreement with the Kibbutz, according to which all of Kariv’s financial affairs would be conducted through Lavie’s personal budget, and he would be responsible to the Kibbutz for all her obligations. In a letter dated 24 February 2005, the NII informed Kariv that her survivors allowance had been revoked retroactively, from 1 August 2002, the date on which the said agreement with the Kibbutz was signed. The letter also informed her that she was entitled to a one-time grant instead of the allowance.

3.            Petitioner 1 in HCJ 4820/08, Ms. Malka Steir (hereinafter: “Steir”), was widowed on 8 March 1981 and began receiving a dependents allowance from the NII. Steir’s husband was killed in a work accident when serving as first mate on the ship Masada, which sank, and their son was born after his death (on 9 November 1981). At some point, Steir began to live with Mr. Eli Tasman, and their daughter was born on 10 April 1989. In March 2004, the NII informed Steir that it would no longer pay her a dependents allowance because it considered her to be a “married woman” as of 18 September 1994 (the date on which the National Labour Court rendered a decision in NLC 54/85-0 Ornan v. National Insurance Institute [31], to which I will refer below).

4.            Petitioner 2 in HCJ 4820/08, Ms. Shulamit Gabay Galoni (hereinafter: “Gabay Galoni”), was widowed in February of 1980 and began receiving a dependents allowance from the NII for herself and for her two daughters. After her daughters grew up, Gabay Galoni continued to receive a dependents allowance for herself only. Gabay Galoni has been living with Mr. Meir Galoni since 1991 and two children have been born to them — a son on 10 September 1991 and a daughter on 1 February 1993. The couple has no agreement between them. In May of 2003, the NII stopped paying the dependents allowance to Gabay Galoni, and a month later they informed her that the payment had been discontinued because the NII considered her to be a “married woman” as of 18 September 1994 (the date on which, as stated, the said decision was rendered in Ornan v. National Insurance Institute [31]).

5.            Petitioner 3 in HCJ 4280/08, Ms. Cheli Juliet (hereinafter: “Juliet”), was widowed in 1991 and began receiving a survivors allowance from the NII. Juliet has lived with Mr. Yigal Erez (hereinafter: “Erez”) since 1998. On 18 October 2004, the NII informed Juliet that her entitlement to a survivors allowance had ended as of 1 February 1998, the date on which she became Erez’ common-law wife. The NII also informed Juliet that because the payment of the allowance had been discontinued, she owed a debt in the amount of NIS 54,231; however, on 28 June 2005 it notified her that this debt had been cancelled. In any event, the NII discontinued its payment of a survivors allowance to Juliet as of 1 March 2004.

In light of the NII’s decision to discontinue its payments of survivors allowances and dependents allowances to these petitioners, they filed claims in the regional labour courts that focused on the question of whether a widow who has not remarried but who lives as a common-law wife is entitled to continue receiving a survivors allowance or a dependents allowance from the NII.

The judgments in the regional labour courts

6.            On 10 October 2005 the Nazareth Regional Labour Court allowed Kariv’s claim, and held that ss. 255 and 262 of the National Insurance Law prescribe the circumstances under which a remarried widow’s entitlement to a dependents allowance ends and those under which a remarried widow’s entitlement is reinstated. The court also held that the legislature had chosen to use “phrases that refer only to the world of marriage, in its original and narrow meaning.” The Nazareth Regional Labour Court also held that the denial of a spouse’s rights was not possible without an express statutory provision and that —

‘… the application of the provisions of s. 255 of the [National Insurance] Law to a “common-law wife/husband” requires additional changes in the section, apart from changing the word “married woman” wherever it appears to “common-law wife”; therefore, and in view of the case-law rule regarding a common-law wife/husband, it cannot be that this obstacle can simply be removed in some way other than a legislative change.’

On 20 May 2007, the Haifa Regional Labour Court joined in this holding and ruled in favor of Juliet. The court held that since the legislature had used clear language, according to which only a remarried widow would lose her entitlement to an allowance —

‘We cannot accept the argument that a widow who has begun a relationship with a new partner without formally marrying him is no longer entitled to a survivors allowance. Since the legislature determined that entitlement to an allowance lapses only upon the widow’s remarriage, only the act of marriage can cancel her right to an allowance, and no other act — including her becoming the common-law wife of another man — can do so.’

The court referred in its judgment to the decision of Vice President Elisheva Barak Ososkin in NIIApp  1407/04 National Insurance Institute  v. Friman [32], and held that “when there is no commitment by way of marriage, a person who has a common-law husband should not lose entitlement to a survivors allowance, because the institution of common-law marriage is not a stable one.”

7.            Regarding s. 135 of the National Insurance Law, the Tel Aviv-Jaffa Regional Labour Court granted Boaron’s claim against the NII, and held that according to the National Insurance Law [Consolidated Version] 5755-1995 (hereinafter: “the National Insurance Law”), entitlement to a dependents allowance expires only upon a widow’s remarriage and that “only the act of marriage will cancel [the widow’s] entitlement to the allowance, and no other act will do this, including her becoming another person’s ‘common-law wife’”. The Regional Labour Court held further that in light of the statutory language, s. 135 of the National Insurance Law cannot be applied to a widow who has become the common-law wife of another man, and noted that the section deals with the “specific dates on which a widow’s entitlement to a dependents allowance lapses or is renewed, and all those dates refer to the date of the marriage”; furthermore,  “regarding a person who is a common-law wife, it is clear that the dates of the beginning of the relationship, as well as its end, are not formal and clear, and therefore they cannot fall within the framework of the said section.” The Regional Labour Court rejected the NII’s claims that the National Labour Court’s holding in Ornan v. National Insurance Institute [31] supports the said interpretation of s. 135 of the National Insurance Law, and held that in the case before it, “the terms that are repeated, and under which the expiration of entitlement to an allowance, and the entitlement to a grant, are tied to specific dates, which are connected to the marriage process — all these lead me to the conclusion that the legislature’s intention regarding this section, given that it used the term “married”, was to refer to official marriage, and not to the institution of “common-law spouses”. In the end, the Regional Labour Court held that the same result will be reached upon a comparison to the Families of Soldiers Killed in Action Law (Pensions and Rehabilitation), 5710-1950 (hereinafter: the “Families of Soldiers Killed in Action Law”).

On 7 February 2006, the Haifa Regional Labour Court granted Gabay Galoni’s claim, referring, inter alia, to the judgment rendered in Boaron’s case. On 10 May 2006, the Tel Aviv-Jaffa Regional Labour Court also adopted this position in granting Steir’s claim against the NII.

The NII appealed all these decisions to the National Labour Court.

The judgments in the National Labour Court

8.            On 28 March 2007, the National Labour Court (President S. Adler, Judge Y. Plitman and S. Tzur, and public representatives Mr. A. Ben Gera and Y. Ben Yehuda) allowed the appeal brought by the NII against the decisions of the Regional Labour Courts in the matters of Boaron and Kariv, and held that the two should be viewed as remarried widows and that the provisions of ss. 135 and 255 of the National Insurance Law should be applied to each of them respectively (hereinafter: the “Boaron case”). The National Labour Court noted that under s. 1 of the National Insurance Law, the term “his wife” is defined as “including his common-law wife who lives with him,” and held that the Law equates the common-law wife to a married woman “and in any event it equates a widow with a common-law widow [sic].” The National Labour Court referred to Judge Plitman’s decision in NII v. Friman [32], in which he held as follows:

‘The question that arises is whether it may be concluded from the use of the expression, “a widow who has remarried” that the intention was to exclude a widow who conducts a full family life with a partner but has not been officially married . . .

[This question] should be answered in the negative for three reasons:

First, because of the reason underlying the objective of the law. The dependents allowance is an allowance which replaces the income brought by the spouse into the household — because the widow runs the household by herself after her husband’s death. Since the widow has now returned to sharing a household and family life with a life partner, she is again receiving support for the household finances, and therefore, in light of the purpose of the payment of the allowance as stated, she is no longer entitled to receive a dependents allowance.

This objective calls for a legal rule that does not distinguish between the law as it is applied to a widow who has officially remarried, and a widow who is a common-law wife. If we were to interpret the statutory language differently, there would be unjustified discrimination against the officially remarried widow whose financial support is discontinued, as opposed to the widow who has established a new family unit without anchoring it through participation in a marriage ceremony, whose allowance does not expire.

Secondly — the non-expiration of entitlement to a dependents allowance for a widow who has established a new home with a common-law husband would create an absurd situation in which, on the one hand, the legislature does not recognize the institution of common-law spouses and a widow therefore does not lose her entitlement to a dependents allowance even if she has reestablished a home with a common-law husband, and on the other hand, it does recognize the concept of a common-law spouse and grants a dependents allowance to a woman whose life partner, the common-law husband, passes away . . .

Thirdly — the absurdity arising from the non-expiration of the entitlement to a dependents allowance for a widow who has established a new home with a common-law husband is exacerbated in the case in which her common-law husband dies as a result of a work accident. In such a case, according to my colleague the Vice President, the widow would enjoy, in theory, a simultaneous double entitlement to two dependents allowances: one due to the death of her [non-common-law] husband and another due to the death of her common-law husband.

The legislature’s objective in establishing entitlement to a dependents allowance for a common-law wife whose life partner died is the same objective as we face here — a perception of the status of the common-law wife as being equal to that of a married woman, at least for the purpose of entitlement to a dependents allowance through which a widow is paid an allowance after the death of her life partner’ (ibid., at paras. 9-12).

The National Labour Court further held that a widow who is a common-law wife should also be viewed as a remarried widow with regard to the conversion of a survivors allowance to a survivors grant, noting that in the same way that a common-law wife is viewed as a married woman, a widow who has become a common-law wife should be considered as having married. The National Labour Court emphasized that this was not only a matter of denial of entitlement to an allowance; it also involved the creation of an equivalence in relation to entitlement to an allowance while providing grants to a remarried widow, and it therefore rejected the argument that there was a violation of the Basic Law: Human Dignity and Liberty. The National Labour Court also held that the date on which a common-law wife was deemed to have married is not determined arbitrarily, and that her entitlement to a grant (and the suspension of her allowance) begins “on the day on which it can be determined that she meets the definition in s. 1 of the National Insurance Law — ‘his common-law wife who lives with him’ — on the basis of an established factual foundation.” For all of the above-mentioned reasons, the National Labour Court held that Boaron and Kariv were to be treated as remarried widows. As the court wrote:

‘What reason is there for distinguishing between these two women whose cases are before us, who have lived with their partners for several years, and who are raising children with them, conducting a joint household, a new family unit, and following a mutual declaration of their relationship in the form of a financial agreement — and those women who have anchored their relationships with their partners through a religious ceremony? Any distinction that is made between the two cases is basically discriminatory and misses the legislative intent to anchor the status of the common-law wife in the definitional section of the National Insurance Law by defining the term “his wife” as “including his common-law wife who lives with him,” thus viewing the status of the common-law wife as being equivalent to that of a married woman’ (para. 14).

Finally, the National Labour Court held that the fact that a couple did not have joint ownership of any assets would not change its ruling, and that the date of expiration of the entitlement to an allowance should be established in each case on the basis of the particular factual circumstances.

9.            On 19 March 2008, the National Labour Court (President S. Adler, Judges J. Plitman and V. Virt-Livne and public representatives S. Habshush and J. Deutsch) also allowed the NII’s appeals of the judgments rendered by the regional labour courts in the suits brought by Gabay Galoni, Juliet and Steir, and held that they should be viewed as remarried widows (hereinafter: the “Gabay Galoni case”). The court repeated its holding that “a narrow interpretation of the term ‘remarried’ whereby it applies only to a widow who has undergone a marriage ceremony and not to a widow who has become a common-law wife leads to an unjustified favoring of the common-law wife over a woman who has been married in a formal ceremony, when the purpose of the law is to create an equivalence between the two.” The National Labour Court further held that the relevant provisions of the National Insurance Law should be interpreted in accordance with the other provisions of that Law, and not in accordance with the interpretation of the Families of Soldiers Killed in Action Law.

The petitions before us relate to these judgments, and following a hearing held in this Court on 3 November 2008, we issued an order nisi on 4 November 2008 ordering the NII to explain why the National Labour Court’s holding, that the meaning of the term “a widow who has remarried” is not limited to widows who have actually remarried but also applies to widows who are living as common-law wives, should not be reversed.

The parties’ arguments

10.          The petitioners argue that this Court must intervene in the National Labour Court’s judgments in the Boaron and Gabay Galoni cases, in view of a substantive legal error made in reaching them. Specifically, the petitioners argue that the National Labour Court’s judgments are inconsistent with the express language of ss. 135, 255(b), (d) and 262 of the National Insurance Law, which relate to a widow who has “remarried”, and that the language does not support an interpretation according to which these provisions relate to widows who are living as common-law wives — women who, by definition, have not remarried but are instead living with a partner. The petitioners argue in this context that the objective that the National Labour Court attributed to ss. 135, 255(b), (d) and 262 of the National Insurance Law — the creation of an equivalence not only in terms of the rights enjoyed by married couples as compared to the rights of couples living together, but also in terms of the obligations that both types of couple bear — deviates from the various possible linguistic interpretations of the section. They emphasize that the provisions establish specific dates on which the widow’s right to a dependents or survivors allowance either expires or is renewed. The petitioners note that the National Insurance Law refers to the concept of common-law marriage, and from this they infer that the legislature chose to apply ss. 135, 255(b), (d) and 262 to widows who have been formally remarried. The petitioners are of the opinion that the National Labour Court’s interpretation of the terms “married” and “date of marriage” will have “sweeping ramifications — without there having been a systemic, comprehensive, in-depth and methodical examination” of the other pieces of legislation dealing with marriage, and that such an examination can and should be carried out by the legislature alone.

As to the purpose of the National Insurance Law, the petitioners argue that it was intended to ensure the social security of Israel’s citizens, and that the level of social security enjoyed by common-law wives is less than that of married women due to the absence of a substantive financial anchor and to the unwillingness of the parties to make a commitment to each other through marriage. On this matter, the petitioners further argue that the ties between individuals who live as common-law spouses are characterized by varying levels of stability, and that clear criteria are therefore required in order to determine when the allowance given to a widow who has become another man’s common-law wife will be discontinued. The petitioners also argue that while the criteria for determining who falls within the definition of a common-law wife for the purpose of granting rights should be lenient, the criteria for making the same determination for the purpose of denying rights should be strict.

The petitioners argue that the National Labour Court has cancelled a right that is granted to a widow by primary legislation, and that in light of the complexity of the subject and its public importance, such a cancellation of rights should be left in the hands of the legislature. They further argue that the National Labour Court’s interpretation of the term “a widow who has remarried” violates the principle of equality with regard to the treatment of widows under the Families of Soldiers Killed in Action Law. In this context, they argue for the rejection of the NII’s position that a justifiable distinction may be made between the two groups of widows. The petitioners argue that the circumstances of a husband’s death are irrelevant, and that the purpose of both laws is to ensure that a widow who has been left without an additional provider can support herself with dignity. The petitioners also argue that the denial of their rights to an allowance due to their having become common-law wives violates their basic property rights; they argue that a statute which deprives citizens of their rights, or which reduces such rights, must be construed literally.

The petitioners further argue that the application of the provisions of ss. 135, 255(b), (d) and 262 of the National Insurance Law to widows who are living as common-law wives involves a degree of arbitrariness in terms of the determination of the date as of which the widow loses her entitlement to an allowance. Finally, the petitioners argue that the widowers have relied on their monthly allowances from the NII for their support and that their partners do not provide them with financial assistance, and do not support them — nor are they obligated to do so.

11.          The NII argues that the National Labour Court was correct in holding that the term a “widow who has remarried” also includes widows who are living as common-law wives, and that the position that the term “married” relates only to women who have had an actual wedding and not to common-law wives was already been rejected in Ornan v. NII [31]. The NII further argues, in this context, that because the term “wife” is defined in s. 1 of the National Insurance Law as including “his common-law wife who lives with him,” the term wife “who has married” applies as well to a woman who has connected her life to a partner as a common-law wife, even if she has not married her partner. According to the NII, a woman who is officially married has no advantage over the woman who is living as a common-law wife, and it is not reasonable that a widow who is the common-law wife of another man should have an advantage over a person who has officially married another person. Regarding this matter, the NII stresses that both a widow who has officially remarried and a widow who is a common-law wife would be entitled to an allowance by virtue of the second “spouse”, if that “spouse” should also pass away.

