Breach of statutory duty

Attorney General v. Weigel

Case/docket number: 
FH 5/63
Date Decided: 
Thursday, October 31, 1963
Decision Type: 
Original
Abstract: 

The respondent was convicted at first instance of being a procurer under section 1(b) of the Penal Law Amendment (Prostitution Offences) Law, 1962, but owing to the special circumstances of the case he was not given a prison sentence but put on probation. An appeal to the Supreme Court having failed, the Attorney-General applied for a Further Hearing* regarding the construction of the said section 10 in the light of section 3 (2) of the Probation of Offenders Ordinance, 1944. The sole issue was whether a person convicted under the Law must be sentenced to imprisonment or may instead be put on probation.

           

Held by a majority (1) An "offence punishable by imprisonment or fine" to which the Probation Ordinance applies is descriptive of the kind of offence for which probation is available. Such an offence does not cease to be of that kind if the penalty is expressly mandatory. "Punishable" is not restrictive so as to exclude a mandatory penalty.

 

(2) A section of the Law under which "a penalty of imprisonment shall be imposed" is intended (upon sentencing) to exclude a penalty as the sole penalty which is not imprisonment. Probation as such is not a penalty and therefore falls outside the ambit of the section.

 

(3) To oust existing sentencing powers and restrict the rights of the individual, particularly in criminal matters, express statutory provision is necessary. Section 10 contains such an express provision as regards conditional imprisonment but not as regards probation.

 

(4) Probation is a method of treatment alternative to imprisonment, intended to assist in the rehabilitation of offenders. Ever since its introduction it has not conflicted with but complemented imprisonment

 

(5) The cases of prostitution offences in which the courts will direct probation rather than impose imprisonment are very rare. Indeed it would defeat section 10, if they did so to any appreciable extent.

 

* Under section 8 of the Courts Law, 1957, a Further Hearing by five or more judges of the Supreme Court will be granted "in view of the importance, difficulty, or novelty" of a ruling of the Supreme Court sitting with three judges.

Voting Justices: 
Primary Author
majority opinion
Author
concurrence
majority opinion
Author
dissent
Author
dissent
Full text of the opinion: 

F.H. 5/63

 

           

ATTORNEY-GENERAL

v.

DANI WEIGEL

 

 

In the Supreme Court sitting as a Court of Criminal Appeal

[October 31, 1963]

Before Olshan P., Berinson J., Cohn J., Manny J. and Halevi J.

 

 

 

Construction of statute - prostitution offences - mandatory imprisonment - exclusion of probation - Penal Law Amendment (Prostitution Offences) Law, 1962, sec. 10-Probation of Offenders Ordinance, 1944, sec. 3 (2).

 

            The respondent was convicted at first instance of being a procurer under section 1(b) of the Penal Law Amendment (Prostitution Offences) Law, 1962, but owing to the special circumstances of the case he was not given a prison sentence but put on probation. An appeal to the Supreme Court having failed, the Attorney-General applied for a Further Hearing* regarding the construction of the said section 10 in the light of section 3 (2) of the Probation of Offenders Ordinance, 1944. The sole issue was whether a person convicted under the Law must be sentenced to imprisonment or may instead be put on probation.

           

Held by a majority (1) An "offence punishable by imprisonment or fine" to which the Probation Ordinance applies is descriptive of the kind of offence for which probation is available. Such an offence does not cease to be of that kind if the penalty is expressly mandatory. "Punishable" is not restrictive so as to exclude a mandatory penalty.

 

(2) A section of the Law under which "a penalty of imprisonment shall be imposed" is intended (upon sentencing) to exclude a penalty as the sole penalty which is not imprisonment. Probation as such is not a penalty and therefore falls outside the ambit of the section.

 

(3) To oust existing sentencing powers and restrict the rights of the individual, particularly in criminal matters, express statutory provision is necessary. Section 10 contains such an express provision as regards conditional imprisonment but not as regards probation.

 

(4) Probation is a method of treatment alternative to imprisonment, intended to assist in the rehabilitation of offenders. Ever since its introduction it has not conflicted with but complemented imprisonment

 

(5) The cases of prostitution offences in which the courts will direct probation rather than impose imprisonment are very rare. Indeed it would defeat section 10, if they did so to any appreciable extent.

 

Israel cases referred to:

 

(1)       Cr.A. 69/63-Attorney-General v.Dani Weigel (1963) 17 P.D. 712.

(2)       Cr.A. 26/55-Rahel and Yaakov Shakraji v. Attorney-General (1955) 9 P.D. 378.

(3)       Cr.A. 44/52-Kassem Hasin Diab v. Attorney-General (1952) 6 P.D. 922.

(4)       H. C. 186/62- B. Veider v. Minister of the lnterior and others (1962) 16 P.D. 1547.

(5)       Cr.A. 38/61-Moshe ben David Yitzhak v. Attorney-General (1962) 16 P.D. 514.

(6)       Cr.A. 155/59-Yaakov Darai  v. Attorney-General (1960) 16 P.D. 233.

(7)       Cr.A. 24/55-Attorney-General v. Barukh Salmander and others (1954) 8 P.D. 474.

(8)       Cr.A. 558/62-Morris Rabo v. Attorney-General (1963) 17 P.D. 162.

(9)   Cr.A.-234/53 Tel Aviv-Yafo Attorney-General v. Avraham ben Yitzhak HaGoel (1955) 11 P.M. 84.

 

English case referred to:

 

(10)     R. v. Parry and others (1952) 2 All E.R. 1179.

 

Z. Bar-Niv, State Attorney, for the appellant.

B. Shagia for the respondent.

 

OLSHAN P.               The sole issue before us is the construction of section 10 of the Penal Law Amendment (Prostitution Offences) Law, 1962, in the light of section 3 (2) of the Probation of Offenders Ordinance, 1944 (hereinafter referred to as "the Ordinance").

 

  Sections 1 and 3 of the said Law define various prostitution offences and prescribe the penalties therefor by the following formulae:

           

"Shall be liable to imprisonment for a term of five years" (sections 1, 2 and 5);

 

"shall be liable to imprisonment for a term of three (five) years"

(section 9);

 

"shall be liable to imprisonment for a term of seven years" (section 3).

 

Then comes section 10 which provides:

 

"Where a person has been convicted of an offence under section 1, 2 or 3 of this Law, a penalty of imprisonment shall be imposed upon him, either as the sole penalty or in conjunction with another penalty, but conditional imprisonment shall not be imposed upon him."

 

            In Attorney-General v Weigel (1), the subject of the present hearing, a majority of the judges were of the opinion that section 10 does not prevent the court from applying section 3 (2) of the Ordinance which generally speaking empowers the court, in the event of a person being punishable with imprisonment or fine, to make a probation order instead of sentencing him. Relying on the phrase "shall be imposed" in section 10, the judge in the minority had no doubt that the section places a duty on the court to impose a sentence of imprisonment, either as a sole penalty or in conjunction with another penalty, and that the court is commanded by the legislature, where a person is convicted under section 1, 2 or 3, to impose a penalty and may not let him go free without any penalty, that is to say, that it is impossible to put him on probation in place of imposing a penalty.

           

            According to the interpretation given by the majority therefore the court must first consider in the light of section 3 (2) of the Ordinance whether or not any penalty is to be imposed and only if it thinks that a penalty should be imposed must it be imprisonment. The minority view was that where a person is convicted of a prostitution offence under section 1, 2 or 3 the court is not free to consider whether or not to impose a penalty but is commanded to impose the penalty of imprisonment.

           

            After hearing counsel representing the parties, I have reached the conclusion that the law is with the minority judge. The submissions of Mr. Bar-Niv, the State Attorney, appeal to me for the following reasons.

           

 (1) The words "shall be imposed" appear to me to be in the imperative mood. A distinction must here be made between "imprisonment shall be imposed" and "shall be liable to imprisonment"; in all the sections of the Criminal Code Ordinance, 1936, the penalty-fixing formula is "is liable to" and only in one section "shall be sentenced" (cf. sections 49, 50, 213 and many others together with section 215 before amendment). Ever since the establishment of the State, whenever the first above formula was intended the legislature employed the words "shall be liable to imprisonment" and whenever the second was intended it used the words "the court shall impose" or "shall be imposed".

 

            Where "is liable to" occurs, the convicted person may be punished with imprisonment and the question of its length will only arise when the court comes to the conclusion that a probation order should not be made in place of imposing a sentence. Were the majority's interpretation of section 10 to be accepted, the legislature would not have needed to use the words "shall be imposed" and it could have adopted the formula "he shall be liable...". Section 10 would also then have been unnecessary.

           

            Having found it proper to use the "shall be imposed" formula in section 10 instead of the "shall be liable" formula in section 1, 2 and 3 of the Law, then - and this is a canon of interpretation - the legislature is not to be assumed to have done so inadvertently. According to the interpretation proposed (by the respondent) we must ignore the words "shall be imposed" and read in place thereof "shall be liable".

           

(2) According to that interpretation also, the opening words "Where a person has been convicted..." must be read as if they said something like "Where a penalty has been imposed under section 1,2 or 3, the penalty shall be imprisonment... but conditional imprisonment shall not be imposed". But significance attaches to the words "Where a person has been convicted". They instruct the court what to do with the defendant after conviction, that is, after conviction a penalty is to be imposed and he is not to be allowed to go free without penalty. We are not at liberty to ignore the legislature's formula and replace it with another consistent with the said interpretation.

 

(3) Why the legislature found it right to add the words "but conditional imprisonment shall not be imposed" but not also "no probation order shall  be made", the answer, it seems to me, is that the purpose of the section is to prescribe the obligatory nature of the penalty from among the various penalties found in our law, such as fines, conditional imprisonment and others. It was necessary to exclude conditional imprisonment expressly because according to Shakraji v Attorney-General (2) imprisonment by itself includes conditional imprisonment. Had the legislature not excluded conditional imprisonment a court could comply with section 10 by imposing the latter-a course not welcome to the legislature. On the other hand, a probation order is not a penalty; section 3 (2) of the Ordinance says that "the court may, in lieu of sentencing him, make a probation order". Hence, the court being bound to impose the penalty of imprisonment, it was not essential to mention the Ordinance which enables relief from penalty.

 

(4) Purposively there is no great difference between a probation order after conviction and conditional imprisonment. The object of a probation order was explained in the judgment of my honourable friend, Berinson J., in Weigel (1) at 719, and I have nothing to add. It seems to me that the imposition of conditional imprisonment is also founded on the belief that if the defendant is given the opportunity, he will mend his ways and refrain from his law-breaking. Upon the enactment of the Penal Law Amendment (Modes of Punishment) (Amendment No. 5) Law, 1963, the identity of the two drew even closer (apart from supervision by a probation officer). Section 7 (4) (b) and (5) (b) provide that if a probationer is convicted of another offence during the period of probation the court may sentence him for the offence for which he was placed on probation. That means that exemption from penalty and placing on probation are subject to the possibility of being sentenced for the first offence, if a breach of the probation order occurs or another offence is committed during probation. According to sections 18D and 18F added in 1963, when a further offence is committed, the court is not bound to activate the conditional imprisonment but may extend it for an additional period. In activating the conditional imprisonment, the court may also order that the sentences be concurrent. Conditional imprisonment is thus directed to those instances where there is a belief or expectation that its imposition instead of actual imprisonment will help the defendant to mend his ways. That belief and expectation exist when a probation order is made. I do not however say that this identity of purpose should be decisive in interpreting section 10. If it is clear from this section that the legislature directed the court to impose a term of imprisonment upon an offender convicted under sections 1, 2 and 3, since in spite of its high purpose, the imposition of conditional imprisonment has, on any view, also been forbidden by the legislature.

 

(5) In association with the opening words "Where a person has been convicted", the marginal heading to section 10, "Mandatory imprisonment", means that once convicted of an offence under sections 1, 2 or 3, an obligation arises to impose imprisonment. In general, where the section of a statute is clear, there is no need to refer to the marginal heading; only those who plead that the meaning is obscure will need to do so. In my judgment no such necessity occurs here, but if it does, it supports the conclusion drawn by the minority judge. The question which arises in connection with this submission is the extent to which the marginal heading is part of the law. In Diab v. Attorney-General (3) Silberg J. indicated (at 926 and 928) the difference that exists in this regard between England and ourselves. It has long been normal in England to embellish a statute with headings and marginal headings after it has been adopted by the legislature. Silberg J. held, after comparing Mandatory legislation, that "there is nothing to prevent us from obtaining 'interpretative inspiration' from the headings". He said

 

"We see therefore that everything revolves round the cardinal question whether these headings and 'embellishments' have or have not been brought to the attention of and approved by the legislature, whether they have or have not received official approval. The traditional English view is that for Parliament there is only the archaic statutory roll which leads the reader on without name or description, without marginal headings and punctuation, and anything which it does not or need not include is not part of the statute, a kind of incidental nugatory addition by 'irresponsible' people who have no hand in the law-making of the legislature".

 

The question is therefore what is the situation with regard to Israeli legislation. When a bill is presented to the Knesset, it includes marginal headings. That may be seen from the copies before the Knesset at the second and third readings... . In the bill of the Law so presented, section 10 had the marginal heading "No penalty of a fine alone" and the words "but conditional imprisonment shall not be imposed upon him" did not appear in the body of the section. During the debate the Minister of Justice mentioned that there were lighter penalties as well as probation orders and he proposed that the section be deleted. Others objected to deletion and suggested that the above words should be added and their suggestion was accepted. The Law as adopted and then published contained section 10 in its present form. If the Law in the second and third reading contained marginal headings, it is to be assumed that the value of the heading we are concerned with was the same as that of the others. I do not need to lay down any hard and fast rule as to whether or not the marginal headings are part of the Law since there are decisions on the question in respect of Israeli legislation. In Voider v. Minister of the Interior (4) it was said (at 1551) that

 

"There is no need to deal with the question whether or not marginal headings are part of the Law, since in any event no authority was cited to show that even if they are not, some bar exists against taking them into account when considering the object of the section in connection with its interpretation."

 

In Yitzhak v. Attorney-General (5) the court said (at 523) that

 

"Although possibly sometimes - when the language is not plain enough and ambiguous - headings may help, it is quite a different matter to base on them an additional offence having no connection at all with the clear definition given in the body of the section."

 

It seems to me that here the marginal heading certainly does not help respondent's counsel in his endeavour to replace "shall be imposed" with "shall be liable", or to introduce before "shall be imposed upon him" the words "upon being sentenced".

 

            In Darai v. Attorney-General (6) the appellant was convicted of an attempt to unlawfully cause the death of a person under section 222 of the Criminal Code Ordinance, 1936. Counsel argued that the prosecution must prove "malice aforethought" as in murder and he relied upon the marginal heading "Attempt to murder". That is, he tried to read into the section the element of "malice aforethought" in view of the word "murder" in the heading. He did not succeed. In the case before us indeed the marginal heading is at one with the provisions of the section and not in conflict. Hence words which do not appear therein are not to be introduced.

           

 (6) The Law relating to assaults on policemen, where a minimum term of imprisonment is also provided, has been cited at length. In Attorney-General v. Salmander (7) this Court decided that that Law is lex specialis and its provisions set aside, implicitly if not expressly, the general provisions contained in the Criminal Code Ordinance, 1936, in as far as the two sets of provisions are inconsistent. (The problem there was whether it is possible to impose on an offender convicted under the said Law a fine according to section 42 (1a) or a recognizance to keep the peace according to section 45 of the Criminal Code Ordinance.) It appears to me that the Probation of Offenders Ordinance, 1944, also contains general provisions whilst the Law concerning prostitution is lex specialis. The former was enacted at a time when there were no laws prescribing "mandatory imprisonment". Accordingly, upon the enactment of a special Law on prostitution, section 3 (2) of the said Ordinance must be read subject to this special Law. If it patently emerges from the wording of section 10, in the context of the other sections, that upon a conviction for prostitution the offender receives mandatorily a prison sentence, it cannot be argued that the section must be treated as containing something which it does not contain, only because the legislature did not expressly exclude the application of section 3 (2) of the Probation Ordinance, particularly when this special Law deals with the imposition of penalties whereas the Ordinance deals with probation which is not a penalty.