The NII also argues that the objective of the National Insurance Law is to assist a family unit when it has lost one of the heads of the household who had contributed to its economic maintenance. In accordance with this objective, when the surviving spouse establishes a new relationship, the need for this continued public support becomes irrelevant. The NII therefore believes that the language of the National Insurance Law, its objective, and its structure, as well as the quest for legislative harmony, do not justify any distinction between a widow who has remarried and a widow who is living as a common-law wife. On the contrary: according to the NII, allowing the appeal would mean unfair discrimination between the treatment of two groups of widows when there is no relevant difference between them with regard to entitlement to an allowance. The NII argues for the rejection of the petitioners’ argument that the National Labour Court’s interpretation establishes a primary legislative arrangement and an ultra vires act; it stresses that a court does have the authority to interpret acts of legislation — noting that this Court has in the past recognized the rights of common-law wives who had not been expressly included in relevant legislation. The NII also argues that identical terms appearing in different statutes are to be interpreted in accordance with each statute’s objective, and that the petitioners’ argument — that the National Labour Court’s interpretation will have sweeping consequences, even though there has not been any in-depth or methodical examination of the interpretation’s effect on other pieces of legislation dealing with marriage — should not be accepted.

Regarding the dates prescribed in the provisions of ss. 135, 255(b), (d) and 262 of the National Insurance Law, the NII argues that even if it is difficult to identify the “correct” date, this does not change the legal interpretation regarding the substantive right, and that insofar as implementation of the provisions is the issue, such implementation is a matter for the competent authorities, to be determined on the basis of appropriate proof, and these determinations will be subject to judicial review by the Regional Labour Court.

The NII argues that the proper interpretation of the term a “widow who has remarried” should not be inferred from the rules that apply to widows under the Families of Soldiers Killed in Action Law, due to the different frameworks and to the relevant difference between these two groups of widows. The NII further argues that the petitioners could also seek an amendment of the law (as was done in the case of the Families of Soldiers Killed in Action Law). The NII thus argues that there is no violation of the principle of equality here, and it further argues that the constitutional right to property does not apply to pension rights under the National Insurance Law. Finally, the NII contends that the petitioners’ argument concerning their reliance on their allowances should not be accepted, and that in any event this reliance neither adds nor detracts from the need to decide on the very existence of the right to an allowance. In this context, the NII also argues that neither the survivors allowance nor the dependents allowance is intended to secure basic living conditions: that objective is achieved through the income support allowance.

Deliberation

12.          This Court, sitting as the High Court of Justice, acts with considerable restraint regarding any intervention in the decisions of the National Labour Court (see HCJ 6522/06 Kochavi v. Jerusalem Labour Court [1], at para. 17; HCJ 8929/08 Ben Nun v. National Labour Court [2], at para. 18) and it will intervene in that court’s judgment only in those cases in which two conditions have been met, cumulatively: first, that the judgment is tainted by a substantive legal error; and second, that justice requires its correction. In examining the existence of a “substantive legal error”, this Court will consider whether, inter alia, the subject under discussion is of public importance and to what extent it is a general and widespread issue (see HCJ 525/84 Hatib v. National Labour Court [3], at pp. 693-694; HCJ 840/03 Israel Professional Firefighters Union — Firefighters Committee v. National Labour Court [4], at pp. 814-815; HCJ 5666/03 Kav LaOved Organization v. National Labour Court [5], at para. 28). There is no dispute that the subject before us is an important one. Nevertheless, I will already state that in my view, the National Labour Court’s decisions in the present matter are not tainted by any substantive legal error that would justify our intervention.

13. Section 135 of the National Insurance Law, relating to dependents allowances, and ss. 255(b), (d) and 262 of that Law, relating to survivors allowances, stands at the heart of the discussion and it is therefore appropriate to cite them in full.

Section 135 of the National Insurance Law refers to a widow who receives a dependents allowance pursuant to Chapter E, which deals with work accident victim insurance. It provides as follows:

135. A widow who has remarried

(a)          If a widow remarries, her right to an allowance expires and the Institute will pay her a grant in two installments as follows:

(1) After the date of her remarriage — an amount equal to the dependents allowance, which is calculated on the basis of the amount of the allowance as stated in s. 132(1) (hereinafter: “the allowance amount”) that was paid for the month in which she remarried, multiplied by eighteen;

(2) At the end of two years from the date of her remarriage — an amount equal to the allowance amount as it would have been paid to her, had she not remarried, for the last month of the said two years, multiplied by eighteen;

However, if she is no longer married ten years after the date on which she remarried, or if, within this period, divorce proceedings between her and her spouse have been initiated in a religious or a civil court, she will again be entitled to an allowance beginning on the date she ceased to be married, as stated, and a grant or a first installment thereof, which was paid to her pursuant to this sub-section, will be credited against the allowance, according to the provisions of paras. (1) – (4) of s. 262(a).

(b) If a widow’s husband from her new marriage passes away and she receives a dependents allowance or a survivors allowance because of him, she will receive the second installment of the grant, even if less than two years have passed from the date of her remarriage; the grant will be calculated on the basis of the allowance amount that would have been paid to her for the month in which her husband passed away as stated, had she not remarried.

(c) Notwithstanding the provisions of sub-section (a), the Minister may prescribe certain conditions and situations in which the right of a widow who has remarried to receive an allowance will not expire.

Section 130(b)(1) of the National Insurance Law provides that the provisions that apply to a widow regarding these matters will also apply to a widower.

Sections 255(b), (d) and 262 of the National Insurance Law refer to a widow who receives a survivor’s allowance pursuant to Chapter K, dealing with Old Age Insurance and Survivors Insurance, and they provide as follows:

255. Payment of a grant

. . .

(b)          If a widow who is entitled to a survivors allowance remarries, her right to the survivors allowance will expire and the Institute will pay her a grant in two installments as follows:

(1) After the date of her remarriage — an amount equal to the survivors allowance which is calculated on the basis of the amount of the allowance as described in s. 252(a)(1) (hereinafter: “the allowance amount”) which had been paid for the month in which she had remarried, multiplied by eighteen;

(2) At the end of two years from the date of her remarriage — an amount equal to the allowance amount as it would have been paid to her, had she not remarried, for the last month of the said two years, multiplied by eighteen;

(c) If a widow’s husband from her new marriage passes away and she receives a survivors allowance or a dependents allowance because of him, she will receive the second installment of the grant, even if less than two years have passed from the date of her remarriage; the grant will be calculated on the basis of the allowance amount that would have been paid to her for the month in which her husband passed away as stated.

(d) A widower, for the purpose of this section, will be treated in the same manner as a widow.

262. A widow or widow who has remarried

(b)          A widow who is entitled to a grant pursuant to this Part due to her marriage will lose her entitlement to an allowance; however, if she is no longer married ten years after the date on which she remarried, or if, within this period, divorce proceedings between her and her spouse have been initiated in a religious or a civil court, she will again be entitled to an allowance beginning on the date she ceased to be married, as stated, and a grant or a first installment thereof, which was paid to her pursuant to this sub-section will be credited against the allowance, subject to the following provisions:

(1)          If the widow’s entitlement to an allowance is renewed within 18 months from the date on which her entitlement to an allowance expired pursuant to her marriage, the amount to be credited against her allowance will be one eighteenth of the first installment, multiplied by the number of months for which she is entitled to an allowance during the said eighteen months;

(2)          If the widow’s entitlement to an allowance is renewed later than 18 months from the date on which her entitlement to an allowance expired pursuant to her marriage, the first installment of the grant will not be credited against her allowance;

(3)          If the widow’s entitlement to an allowance is renewed later than two years and earlier than three years after the date on which her entitlement to an allowance expired pursuant to her marriage, the amount to be credited against her allowance will be one eighteenth of the second installment, multiplied by the number of months for which she is entitled to an allowance during the last eighteen months of the said three years;

(4)          If the widow’s entitlement to an allowance is renewed later than three years after the date on which her entitlement to an allowance expired pursuant to her marriage, the second installment of the grant will not be credited against her allowance;

(b)          Notwithstanding the provisions of sub-section (a), the Minister may specify certain situations and conditions in which the right of a widow who has remarried to receive an allowance will not expire.

(c)           The provisions of this section will apply to a widower as well, mutatis mutandis.

14.          The question we face is, as stated, whether the provisions of ss. 135, 255(b) – (d) and 262 of the National Insurance Law are also properly applied to a widow or widower who subsequent to being widowed has become the common-law wife or husband of another partner.

The starting point of any process of statutory interpretation is the statutory language, and that language will set the limits of the interpretation, in the sense that the words of the statute may not be given a meaning that they cannot support (see MApp 67/84 Hadad v. Paz [6], at p. 670; CA 2000/97 Lindorn v. Kranit Fund for Compensation of Road Accident Victims [7], at p. 25; CA 8569/06 Director of Land Taxation, Haifa Office v. Polity [8], at para. 26). This Court has therefore held on several occasions that “the language component is not a sufficient condition for a particular interpretation, but it is a necessary condition” (CA 3622/96 Hacham v. Kupat Holim “Maccabi” [9], at pp. 646-647) and that “the judge may not  . . . realize an objective unless it has some basis — even a weak one — in the statutory language” (FH 40/80 Koenig v. Cohen [10], at p. 715; see also LCA 3899/04 State of Israel v. Even Zohar [11], at para. 14; Director of Land Taxation v. Polity [8], at para. 26; A. Barak, Legal Interpretation (vol. 2, ‘Statutory Interpretation,’ 1993), at pp. 81-84, 97-100).

15.          Can the language in ss. 135, 255(b), (d) and 262 of the National Insurance Law support a legal interpretation that also applies these provisions to a widow or widower who is living as a common-law spouse?

In order to answer this question, we must examine, inter alia, the definitional section of the statute, which is designed to establish the scope of the linguistic significance of the terms that are the subject of each definition (see Director of Land Taxation v. Polity [8], at paras. 29-30; Barak, Legal Interpretation, supra, at pp. 137-138). The definitional section of the National Insurance Law (s. 1) provides as follows: “‘his wife’ — including his common-law wife who lives with him.” The term “including” generally expands the scope of the literal meaning that may be attributed to the defined term (see Barak, Legal Interpretation, supra, at p. 138) and in Ornan v. NII [31], the National Labour Court, in reliance, inter alia, on the definitional section, held  that the term “a married woman” also includes a common-law wife. In that case, the National Labour Court rejected the NII’s argument (the opposite argument to the argument it makes here) that the term “married woman” means only an officially married woman, and held that the term “his wife” in the definitional section “means a ‘married woman’, because were this not the case, why would it have been necessary for the legislature to add at the end, ‘including his common-law wife’?” (Ibid., [31], at p. 407.) The National Labour Court also noted in that case that “there is nothing in that section [which was the subject of the dispute there], either in its substance or in its context, that contradicts the definition of the term ‘his wife’ in s. 1 of the statute, and that the rule applying to a ‘married woman’ [in that section] is the same as that applying to ‘his wife’ in s. 1 of the statute” (ibid., [31], at p. 408). This holding was reached in light of the provision in s. 2 of the Interpretation Law, 5741-1981, under which “a term that is defined in legislation will have the meaning assigned to it by the definition . .  . unless otherwise stated with regard to the particular matter, and provided that nothing in the subject-matter or context is inconsistent with the definition.”

16.          We accept the position that the term “married woman” can, in linguistic terms, support a legal meaning that includes “a woman living as a common-law wife.” But the petitioners claim that the language in the sections under discussion in this case — unlike the section which was the subject of Ornan v. NII [31] — indicates only a narrow range for possible interpretation, one which does not include a widow who is a common-law wife. This is because the provisions of ss. 135, 255(b), (d) and 262 of the National Insurance Law relate to defined dates that are, in their view, relevant only to widows who have remarried officially, particularly the date on which the widow remarried and the date as of which she was no longer remarried.

I cannot accept the petitioners’ argument in this matter.

Indeed, the assumption is that “the legislature is using regular language and the language cannot be interpreted other than according to its plain meaning” (HCJ 6247/04 Gorodetzki v. Minister of Interior [12]); occasionally, however, and to the extent justified by the objective that the statute is intended to achieve, the interpreter may attribute  a unique and unusual meaning to particular words, if that meaning falls within the linguistic range delineated by the statutory language (see Barak, Legal Interpretation, supra, at pp. 117-118). In this case, and as I will describe below, it appears to me that from a linguistic perspective, the dates specified in ss. 135, 255(b), (d) and 262 of the National Insurance Law (the date on which a widow remarried or the date as of which she was no longer married) can be interpreted in a manner that applies them also to the dates on which a widow began or ceased to be a common-law wife, whichever is relevant. Indeed, while it is a simple matter to identify the establishment of a marital connection by virtue of a formal and constitutive act, the identification of a date on which a couple began to live together as common-law spouses or the date on which a couple ceased to live as such is less clear-cut, and requires a factual examination of the nature and circumstances of the relationship. In my view, however, this fact does not rule out an interpretation that applies the provisions to which the petitions before us relate to common-law spouses as well, in view of the standard criteria for determining these matters, according to which a couple will be recognized as common-law spouses if they have a conjugal relationship and a shared household (see AAA 4614/05 State of Israel v. Oren [13]; CA 1966/07 Ariel v. Egged Members Pension Fund Ltd. [14], at para. 25). Similar tests are applied by the NII with regard to the granting of allowances (see, for example, NIIApp 731/07 Kirshner v. NII [33]), and there is nothing to prevent their application where required with respect to the expiration of the right to an allowance. In any event, a party who believes that he or she has been harmed by a decision of the NII regarding this matter is free to initiate the appeal procedures prescribed by law (see and compare: HCJ 2316/05 A v. National Labour Court [15]; NIIApp1212/04 Apter v. NII [34], at p. 469).

Since my conclusion is that the language of the relevant statutory sections does not negate any of the interpretations that the parties wish to give to the provisions of ss. 135, 255(b), (d) and 262 of the National Insurance Law, we must now proceed to determine what is the objective that underlies the legislation that we are required to interpret.

17.          The objective of the National Insurance Law with respect to survivors allowances and work accident victim insurance is “to protect against economic shortages that are liable to follow the curtailing of income as a result of a provider’s work accident, old age or death. Its purpose is not to grant rights to a person by reason of his being the relative of another person, but rather, to prevent a defined group of persons from suffering from financial shortages because they are no longer receiving their own income or the income of their provider” (NLC 30/19-0 NII v. Mano [35], at p. 77; see also: NLC 52/69-0        Leon v. NII [36], at p. 464; NLC 53/6-7 Batar v. Central Pension Fund of Histradrut Workers, Ltd [37], at p. 140; NLC 57/6-2 Central Pension Fund of Histradrut Workers, Ltd v. Kochavi [38], at para. 6; see and compare HCJ 4193/04 Gartner-Goldschmidt v. National Labour Court [16]).Thus, the survivors and dependents allowances that are paid pursuant to the National Insurance Law are intended to compensate for the loss of financial support that a person had been receiving from his or her partner as a dependent of that partner in connection with such support, and to preserve a roughly similar standard of living to that which the survivor enjoyed prior to the provider’s death (see Gorodetzki v. Minister of Interior [12], at para. 23; NIIApp 1169/01 Avital v. NII [39]; Kirshner v. NII [33], at para. 8(e)).

In light of these objectives, the right of a widow or widower to an allowance expires upon remarriage, according to the provisions of ss. 135, 255(b), (d) and 262 of the National Insurance Law. This is due to the assumption that the new familial unit that has been established will be sufficient to replace the loss of income that ensued from the death of the previous partner (see NIIApp 779/06 NII v. Wolkowitz [40], per President S. Adler, at para. 3). At the same time, and in order to enable a widow or widower to adapt to the expiration of the right to an allowance pursuant to the above-mentioned sections, the statute provides that they will be entitled to a grant which is equal to thirty-six months of the allowance. (The two installments of the grant are paid within a period of two years from the date of the remarriage.) The Minister of Labour and Welfare is also authorized, by virtue of ss. 135(c), and 262(d) of the National Insurance Law, to prescribe certain circumstances and conditions under which the right of a remarried widower or widow to an allowance will not expire. The regulations that the Minister enacted pursuant to this authorization (see National Insurance Regulations (Dependents Allowance for Remarried Widows), 5737-1976) provide that a remarried widow’s right to a dependents allowance will not expire if the new husband is unable to support himself or if he is over 60 years old, provided that the new husband’s income does not exceed one twelfth of the amount specified in Item 1 of Table B of the National Insurance Law. Similar regulations have not been enacted with respect to a survivors allowance.

The objective of the provisions that cancel the right to an allowance in the event of an official remarriage, and the above-mentioned rationales which underlie that objective, are also applicable with respect to a widow or widower who has begun to live with a new partner in a common-law marriage. Indeed, a widow or widower who lives as a common-law spouse will benefit from shared income with the new partner and from a shared bearing of expenses — assuming that there is a shared household, which is a condition for the couple being classified as common-law spouses. Under these circumstances, there is no justification for the widow or widower to continue to receive a survivors allowance or a dependents allowance; such allowances are intended to provide protection from the financial shortage that the death of a provider is expected to entail.

18.          Together with the search for the specific objective of the legislation that we wish to interpret, we ought to examine the extent to which the legislation expresses the basic values of the legal system, in light of the accepted principle that these values must find expression in every piece of legislation. One of the basic values of the legal system in Israel, relating directly to the matter under discussion here, is the principle of equality, a value which has been accorded constitutional status (see HCJ 953/87 Poraz v. Mayor of Tel Aviv Shlomo Lahat [17], at pp. 329-332; Lindorn v. Kranit Fund [7], at pp. 29-30; HCJ 6427/02 Movement for Quality Government v. The Knesset [18], (per President Barak, at paras. 36-40); HCJ 4124/00 Yekutieli v. Minister of Religion [19], at para. 35). The significance of this is that when there is no relevant difference between individuals, they are entitled to equal treatment, inter alia in terms of the legal rules that apply to them. A claim of discrimination can therefore arise when a different legal rule is applied to individuals or groups between whom there is no relevant difference (see HCJFH 4191/97 Recanat v. National Labour Court [20], at pp. 343-345). The complexity involved in the implementation of the principle of equality was noted by President Beinisch in Yekutieli v. Minister of Religion [19] as follows:

‘It is not a simple matter to determine whether a particular norm violates the principle of equality. By its very nature, the question calls for a discussion of the characteristics and purposes of the norm, and a determination of the “peer group” relevant to the matter at hand. The peer group is the group of individuals or entities to which the obligation to act in accordance with the principle of equality applies . . . and it is derived, inter alia, from the norm’s purpose and from the scope of its application. Sometimes the legislature determines the peer group as a part of the norm itself, and sometimes the court must define, by means of a number of variables, what the peer group is in each specific case’ (ibid., at para. 36).

Here, the petitioners and the NII do not dispute the fact that there is a difference between the group comprising widows who have remarried by virtue of a wedding ceremony which is recognized by law, and the group comprising widows who are living as common-law wives. The parties’ disagreement relates to the matter of whether, for the purposes of ss. 135, 255(b), (d) and 262 of the National Insurance Law, the difference between these groups is a relevant one. The NII argues that an interpretation of the above-mentioned sections which excludes widowers and widows who are living as common-law spouses from coverage by those sections will create a situation whereby two groups between whom there is no relevant difference are treated differently. This argument, which the National Labour Court accepted, is a strong one, and I also believe that there is no relevant difference between the widowers and widows who have been officially remarried and those who are living as common-law spouses — no difference that justifies the application of a different legal rule to the two groups with regard to the expiration of the right to an allowance. Indeed, the members of both of these groups lost a source of income when their partners passed away, and the members of both groups have established new family units, and in relation to both groups, there is a presumption that the new partners share income and expenses. The petitioners argue in this regard that the relationship between partners who are living in a common-law marriage is less stable than the relationship between partners who were married officially, and that this creates a relevant distinction that justifies different treatment with regard to the expiration of the right to an allowance. This argument cannot be accepted, for even if we presume — in concert with the petitioners — that the relationship between partners who are living in a common-law marriage is indeed less stable than the relationship between partners who are officially married, this does not create a relevant distinction between the two groups with respect to the present matter. This is because the arrangement prescribed in ss. 135, 255(b), (d) and 262 of the National Insurance Law, which cancels the right to an allowance, also foresees the possibility that the new relationship will not last, and ss. 135(b)(2) and 262(a) of the statute therefore include a provision that a widow who remarries will regain her entitlement to an allowance —

‘ . . . if she is no longer married ten years after the date on which she was remarried, or if, within this period, divorce proceedings between her and her spouse have been initiated  . . .’

It is understood, however, that if the provision that cancels the right to an allowance also applies to widows or widowers who are living as common-law spouses, the provision that re-entitles them to an allowance if the new common-law relationship ceases to exist before ten years have elapsed since its inception will also apply to them. Thus, the alleged distinction based on the difference in the level of the stability of the relationship is also insufficient to justify the application of a different legal rule to the petitioners as widows who are now living as common-law wives, on the one hand, and to widows who have been officially remarried, on the other hand.

19. In Ornan v. National Insurance Institute [31], the National Labour Court, in a different context pertaining to the National Insurance Law, noted the implications of a discriminatory rule that involves an improper favoring of common-law wives, stating as follows:

‘We should not attribute to the legislature an intention to grant the common-law wife only benefits, and to spare her the disadvantages. The aim of the Law is to create an equivalence for all purposes — with respect to both the good and the bad — between the common-law wife and the married woman’ (ibid., at p. 408).

I find this approach to be acceptable, and it provides an appropriate response to the contention that the provisions of the National Insurance Law can be extended through interpretation when they grant benefits, but cannot be extended when the extension involves a negation of rights. Indeed, it is hard to imagine that for the purpose of granting a survivors allowance (pursuant to s. 252 of the Law) and a dependents allowance (pursuant to s. 131 of the Law), a common-law wife will be considered a “widow” due to having been the “wife” (under the definition in s. 1 of the Law) of her deceased partner (see: NLC 56/255-0 Atar v. NII [41], at p. 387; Kirshner v. NII [33], at para. 8(a)), but that she will not be considered to be the “wife” of her new partner with whom she is living as a common-law spouse with regard to the expiration of the entitlement to these rights (pursuant to ss. 135, 255(b) and (d) of the Law).

It appears to me that the same question arises regarding both the granting of rights and their expiration, i.e., whether there is a relevant distinction, with respect to either issue, between couples who are officially married and couples who are living together in a common-law marriage (see and compare 4341/99 CrimA Vidal v. State of Israel [21],                 at p. 334; CA 2622/01 Director of Land Appreciation Tax v. Levanon [22], at p. 326).

Professor Shahar Lifshitz’ comments are also pertinent here:

‘When, as the result of the attempt to equate the support given to the institution of common-law marriages and the institution of official marriage, a situation is created that favors the common-law partners, the result is untenable . . . in light of the proclivity to equate the rights of common-law spouses to those of married people, a parallel reform is required that will equate the duties imposed in the two cases . . . ’ (S. Lifshitz, Common-Law Partners From the Perspective of the Civil Theory of Family Law (2005), at pp. 235-236).

The degree to which different treatment of widows and widowers in common-law marriages (as compared to the treatment of widows and widowers who have officially remarried) is liable to create a discriminatory and even absurd situation regarding the expiration of entitlement to survivors allowances or for dependents allowances, was demonstrated in the National Labour Court’s decision, when it noted the following among the reasons for its ruling:

‘The absurdity with respect to the non-expiration of the entitlement to a dependents allowance of a widow who has established a new home with her common-law husband is exacerbated in the case in which her common-law husband dies as a result of a work accident. In such a case, according to my colleague the Vice President (in Friman), the widow will in theory be entitled, simultaneously, to two dependents allowances: one arising from the death of her official husband and one arising from the death of her common-law husband.’

This discriminatory result does indeed reach the level of absurdity and it must be avoided, not only because of the harm done to the principle of equality but also because of the rule that requires us to avoid, to the extent possible, an interpretation of statutory provisions that leads to an absurd result (see and compare, CA 165/82 Kibbutz Hatzor v. Rehovot Tax Assessor [23], at p. 74; CA 1186/93 State of Israel, Minister of Justice v. Israel Discount Bank Ltd [24], at p. 361; Barak, Legal Interpretation, supra, at pp. 280-283).

In light of the above, I believe that with respect to the expiration of entitlement to a survivors or a dependents allowance pursuant to ss. 135, 255(b), (d) or 255(b), (d) and 262 of the National Insurance Law, the widows who are living as common-law wives should be subject to the same rule as widows who have been officially remarried, as the purpose of the legislation justifies this interpretation, and as it is also an interpretation that the statutory language will support.

20.          We must still consider the petitioners’ argument that the adoption of the National Labour Court’s interpretation of the provisions of ss. 135, 255(b), (d) and 262 of the National Insurance Law, i.e., that rights to allowances will expire for widows who are living with their partners as common-law wives, unfairly discriminates against them, as compared to widows who live as common-law wives and who are entitled to pensions pursuant to the Families of Soldiers Killed in Action Law. This argument must also be rejected. First, Amendment 30 of the Families of Soldiers Killed in Action Law changed that Law’s definition of a widow to “a person who was the wife of the decedent at the time of his death, including a woman who prior to the decedent’s death was living with him and who, on the date of his death, was his common-law wife — even if she has married another person” (emphasis added), and s. 12A of that Law, whereby the widow of a decedent who remarried lost her entitlement to a pension pursuant to the Law, was cancelled  (see the Families of Soldiers Killed in Action Law (Amendment 30), 5770-3009, SH 252). In enacting these measures, the legislature demonstrated that with respect to the widows of soldiers who were killed in action, the intention was to continue the payment of a pension even after they remarried, and, in any event, if they were living as the common-law wives of other men. Second, it has been held several times that in enacting a series of laws relating to those who were wounded or who sacrificed their lives for the country, or to their families, the legislature wished to give expression to the moral obligation owed by the state, and that these laws should therefore not be viewed as intended only to provide social security, as the National Insurance Law does. This explains the difference that appears in some contexts between the language in the National Insurance Law and the language in these other laws (see: HCJ 5304/02 Israel Association of Victims of Work Accidents and Widows of Victims of Work Accidents v. State of Israel, Knesset [25], at pp. 141-142; HCJ 8487/03 IDF Disabled Veterans Organization v. Minister of Defense [26], at paras. 21-23; HCJ 9863/06 Karan - Society of Combat Veteran Quadriplegics v. State of Israel - Minister of Health [27], at paras. 11-14).

For all the reasons mentioned above, I propose to my colleagues that the petitions be denied without any order regarding costs.

 

Justice E. E. Levy

I concur.

 

President D. Beinisch

I concur in the decision of my colleague, Justice E. Hayut, and I also agree with her reasoning. Indeed, Israeli legislation and case law have recognized the status of the common-law spouse; this has certainly been the case with respect to social support and rights (see, among others, the Inheritance Law, 5725-1965; Names Law, 5716-1956; Families of Soldiers Killed in Action Law. And see, for example HCJ 693/91 Efrat v. Director of the Population Registry [28]; Lindorn v. Kranit Fund [7]; Director of Land Appreciation Taxation v. Levanon [22]). The professional literature, it is true, contains various views relating to the possibility of applying to common-law couples arrangements that are similar to those applying to married couples. For example, the argument is made that the various arrangements that apply to married couples should not be applied equally to couples living together in common-law relationships, so as not to frustrate the wishes of those who have chosen, knowingly, to refrain from entering into official marriages (see, for example, the arguments made in S. Lifshitz, Common-Law Partners, supra, at pp. 199-216). In any event, this question does not arise in the case before us, since it appears to me that even those who believe that only some of the arrangements that apply to married couples should be applied to common-law couples would agree that the arrangements arising out of social legislation should be applied to common-law couples as well (see, for example, the distinction drawn by Lifshitz between “responsive” rules and “directed” rules, supra, at p. 217).

Although the concept of common-law relationships is not a new one in our system, not all the relevant legislative arrangements have been adjusted to the changes that have occurred in modern times in the structure of the family unit. With respect to certain laws, the legislature has not responded to this issue at all (see, for example, Director of Land Appreciation Taxation v. Levanon [22], per Justice Strassberg-Cohen, at pp. 315-316:  “The laws in relation to which the question arises as to whether or not they grant rights to a common-law wife do not have uniform language. Some of them make express use of the term ‘common-law wife’or a similar term, while defining that term clearly and explicitly. Some of them . . . use the term ‘partner’ without defining it”). In the absence of any express reference by the legislature to the application of a law to common-law partners, there are courts which, in interpreting the relevant legislation, have applied various provisions and arrangements to common-law partners as well. This was the case, for example, in Lindorn v. Kranit Fund [7], in which the court held that for the purpose of paying compensation to dependents pursuant to the Civil Wrongs Ordinance [New Version], 5728-1968, both the linguistic and the legal meanings of the phrase “partner” includes, necessarily, the concept of common-law partners.

Regarding the petition before us, as elucidated in my colleague’s opinion, s. 1 of the National Insurance Law — the definitional section — provides that the term “his wife” will “include his common-law wife who lives with him.” The definitional section applies to the entire statute, and it therefore indicates that the legislature saw the relationship between common-law partners as a framework that is covered by the statute. Furthermore, common-law wives who become widowed are not denied survivors allowances or dependents allowances — the allowances which are the focus of the discussion in this petition — and common-law wives are therefore entitled to such allowances, as are married women who have been widowed. In other words, while the situation of married women and common-law wives are completely identical with regard to entitlement to survivors allowances and dependents allowances if such married women or common-law wives should unfortunately be widowed, the same exact pension would later be cancelled only for those women who have chosen to remarry through an official marriage. This result is especially problematic, as my colleague has noted, in situations in which the widow who becomes a common-law wife is widowed again when her common-law husband passes away. In such a situation, she would be entitled to the original allowance and to another allowance by virtue of the common-law husband. The absence of symmetry between the recognition of an affirmative right and the denial of that right creates, as stated, a distortion which is likely to lead to absurd results.

I therefore agree with the conclusion reached by my colleague, Justice Hayut, that the interpretation of ss. 135, 255 and 262 of the Law necessitates the denial of the allowance to widows who acquire common-law partners, in the same way that the allowance would be denied to widows who have remarried. First, I too believe that the statutory language can support this meaning, especially given the definition of the term “his wife” in the definitional section. As is known, “the main purpose of the definitions is to establish the scope of the (express or implied) meaning of the text of the terms” (Barak, Legal Interpretation, supra, at p. 138). Additionally, the linguistic context of a piece of legislation is interpreted in relation to the statute as a complete unit, which helps determine the legal meaning of a term or section within the statute (ibid., pp. 106-107). Here, the complete unit of the National Insurance Law, in its entirety, indicates that the legislature intended to include common-law partners within the statute’s coverage, and to apply to them all the relevant rights and obligations. Secondly, this conclusion is also supported by a purposive interpretation of the Law, the purpose of which is to provide compensation for the loss of the economic support that a person received from a partner in the past, as long as the person being compensated is not in a new relationship through which such support has been renewed.

I am aware that the practical meaning of this interpretation, in the petition before us, is that the petitioners will lose their entitlement to an allowance; and that when an interpretation leads to a denial of rights, we generally lean towards construing the relevant language narrowly and literally. However, in the case before us, even though according to a purposive interpretation, as my colleague Justice Hayut noted, the widows who have common-law husbands will lose their survivors allowances or dependents allowances, this result is consistent with the purpose of the legislation and promotes the basic right of equality, in a situation in which there is no reason for making a distinction between the two groups. Regarding this matter, I accept that the petitioners have not presented persuasive reasons for recognizing a distinction between them and widows who have remarried. Even if the argument that there is a difference between these groups due to the lack of obligation and stability in the common-law relationships were to be accepted — and I am not persuaded that by itself this is a well-founded argument — it would still be insufficient to justify a different interpretation than that being proposed, since in any event, the provisions of the National Insurance Law foresee the possibility that the relationship between the partners, in either an official or common-law marriage, may come to an end, and the Law provides a solution in the form of a renewal of the allowance. The same applies to the petitioners’ contention with respect to the determination of the date on which the relationship with the common-law partner is to be recognized (and thus, the date on which the allowance is terminated). In actuality, the NII is accustomed to determining such dates for various purposes listed in the National Insurance Law. Therefore, just as it is possible to establish the date on which a relationship begins for the purpose of recognizing rights, it is also possible to determine the date on which the entitlement to an allowance will come to an end.