 

            In Salmander (7) this Court held that the minimum imprisonment prescribed is a penalty which cannot be reduced, that is, it is mandatory, notwithstanding the use of "shall be liable" (and not "shall be imposed"). The meaning of "shall be liable" in the Law there is that an offender may be punished by imprisonment up to the prescribed maximum but must be punished with the minimum term of imprisonment.

           

            In view of the decision in Salmander we must say, and we may not ignore the fact, that the question whether the offender may be held free of all penalty and be put on probation according to the Ordinance was not raised in this appeal. Relying on Attorney-General v. HaGoel (9) - that the provisions of the Law relating to assaults on policemen do not prevent making a probation order instead of imposing a penalty - one may say that "shall be liable" to a minimum term of imprisonment (as obligatory) becomes operative only after the court takes the view that a probation order is not to be made in place of imposing a penalty, since this Law does not employ the language of section 10 ("Where a person has been convicted... shall be imposed"). There is no need to take up any position on the merits of the argument itself.

 

(7) Section 1 of the Penal Law Revision (Abolition of the Death Penalty for Murder) Law, 1954, abolishes the death penalty for murder and provides that "Where a person has been convicted of murder, the court shall impose the penalty of imprisonment for life, and only that penalty". Here everyone, other than respondent's counsel who must differ if he is to be consistent, agrees that the possibility of making a probation order instead of imposing the penalty is excluded. The argument here is, however, that that is because of the addition of "and only that penalty". This argument, it seems to me, is groundless. If a probation order is not a penalty, then the words cited do not form a provision excluding probation as an alternative to imposing the penalty. Consistently with the suggested interpretation of section 10, this section would also have to be read as if providing "Where a person has been convicted of murder, and the court is of the opinion that he is not to be exempted from penalty and put on probation, the court shall impose the penalty of imprisonment for life, and only that penalty". That is, if a penalty is imposed it must only be life imprisonment. It follows that there is no connection between the words added and the prohibition against making a probation order. The prohibition stems from the words "Where a person has been convicted... the court shall impose", which is similar to the language used by the legislature in section 10, and not from the words "and only that penalty". If the fact that probation has no place in murder is not disputed, then I see no justification for adopting a different interpretation in section 10.

 

(8) As I have said, "shall be liable" is generally used by the Israeli legislature in place of the Mandatory "is liable" and "shall be imposed upon him" in place of "shall be sentenced". That there is a difference in meaning between the two phrases used by the Israeli legislature is not to be disputed, and I have not heard of any other meaning attributed to "shall be imposed upon him" to distinguish it from "shall be liable". Prostitution offences were specified in many of the sections of the Criminal Code Ordinance, 1936. In treating some of these offences with particular stringency because they are increasingly plaguing the country, the legislature repealed the sections of the Criminal Code Ordinance, 1936, and replaced them with the Law in question, as lex specialis. In this Law section 10 is devoted to the offences mentioned in sections 1, 2 and 3. Although the penalties for offences under sections 5. 6 and 9 were increased the normal course was followed and words of command or mandate were not employed. With regard to these latter offences nothing was said limiting the discretion of the court in choosing the penalty or even in making a probation order. The intention of the legislature, it seems to me, is thus clear. What is involved is the principle of strict construction in favour of the offender, and this principle is not impaired since any other interpretation of section 10 is artificial and cannot be sustained without introducing words which the section does not contain.

 

(9) Assuming that after enacting the Probation of Offenders Ordinance the Mandatory legislator had amended section 215 of the Criminal Code Ordinance by providing that "upon conviction shall be sentenced to imprisonment for life", in my judgment there would have been no room for the argument that a probation order could be made instead of life imprisonment. The Probation Ordinance is not a "constitutional" law in the light of which all other law is reviewed. That being so, the two Laws must be reconciled, having their respective legislative intent in mind. Plainly, the 1944 Probation Ordinance does not embrace any intention to give section 3 (2) an entrenched position for the future. Had that been the intention, it would have been wholly invalid from the viewpoint of constitutional law. It is therefore to be understood that as regards the future the intention of the Ordinance was that use of section 3 (2) is subject to every new Law which can expressly repeal it or restrict its thrust with regard to some particular offence by prescribing that when an offender is convicted thereof he is to be sentenced by imposing the penalty of imprisonment. But such an intention would have to be clearly expressed in the new Law. Thus we return to the meaning of section 10 which appears to me to be so clear that we may not say to the legislature that, although the meaning is clear, we will ignore the clear intention simply because it did not expressly state that section 3 (2) of the Probation Ordinance is not to apply. To that the legislature would say that the presumption is that it was aware of section 3 (2) of the Ordinance and the failure to mention the necessary words - rightly or not, and as I have said above I think rightly - is not a ground justifying disregard of the clear meaning of section 10.

 

            The many reasons for rejecting the suggested interpretation of section 10 are not evidence that it is not clear or is ambiguous. The many reasons are the consequence of the many arguments advanced which in themselves do not prove that the intention of the legislature is not plain.

 

            In my judgment the appeal should be granted and imprisonment imposed upon the respondent.

           

BERINSON J.                        In the previous hearing of this matter we heard exhaustive arguments from the Deputy State Attorney, Mr. Bach, and the late Mr. Toussia-Cohen on the main issue, the interpretation of section 10 of the Penal Law Amendment (Prostitution Offences) Law, 1962, and its relation to section 3 (2) of the Probation of Offenders Ordinance, 1944. The majority and minority judgments appear to me not to have passed over any point worthy of attention, In this Further Hearing the State Attorney appeared and repeated in fact these arguments but more expansively and with the coherence normally characteristic of him. I have no intention of depreciating the value of his submissions by saying briefly that I have found nothing to move me to change my previous view which I explained at length in the earlier hearing. I shall therefore confine myself to a number of brief observations.

 

            In this Further Hearing the question is whether section 10 of the Prostitution Offences Law can stand alongside section 3 (2) of the Probation of Offenders Ordinance, 1944, so that the provisions of the latter are applicable notwithstanding section 10, or whether section 10 ousts the application of section 3 (2). The question turns on the meaning to be given to "offence punishable with imprisonment" in section 3 (2). The view has been voiced that "punishable" refers only to offences for which the court may impose imprisonment and not to offences for which imprisonment is mandatory. I cannot agree to this interpretation. In my opinion, the phrase involved describes a group of offences in respect of which a probation order may be made instead of imposing a penalty (imprisonment or fine) and it is immaterial how the court comes to impose the penalty on the offender, whether permissively or mandatorily. An "offence punishable with imprisonment" does not cease to be such when the imprisonment is mandatory.

           

            The President says that had it not been the intention of the legislature to direct the court to impose a penalty, and precisely the penalty of imprisonment, for prostitution offences under sections 1- 3 of the Law to deny the possibility of making a probation order in place of imposing a penalty, it would not have adopted the imperative mood in section 10, "shall be imposed", and generally there would have been no need for this special section since it had already prescribed for the specific offences the maximum penalty of imprisonment by the terms "shall be liable to imprisonment". I have another explanation. Section 10 is not superfluous in the least because it is intended to limit the kinds of penalties which a court is empowered to impose for prostitution offences. When it imposes a penalty, it must impose the penalty of imprisonment (whether or not in conjunction with another penalty) but no other penalty can serve as a substitute to imprisonment. That, in my opinion, is the meaning of the mandatory imprisonment in section 10. It does not, however, negative the alternative of putting the offender on probation which is not a penalty and may replace it.