I also agree with the position that a distinction should be drawn between the right of an IDF widow to receive a survivors allowance, on the one hand, and the rights of other injured parties to whom the legislature wished to provide social security, on the other hand. The distinction, which is anchored in primary legislation, results from the different objectives of the support provided to the different categories of injured parties. This is in no way an expression of a desire to harm injured parties who have experienced general misfortune; the intention is only to recognize the special status of those to whom the state and Israeli society owe a special moral debt. The degree to which a distinction is to be drawn and the expression given to that distinction is a matter to be determined by the legislature.

Needless to say, even though the interpretation of the National Insurance Law does lead to a conclusion that survivors allowances and dependents allowances should be eliminated for widows who have common-law husbands, it may be that the legislature should make express provision  for this in the National Insurance Law, as it has done with respect to other pieces of legislation (see, for example, the amendment to the definition of “spouse” in the Income Support Law, 5741-1980, in which it was established that the term “spouses” will “include a man and women who are a common-law couple and who live together.” The practical significance of the amendment is that common-law partners are not considered to be “singles”, entitled to the allowance paid to singles). It is further noted that we do not, in our decision, take a position regarding the appropriate interpretation with respect to other arrangements established in statutes that are not the subject of this judgment.

This interpretation conforms to the need to recognize the changes that are taking place regarding the family unit model, and displays a willingness to adjust the legal arrangements applying to traditional families to other family structures as well, subject to the changes necessitated by the differences in the relationships among these alternative family structures. Naturally, a just and egalitarian application of these arrangements requires that there be symmetry between rights and obligations, in a manner that fully realizes the purpose of the legislation. Therefore, I too see no grounds, everything considered, for intervening in the decision of the National Labour Court, and in my opinion the petitions should be denied.

 

 

Vice President E. Rivlin

I concur in the decision of my colleague Justice E. Hayut, and in the comments of my colleague President D. Beinisch.

 

 

Justice A. Proccacia

I agree with the decision of my colleague Justice E. Hayut, including with her reasoning and with her conclusions. I also agree with the additional comments made by my colleague, President Beinisch.

Social security in Israel, as reflected in the National Insurance Law, is founded on the concept of solidarity and mutual assistance. The funding for this comes from the payment of mandatory National Insurance contributions, which are collected according to the economic means of those insured, and from government funds; payments from the NII, on the other hand, are intended to provide basic-level assistance to those in need, necessary for life with dignity (see HCJ 6304/09 Lahav v. Attorney General [29], at paras. 42-59). The NII’s resources are, by their nature, limited; the realization of its objectives, in terms of providing assistance for life with dignity for the needy members of society, therefore requires that maximum care be taken so that its resources are allocated only in a manner that serves the true objectives for which they have been designated. The realization of the main objective of the National Insurance therefore requires that a good look be taken at a person’s true needs and at true neediness, and that formats and frameworks that exist only as formalities should be avoided, because they do not necessarily reflect the actual reality. The National Insurance funds are to be directed only at the “have-nots” and not at the “haves”, regardless of the particular name given to the personal status of a particular “have”; and the idea of social security requires that assistance be given to a widow only as long as her actual personal situation has not changed, and only as long as she does not live in a relationship as part of a couple, through which she is able to receive support and security. Once she has returned to a life based on being part of a couple, whether in the framework of an official marriage or in the framework of a relationship known as “common-law marriage”, she is presumed to no longer require the support of the social security system. The allowance to which she was entitled in the past, when she lived by herself and faced the struggle for existence alone, should now be directed towards other social objectives reflecting a real need. The social conception underlying the National Insurance Law strives, therefore, to examine life as it really is, according to a criterion of actuality; it distances itself from formalistic frameworks that do not reflect the true situation. In order to promote the objective of providing social security, the statute, for the most part, avoids the official frameworks of marriage and divorce and examines  the true life of a couple, as it is conducted on a daily basis (compare to the similar purpose of the Public Service Law (Pensions) [Consolidated Version], 5730-1970, and in this context, HCJ 4193/04 Gartner-Goldschmidt v. National Labour Court [31], (per Justice Procaccia, at paras. 20-21)).

The interpretation given by my colleague Justice E. Hayut to the provisions of the National Insurance Law, looking at the reality of human life, as distinguished from an official format that defines personal status, is consistent with the language of the statute, and with its social purpose.

I would further comment that equating the rule applied to a widow who lives with a common-law partner to the rule applied to a widow who remarries, for the purpose of determining entitlement to a survivors allowance or a dependents allowance, may create substantial problems regarding enforcement. What is the test for recognizing the existence of “common-law relationship”; when and how will the competent authority become aware that this type of relationship has come into being; and how will the principle of equality in enforcement be maintained in this area? These questions have not been raised before us, but we can assume that the competent authority is aware of them and is prepared to deal with them.

 

Justice H. Melcer:

I agree with the comprehensive opinion of my colleague Justice E. Hayut, and with the comments of President D. Beinisch. Nevertheless, I wish to add three comments:

(a)          I accept the conclusion that a woman who has not remarried, but who does live with her partner as a common-law wife — is comparable to a widow who has remarried, with respect to the expiration of her entitlement to a survivors allowance or to a dependents allowance which is given to her by virtue of her deceased husband. The linguistic context and a purposive interpretation of the provisions of the National Insurance Law are sufficient to establish this.

Nevertheless, in order to reach the said result, I do not need to rely on the argument that were we to hold otherwise, a widow who became a common-law wife and is now widowed of her common-law husband could be entitled to both the original allowance and to an allowance by virtue of her deceased common-law partner, and that this result borders on the absurd. I do not need such an argument because the concept of a “common-law wife” does occasionally create, by its very nature, problematic situations that may in extreme cases lead to double payments, or to divided payments, or to other complicated solutions. This can happen, for example, if the widow’s common-law partner was married to another person at the time of his death — and I will not elaborate (see ss. 130 and 238 of the National Insurance Law; CA 233/98 Katz v. Keren Makefet [30]; Atar v. NII [41]; and finally, Ariel v. Egged Members Pension Fund Ltd [14]; Lifshitz, Common-Law Partners, supra, at pp. 267-268.)  

(b)          The change in status of a widow who has remarried is usually clear and unequivocal, determined entirely by the validity of the marriage. On the other hand, a change in status that occurs when a widow becomes the common-law wife of the man with whom she lives (as in the definition of s. 1 of the National Insurance Law) is not as unequivocal. It is comprised of two cumulative conditions (see Atar v. NII [41]), and a determination that such a change has taken place will depend on the facts and circumstances (see Ariel v. Egged Members Pension Fund Ltd [14]). It therefore appears to me that prior to terminating the entitlement to an allowance, the NII should grant the person whose said entitlement is to be cancelled a full right to argue against such cancellation, over and above what would in any event be such person’s right to appeal following the decision.

(c)           It would be best if regulations were enacted pursuant to s. 262(b) of the National Insurance Law, which would establish the types of cases and conditions in which the right of a widow who has remarried to receive a survivors allowance would not expire. I have not heard any clear explanation for the fact that no such regulations have been enacted to date, while similar regulations have been enacted pursuant to s. 135(c) of the National Insurance Law regarding the non-expiration of a remarried widow’s right to a dependents allowance in certain situations (see National Insurance Regulations (Dependents allowance for a Remarried Widow), 5737-1976).

 

Justice E. Arbel

I concur in the opinion of my colleague Justice E. Hayut. I agree with her that a widow who becomes a common-law wife should be treated as a widow who has remarried, as that term is properly interpreted in the context of ss. 135, 255(b) and (d) and 262 of the National Insurance Law.

Since such a widow has again established a family life with a life partner and is again living as part of a joint household, her entitlement to continued receipt of a dependents allowance should expire, as the purpose of the payment of the allowance is to secure the dignified support of a widow who has been left without an additional provider (subject to the exceptions listed in the opinion of Justice Hayut, at p. 17). Any different interpretation would create an improper disparity between the treatment of a widow who has officially remarried and the treatment of a widow who has established a family unit with a new partner but without a wedding ceremony. I agree that the legislature’s intent would be subverted if a distinction were to be drawn between the two groups, given that the status of a common-law partner is established in the definitional section of the Law, even though I do not ignore the fact that within this framework, common-law partners may have different levels of commitment. It is indeed reasonable to attribute to the legislature an intention to grant the common-law wife both the good and the bad — meaning that a common-law wife will enjoy the rights of a married woman, but that these rights will expire in the same way as they do for a married woman. I agree with those who argue that it would be preferable if the legislature enacted an express provision establishing the termination of these rights, but as long as the legislature has not responded to the matter, and for the reasons that my colleague has described, the proposed interpretation is to be preferred. I would also add that there can be no doubt regarding the obligation of the state to those who were injured or who sacrificed their lives for the state, or to their families, and that this justifies the distinction that is made with respect to these widows, as explained by my colleague.

 

Decided as per Justice E. Hayut.

 

11Tishrei 5771.

19 September 2010.

 

C.A. 370/63

           

 

MUSAH BASSET and CALEDONIAN INSURANCE CO. LTD.

v.

HAPOL COMPULSORY INSURANCE LTD.

 

           

The Supreme Court sitting as a Court of Civil Appeal

[March 15, 1964]

Before Olshan P., Agranat D.P. and Berinson J.

 

 

Insurance - traffic accident - liability to third parties - right of contribution among insurers - Civil Wrongs Ordinance, 1944, sec. 64(1)(c) - Motor Vehicles Insurance Ordinance (Third-Party Risks), 1947, sec. 10(1) and (2)(a).

 

            The first appellant was involved in a traffic accident, for which he was partly responsible. as a result of which a number of persons were injured. The respondent, the insurer of the other vehicle, settled the claims of some of the injured in negotiations outside court, after having invited the appellants to join in the negotiations. The latter refused to do so nor did they make any contribution to the payments made by the respondent who sued for contribution. The appellant denied liability and applied for the action to be dismissed in limine for no cause of action.

           

Held. The right of contribution lies in Equity or quasi-contract and not in contract, since it would not be just for a party to be relieved from a financial burden and thus be enriched at the expense of another. The right is available whenever two people are liable in solidum and not necessarily jointly or jointly and severally. When two people are liable in respect of the same matter, the presumption, in the absence of evidence to the contrary, is that each must bear half of the liability, and if one pays more the other is unlawfully enriched at his expense. The underlying principle is flexible and therefore applicable to all kinds of different situations, irrespective of whether judgment has been obtained regarding liability of the person from whom contribution is claimed, provided it is to be anticipated that if action had been taken against him he would have been rendered liable.

 

Israel cases referred to:

 

(1)   C.A. 479/60 - Natan Apelstein and others v. Juliet and Zwi Aharoni (1961) 15 P.D. 682.

(2)       C.A. 203/54 - Zion Shalti v. Moshe Canterowitz and others (1955) 9 P.D. 559.

(3)       C.A. 294/53 - David Caspi v. Moshe Yaakov (1955) 9 P.D. 1858.

(4)       C:A. 33/54 - Commercial Union v. Abraham Sher and others (1954) 8 P.D. 427.

(5)   C.A. 255/56 - Rolf Karman v. "HaSneh" Israeli Insurance Co. Ltd. (1956) 10 P.D. 1912.

(6)   C.A. Tel Aviv-Jaffa, 176/59 - Meir Greitzer v. "Bohan" Insurance Co. Ltd. (1960) 23 P.M. 212.

(7)   C.F. Jerusalem, 22/53 - Shlomo Zaddok v. Eliezer Ben Pinhas Schweitzer and others (1958) 16 P.M. 129.

 

English cases referred to:

 

(8)   George Wimpey and Co. Ltd. v. British Overseas Airways Corporation (1954) 3 All E.R. 661; (1955) A.C. 169.

(9)   Edward Deering v. Earl of Winchelsea, John Roes, and The Accorney-General 126 E.R. 1276 (1787).

(10)     Samuel Stirling and others v. Robert Forrester 4 E.R. 712 (1821).

(11)     Whitham v. Bullock (1939) 2 K.B. 81: (1939) 2 All E.R. 310.

(12)     Merryweather v. Nixan 101 E.R. 1337 (1799).

(13)     Palmer v. Wick and Pulteneytown Steam Shipping Company, Ltd.(1894) 2 A.C. 318.

(14)     Adamson v. Jarvis 130 E.R. 693 (1827).

(15)     The Englishman and The Australia (1895) P. 212.

(16)     The Koursk (1924) P. 140.

(17) Romford Ice and Cold Storage Co., Ltd. v. Liscer (1955) 3 All E.R. 460: (1957) 1 All E.R. 125.

           

L. Weinberg and R.A. Gipter for the appellants.

D. Friedman for the respondents.

 

AGRANAT D.P.:                  In this appeal an interesting question falls to be considered: in the event of a collision between two vehicles due to the negligence of both the drivers, a third person is injured who thereafter settles with the insurer of one of the drivers and receives from it a sum of money for damages, is that insurer entitled to resort to the second tortfeasor and his insurer for part of the sum which it paid to the injured person?

            This question was raised in an action brought by the respondent against the appellants in the Tel Aviv-Jaffa District Court, based principally on the following facts:

           

(a) In the evening of 6 July 1961, the first appellant was driving a lorry on the Hadera-Netanya road and because of a puncture in it, he stopped and parked the lorry at the side of the road but with its wheels projecting on to the road and without leaving enough light in the lorry, including the rear, to warn persons travelling along the road of its presence.

 

(b) Some time afterwards, a bus driven from the direction of Hadera by one Ya'acov Mokhof, collided with the lorry so parked without enough light, and as a result, a number of passengers in the bus were injured, one of them dying from his injuries.

 

(c) At the time of the accident the second appellant was the insurer of the lorry in accordance with the Motor Vehicles Insurance Ordinance (Third-Party Risks), 1947 (hereinafter called "the 1947 Ordinance"), while the respondent was the insurer of the bus as aforesaid.

 

(d) Following the accident, negotiations took place outside court between the respondent and some of the injured over their claims for damages, and a compromise was reached, according to which the respondent paid them a total sum of IL 25,010 in settlement.

 

(e) The appellants were also invited to join the negotiations but they refused to do so and did not share in the payment of damages which the injured received.

 

(f) In the above-mentioned action the appellants were requested to share in the said payment up to half and therefore to reimburse the respondent the sum IL 12,505.

 

            The appellants filed a Statement of Defence wherein they denied their obligation to share in the sum paid by the respondent in accordance with the settlement and then applied to the District Court to strike out the action in limine for lack of cause of action. In a reasoned judgment of 12 July 1963, the learned judge dismissed the application. This appeal is brought against that judgment.

           

            In support of the appeal, the appellants' counsel repeated the two main arguments, on which he had relied before the judge. (a) There is no dispute between the parties: (b) the respondent is not entitled to claim contribution from the second appellant (the lorry's insurer) in the given amount, without the obligation to make good the damage of the persons injured in the accident having been imposed on the latter in accordance with section 10 of the 1947 Ordinance. For such an obligation to arise, he went on to argue, prior conditions must be fulfilled, one that judgment was given in favour of the injured against the first appellant (the lorry driver), and the other that the first appellant received advance notice of the proceedings in which the judgment was given. The respondent does not argue here that these conditions or either of them was fulfilled before the payment was made; it was also impossible for them to be fulfilled after the payment, because when the settlement between the injured and the respondent was reached and the latter paid them monies to discharge their claims, they got full satisfaction. The second appellant therefore does not have to indemnify the respondent in respect of these monies.

           

            In my opinion there is no foundation for these arguments. To explain that, I proceed on the three following assumptions.

           

(1) In the Statement of Claim the respondent pleaded that "the accident was totally or mainly caused through the negligence... of the first defendant" (the lorry driver). In view of this plea, it was perhaps possible to think that when the respondent paid the injured persons' claims in accordance with the settlement, it acted as a volunteer and therefore has no cause of action against the appellants. But I do not wish to lay down any hard and fast rule on this point because appellants' counsel in his summation made no submission in this vein. On the other hand, respondent's counsel in his summation attributes negligence also to the bus driver for the accident in saying "that the share the respondent claims from the appellants is in accordance with the proportion between its insured's negligence and the first appellant's negligence". Not only that, but the respondent also set his claim at half the sum paid by it to those injured in the accident. Accordingly, I find that it is necessary to deal with this appeal on the assumption that the cause of the damage should be attributed to the negligence of each of the two drivers.

 

(2) Attention must be paid to the fact that owing to the aforementioned settlement the two conditions set out in section 10 of the Ordinance and mentioned above were also not fulfilled as regards the respondent. But I am of the opinion that this matter cannot prejudice the respondent's cause of action, because the fact that it paid the said monies to the injured persons in accordance with the settlement must be regarded as an admission on its part of its liability to discharge their claims, within section 10 above; that is to say, the payment together with the admission it implies takes the place of the fulfilment of those conditions. (See by analogy, the example in paragraph 14(b) in the judgment of Sussman J. in Apelstein v. Aharoni (1) at p.696: see also the remarks of Lords Simonds and Reid in George Wimpey & Co. v. B.O.A.C. (8) at pp.664 and 672; and further G. Williams, Joint Torts and Contributory Negligence, paragraph 31, p. 97; Fleming, Law of Lores, 2nd edition, pp. 694-695). It will be noted that no argument by the appellants was heard against this assumption either.

 

(3) According to the first above assumption in connection to the facts pleaded in the Statement of Claim, it follows that the two drivers cannot be regarded as joint tortfeasors, but only as tortfeasors who contributed to the occurrence of the same tortious result by negligent actions which were separate from and independent of one another (concurrent tortfeasors). Yet it is clear - and that is my third assumption – that by the respondent (the insurer of the bus driver) settling the claims of the injured, also the lorry driver (the first appellant) is freed from all liability towards them for the damage they incurred (G. Williams, op.  cit., paragraph 9, p. 34; Shalci v. Canterowitz (2) at p. 560). And the insurer of the lorry driver (the second appellant) as well is ipso facto freed from all liability towards them for the same damage. Appellants' counsel concurred in this view and indeed this concurrence is closely related to his argument that since the claims were discharged by the respondent in accordance with the settlement, no proceedings would be instituted by the injured for damages from the appellants because "a settlement with one joint tortfeasor releases the second", although in using the expression "joint tortfeasor", counsel was imprecise in his language, as explained above.

 

            In the light of these assumptions let me give the reason for my opinion that the arguments of appellants' counsel rest on shaky foundations. To do so, I must first deal with the meaning of the right of contribution.

 

(a) As is known, the source of this right lies in the rule of Equity that equity is equality, and accordingly, if two people have to fulfil the same financial claim of a third person and it is discharged by one of them, so that the other is wholly or partially freed from this burden, the former is entitled to resort to him and exercise the right of contribution at a rate considered by the court to be just in the circumstances of the case. The reason for this rule is that in such a case it would not be just that one debtor freed from financial burden should be enriched at the expense of the debtor who brought about this result. The right of contribution is therefore based on the principle of justice - literally - and not on the existence of any contractual relations whatsoever, though a contract can negate it completely or limit it (see Halsbury-Simonds, Laws of England, Vol. 14, paragraph 934, pp. 492-493). What emerges from this is that the fact that the liability which rested on the two was a liability in solidum - and not necessarily joint, or joint and. several is sufficient to attach to the payer the right of contribution. Even as early as 1787 it was decided in Deering v. Earl of Winchelsea (9) that one guarantor who paid a debt could resort to another guarantor, even though between them there was no relationship and the two guarantees were created under separate documents; and the court affirmed the rule in 1921 in Stirling v. Forrester (10). In the first of these cases Lord Eyre said (at p. 1277)

 

"the bottom of contribution is a fixed principle of justice, and is not founded in contract. Contract indeed may qualify it".

 

And then (at p. 1278)

 

"In the particular case of sureties, it is admitted that one surety may compel another to contribute to the debt for which they are jointly bound. On what principle? Can it be because they are jointly bound? What if they are jointly and severally bound? What if severally bound by the same and different instruments? In every one of those cases sureties have a common interest and a common burthern. They are bound as effectually quoad contribution, as if bound in one instrument, with this difference only, that the sums in each instrument ascertain the proportions, whereas if they were all joined in the same engagement they must all contribute equally."

 

In the second case Lord Redesdale said (at p. 719):

 

"The principle of Deering v. Lord Winchelsea proceeded on a principle of law which must exist in all countries, that where several persons are debtors all shall be equal... . The duty of contribution extends to all persons who are within the equitable obligation."

 

In the modern period the principle of contribution was formulated by Clauson J. in Whitham v. Bullock (11) in the following words:

 

"In equity the principle must be regarded as covering cases in which there is community of interest in the subject-matter to which the burden is attached, which has been enforced against the plaintiff alone, coupled with the benefit to the defendant even though there is no common liability to be sued."

 

            In view of the rationale of the contribution principle - that it is only intended to prevent unlawful enrichment - leading jurists are of the opinion that one must relate it today to "quasi-contract" (see Woodward, The Law of Quasi Contract, pp. 391, 409: G. Williams, op. cit., paragraph 30, p. 95). According to this approach the application of the principle in local law was thus explained by Cheshin D.P. in Caspi v. Yaakov (3) at p. 1863:

           

"The duty of the remainder of the debtors to share in the payment made by one debtor is 'quasi-contractual' in nature and is intended only to prevent unlawful enrichment. Where two are liable for one debt, the presumption is - if there is no proof to the contrary - that each must pay a half. If follows that if the one pays more than his share, the other is unlawfully enriched at his expense, and the extent of the enrichment is measured by what the first was forced to pay in excess of his share... . The emphasis is therefore on the unlawful enrichment at the expense of his friend, that is to say, on the unfair and unjust basis of enrichment."

 

 (See also B. Cohen J. in Greirzer v. Bohan (6) at p. 216.)

 

            These observations instruct us that the principle with which we are dealing - whether part of the rules of Equity or whether it must today be related to "quasicontract" - is of a wide and flexible character and therefore applicable to different and changing factual situations. as attested by the many examples of its practical application cited by respondent's counsel in his summation. Additional evidence in this regard can be found in an article published in Yale Law Review (Vol. 45. p. 153]:

           

"Analysis shows that contribution... is a flexible doctrine applicable in many situations where it is desirable to prevent unjust enrichment."

 

            The result of the above is that despite the absence of any issue between the parties by virtue of contract or enacted law, no logical reason seems to exist to prevent the application of the principle to the present case. On the one hand, the persons injured were entitled to claim from each of the parties the payment of damages, and on the other discharge of these claims by the respondent released the appellants therefrom and justice therefore demands that they participate in the said payment at the appropriate rate, so that they are not enriched at the expense of the respondent.

           

(b) Appellant's counsel submits: when the local legislator provided - in section 64(1)(c) of the Civil Wrongs Ordinance, 1944 - an arrangement according to which a tortfeasor who settles a claim for damages of the injured party is given the right of contribution from a joint tortfeasor, it did not direct that the tortfeasor's insurer should have an identical right when it was he who settled the claim. Furthermore, when the legislator provided in section 10 of the 1947 Ordinance that the injured person is entitled to recover damages directly from the insurer of the driver who caused the accident, again it did not provide that the same insurer should, after making good the damage, have the remedy of contribution from the other tortfeasor and his insurer. The conclusion is that the legislator's silence on this matter in the above two provisions means that it did not intend the above right to accrue to the insurer/payer, whether in respect of the other tortfeasor/driver or his insurer.

 

            This argument does not recommend itself to me. But in order to withstand it, I must further review the development of the English law in relation to the principle of contribution, to the same extent that it concerns the question of its application to tortfeasors amongst themselves.

           

(1) Considering the breadth and nature of the principle, it seems that the English judges would have had no difficulty - even before provision of the statutory arrangement mentioned in section 6(1) of the Law Reform (... Tortfeasors) Act, 1935, which is parallel to that in section 64(1)(c) of the local Ordinance - in recognising the right of the tortfeasor who paid the injured party his damages to have recourse to his joint tortfeasor. The Common law did not, however, at first proceed in this logical and direct manner. On the contrary, when the question arose - and that was in 1799 in Merryweather v. Nixan (12), Lord Kenyon laid down the rule that no right to contribution exists as between tortfeasors themselves and that, it seems, for the reason that a tortious act is regarded as an illegal act and therefore the court will not assist a plaintiff when his cause of action is based on such conduct: ex turpi causa non oritur actio. (As to this explanation of the rule, see G. Williams, op. cit., paragraph 26, p. 80.)

 

(2) Not many years passed, however, and it became apparent that the rule could lead to an unjust result because the injured party could get satisfaction by claiming against only one of the tortfeasors at his choice and with settlement of the claim by the latter, the other tortfeasor would be freed from liability towards the injured party without having to restore anything to the payer in respect of his share in the injury (dicta of Lord Herschell and Lord Watson in Palmer v. Wick, etc. Co. (13) at pp. 318, 324, 326, 327, and Lord Porter in Wimpey (8) at p. 666). It was therefore sought to ameliorate the rule so that contribution is not denied a tortfeasor who was compelled to pay - and paid - the damages of an injured party for a civil wrong committed in good faith and without moral fault. That was the factual situation dealt with in 1827 in Adamson v. Jarvis (14). There, the plaintiff sold on behalf of the defendant and according to his instructions the property of another person, in the bona fide belief - having so heard from the defendant - that the property belonged to the latter. After the true owner had sued and recovered damages from him, the seller presented a claim against his principal for return of the amount and his claim was accepted. In his judgment Best C.J. said:

 

"From the concluding part of Lord Kenyon's judgment in Merryweather v. Nixan and from reason and sound policy, the rule that wrong-doers cannot have redress or contribution against each other is confined to cases where the person seeking redress must be presumed to have known that he was doing an unlawful act."

 

(3)       It had not yet been clarified whether this rule was intended to limit the applicability of the "prohibitive" rule, laid down in Merryweather (12) to an intentional conscious tortfeasor or whether the rule still operated to deny this remedy also from a tortfeasor who had merely acted negligently. This question was dealt with by the House of Lords in Palmer (13), but was not finally settled because judgment was given in accordance with Scottish law which never recognised the above-mentioned rule at all. Lord Herschell, however, had some harsh things to say about the rule (at 324) although he agreed that it was still in force in the English law:

 

"It is now too late to question that decision in this country; but when I am asked to hold it to be part of the law of Scotland, I am bound to say that it does not appear to me founded on any principle of justice or equity, or even public policy, which justifies its extension to the jurisprudence of other countries. There has certainly been a tendency to limit its application in England."

 

            Furthermore, after pointing out - with approval and as evidence to the "softening" tendency evident in the precedents - the decision of Best C.J. in Adamson (14], he added:

           

"If the view thus expressed... be correct (and I see no reason to dissent from it), the doctrine that one tortfeasor cannot recover from another is inapplicable to a case like that now under consideration."

 

            In view of the fact that Palmer (13) was decided according to Scottish law, the words last cited were, it must be understood, not necessary for the merits of the case and were not binding (see the observations of the other Lords who sat in judgment, and especially those of Lord Halsbury at pp. 333-334; but compare G. Williams, op. cit., p. 83). Indeed, in later cases it was decided that in cases of negligence, a tortfeasor could not turn to his negligent co-actor for contribution whether the two were joint or concurrent tortfeasors (see The Englishman and The Australia (15) and The Koursk (16)).

 

(4) That was the juridical situation in the matter on the eve of the enactment of the Act of 1935 which came to close the breach and provided for the remedy of contribution as between tortfeasors themselves. In explaining the object of this law, Lord Porter said in Wimpey (8) (at p. 666):

 

"Before the passing of the Act it was left to the claimant to choose his victim. The person sued, whether he was a joint or a separate tortfeasor, if he was implicated as being partly responsible for the accident, had to abide by that choice... . The object of the Act was to cure this evil and to enable those on whom the burden had been placed to recover a just proportion from those who shared the blame."

 

(5) In his book, written in 1951, Williams expressed the view (p. 84) that since the above-mentioned Act, the rule laid down in Merryweather (12) has become obsolete, and in any case it certainly is not in force as regards negligent tortfeasors (p. 87). And then, after some years, the question arose whether the same rule still constitutes an obstacle to a claim for contribution by one joint tortfeasor against the other, not based on the 1935 Act but on another cause of action (breach of contract). I refer to the case of Romford Ice Co. v. Lister (17). According to the facts, one of the plaintiff's employees was injured when a car driven by his son, the defendant, struck him. The son also was the plaintiff's employee, being employed as a driver for many years. Because the accident occurred in the course of fulfilling this function and was caused by negligent driving, the plaintiff was liable - on the ground of vicarious liability for the driver's negligence - to pay damages to the injured party and were so paid by the plaintiff's insurance company.

 

            Afterwards, the insurer, in the name of the plaintiff, claimed - on the basis of the right of subrogation under the insurance policy - indemnity from the defendant (the driver). The latter pleaded (inter alia) that his employer (the plaintiff) is to be regarded in law, by reason of its vicarious liability for his negligence, as a joint tortfeasor and is         therefore to be denied contribution by virtue of the Common law rule, since its claim was based on the ground that the defendant had been in breach of his contractual obligation to fulfil his duty of driving with competency and reasonable care (and not on the 1935 Act).

           

            This argument was not accepted for the reason that no moral fault lay on the plaintiff for the negligent act of its employee, in respect of which it was liable to pay damages to the injured party, and it was to be considered as a joint tortfeasor only in a narrow technical sense; therefore the "ameliorating" rule, laid down by Best C.J. in Adamson (14) was applicable. This is what Romer J. had to say (at 478):

           

"The general principle, which the defendant invokes, is certainly supported by venerable authority (see e.g. Merryweacher v. Nixan), but it is not a rule of universal application... . Although the plaintiffs were liable in damages to the defendant's father for the accident which befell him, they themselves were morally blameless in the matter and their liability to the father arose solely from the fact that they were answerable for the negligence of the defendant himself. In these circumstances, it would ... be a flaw in our law, and against natural justice, to permit the defendant to rely on his own wrongful act as a defence to proceedings for breach of contract... . The current of ... authority ... on the point is distinctly the other way."

 

And after citing Best C.J., he held:

 

"The plaintiff's action in the present case, based on breach of contract, is not defeated by the suggested principle that there can be no contribution between joint tortfeasors."

 

            The judgment was upheld in the House of Lords on other grounds, but these observations of Romer J. were approved by Lord Simonds (at p. 135).

           

(c) On the basis of this survey it is to be concluded that once a person injured in a road accident is given the statutory right to levy damages from the insurer of the negligent driver, there is no need for the legislator to provide a special arrangement whereby the insurer, after having paid the damages adjudged against it, is able to claim contribution from the driver who was a partner to the injury, because the "prohibitive" rule of the Common law cannot - after being limited and "softened" as aforesaid - frustrate such a claim. The insurer which made good the damage of the injured person was not itself guilty of any illegal or immoral behaviour whatsoever with regard to the injury caused by the insured; as was emphasised by the writer of the above-mentioned Note (Yale L.R., Vol. 45, p. 154):

 

"The reasoning invoked to deny contribution between co-tortfeasors can have no application to their indemnitors, whose interests are opposed to the commission of torts, and who come into court with clean hands."

 

            I think that this should have been the law even had the statutory arrangement in section 64(1)(c) of the 1944 Ordinance not negated the validity of the rule forbidding the grant of the said remedy to one tortfeasor against his associate, since the position of the insurer who has made good the damage of a person injured in a road accident is no less strong than the employer in Lister (17), especially as in order to recover the monies it has paid it has no need of subrogation of the rights of the insured as against the other wrongdoer:

           

"Contribution does not depend on subrogation" (ibid., p. 152, note 25).

 

A fortiori the remedy should not be denied such an insurer when the juridical situation today - both in England and in Israel - is that the above-mentioned rule lacks validity. This view finds support in the words of the writer of an article in the Harvard Law Review (Vol. 50, p. 989):

 

"Where this rule has been abrogated by judicial decision, the insurer of one wrongdoer has obtained contribution from a joint wrongdoer and his insurer.... It is difficult to understand why a statute abolishing these disabilities inter se of joint wrongdoers should not have at least as great an effect as a judicial decision abolishing them."

 

            The conclusion is that in the absence of a contract to the contrary, no reason exists - whether grounded in law or in the public policy - to  justify denying the insurer the remedy of enforcing contribution against the party implicated in the injury along with the insured, after it has made good the damage caused by the negligent driving of the insured. Therefore, the argument of absence of issue falls away on its two parts.

 

(d) It will be recalled that the second main argument of appellants' counsel is that as long as the two conditions mentioned in section 10(1) and (2)(a) of the 1947 Ordinance have not been fulfilled - the giving of a judgment which charges the first appellant to pay damages to the injured persons and receipt of the statutory notice by the second appellant - its obligation to settle their claims does not and cannot arise in the future, because after the injured persons have received satisfaction it is impossible for the above conditions ever to be fulfilled; the respondent therefore does not have the right to sue the appellant for contribution. This argument also I cannot accept.