 

            The State Attorney persists in arguing that if section 10 of the Prostitution Offences Law does not entirely exclude the possibility of making a probation order, then the same rule should apply also to murder with regard to which the legislature employs exactly the same terms in directing in section 1 of the Penal Law Revision (Abolition of the Death Penalty for Murder) Law, 1954, that where a person has been convicted of murder the court shall impose life imprisonment and that alone. The terms of this Law indeed make it difficult psychologically to accept the view that I have propounded, although an important difference exists between the two Laws. In the first, the penalty is mandatory imprisonment (with or without some other penalty) but the court is completely free to fix the term of imprisonment /is no other penalty. If, however, it is said that this important difference is not determinative for the question before us, then, there being no option, I would not hold back from saying that both should be treated alike and in both a probation order may be made instead of imposing imprisonment. Until the adoption of the Law abolishing the death penalty for murder no difficulty occurred. When the Probation of Offenders Ordinance was enacted in 1944, it was clear that it did not apply to murder. At that time and until its abolition in 1954, death was the only penalty for murder and the Ordinance did not apply because it only covered offences for which the penalty was imprisonment or fine. When the Knesset abolished the death penalty and replaced it with life imprisonment but did not say anything about probation, murder also became "an offence and punishable with imprisonment" within the meaning of section 3 (2) of the Ordinance. It is difficult to imagine a case in which the court would in fact exercise this power but theoretically it is available as it then was in the case of manslaughter the penalty for which was life imprisonment, and today as well when it is a term of 20 years' imprisonment.

 

            In my earlier judgment I explained the view why it cannot be contemplated that by adopting section 10 of the Prostitution Offences Law the legislature intended to avoid indirectly the possibility of placing a person upon probation instead of sentencing him to imprisonment, and I do not need to go over that again. Had the Knesset so desired it would have needed to say so expressly, as it did regarding the non-imposition of a conditional sentence in place of actual imprisonment.

           

            My view remains as it was and in my judgment the Further Hearing should be dismissed and the majority opinion of the previous hearing upheld.

           

HALEVI J.                  The question before us is the relationship between section 10 of the Penal Law Amendment (Prostitution Offences) Law, 1962 (hereinafter referred to as "the Prostitution Offences Law") and section 3 (2) of the Probation of Offenders Ordinance, 1944 (hereinafter called "the Probation Ordinance"). Are these two enactments compatible? And if not, which takes precedence?

 

            Sections 1, 2, 3, 5, 6 and 9 of the Prostitution Offences Law define various offences and prescribe for each the maximum penalty which an offender may receive by the formula "shall be liable". Regarding offences under sections 1-3 the legislature goes on to prescribe by section 10, that "where a person is convicted... a penalty of imprisonment shall be imposed..., either as the sole penalty or in conjunction with another penalty, but conditional imprisonment shall not be imposed". The meaning of this provision - and in this regard I join in the view of the President and Cohn J. without hesitation - is that mandatory imprisonment is laid down for the offences mentioned.

           

            On the other hand section 3 (2) of the Probation Ordinance provides that "where any person is convicted... upon information of an offence punishable with imprisonment or fine, and the court is of the opinion that, having regard to the circumstances, including the character, the antecedents, age, home surroundings, health or mental condition of the offender, the nature of the offence and any extenuating circumstances in which the offence was committed, it is expedient to release the offender on probation, the court may, in lieu of sentencing him, make a probation order".

 

            In view of these two sections, the question arises of the relationship between section 10, imposing mandatory imprisonment, and section 3, empowering the court to release an offender on probation instead of sentencing him to prison. Can the two sections exist side by side or are they conflicting? And if they are conflicting, which takes precedence? Opinions are divided and each has some foundation.

           

            One view is that neither affects the other since they concern different things - "a penalty" and "probation" which is not a penalty. Section 10 prescribes "mandatory imprisonment" as the penalty for any person convicted of an offence under section 1 or 2 or 3 of the Prostitution Offences Law, thus restricting the judge's discretion in choosing between different penalties - imprisonment, conditional imprisonment or fine - when sentencing the offender. Section 3 (2) on the other hand does not affect the content of the sentence and the kind of penalty which is to be imposed. It allows the judge in given circumstances to refrain from sentencing and instead make a probation order. According to this outlook there is no conflict between the two sections, but if any substantial inconsistency does exist, section 3 (2) of the Probation Ordinance prevails.

           

            Another view urges that section 10 of the Prostitution Offences Law contradicts and sets aside section 3 (2) of the Probation Ordinance. The provision in section 10 that "where a person has been convicted...a penalty of imprisonment shall be imposed" obliges the judge convicting the defendant to impose a penalty and that penalty has to be imprisonment. The judge will not be doing his duty if he exercises his normal power under section 3 (2) of the Probation Ordinance "to release the offender on probation... in lieu of sentencing him". The duty to impose imprisonment upon any one convicted of one of the offences referred to in section 10 deprives the judge of the power to put the offender on probation. Inevitably, according to this view, in the conflict between section 10 of the Prostitution Offences Law and section 3 (2) of the Probation Ordinance section 10 prevails.

           

            The matter is therefore open to debate but upon consideration the first view seems to me to be preferable to the second. My reasons are as follows.

           

            The Prostitution Offences Law is to be read and understood against the background of the Penal Law Revision (Modes of Punishment) Law, 1954. Section 1 of that Law provides that

           

"A court which has convicted a person of an offence may impose on him any penalty not exceeding the penalty prescribed by law for that offence".

 

Section 10 provides that

 

"Where the law prescribes imprisonment and does not prescribe a fine, the court may -

...        

(3)...impose imprisonment as prescribed or a fine not exceeding IL 5,000 or both such penalties; provided that where the law makes imprisonment obligatory or prescribes a minimum period of imprisonment, imprisonment shall not be replaced by a fine".

 

Section 18 before amendment in 1963 provided that

 

"(a) Where the court may impose a penalty of imprisonment, it may, in lieu thereof, impose conditional imprisonment".

 

And after amendment, that

 

"(a) Where the court imposes a penalty of imprisonment, it may, in the sentence, direct that whole or part of such penalty shall be conditional"

 

Section 25 as amended provides that

 

"The court which has convicted a person may, in addition to the penalty imposed, order the person sentenced to bind himself by recognizance to abstain from an offence for such period not exceeding three years as the court may prescribe".

 

            These sections taken together prescribe the great rule as to modes of punishment in Israel, that every penalty prescribed by any criminal law is a maximum penalty and that the legislature entrusts to the judge the task to prescribe in his discretion the penalty appropriate to each case both as regards the kind of penalty and as regards its extent, as appears to him to be right and proper. Section 10 of the Prostitution Offences Law makes an exception from this general rule. Apart from this section, a court convicting someone under section 1, 2 or 3 of the Law might, in view of the sections of the Modes of Punishment Law set out above, impose a penalty of imprisonment as prescribed in the section dealing with the offence in question or conditional imprisonment or a fine of up to IL 5,000 or a combination of such penalties with or without recognizance. But then section 10 comes along and provides that

           

"Where a person has been convicted of an offence under section 1, 2 or 3 of this Law, a penalty of imprisonment shall be imposed upon him, either as the sole penalty or in conjunction with another penalty, but conditional imprisonment shall not be imposed upon him".

 

The effect and significance of section 10 is to restrict the judge's freedom of choice as between the kinds of penalties mentioned in the Modes of Punishment Law to imprisonment with or without "another penalty" such as fine or recognizance (and according to Rabo v. Attorney-General (8), also conditional imprisonment). The sole penalty prescribed by section 10 is (unconditional) imprisonment for the offences in question and in this sense the marginal heading that sums up the section, "Mandatory imprisonment", is correct.