 

(1) In my view when dealing in a case for contribution with the question of the defendant's liability to fulfil the third party's monetary claim, the fact that payment in the meantime by the plaintiff might release the defendant from that liability should be ignored. These two things - the defendant's liability towards the third party and his discharge therefrom because of the plaintiff's payment - constitute separate elements of the ground for contribution and the question whether one of them exists is not dependent on the answer to the question whether the other element exists. If that were not so, the reason for this remedy is emptied of its content and value. Surely just because the plaintiff's payment releases the defendant from his monetary liability towards the third party, he is rightly required to make contribution in order not to be enriched at the expense of the plaintiff; and how can it be said therefore that the very payment sets at naught the latter's right to contribution. Hence also there is no value in the argument of the frustration of the possible future fulfilment of the two statutory conditions by the second appellant, which were stressed by counsel as preconditions of its said liability.

 

(2) If, in order to decide whether ground exists for the second appellant's liability toward the injured, we must ignore the fact of the said payment, then it is essential that we examine it according to the following test: just prior to the payment or the day when the present claim for contribution was made (I see no need to decide which is determinative between the two), did the appellant anticipate the liability to pay damages to the injured persons for the injury caused to them by the insured? This test should be applied today in the light of the rule in Commercial Union v. Sher (4), that by virtue of section 10 of the 1947 Ordinance an injured party is entitled to claim that its damage be made good directly by the insurer, provided that the insured is joined as a party to the claim (at p. 435); see also Karman v. "HaSneh" (5) at pp. 1914-1915. The meaning of this rule is that in the present case the test must be applied so that, had the injured presented their claims for damages against the two appellants the court would have found the second appellant liable to pay. To my mind it is clear our assumption must be that in this hypothetical case the court would not, in answering the said question, have considered the two above conditions of law. There are two reasons for this which go together.

 

            First, where an injured person sues the insurer and the insured together for damages under the above-mentioned rule there is no practical worth to the question whether or not the two conditions were fulfilled. That is manifest as to the requirement of notice mentioned in section 10(2)(a) of the Ordinance, the object of which is to enable the insurer to defend when the injured person sues the insured alone; where the two are sued together, the insurer knows, through the summons to court, of the claim brought against the insured and can defend itself against it; that is to say, the summons is like the statutory notice which therefore becomes superfluous (see Zaddok v. Schweitzer (7) at p. 140). As for the second condition - the requirement of a judgment, under section 10(1) of the Ordinance - here also it is clear that from a practical point of view the questions which may engage the court - according to the patties' pleadings - in such a case are merely on the one hand the driver's responsibility for the accident and on the other hand the insurer's liability by virtue of the insurance policy; such as, for example, (1) was the accident caused as a result of the driver's negligence; (2) what is the extent of the injury and the amount of the damages to be determined in respect thereof; (3) does an insurance policy exist within the meaning of the Ordinance, which covers the case? As was stated by Judge Harpazi in Greiczer v. "Bohan" (6) at p. 215:

           

"By virtue of the Insurance Ordinance as interpreted, the claims against the insurer and insured are therefore submitted together and once the claim is proven, including the fact that the event is covered by the insurance policy, the plaintiff is entitled to judgment making the insured and the insurer liable in solidum. Under this liability the plaintiff is entitled to execute the judgment directly against the insurer, without taking any action against the insured at all."

 

            Even if we have to say that from the formal, precise point of view, the insured's liability precedes that of the insurer, though they are defendants in one trial, nothing attaches to that because the question to be answered from the point of view of the claim for contribution, is only of a mere practical-legal character: whether in the hypothetical case of the injured person suing the insurer (together with the insured), the insured would expect to be liable for the damages in respect of which contribution is claimed? To this matter I shall return.

           

(3) The second reason for my view in this matter is that the two statutory conditions must be regarded as merely procedural, and therefore not to be taken into account in respect of a claim for contribution. This character of the statutory notice condition is self evident. The same is true of the condition of a judgment against the insured, witness the fact that the principal reason which influenced Olshan P. - and he was one of the two majority judges who gave section 10(1) the interpretation that there must be an issue between the injured and the insurer - is that

 

"The provision of obtaining judgment against the insured is only intended to direct that in order to find the insurer liable, proof in the form of a judgment against the insured is required, and no other proof will suffice" (Commercial Union (4), at p. 435).

 

            If that is the purpose of the said condition, it is merely of a procedural nature, a point which also emerges from Salmond (Jurisprudence, 11th ed. pp. 503,506), that the presentation of evidence - and also the giving of judgment - belongs to the procedural branch of the law. If that is the case, I find that the approach taken by Sussman J. in Apelstein (1) at p. 697, applies equally here: when, in a case for contribution brought under section 64(1)(c) of the Civil Wrongs Ordinance, against a tortfeasor who has not yet been found liable towards the injured party, a question of the liability of the defendant as regards the injured party comes up for consideration, the answer must be sought in substantive and not procedural law. Therefore, he held that the fact that the defendant in that case was the husband of the injured woman would not defeat the claim, since the prohibition provided in section 9 of the Ordinance (regarding evidence by spouses) is of a mere procedural nature and has no effect on the husband's liability under substantive law to compensate the wife for the damage caused to her. It is true that this rule was laid down for the need of interpreting the words "if he were sued" which are mentioned in section 64(1)(c), but it includes, in my opinion, a general test which belongs to the principle of contribution and effectuates it, and is in any event applicable to the present matter. For this reason, it is again necessary to ignore the two statutory conditions, owing to their procedural character.

 

(4) In his separate judgment in Commercial Union v. Sher (4) Berinson J. - who also supported the interpretation that an issue between the tortfeasor and the insurer must exist - relied on reasoning different from that of Olshan P. He said (at p. 431):

 

"I think we have to distinguish between the insurer's liability to pay the injured person and the injured person's right to sue the insurer. Section 10(1) in principle grants to those physically injured by a car ... a right to compensation from the insurer. Because of that, we do not see any substantial difference between the injured person joining such insurer as a party to his original claim against the insured and a defendant joining a third party where he argues that he is entitled to indemnity from the third party. In both instances the liability to compensation does not exist when the joinder is made but only arises if and when a judgment is given in favour of the plaintiff."

 

            From this reasoning appellants' counsel inferred that as long as judgment is not given against the insured - even where the insurer is joined as a defendant - he is under no liability to compensate the injured person and obviously no right to contribution as above arises. In my opinion, the last conclusion rests on an error. The problem which occupied Berinson J. and to which his above reasoning relates was whether at the time action was commenced in that case there was an issue between the injured plaintiff and the insurer. The affirmative answer he gave to this question had regard only to the then legal situation and was based on the fact that at that time the injured had the "right of action" against the insurer even though the "liability to pay" had not yet arisen and depended on judgment afterwards being against the insured. On the other hand, when, in a case for contribution against an insurer who has not yet been made liable to pay compensation to the injured, the question of such liability arises, a different approach must be taken in the sense that the answer to this question will be determined by the result in which the hypothetical case of the injured person against the insurer and the insured would conclude. In other words, the question that must be answered here is whether there fell on the defendant - if the plaintiff did not settle the demand for compensation- the risk and the expectation that he himself would be liable to pay the injured party. It is clear that the approach which is behind this practical - legal test, does not contradict the reasoning of Berinson J. because it lies within the purpose for which the remedy of contribution is aimed at, to avoid unjust enrichment at the expense of the plaintiff, as aforesaid.

 

(5) Having regard to the above "expectation" test, I find also that there is no value in the argument of appellants' counsel, that the conditions for giving the statutory notice and obtaining judgment against the insured have not yet lost their practical importance in a case where an injured person exercises his right to sue the tortfeasor and his insurer for damages in separate actions because in an action against the second the question whether these conditions or either of them was fulfilled might still arise. My answer is that this is not the case before us, and we are therefore entitled, in applying the said test, to take into account the possibility that here the injured persons might have filed one claim for damages against the two appellants; and also to pose to ourselves the question whether, in the light of this assumption, the second appellant would have expected to have liability imposed on it. Secondly, the assumption about splitting the process against the insurer and the insured cannot change my conclusion, because the question that must always be answered in a case for contribution is whether the anticipated result of two such hypothetical actions is that the insurer would be liable for making good the damage: and it has already been emphasised that the answer to this question does not depend on the two said conditions but only on the substantive law.

 

            In my opinion therefore the learned judge was correct in deciding to reject the appellants' application. I must add that having also reached this conclusion for reasons which to me seemed based on pure law, I find it equally desirable from the point of view of the purpose of enabling insurance companies to settle with injured people outside court.

           

            On the basis of the foregoing, the appeal should be dismissed and the appellants made liable to pay the respondent the costs of the appeal in the inclusive amount of IL 500.

           

OLSHAN P.:              I concur.

 

BERINSON J.:           I concur.

 

            Appeal dismissed.

            Judgment given March 15, 1964.

LCA 2281/05

 

Arieh Israel Insurance Company Ltd

v.

Adv. Moshe Kaplansky

 

 

The Supreme Court sitting as the Court of Civil Appeals

[12 November 2007]

Before Justices M. Naor, E. Arbel, D. Cheshin

 

Application for leave to appeal the judgment of the Tel-Aviv District Court (Vice-President Y. Gross and Justices E. Covo, M. Rubinstein) of 25 January 2005 in CA 2983/01.

 

Facts: The respondent, a lawyer, represented a company (hereinafter ‘the company’) that filed a claim against the appellant insurance company for fire loss. Before it received the insurance payout, the company asked the respondent to sign a document stating that he no longer represented them. It explained that the insurance company refused to make the payout for as long as the respondent represented the company. The respondent signed the document. When the company received the payout, it refused to pay the respondent the agreed fee for his services. The respondent sued the company for breach of contract, and the insurance company for inducing the company to breach the contract.

The Magistrates Court held that only the company was liable for the respondent’s fees. Since the company was unable to pay the fees, the respondent appealed the finding of the Magistrates Court that the applicant was not liable. The District Court allowed the appeal and found the applicant liable for the fees. It held that the insurance broker had induced the company to terminate the representation contract with the respondent. It further held that the insurance broker is an agent of the insurer under Article 6 of Chapter 1 of the Insurance Contract Law, 5741-1981, and therefore the applicant had the burden of proving that in the circumstances the insurance broker had not acted as its agent.

The applicant applied for leave to appeal to the Supreme Court, which granted leave to appeal on the question whether the insurance company was liable, under the law of agency, for the insurance broker’s having induced the company to terminate the representation contract with the respondent.

 

Held: Article 6 of Chapter 1 of the Insurance Contract Law lists specific situations in which the insurance broker is regarded as acting as the agent of the insurer. This case does not fall within one of those situations. In the absence of a specific provision of statute, the general law of agency applies.

(Majority opinion – Justices Arbel, Cheshin) The case should be returned to the Magistrates Court to consider whether the insurance broker was an agent of the applicant and whether the applicant is liable for the insurance broker’s tort of inducing the company to breach its contract with the respondent.

(Minority opinion – Justice Naor) Because the respondent only raised the agency argument in his closing arguments in the Magistrates Court, and such an argument requires a clarification of facts, the case should not be returned to the Magistrates Court, and the original decision of the Magistrates Court should be reinstated.

(Majority opinion – Justices Naor, Cheshin) The respondent should be liable for legal fees and trial costs in a sum of NIS 20,000.

(Minority opinion – Justice Arbel) The liability for legal fees and trial costs in the appeals should be decided by the Magistrates Court, in accordance with the outcome of the case.

 

Appeal allowed.

 

Legislation cited:

Agency Law, 5725-1965, ss. 1, 3(a), 6(a), 6(b).

Insurance Contract Law, 5741-1981, Chapter 1, Article 6, ss. 33, 33-35, 35, 36.

 

Israeli Supreme Court cases cited:

[1]      LA 103/82 Haifa Car Park Ltd v. Spark Plug (Hadar Haifa) Ltd [1982] IsrSC 36(3) 123.

[2]      HCJ 5064/03 Association of Insurance Brokers & Agents in Israel v. Supervisor of Insurance [2004] IsrSC 58(3) 217.

[3]      CA 702/89 Eliyahu Insurance Co. Ltd v. Orim [1991] IsrSC 45(2) 811.

[4]      CA 25/82 Weitzman v. Prudential Insurance Co. Ltd [1984] IsrSC 38(1) 501.

[5]      CA 1064/03 Eliyahu Insurance Co. Ltd v. Estate of Piemonte [2006] (1) TakSC 1806.

[6]      CA 391/77 Dadash v. Arieh Insurance Co. Ltd [1978] IsrSC 32(3) 649.

[7]      CA 102/87 Arieh Israel Insurance Co. Ltd v. Ludjia Textile Co. Ltd [1989] IsrSC 43(2) 804.

[8]      CA 422/85 Bank Leumi of Israel Ltd v. Israel Subinsurance Co. Ltd [1991] IsrSC 45(5) 32.

[9]      CA 793/76 Lookman v. Schiff [1979] IsrSC 33(2) 533.

[10]    CA 3248/91 Ben-Ari (Winiger) v. Boaron Yitzhak Ltd [1995] IsrSC 49(1) 870.

[11]    CA 166/77 Dadon v. Avraham [1979] IsrSC 33(3) 365.

[12]    CA 294/76 Anglo-Saxon Property Agency (Savion) v. Passerman [1977] IsrSC 31(1) 589.

[13]    CA 6799/02 Yulzari v. United Mizrahi Bank Ltd [2004] IsrSC 58(2) 145.

[14]    CA 207/86 Magen v. Bachar [1988] IsrSC 42(4) 63.

 

American cases cited:

[15]    Ohio Farmers Insurance Co. v. Hotler, 2006 U.S. Dist. Lexis 7210.

[16]    Mizuho Corporate Bank v. Cory & Associates, Inc., 341 F.3d 644 (7th Cir. 2003).

[17]    Zannini v. Reliance Insurance Co. of Illinois, 147 Ill. 2d 437, 590 N.E.2d 457 (Ill. SC 1992).

 

For the appellant — Y. Shavit, Y. Charash.

The respondent was represented by himself and A. Pardal.

 

 

 

JUDGMENT

 

 

Justice E. Arbel

1.    On 28 March 1997 a fire broke out at the premises of "Anat Trade and Holdings Ltd" (hereinafter: “the company”) causing them damages. The company and its directors decided to retain the legal services of the respondent for the purpose of obtaining the insurance payout from the applicant. A fee agreement was signed between the company and the respondent, according to which the respondent was entitled to a percentage of whatever money was recovered from the applicant. On 27 August 1997 the directors of the company met with the respondent and asked him to sign a confirmation that he no longer represented the company in the matter of the insurance payout. The company directors explained to the respondent that the applicant was not prepared to make the insurance payout to them until the respondent stopped representing the company. Since the company was in a difficult economic position , it had no choice but to comply with this demand. The respondent signed a confirmation that under which he would stop representing the company, and the company received the insurance payout. The respondent then asked the directors of the company for his fees. His request was denied. He therefore filed a claim against the company and its directors for breach of contract, and against the applicant and the manager of the applicant’s claims department for inducement to breach a contract.

2.    The Petah-Tikva Magistrates Court (the honourable Judge I. Schneller) held that the company had not breached the agreement with the respondent since it was entitled to sever the contractual relationship with him at any stage of the legal representation. Therefore, the court concluded that the respondent was only entitled to remuneration from the company until the date on which the representation was terminated. The court also held that the directors of the company acted as organs of the company and therefore had not breached the contract with the respondent. Insofar as the applicant was concerned, the court held that even if the insurance broker exerted pressure to terminate the representation, it had not been proved that in doing so the broker acted as an agent of the applicant or of the manager of its claims department. The court therefore held that the company owed the respondent only fair remuneration for his work in the period prior to the termination of the representation. The remaining claims were denied.

3.    The respondent appealed the judgment of the Magistrates Court to the Tel-Aviv-Jaffa District Court (the honourable Vice-President Judge Y. Gross and Judges E. Covo, M. Rubinstein). The appeal was filed solely against the appellant and the manager of its claims department, since it became clear that it was not possible to collect from the company in view of its economic position, nor was it possible to determine the whereabouts of its directors in Israel. The District Court allowed the appeal against the appellant and found it severally liable for the fair amount of remuneration determined by the Magistrates Court. The court held that the company had breached the agreement with the respondent, since it had terminated his representation in bad faith at the insurance broker’s request. The court also held that the appellant’s insurance broker had induced a breach of the agreement between the company and the respondent by demanding the termination of the representation. Finally, the District Court held that the insurance broker was an agent of the insurer under Article 6 of Chapter 1 of the Insurance Contract Law, 5741-1981 (hereafter: ‘the Law’), and therefore if the applicant wished to prove that in the circumstances of the case the insurance broker did not act as its agent, the burden of proving this claim rested with it.