 

            As for the wording of section 10 - "Where a person is convicted of an offence... imprisonment shall be imposed upon him" - it is proper to notice the similar wording of section 1 of the Modes of Punishment Law - "A court which has convicted a person of an offence may impose on him any penalty" (Cf. also section 10 of this Law - "Where the law prescribes imprisonment ... the court may impose"). This parallelism to my mind strengthens the view I have taken that section 10 of the Prostitution Offences Law is to be read in the light of sections 1, 10 and 18 of the Modes of Punishment Law. In order to depart from the maximum-penalty rule laid down in the Modes of Punishment Law (sections 1 and 10) section 10 of the Prostitution Offences Law says that "Where a person has been convicted of an offence... a penalty of imprisonment shall be imposed upon him, either as the sole penalty or in conjunction with another penalty". In order to exclude section 18 of the Modes of Punishment Law in its original version, section 10 employs the same terms but adds "but conditional imprisonment shall not be imposed upon him". The phrase "Mandatory imprisonment" in the margin to section 10 repeats also the language of the end part of section 10 of the Modes of Punishment Law, that "where the law makes imprisonment obligatory... imprisonment shall not be replaced by a fine".

 

            It seems to me that the main purpose of section 10 is merely to exclude the offences mentioned therein from the provisions of the Modes of Punishment Law which give the court freedom of choosing between kinds of punishment in its discretion. Section 10 varies the normal "modes of punishment" by prescribing "mandatory imprisonment" for given offences. But it does not deal with or affect the placing of offenders on probation. As my honourable friend, Berinson J., said, probation is an "alternative" to penalty, a point stressed in section 3 (2) by the words "in lieu of sentencing him". According to that section, the judge must before making the probation order explain its meaning to the offender and inter alia that "if he fails... to comply therewith or commits another offence, he will be liable to be sentenced for the original offence". When sentence is pronounced for the original offence (in the event of a breach of the probation order etc.) section 10 of the Prostitution Offences Law will apply and imprisonment will be imposed. Section 10 does not set aside the provisions of the Probation Ordinance nor compel the judge to give a sentence since section 3 (2) of the Ordinance empowers him to abstain from doing so and to put the offender on probation. Section 10 lays down provisions binding as regards the content of the sentence but not as regards to the circumstances in which it is or is not to be given according to an enactment not referred to therein.

           

            Section 3 (2) of the Probation Ordinance applies to every offence "punishable with imprisonment or fine". It cannot be argued that these words are confined to an offence for which just"imprisonment or fine" are prescribed, excluding mandatory imprisonment. The meaning is undoubtedly "an offence punishable by imprisonment or an offence punishable by fine". The word "punishable" also does not restrict one to a penalty which is not "mandatory". Section 3 (2) of the Probation Ordinance was copied with some small variations from section 1 (2) of the (English) Probation of Offenders Act. 1907. which provides inter alia that

 

"Where any person has been convicted on indictment of any offence punishable with imprisonment. ... the court may, in lieu of imposing a sentence of imprisonment, make an order etc.".

 

Until the enactment of the Criminal Justice Act, 1948 (which replaced the 1907 Act) there was no general statute in England which enabled all the courts to impose a fine instead of imprisonment for commission of a felony. Section 13 of the Criminal Justice Act provides that

 

"Any court before which an offender is convicted on indictment of felony (not being a felony the sentence for which is fixed by law) shall have power to fine the offender in lieu of or in addition to dealing with him in any other manner in which the court has power to deal with him".

 

In R. v. Parry (10) Lord Goddard C.J. (at 1180) explained the history of section 13 as follows.

 

"The history of that section and the reason for importing it into the Criminal Justice Act, 1948, is well known. There were certain felonies, principally those under the Larceny Act, 1916, in which a court of summary jurisdiction had power to fine. That was because it was considered desirable in the case of petty thefts that a court should be able to fine the offender and not send him to prison, but in cases which came before a court of assize or quarter sessions on indictment there was no power to fine until this Act of 1948, except in the case of manslaughter. The reason for that was that the offence of manslaughter varies enormously in seriousness according to the circumstances in which it is committed. Over and over again judges have had to deal at assizes with an offence which technically was a felony, where they would have been glad to have imposed a fine had there been power to do so. The court was often left in the position that it had either to send a person of hitherto good character to prison for a comparatively small offence or else bind him over, which was to inflict no punishment. That is the reason why Parliament by the Act of 1948 gave to courts trying cases on indictment the same powers as courts of summary jurisdiction formerly had in certain cases and now have in all cases of felony, i.e., the power of imposing a fine instead of sending to prison."

 

            Thus until 1948 the penalty for most felons in England was "mandatory imprisonment" in the sense of the last part of section 10 of the Modes of Punishment Law and section 10 of the Prostitution Offences Law. Nevertheless the English courts were never denied the power to release a person convicted of any offence apart from murder by binding him over, with or without sureties, to come up for judgment, a course which served as an alternative to sentencing him and imposing mandatory imprisonment. (See the judgment of Lord Goddard in the case cited above and Archbold, Pleading, Evidence and Practice in Criminal Cases, 35th ed., paragraph 722.) Another alternative to sentencing was introduced by section 1(2) of the Probation of Offenders Act, 1907 (mentioned above) which empowered the courts to release on probation any person convicted of an offence "punishable with imprisonment", other than those for which the penalty was death. In view of the statutory situation in England until 1948, "punishable with imprisonment" in section 1 (2) of the Probation of Offenders Act, 1907 (which served as the pattern for drafting of section 3 (2) of the 1944 Probation of Offenders Ordinance) included also, and mainly, offences for which imprisonment was mandatory. The intention of the English legislature was to give the courts a new alternative (far more important than the old one of binding over) to imposing mandatory imprisonment on an offender who seemed to merit and be suitable for probation. Throughout the subsistence of the original English Probation Act (from 1907 until 1948) there existed therefore side by side "mandatory imprisonment" and "probation" applicable to the same offences, and not only were they not in conflict but complementary, serving as the legislature had intended, as alternative methods for the courts. There is no reason for attributing a different relationship between mandatory imprisonment under section 10 of the Prostitution Offences Law and probation under section 3 (2) of the Probation Ordinance.

           

            The English Probation Act of 1907 was, as I have said, replaced by the Criminal Justice Act of 1948, section 3 (1) of which provides inter alia that

           

"Where a court by or before which a person is convicted of an offence (not being an offence the sentence for which is fixed by law) is of opinion etc. ... the court may, instead of sentencing him, make a probation order"

 

            Section 80 of the same Act defines

 

" 'Offence the sentence for which is fixed by law' means an offence for which the court is required to sentence the offender to death or imprisonment for life or to detention during His Majesty's pleasure".

 

An offence "for which the court is required to sentence the offender to... imprisonment for life" is non-capital murder under section 9 of the Homicide Act, 1957. Section 3 (1) of the 1948 Act does not directly affect the matter before us and I have only mentioned it in order to show that even under existing English law, a probation order can be made in every criminal offence apart from murder and those for which life imprisonment is prescribed.

 

            I see no need to express an opinion regarding the interpretation of the Penal Law Revision (Abolition of the Death Penalty for Murder) Law, 1954. Even if the legislature did not realise the need for amending the Probation Ordinance as a result of the abolition of the death penalty for murder there is yet a vast difference between life imprisonment as a mandatory penalty (see section 2 of the Modes of Punishment Law) and mandatory imprisonment for one day prescribed by section 10 of the Prostitution Offences Law. Whatever the position regarding mandatory life imprisonment, there is nothing in section 3 (2) of the Probation Ordinance to suggest that mere "mandatory imprisonment" with which we are concerned excludes an offence from the operation of the Ordinance.

           

The existing legislation regarding the modes of punishment is not of one piece and even if all the difficulties concerning the different enactments in this area have as yet not been resolved, no far-going conclusions in law are to be drawn from that. Accordingly it appears to me that one should not infer from the lack of reasonableness in applying the Probation Ordinance to murder for which the penalty is mandatory life imprisonment, that this Ordinance does not apply to every other offence the penalty for which is mandatory imprisonment.