4.    The applicant argues that the District Court erred when it determined that the agreement between the respondent and the company was breached in bad faith by the company, and when it found that the insurance broker had induced a breach of that agreement. The applicant’s main argument concerns the finding of the court that the insurance broker is an agent of the applicant and that the applicant is therefore vicariously liable for the broker’s acts. It argues that raising impermissible broadening of scope of the original claim. The applicant is of the opinion that the District Court interpreted the provisions of the Law  in a manner that is contrary to their wording and that the situation in this case does not fall within any of the sections of the Law  that provide for an agency between the broker and the insurance company. According to the applicant, this issue gives rise to a fundamental legal question that justifies granting leave to appeal.

5.    The respondent claims that the District Court was correct in its factual findings as to the breach of contract and the insurance broker’s inducement of the breach. With regard to whether the insurance broker was an agent of the applicant, the respondent claims that the finding of the District Court that the insurance broker did act as the agent of the applicant is entirely consistent with the factual findings of the Magistrates Court. The respondent claims that the case falls within the scope of s. 35 of the Law, according to which, for the purpose of notices given by the insured or the beneficiary to the insurer, the insurance broker is regarded as the agent of the insurer.

6.    On 6 January 2006 we held a hearing of the application, and after we heard the arguments of the parties, we decided on 15 January 2007 to grant leave to appeal and to regard the application as the appeal. It was therefore decided that the parties would be given an opportunity to submit further arguments on the question of the applicant’s liability as the insurance broker’s principal. Now that we have received the further arguments of the parties, the time has come to decide the appeal.

Deliberations

7.    The District Court based its judgment on three findings: first, it held that the company breached the agreement that it signed with the respondent. Second, it found that the insurance broker induced the breach of contract between the company and the respondent, by demanding that the company terminate its representation by the respondent. Third, the court held that the insurance broker acted as the agent of the applicant by virtue of Article 6 of Chapter 1 of the Law, and that the applicant bore the burden of disproving this agency relationship in the circumstances of the present case.

The first two findings of the District Court are mainly factual ones that depend on the circumstances of the specific case, and therefore there is no basis for our intervention, especially not within the scope of an application for leave to appeal to a third instance (LA 103/82 Haifa Car Park Ltd v. Spark Plug (Hadar Haifa) Ltd [1]). It is, however, my opinion that the third finding of the District Court justifies a more thorough consideration of the question of the status of the insurance broker and the legal relationship between him and the insurance company, and between him and the insured.

The application of Article 6 of Chapter 1 of the Law

8.    The District Court held that ‘according to the provisions of Article 6 [of Chapter 1] of the Insurance Contract Law, 5741-1981, the insurance broker is an agent of the insurer.’ In this I believe that the lower court made an error. Article 6 of Chapter 1 of the Law (in ss. 33-35) defines three specific situations in which the insurance broker will be regarded as the insurer’s agent, and in s. 36 it provides that the Agency Law, 5725-1965 (hereinafter: ‘the Agency Law’) will apply, mutatis mutandis, to such an agency. The purpose of these sections is to protect the insured. The significance of creating a presumption of this kind is that the insurer will be liable for any failure of the broker to comply with his obligations to the insured, where the major advantage of this is that the insurer, unlike the broker, has a ‘deep pocket.’ In practice, the acts described in ss. 33-35 require the insurer to supervise the acts of the broker and to take responsibility for the acts of its broker (see HCJ 5064/03 Association of Insurance Brokers & Agents in Israel v. Supervisor of Insurance [2], at p. 232; CA 702/89 Eliyahu Insurance Co. Ltd v. Orim [3], at pp. 817-818; D. Schwartz & R. Schlinger, Insurance Law (2005), at p. 376).

During the debate that was held in the Knesset before the Law was passed, MK Mordechai Virshubski explained the idea underlying the enactment of Article 6:

‘The last thing that I wish to discuss is that we have determined the status of the insurance broker… Emotions ran high and the arguments were heated, but finally a decision was made — which was not to the liking of the insurance companies — that for the purpose of the negotiations before making the insurance contract and for the purpose of making the contract, the insurance broker will be regarded as the agent of the insurer. There was a difference of opinion on this. The insurance companies argued that they wanted to regard the broker as the agent of the insured. But we said: a person presenting himself as an insurance broker comes to the home of an innocent person and persuades him to sign an insurance agreement. Then he leaves and the person thinks in his innocence that he is insured, with all of the conditions that the broker told him, and he is happy and contented until the insurance company says: that was not my broker at all, he was not authorized to do what he did and you are not insured. Alternatively, the insurance company says that the terms that were on the signed document are not the terms that govern the relationship between it and the insured. We wanted to put an end to this dispute, and we decided that the law will say that the insurance broker will be regarded as the agent of the insurer, and what he said to the insured when he persuaded him to sign, when he made him a client of the insurance company, binds the insurance company’ (Knesset Proceedings 91, 1443 (5741)).

9.    In Article 6 the legislature addressed three specific situations in which the insurance broker is presumed to be the agent of the insurer. In the Report of the Commission for Examining the Legal Status of the Insurance Broker (1998) (hereafter: ‘the commission’s report), at p. 13, it is stated that the situations in Article 6 are characterized by the  concern that a consumer interest would be prejudiced as a result of the objectivity required of the insurance broker in a transaction. It should be pointed out that the members of the commission were unanimous in their opinion that there are no additional situations to those listed in Article 6 of Chapter 1 of the Law that require the broker to be classified as an agent.

Prof. Stern is of the opinion that the Law does not seek to regulate the relationship between broker and the insurer inter se, but it is in essence a consumer law that concerns itself solely with the interests of the insured and tries to mitigate to some degree the inequality created by the power disparity between the parties to the insurance contract. Stern therefore regards Article 6 as a kind of addendum to the Law that was added at the request of insurance brokers. He argues that what is common to the matters mentioned in Article 6 is the intention to grant additional protection to the insured in his dealing with the insurer. Even Stern is of the opinion that apart from these situations the Law does not adopt any position regarding the status of the insurance broker in relation to the insurer (Y.Z. Stern, ‘On the Legal Status of the Insurance Broker: Broker-Insurer Relations,’ 10 Bar-Ilan Law Studies (Mehkarei Mishpat) 93 (1993), at pp. 95-96).

We should therefore begin by examining whether the situation in this case falls within one of the situations that are described in the aforesaid sections.

10. Sections 33-35 of the Law provide:

‘Agency for the contract

33. (a) For the purpose of the negotiations prior to the making of the insurance contract and for the purpose of making the contract, the insurance broker shall be regarded as the agent of the insurer, unless he acted as the agent of the insured in accordance with his written request.

     (b) For the purpose of the duty of disclosure in making the insurance contract, the knowledge of the insurance broker with regard to the correct facts of a material matter shall be regarded as the knowledge of the insurer.

Agency for the insurance premiums

34. For the purpose of receiving the insurance premiums, the insurance broker who arranged the insurance or who was stated in the policy as the insurance broker is regarded as the agent of the insurer, unless the insurer gave written notice to the insured that they should not be paid to that broker.

Agency for giving notices

35. For the purpose of the insured and the beneficiary giving notices to the insurer, the insurance broker who arranged the insurance or who was stated in the policy as the insurance broker is regarded as the agent of the insured, unless the insurer gave written notice to the insured and the beneficiary in writing that notices should be sent to another address.’

The respondent claims in his supplementary arguments that ss. 34 and 35 of the Law apply. I do not think that this argument can be accepted. Section 34 specifically addresses the insurance premiums that the insured is liable to pay to the insurer, and the status of the insurance broker who receives the premiums from the insured on behalf of the insurer. The purpose of this section is to remove any concern that the insured will be left without insurance coverage because the insurance premiums that he paid to the broker were not transferred by the broker to the insurer, because the broker either ‘lost’ or used that money (Association of Insurance Brokers & Agents in Israel v. Supervisor of Insurance [2], at pp. 233-235; S. Weller, The Insurance Contract Law, 5741-1981 (vol. 1, 2005), at pp. 719-721). By contrast, the situation in our case concerns the process of obtaining the insurance payout, which is not included within the framework of this section. The inclusion of activity relating to the insurance payout within the scope of s. 35 of the law, which concerns the giving of notices by the insured and the beneficiary to the insurer, is also difficult, in view of both the language and the purpose of the section. Section 35 is intended to answer the question whether an insured  person, who gave the insurance broker the notice that is required by the insurance contract or by law, has discharged his duty vis-à-vis the insurer. Section 35 gives a positive answer to this question (Weller, The Insurance Contract Law, 5741-1981, at p. 723). It would appear that the process of obtaining the insurance payout is therefore not included within the specific sections of Article 6 of Chapter 1 of the law (see Weller, ibid., at p. 686).

Now that we have determined that Article 6 of Chapter 1 of the Law does not apply to our case, we should examine the significance of this finding with regards to the legal relationship between the insurer, the insured and the insurance broker.

The status of the insurance broker outside Article 6 of Chapter 1 of the law

11. In his book Weller raises five possibilities for determining the status of a broker in cases that are not governed by Article 6 of Chapter 1 of the Law (Weller, at pp. 687-689). First, the insurance broker may be regarded as the agent of the insured. The logic behind this is that the insurance broker should have a fiduciary duty to the insured, so that he serves the interests of the insured rather than the insurer (see support for this view in D.M. Sasson, Insurance Law (1988), at p. 51). Second, the insurance broker may be regarded as the agent of the insurer. Weller claims that had the legislature wanted to choose this possibility, it would not have legislated specific cases in which such an agency relationship applies. Third, the status of the insurance broker may merely be that of a broker, and not that of an agent. A broker, unlike an agent, has no power to perform legal acts on behalf of one of the parties, nor does he have a fiduciary duty to only one of the parties (see also I. Englard, ‘On Brokerage and Agency,’ 10 Hebrew Univ. L. Rev. (Mishpatim) 359 (1980)). Thus the broker will not serve the interests of only one party, but will have duties to both parties. Weller claims that this possibility is problematic in cases where the insurer authorizes the broker to carry out legal acts on its behalf, such as thecae where the insurer gives the broker authorization to conduct negotiations on its behalf with an insured with regard to the insurance payout and to reach an agreement with the insured in this regard. Fourth, the broker may be regarded as the agent of both the insurer and the insured. Weller discusses the difficulty inherent in such a situation where the broker has a fiduciary duty to two parties with conflicting interests. Fifth, the status of the insurance broker will depend upon the circumstances. Weller supports this possibility and claims that the status of the broker should be determined as an agent of the insured, an agent of the insurer or merely a broker in accordance with the authorization given to the insurance broker by each of the parties with regard to a certain act, and in accordance with the policy considerations that are relevant to the case.

12. In his article Stern raises concerns about applying the laws of agency to the relationship between the insurer and the insurance broker. Stern believes that the insurance broker should be regarded solely as a broker between the two parties. In his opinion, there is no agency relationship between the insurance broker and the insurer because business practice in Israel shows that the insurance broker does not have any general power or authority to bind the insurer in his dealings with the insured. He also argues that even if an apparent agency is created under s. 3(a) of the Agency Law by the conduct of the principal (the insurer) vis-à-vis the third party (the client), this cannot affect the relationship between the broker and the insurer. Lastly, he argues that the insurance broker also cannot be regarded as an agent of the insurer under Article 6 of Chapter 1 of the law, since this regulates specific situations in which the insurance broker will be regarded as the agent of the insurer, and these constitute exceptions that testify to the general rule. Stern also mentions practical problems that may arise if the law of agency is applied to the relationship between the insurance broker and the insurer. Thus, for example, he argues that such an agency will result in the insurer’s interests being preferred by the insurance broker and the insured’s interests being neglected. He is also of the opinion that applying the laws of agency will have serious repercussions for the insurer, since it will find itself liable for a wide variety of acts of the broker without any justification and without there being any special relationship of trust that derives from the broker and the insurer being acquainted with one another.

13. I am of the opinion that in practice there is no real difference between Weller’s suggestion that each case be examined according to its circumstances and Stern’s suggestion that the insurance broker be regarded mainly as a broker between the parties. This approach that regards the insurance broker mainly as a broker allows the laws of agency to be applied to the insurance broker when he acts in accordance with a consensual, apparent or statutory agency (Y. Elias, Insurance Law (vol. 1, 2002), at p. 499). On the other hand, even according to Weller, where neither of the parties proves anything with regard to the specific circumstances of the case, we should create a baseline rule It would appear that he too believes that that rule should be that the insurance broker acts solely as a broker, unless one of the parties proves that in the circumstances of the case there is an agency. The example raised by Weller in order to contradict the agency approach, in which the case where the insurer gives the insurance broker an authorization to carry out legal acts on its behalf, does not in my opinion rule out this approach since according to this example the brokerage approach will also recognize the existence of a consensual agency between the insurer and the insurance broker.

14. In my opinion, the approach that the starting point is that the insurance broker is a broker between the parties, and in any case it can be proved that there is an agreed, apparent or statutory agency relations, is a proper approach to this issue. First, Article 6 of Chapter 1 of the Law incorporates several common situations in which the legislature decided to give the insured protection by providing that the insurance broker is the agent of the insurer, and therefore the insurer is liable for the broker’s omissions and mistakes. In other situations, where the legislature did not choose to grant the insured the protection of a presumption of agency, the legal position in any situation that will arise in the future in a specific case cannot be determined categorically. Therefore, the assumption will be that the insurance broker is merely a broker between the parties, and each party will be allowed to prove the existence of an agency relationship in the circumstances of the specific case. Second, case law has laid down that the arrangement that applies to situations which occurred before the statute came into effect is that the special circumstances of each case should be examined in order to decide the question whether the person who acted as the insurance broker is an agent (CA 25/82 Weitzman v. Prudential Insurance Co. Ltd [4], at pp. 503-504). I see no reason to depart from this arrangement when we are speaking of cases that have not been regulated in statute. Third, this conclusion is supported by logic and proper policy. Even if we regard the purpose of the Law as the protection of insured against the greater power of the insurer (CA 1064/03 Eliyahu Insurance Co. Ltd v. Estate of Piemonte [5]), it is not possible to decide ab initio every question of which legal relationship will benefit the insured. Admittedly, recognizing the insurance broker as an agent of the insurer imposes liability on the insurer for the insurance broker’s omissions and thereby protects the consumer, but it should be remembered that the significance of this agency is that it imposes a fiduciary duty on the insurance broker towards the insurer, a duty that is not always desirable for the insured. Thus, in a case where the insured regards the insurance broker as his agent and reveals confidential information to him, he certainly does not want the insurance broker to have a duty to pass on this information to the insurer because the broker has a fiduciary duty to the insurer. On the other hand, even Sasson, who as we have mentioned supports the position that the insurance broker is an agent of the insured in all the cases which are not stipulated in the statute, points out the difficulty that will arise in certain cases. Thus he gives an example of an insurer who transfers the insurance payout to the insurance broker, but the broker does not transfer it to the insured because of embezzlement or insolvency. In such a case, a difficulty arises if it is determined that the insurance broker is the agent of the insured, since then the insured will not be able to make a claim against the insurer for not making the payment to him (Sasson, Insurance Law, supra, at pp. 52-53).

It should be noted that a similar, albeit more limited, position was adopted in the commission’s report (at p. 13). According to this position, the insurance broker should be given the legal status of a broker, except where there is a concern of harm to a consumer interest as a result of the objectivity that is required of the insurance broker in a transaction, in which case the insurance broker should be defined as an agent of the insurer. But at the same time the commission restricted these cases solely to those currently set out in Article 6 of Chapter 1 of the Law. The commission also proposed that the Law should state that the provisions of the Agency Law do not apply to cases that are not included in Article 6 of Chapter 1 of the Law, unless a principal expresses consent to the agency. As I have said, my opinion is that the proper approach is to allow each case to be considered on its merits, and to allow an apparent agency to be recognized in accordance with the provisions of the Agency Law and the interpretation given to it in case law.

15. I am of the opinion that, even following the approach that the starting point is that the insurance broker is merely a broker, it is possible to find solutions to situations where the insured and his interests need to be protected, and therefore there is no concern that this approach will not allow any solution in cases where the Law should ideally protect him. On the contrary, I think that considering each case on its merits will allow the court to adopt an approach that protects the insured’s interests and conform with the Law’s purpose of protecting the insured.