 

            Since section 3 (2) of the Probation Ordinance does not distinguish between imprisonment which is mandatory and that which is not, the legislature's intention to deny the application of the Probation Ordinance, if it had such intention, should have found expression in section 10 of the Prostitution Offences Law. In order to ascertain the legislature's intention I do not need to rely on the speeches in the Knesset during the debate on the section. According to the usual rules of interpretation, express statutory provision is necessary to negative lawful judicial powers, particularly in criminal matters. The judicial power under section 3 (2) of the Probation Ordinance to release a person convicted on information for an offence punishable by imprisonment and to put him on probation is not negated by any express provision of section 10 of the Prostitution Offences Law. In the judgment of my honourable friend, Cohn J., in Weigel (1) the legislature's intention to deny the existing powers under the Probation Ordinance is implied from the word "Where a person has been convicted... a penalty of imprisonment shall be imposed upon him", which he construes as "Where a person has been convicted... a penalty of imprisonment shall be imposed upon (but he shall not be released on probation) and the penalty shall be imprisonment (and no other penalty)". With all respect, this seems to me mere inference since there is no "automatic penalty". Section 10 does not say that "notwithstanding the provisions of any other enactment" the penalty of imprisonment shall be imposed. In my view, so fundamental a matter as the setting aside in part of the method of probation cannot rest on inference without express statutory provision, since it restricts the powers of the court, the rights of the individual in criminal matters and the functioning of a probation service intended to rehabilitate the offender and turn him into a useful citizen.

 

            Nevertheless I do find myself bound to stress what my honourable friend, Berinson J., said at the end of his judgment in Weigel, that in offences of the kind in question it will be "most rare" for the court actually to exercise its power to place an offender on probation. The Prostitution Offences Law of 1962 was intended to treat procurers of various kinds with severity and it was found fit in the public interest to increase the penalty to five or seven years' imprisonment, to make imprisonment mandatory and to direct that it should not be commuted to conditional imprisonment. Probation officers and judges would make the Law a sham, were they to go on using probation for offenders who come within section 10. I have mentioned probation officers since under section 3 (2) of the Probation Ordinance, as amended, a court is not to make a probation order until it has received the opinion of a probation officer. Moreover, under section 19(a) of the Modes of Punishment Law, the court may, before imposing a penalty, require a written report by a probation officer, and under section 19(b), as amended, the court may not impose a penalty of unconditional imprisonment on an offender who had not reached the age of 21 at the time when the offence was committed until such a report has been received. Section 19(c) provides that "in a report as aforesaid, the probation officer may recommend to the court the type of penalty which, in his opinion, offers prospects of reforming the prisoner". Thus the probation officer plays an important role when the court effectuates probation and in this sense he is "a partner of the judge", although it is the latter who has the last word. It is in general difficult for an appellate court to interfere with the discretion of a judge who decides to place an offender on probation, and the question whether the learned District Court judge in the present case was right does not arise. In any event, apart from exceptional instances, the right place for procurers and those who promote prostitution is prison.

 

            For these reasons I propose to confirm the decision of the majority in Weigel (1) and to dismiss the appeal.

           

MANNY J.                 I concur in the judgments of my learned brothers, Berinson J. and Halevi J., and join in the conclusion they have reached.

 

COHN J.                     I disagree with the premise of my honourable friend, Halevi J., that section 10 of the Penal Law Amendment (Prostitution Offences) Law is to be read and construed against "the background" of the Penal Law Revision (Modes of Punishment) Law. For me, the opposite is the case: the entire object of section 10 is only to take out the penalties mentioned therein from the rules prescribed in this Law regarding punishment for all other kinds of offences. It is very true that section 10 is not intended to affect the rule of the maximation of penalties and to this extent the general law applies to it, but it is intended expressly and unambiguously to affect the alternation of penalties, and just as it decrees "mandatory imprisonment" excluding fine and conditional imprisonment, it also decrees imprisonment excluding modes of treatment which do not come within the meaning of penalty.

 

            Likewise I do not draw the analogy which my honourable friend, Halevi J., has drawn between "may impose" in the Modes of Punishment Law and "shall be imposed" in the Prostitution Offences Law. I agree wholly with the learned President that the imperative of "shall be imposed" is not to be ignored, in contrast to the permissiveness and discretion of "may impose". Here as well, the opposite is the case: whilst the Modes of Punishment Law gives the judge a discretion as to the severity of the penalty he may impose, the Prostitution Offences Law denies him that discretion since, whatever he may wish to do, imprisonment shall be imposed.

 

            As I suggested in my previous judgment in this matter, it seems to me that the question of interpreting section 3(2) of the Probation of Offenders Ordinance, 1944, does not arise at all. The appellant's fate must, in my opinion, be decided according only to the interpretation of section 10 of the Prostitution Offences Law; and on the correct interpretation of this section there is no place for applying this provision of the Probation Ordinance whatever its interpretation, because section 10 excludes the application of any statutory provision which empowers the court to deal with a person convicted of an offence under the Law in any manner other than by imposing imprisonment alone.

           

            Accordingly I come to the same conclusion as the learned President and adhere to his view.

           

Further Hearing dismissed by a majority and the majority decision in the previous hearing upheld.

 

Judgment given on October 31, 1963.

 

* Under section 8 of the Courts Law, 1957, a Further Hearing by five or more judges of the Supreme Court will be granted "in view of the importance, difficulty, or novelty" of a ruling of the Supreme Court sitting with three judges.

Yerushalmi v. Polaris Imports Ltd.

Case/docket number: 
CA 4493/05
Date Decided: 
Wednesday, March 7, 2007
Decision Type: 
Appellate
Abstract: 

Facts: The first respondent agreed to sponsor the first appellant to represent it in a motorbike race in Egypt. In the race the first appellant was seriously injured. There was no statutory duty to take out personal accident insurance for the first appellant, and no such insurance had been taken out. The main issue in the appeal was whether the first respondent had been negligent in not taking out insurance for the first appellant or at least in not ascertaining that the first appellant had taken out insurance for himself.

 

Held: In general, where there is no statutory duty to take out insurance, one party to a joint venture will not be required by the tort of negligence to take out insurance for the other, unless there is a special relationship between them or a reliance of one party on the other. In this case there was no such special relationship or reliance.

 

Appeal denied.

Voting Justices: 
Primary Author
majority opinion
Author
concurrence
majority opinion
Introduction to the full text: 

 

 

Full text of the opinion: 

CA 4493/05

 

1.            Eyal Yerushalmi

2.            Beit Nir Kibbutz

v.

1.            Polaris Machine Imports Ltd

2.            Yaadim Development Co. Ltd

3.            Yoav HaRamati

4.            Dan Horovitz

 

 

The Supreme Court sitting as the Court of Civil Appeals

[22 February 2006]

Before Justices A. Grunis, M. Naor, E. Hayut

 

Appeal of the judgment of the Tel-Aviv-Jaffa District Court (Judge Z. Brun) on 14 March 2005 in CC 3413/98.

 

Facts: The first respondent agreed to sponsor the first appellant to represent it in a motorbike race in Egypt. In the race the first appellant was seriously injured. There was no statutory duty to take out personal accident insurance for the first appellant, and no such insurance had been taken out. The main issue in the appeal was whether the first respondent had been negligent in not taking out insurance for the first appellant or at least in not ascertaining that the first appellant had taken out insurance for himself.

 

Held: In general, where there is no statutory duty to take out insurance, one party to a joint venture will not be required by the tort of negligence to take out insurance for the other, unless there is a special relationship between them or a reliance of one party on the other. In this case there was no such special relationship or reliance.

 

Appeal denied.

 

Legislation cited:

Aviation Services Licensing (Aviation Schools) Regulations, 5731-1971, r. 4(5).

Contracts (General Part) Law, 5733-1973, ss. 24, 26.

Immunization Victims Insurance Law, 5750-1989, s. 2.

Insurance Contract Law, 5741-1981, chs. 2 and 3.

Motor Car Insurance Ordinance [New Version], 5730-1970, s.2.

National Insurance Institute Law [Consolidated Version], 5755-1995, s. 79.

Road Accident Victims Compensation Law, 5735-1975.

Sports Diving (Imposing an Insurance Liability on Divers) Regulations, 5740-1980

Sports Law, 5748-1988, s. 7(a).

Sports Driving Law, 5766-2005, ss. 2(c), 15, 23(c), 30(b), 34, 35.

Torts Ordinance [New Version], 5728-1968.

 

Israeli Supreme Court cases cited:

[1]          LCA 11049/03 Israeli Phoenix Insurance Co. Ltd v. Nidaf [2004] (1) TakSC 3305.

[2]          FH 20/82 Adders Building Materials Ltd v. Harlow and Jones GMBH [1988] IsrSC 42(1) 221.

[3]          CA 37/86 Levy v. Sherman [1990] IsrSC 44(4) 446.

[4]          CA 735/75 Reutman v. Aderet [1976] IsrSC 30(3) 75.

[5]          CA 153/04 Rabinovitz v. Rosenbaum [2006] (1) TakSC 1549.

[6]          CA 485/60 Berman v. Marziof [1961] IsrSC 15 1913.

[7]          CA 371/90 Subhi v. Israel Railways [1993] IsrSC 47(3) 345.

[8]          CA 4025/91 Zvi v. Carroll [1996] IsrSC 50(3) 784.

[9]          CA 285/73 Lagil Israel Trampoline and Sports Equipment Ltd v. Nahmias [1974] IsrSC 29(1) 63.

[10]        CFH 7794/98 Moshe v. Clifford [2003] IsrSC 57(4) 721.

[11]        CA 140/00 Estate of Ettinger v. Company for the Reconstruction and Development of the Jewish Quarter [2004] IsrSC 58(4) 486; [2004] IsrLR 101.

[12]        CA 3464/05 Paz Oil Co. Ltd v. State of Israel [2006] (3) TakSC 430.

[13]        CA 145/80 Vaknin v. Beit Shemesh Local Council [1983] IsrSC 37(1) 113.

[14]        CA 2906/01 Haifa Municipality v. Menora Insurance Co. Ltd [2006] (2) TakSC 2504.

[15]        CA 931/99 Menorah Insurance Co. Ltd v. Jerusalem Candles Ilum (1987) Ltd [2002] IsrSC 56(2) 550.

 

Israeli District Court cases cited:

[16]        CC (TA-DC) 2474/86 Netzer v. Kanfonit Light Aircraft Co. Ltd [1994] (2) IsrDC 441.

 

American cases cited:

[17]        East River Steamship Corp. v. Transamerica Delaval Inc., 476 U.S. 858 (1986).

[18]        LaClair v. Silberline Manufacturing Co., Inc., 379 Mass. 21, 393 N.E. 2d 867 (1979).

 

English cases cited:

[19]        Henderson v. Merrett Syndicates Ltd [1995] 2 A.C. 145, [1994] 3 All ER 506 (HL).

[20]        Van Oppen v. Clerk to the Bedford Charity Trustees [1989] 3 All ER 389 (CA).

[21]        Reid v. Rush & Tompkins Group PLC [1989] 3 All ER 228 (CA).

[22]        Naylor v. Payling [2004] EWCA (Civ) 560 (CA).

 

For the appellants — S. Savion.

For the respondents — E. Levi.

 

 

JUDGMENT

 

 

Justice E. Hayut

Synopsis of the facts and details of the legal proceedings

1.            The first appellant, who was born in 1961 and is a member of the Beit Nir Kibbutz (the second appellant), was injured on 12 October 1994 during the Pharaohs’ Rally motorcycle race in Egypt in which he participated (hereafter: the accident). As a result of the accident the first appellant seriously injured his back and was left paralysed in the lower half of his body. In a claim that he filed at the National Insurance Institute, the first appellant argued that he participated in the race as an employee of the first respondent that engaged, at the times relevant to the case, and among other things in the business of importing KTM all-terrain motorcycles. The first appellant rode one of these motorcycles during the race in which he was injured (hereafter: the motorcycle). The first appellant’s claim to recognize the accident as a work accident was rejected by the National Insurance Institute even though after the accident the first respondent reported to the National Insurance Institute that he was its employee. The National Insurance Institute decided in this context that, according to the information received by it, the accident did not occur ‘in the course of and as a result of’ the first appellant’s employment with the first respondent and therefore it concluded that it was not a ‘work accident’ as defined in s. 79 of the National Insurance Institute Law [Consolidated Version], 5755-1995 (hereafter: the National Insurance Institute Law). In its judgment of 23 September 1997, the Beer Sheba Regional Labour Court (the honourable JudgeJ. Hoffman) adopted the position of the National Insurance Institute and rejected the first appellant’s version of events that the accident was a work accident. An appeal that the first appellant filed in the National Labour Court was also denied in a judgment of 8 June 1999 (the honourable President S. Adler, Vice-President Y. Eliasof, Judge Y. Flitman, Workers’ Representative S. Guberman, Employers’ Representative G. Stoietzky).

2.            When the first appellant’s claim was denied by the Regional Labour Court, the appellants filed a monetary action in the Tel-Aviv-Jaffa District Court against the first respondent, the second respondent (a company that imports agricultural machines that managed its business on the premises where the first respondent operated) and also against the third and fourth respondents, who are the directors of the first respondent and shareholders in both companies. In his action the first appellant continued to claim that he went to the race as an employee of the first respondent and he argued that the first and second respondents, as his employers, breached their undertaking in the contractual sphere to ensure his maximum safety. The first appellant further argued, alternatively, that the accident occurred as a result of the negligence of some or all of the respondents towards him when he rode the motorcycle that was under their complete control, and that they had the burden of showing that they were not negligent because the incident that caused the damage was more consistent with the conclusion that they acted without reasonable care than the conclusion that they acted with reasonable care. In addition to these arguments, by means of which the first appellant sought to attribute liability for the actual accident to some or all of the respondents, the first appellant raised additional claims in the contractual realm and in torts with regard to the duty owed to him by some or all of the respondents to purchase for him a personal accident insurance policy to cover damages of the kind that he suffered as a result of the accident. The first appellant further argued that the respondents breached this duty and as a result of this he was left without cover for the damage that resulted from the lack of insurance for his participation in the race. The kibbutz, the second respondent, based its claim against the respondents on the fact that it paid for the damage that was caused to the first appellant as a result of the accident.

3.            In its judgment of 14 March 2005 the District Court (the honourable Judge Z. Brun) denied the action. The court held that the decision of the Labour Court gave rise to collateral estoppel with regard to the first appellant’s claim that he participated in the race as an employee of the first respondent. Beyond what was strictly necessary for its decision, the District Court went on to find that the very same conclusion could be drawn from the evidence presented before it. The court said in this regard that the relationship between the first appellant and the first respondent was created as a result of an advertisement published by the first respondent in which it said that ‘it wanted to send on its behalf three experienced and qualified all-terrain riders to compete in the Pharaohs rally.’ The first appellant, who is a mechanic by profession and an amateur race driver, had taken part in the past in various races in Israel and abroad. He replied to the advertisement and during August 1994 he concluded a basic oral arrangement with the first respondent with regards to the terms of his competing in the race on its behalf. Only subsequently, on 30 August 1994, did the first appellant and the first respondent reach an additional agreement that the former would be employed by the latter as a mechanic. The District Court held that from the evidence that was presented it was persuaded that ‘the participation of the plaintiff in the race was not a condition of his employment and it would have happened even without the sponsorship of the defendant’ and that ‘we are speaking in a case such as this of funding in return for advertising only, without any employee-employer relationship.’ The District Court went on to agree in this respect with the remarks of the Regional Labour Court, which said:

‘This factual position is consistent with the definition that the company was a “sponsor” of the plaintiff’s participation in the race and it should not be defined in this framework as his employer. A sponsor means a company or an agency that funds the expenses of the project in return for advertising, facts that even the plaintiff does not dispute.’