First, it should be emphasized that the insurance broker is not of course exempt from all obligations to the parties. He is subject to the obligations of the general law. It should be recalled that being an insurance broker gives rise to a contractual relationship that imposes various obligations on the parties, including a fiduciary duty, a prudence duty and the duty to act in a customary manner and in good faith (see Englard, ‘On Brokerage and Agency,’ supra, at pp. 363-364).

Second, in Article 6 of Chapter 1 the legislature gave the insured relatively broad protection in common situations that arise between the insurance broker and the insured, such as negotiations prior to the formation of the insurance contract and the formation of the insurance contract itself.

Third, I am in agreement with Weller that the interpretation that will be given by the court to the circumstances of the case and the answer to the question whether there is an agency in the circumstances of the case should also be influenced by the policy considerations that apply in that case. Among the policy considerations that are mentioned, it is important to emphasize the possibility of distributing the damage that is normally available to the insurer, and the more extensive information that the insurer is able to obtain with regard to his brokers in comparison to the information that the insured possesses (Weller, at pp. 678-679). These policy considerations can in appropriate cases justify a broader interpretation of the existence of an apparent agency or the application of the sections in Article 6 of Chapter 1 of the Law. In other words, the general laws of agency are what will determine the agency’s existence, scope, etc., but their application and implementation in each case will depend upon the special policy considerations in an insurance scenario.

Finally, in addition to the basic approach set out here, it is possible to argue that the supporters of the approach that considers cases on their merits will be prepared to recognize the existence of an agency relationship even when no consensual, apparent or statutory agency has been proved, solely on the basis of policy considerations that justify a recognition of an agency relationship. Admittedly, it would appear that Weller did not intend this, but I am of the opinion that a certain opening should be left for exceptional cases that will justify recognition of an agency between the insurance broker and the insurer for consumer policy considerations of protecting the insured, and therefore it cannot be said that the list in Article 6 is a closed list of cases. Admittedly great caution should be exercised when determining cases of these kinds, but the consumer should not be left unprotected in a situation where policy considerations justify protecting him by creating an agency between the insurance broker and the insurer. Naturally, within the scope of the policy considerations we should also consider those that justify refraining from extending the scope of the insurer’s liability.

16. The result is therefore that outside Article 6 of Chapter 1 of the Law the three-way relationship between the insured, the insurance broker and the insurer should be examined as an particular case of the general laws of agency, in which the laws in specific context will be given an interpretation that seeks to protect the insured. Therefore the usual method of creating an agency will be by giving an explicit authorization to an agent to act on behalf of a principal. Such an agency will more easily describe the relationship between the insurance broker and the insurer in certain cases. Nonetheless, there are situations in which there will be no explicit authorization for an agency but an agency will still be recognized between two parties. This, for example, is what happens in the case of an apparent agency, in which the agency is created by the conduct of the principal vis-à-vis the third party. Therefore, any representation of the principal, in an act or an omission, from which the third party may deduce the existence of an authority given by him to the acts of the agent, is capable of rendering the principal liable in his relationship with the third party, unless the third party knew, or should have known as a reasonable person, that the agent did not have authority (Elias, Insurance Law, supra, at pp. 502-503). The institution of the apparent agency is particularly important when we are seeking to protect the insured, since in cases where the insurance company makes a representation to the insured that the insurance broker is acting with authority, the insurance company will be liable to the insured for the acts of the broker. When examining whether there exists an apparent agency between the insurance broker and the insurer and whether the aforesaid exception thereto applies, it will be necessary to take into account the disparity in information and strength between the insurance company and the insured. Possible indications of the existence of an apparent agency can be the fact that the broker works in the insurer’s office; the receipts given by the broker bear the name and symbols of the insurance company, the broker works mainly for the insurer, and only in rare cases for other insurers; there is no distinction between the insurance broker and other workers of the insurance company (see CA 391/77 Dadash v. Arieh Insurance Co. Ltd [6], at p. 653). An additional doctrine that creates an agency is found in s. 6(a) of the Agency Law, which concerns the ratification of an action that was done by someone as the agent of another when he had no authority to do it or exceeded his authority. The section provides that ratification is equivalent to authority ab initio, provided that a right that someone registered in good faith and for consideration before the ratification is not prejudiced. I will merely point out that this doctrine has also been applied in Israeli case law with regard to the relationship between an insurer and an insurance broker (CA 102/87 Arieh Israel Insurance Co. Ltd v. Ludjia Textile Co. Ltd [7]).

17. It should also be mentioned that under the law of agency it is insufficient to find that there is an agency between the insurer and the insurance broker. In every case it is necessary to examine whether the insurance broker acted within the scope of his authority or whether he exceeded the authority given to him. Where there is a departure from the authority given, the insurance company will not be liable for that act and the insured will be given the choice of regarding the insurance broker as the other party to the contract, or rescinding it and suing the insurance broker for his damage (s. 6(b) of the Agency Law). The difficulty that may arise in cases of this kind is that the insured may be left with damage that in many cases he cannot recover from the insurance broker because of the latter’s limited financial resources. Therefore, the tendency should be to give a broad interpretation to the limits of the authority granted to the insurance broker by the insurer, and to give a narrow interpretation to a departure from authority, in order to protect the insured. The justification for this derives from the fact that the insurer is the strong party in the transaction, the party that has the tools to supervise and monitor the actions of the insurance broker, and the party that has the ability to protect itself and pay for the consequences of the acts of the insurance broker that exceed his authority. In other words, the insurer can prevent the damage in the most economic way (see Elias, Insurance Law, supra, at p. 519). This Court has said in this regard:

‘The insurer should ascertain that his agent is acting in accordance with the authority given him, and he should ascertain that he chooses a reliable insurance broker who will act to his satisfaction. Naturally, when the broker departs from his authority as an agent, the insurer will be entitled to the remedies listed in the Agency Law, 5725-1965. In my opinion, there is nothing to prevent the insurance broker telling the insured that the arrangement between them is subject to the approval of the insurance company and until then the insured does not have any insurance cover, provided that he does so expressly. But in a case like the case before us, where the insurance broker does not make the acceptance conditional but guarantees that there is insurance cover starting from a certain date, the insurer will be bound’ (CA 702/89 Eliyahu Insurance Co. Ltd v. Orim [3], at p. 818).

18. For our purposes, the key issue is the law of agency relating to the liability of the insurance company for a tort committed by the insurance broker. The principle is that the agency does not apply to prohibited acts that were done by the agent, and in a case of this kind the agent will be personally liable for his damage (see A. Barak, The Agency Law (vol. 1, 1996), at pp. 84-85) and Elias, Insurance Law, supra, at p. 520-521). Nonetheless, there are cases in which the principal will also be liable for the tort done by the agent. The insurer’s liability in cases of this kind may derive either from the law of agency, when the agent’s act falls within the scope of the external appearance of his authority, or from the law of torts itself, by virtue of the insurer’s direct or vicarious liability. In the latter case, the principal will be liable in every case where the agent commits a tort within the scope of his duties as agent, subject to certain reservations (see Barak, The Agency Law, supra, at pp. 84-87; A. Barak, Vicarious Liability in Tort Law (1964), at pp. 93-111; CA 422/85 Bank Leumi of Israel Ltd v. Israel Subinsurance Co. Ltd [8]).

19. In American law there is a distinction between an insurance agent and an insurance broker, who is a kind of middle man. Whereas the former will usually be regarded as an agent of the insurer, the latter will usually be regarded as an agent of the insured. However, the decision as to whether a person is an agent or a broker depends upon the circumstances and should be made on a case by case basis, so that the same broker may be considered for some acts the agent of the insurer, and for others the agent of the insured (see 43 Am. Jur. 2d. §123). Whether there is an agency is determined in accordance with the general rules of agency, and in insurance matters indications that are relevant to situations of these kinds are examined. An agency may be established upon the basis of an express agency, an implied agency (which is determined in accordance with what a reasonable broker would think and believe) and an apparent agency (which is determined in accordance with a representation made by the insurer to the insured (see 3 Am. Jur. 2d §72, 73). There is extensive case law in the United States on the question of when insurance brokers should be regarded as the insurer’s agent and when they should be regarded as the insured’s agent, but no comprehensive tests have been laid down in this regard. It is, however, possible to find various indications as to how the matter should be examined. One of the states that has laid down clear tests in this regard is the State of Illinois, which has laid down a four-stage test for examining the status of the insurance broker: (1) which party induced the insurance agent to start working); (2) who controlled the insurance agent’s actions; (3) who paid the insurance agent; and (4) whose interests the insurance agent was protecting (Ohio Farmers Insurance Co. v. Hotler [15]; Mizuho Corporate Bank v. Cory & Associates, Inc. [16], at p. 654; Zannini v. Reliance Insurance Co. of Illinois [17]).

In English law the legal position on this question is similar to that of  American law. While an insurance agent will be regarded as the agent of the insurer, an insurance broker will be the agent of the insured. Here too the determination as to the kind of broker concerned is made in accordance with the circumstances of the case and the conduct of the insurance broker in the specific case (R.M. Merkin, Colinvaux’s Law of Insurance (seventh edition, 1998), at pp. 324-325). Naturally, English law (like American law) also needs to determine the scope of the agency in each case, and if an insurance broker exceeds his authority, he will be liable personally, and the insurer for whom he acted will not be liable.

20. In conclusion, it should be noted that I am leaving another significant question undecided, , namely the definition of the term ‘legal act’ in the Agency Law. The agency is defined in s. 1 of the Agency Law as ‘authorizing an agent to do, on behalf of or instead of a principal, a legal act vis-à-vis a third party.’ No one denies that an insurance broker whose role is limited to locating the parties to the transaction and bringing them together without taking an active role in the negotiations does not carry out a ‘legal act,’ and therefore he will not be recognized as an agent of one of the parties (Elias, Insurance Law, supra, at p. 499). The difference of opinion arises in cases where, for example, the insurance broker takes an active part in the negotiations. The question in such cases is whether the term ‘legal act’ should be given a broad interpretation that also includes a situation of this kind. This question has been considered in case law and professional literature, but has not yet been decided (those who think that conducting active negotiations does not constitute agency: Barak, The Agency Law, supra, at pp. 391-393; Englard, ‘On Brokerage and Agency,’ supra, at p. 361; G. Procaccia, Agency Law In Israel (1986), at p. 84; Justice Y. Kahan in CA 793/76 Lookman v. Schiff [9]; Justices Mazza and Bach in CA 3248/91 Ben-Ari (Winiger) v. Buaron Yitzhak Ltd [10]; those that think that conducting active negotiations should be considered an agency: Justice M. Elon in CA 166/77 Dadon v. Avraham [11]; Justice Ben-Porat in CA 294/76 Anglo-Saxon Property Agency (Savion) v. Passerman [12]). In any case, the ramifications of this question on the relationship between an insurer, insurance broker and insured are relatively limited, since with regard to holding negotiations for the purpose of making an insurance contract, s. 33 of the Law provides a presumption that there is an agency between the insurance broker and the insurer. The question will arise when the negotiations that take place between the insurer and the insured through the insurance broker are not for the purpose of making an insurance contract, but, for example, for the purpose of receiving an insurance payout. These cases, and the special nature of the issue in so far as it concerns the relationship between the insurer, insurance broker and insured, will be considered when the appropriate case comes before us.

From general principles to the specific case

21. As stated above, I am of the opinion that Article 6 of Chapter 1 does not apply to the situation in this case, and therefore the legal status of the insurance broker in this case should be examined in accordance with the circumstances of the case. I think that the matter should be returned to the trial court (the Magistrates Court), which should consider the matter in accordance with the guidelines set out in this judgment, and decide mainly the following two questions: first, whetherthe insurance broker was an agent for the applicant; and second, if the answer to the first question is yes, whether the applicant liable for the tort that was committed by the insurance broker against the respondent. In this sense the appeal is allowed. The costs of this proceeding should be taken into account by the Magistrates Court to which the matter is returned, subject to the outcome of its new judgment.

 

 

Justice M. Naor

1.    I too am of the opinion that the appeal should be allowed. Notwithstanding, there is no reason, in my opinion, to return the case to the Magistrates Court.

2.    As my colleague Justice Arbel held, the justification for granting leave to appeal in this case is the determination of the District Court that the insurance broker acted as the agent of the applicant by virtue of article 6 of the Insurance Contract Law, 5741-1981 (hereafter: the Law). I agree with the detailed legal analysis of my colleague, according to which article 6 of the Law does not apply to this case. For this reason the appeal should be allowed and the determination of the District Court should be set aside. My colleague Justice Arbel examined whether it is possible to find a basis for the determination of the District Court outside the scope of article 6, and determined  guidelines on that subject. While I agree with my colleague’s legal analysis in my opinion, I see no justification in this instance for returning the case to the trial court. This is because the respondent’s argument, which was accepted in the District Court, that the insurance broker acted as the applicant’s agent (hereafter: “the agency claim”), was constituted an improper change of front, being raised at a late stage of the case and there is therefore, in my opinion, no reason to return the hearing of the case to the Magistrates Court.

3.    It should be noted that the agency claim — whether or not by virtue of article 6 of the Law — is not mentioned in the amended statement of claim that was filed in the Magistrates Court. The agency claim was raised for the first time, and in brief, in the respondent’s closing arguments in the Magistrates Court (p. 8 of the respondent’s closing arguments in the Magistrates Court). But raising the claim in closing arguments is insufficient. The Magistrates Court itself did not regard it as an argument that had been legally raised, and it held that it had not been argued or proved:

‘It should be emphasized that even if the broker is indeed the one who, for some reason or other, pushed to sever the relationship, and I do not say that this was the case, it was neither claimed nor proved that in such an act, if it indeed occurred, the broker acted as an agent [of the applicant] or at its request .’

Because of the way in which the written pleadings were worded, the factual issue regarding agency was not adjudicated in the Magistrates court, neither in the examination of the witnesses nor in the other evidence. The insurance broker was not summoned to testify by either of the parties in the Magistrates Court. Incidentally, even in the District Court the agency claim was not raised as a main argument. The issue of the broker was mentioned incidentally in the section of arguments concerning witnesses that ought to have been summoned to the trial (para. 40 of the respondent’s skeleton arguments in the District Court).

4.    My colleague and myself do not dispute that the agency claim in this case requires a clarification of the facts. But in my opinion there is no justification for ordering such a clarification of the facts at this stage and returning the case to the trial court, since, as I have said, the agency argument was not originally raised in the trial court in the proper manner. In this regard, it is insufficient to raise the argument for the first time in closing arguments in the trial court, unless the other party agrees to the change of front , or if permission is given to amend the written pleadings (CA 6799/02 Yulzari v. United Mizrahi Bank Ltd [13], at para. 6 of the opinion of Justice E. Hayut). In our case the applicant did not agree to the change of front, and the permission of the court to amend the written pleadings in this regard was neither requested nor granted. This also has an effect at the appeal stage, since the court of appeal will not consider a ground of appeal that was not raised in the trial court, especially where it is a factual argument that is raised for the first time in the appeal (CA 207/86 Magen v. Bachar [14], at para. 8 of the opinion of President M. Shamgar). Such is the argument in this case.

5.    It would appear that in the Magistrates Court the respondent, Advocate Kaplansky, had a ‘late start.’ It was only in his closing arguments that he raised the agency claim. In my eyes, the timing of that claim, which obviously requires factual clarification -  - being raised at the closing arguments stage - is also an indication that the claim was not a serious one even from respondent's standpoint, and in my opinion he should not be allowed to retry his case in accordance with an improved version.

6.    Therefore, were my opinion accepted, we would set aside the judgment of the District Court, as my colleague proposes, and we would reinstate the judgment of the Magistrates Court without returning the case to it. The respondent shall pay legal fees totalling NIS 20,000, as well as trial costs.

 

 

Justice D. Cheshin

I agree with the opinion of my colleague Justice Arbel. But since the respondent only raised the agency claim for the first time in his closing arguments in the Magistrates’ Court, which constituted a departure from his written pleadings and the raising of a new factual dispute between the parties, as described in the opinion of my colleague Justice Naor, I would find him liable to pay the applicant’s cost in the litigation before the District Court and before us.

I therefore propose that the respondent shall pay legal fees in the sum of NIS 20,000, as well as the trial costs.

 

 

Appeal allowed.

2 Kislev 5768.

12 November 2007.