The District Court also said that the arguments of the first appellant with regard to the liability of some or all of the respondents for the accident ‘do not have an evidentiary basis’ and he abandoned them in the course of the trial. In addition the District Court held that there is no basis for the claim insofar as it was directed against respondents 2-4. The court therefore focused its decision on the question of whether the first respondent breached its obligations and undertakings to the first appellant inasmuch as if failed to ensure that he was insured for personal accidents for the risks of participating in the race. In this respect the District Court held that the group of Israeli motorcycle riders whom the first appellant joined for the purpose of the race was a group that was independent of the first respondent and it was privately organized for this purpose, and the first respondent, so the District Court held, ‘did not organize or manage this group.’ The District Court also held, relying inter alia on the testimony of the first appellant himself, that it was not agreed between him and the first respondent, either expressly or by implication, that the first respondent would insure him for personal accidents and therefore no contractual obligation should be imputed to the first respondent in this regard. In its judgment the District Court did not address the claim of negligence raised by the first appellant against the first respondent because it did not take out personal accident insurance for him. Therefore there is no decision in the judgment on the question of whether the first respondent is liable under the law of torts for the economic damage caused to the first appellant (and the second appellant for redressing the the damage) as a result of his not having the aforesaid insurance.

This led to the appeal before us.

The arguments of the parties

4.            The appellants argue that the trial court erred in finding that they were estopped from arguing that an employment relationship existed between the first appellant and the first respondent because of the rule of res judicata and because of collateral estoppel which applies in this context as a result of the decisions of the Labour Courts. They claimed that the tests for the existence of an employment relationship for the purpose of the National Insurance Institute Law differ from the tests that apply in this regard under the law of torts. The appellants go on to argue that evidence that was presented in the Labour Court is not admissible in the civil court and that one of the witnesses who was involved in the case and testified in the civil court did not testify at all in the Labour Court. On the merits of the matter the appellants once again claim that there was an employment relationship between the first appellant and the first respondent for the purpose of his participation in the race. They claimed the first appellant was under the complete control of the first respondent, the offer that he accepted was in fact an employment offer and he would not have taken part in the race had he not been sent by the first respondent. The appellants also claim that the payment of the expenses for the race by the first respondent, its contract with additional sponsors, the organization of training races, the sending of a mechanic to the race on its behalf in order to supervise the first appellant, and the lack of any distinction between the first appellant’s work as a mechanic and his participation in the race, all show the active involvement of the first respondent in the organization of the race that is not explained by a mere sponsorship. Alternatively, the appellants claim that the first appellant participated in the race as an agent of the first respondent and that the latter took upon itself, by its conduct or by implication, a contractual duty to insure him. The appellants further argue that the first respondent breached the duty of care that it had as the employer or principal when it failed to take the precautionary measure that was required in the circumstances of the case to ensure that any damage to the first appellant would be compensated and passed on to others by purchasing insurance for him or at least by ensuring that he bought such insurance for himself. The appellants further argue that when someone carries out a dangerous task for another person, that other person is obligated to insure him or to make sure that he has insurance for the risks involved in that task, since that other person has all the information concerning the risks involved and he has the necessary financial resources to pay for it. According to the appellants, the first respondent was in fact aware of the risks involved in the race and even insured the mechanic that it sent on its behalf with the first appellant against these risks. The appellants also argue that imposing a duty on someone who funds sporting activity to ensure that the risks are covered by insurance is capable of serving the interests of society in promoting sport and is consistent with the proper standard of conduct provided in the Sports Law, 5748-1988 (hereafter: the Sports Law). The appellants raise additional arguments with regards to the fact that the first appellant relied on the first respondent’s responsibility for insurance in view of its undertaking to pay all the expenses of the race, in view of its purchase of compulsory insurance, and in view of an express request that the first appellant claims to have made to it in this regard. Alternatively, the appellants argue that the first respondent was negligent in that it made a representation that the participation of the first appellant in the race was within the framework of an employment relationship or an agency relationship between him and the first respondent and that he was therefore insured, and also in its failure to examine the instructions given to the participants in the race. With regards to the third and fourth respondents, the appellants argue that by inducing the first appellant to participate in the race without insurance, they took an unreasonable risk that amounts to an abuse of the veil of incorporation in such a way that it justifies the lifting of the veil in the relationship between them and him. The appellants also argue that the third and fourth respondents were personally negligent in that they did not ensure that insurance had been taken out and in that they initiated the first appellant’s participation in the race even though they did not have any previous experience in organizing a project of this kind.

5.            The respondents rely on the judgment of the District Court and argue that the in this case, the judgment of the Regional Labour Court that held that the accident was not a work accident satisfies all of the conditions that give rise to collateral estoppel. The respondents argue in this regard that the difference between the procedural arrangements and the rules of evidence in the Labour Court and those in the civil court are of no relevance in this case, and that the estoppel was intended to prevent a situation in which the Labour Court and the civil court arrive at contradictory conclusions on the basis of the same evidence. On the merits of the case the respondents argue that there is no basis for intervening in the factual determination of the trial court, which was properly based on the evidence that shows that the first appellant did not participate in the race as an employee of the first respondent. The respondents further argue that this court should accept the findings of the District Court that the case involves a sponsorship transaction that was based on advertising the motorbike in return for a contribution to the expenses of the race and the sale of the motorbike at a cheap price to the first appellant, and not on an employment relationship or agency, and that within the framework of this transaction the first respondent did not undertake to purchase personal accident insurance for the first appellant. With regard to the appellants’ claim concerning liability in torts, the respondents claim that this argument constitutes the introduction of a new claim into the case, which is not permitted, and in any case the claim should be rejected. The respondents further argue that the issue here is one of voluntary insurance and that the first appellant, who had knowledge and previous experience of races of this kind, never insured himself for personal accidents. The respondents argue that the Sports Law is not relevant here since this case only concerns the sponsorship of someone who participated in a private capacity in a race that took place outside Israel. Finally the respondents argue that the appeal should be dismissed in limine in so far as it relates to respondents 2-4 since there is no real claim against them. With regard to the second respondent it is claimed that it is a separate company, engages in a different type of activity from the first respondent and the shareholders of the two companies are not identical. It is also argued that the claims against the second respondent were in fact abandoned by the appellants at the appeal stage and this reason in itself is sufficient reason to deny the claim in so far as the second respondent is concerned. With regard to respondents 3 and 4 it is argued that the appellants did not succeed in showing any cause of action whatsoever against them, including by virtue of lifting the veil of incorporation of the first respondent.

6.            In their reply to the respondents’ arguments the appellants claim, inter alia, that the argument that the first respondent had a duty of care towards the first appellant under the law of torts is a legal argument that may be raised at any stage and therefore it does not amount to the introduction of a new claim, and they also argue that the first and second respondents made a representation to the first appellant that the second respondent was not a separate company but a part of one corporation called ‘Yaadim-Polaris,’ and therefore the second respondent should be regarded as responsible jointly and severally with the first respondent for all the damages that were caused in the circumstances of the case.

Deliberation

7.            In the appeal before us, the appellants restricted their arguments to the issue of the economic damage arising from the lack of personal accident insurance and to the respondents’ liability for this damage in the field of contracts and torts. The other arguments concerning the respondents’ liability for the actual occurrence of the accident and the damage arising directly from it were abandoned during the proceedings in the trial court and were not raised again before us. I will begin by saying that I agree with the findings and conclusions of the District Court with regard to respondents 2-4 and I found no merit in the arguments in the appeal relating to this. The appeal is therefore denied in so far as it is directed against the findings of the District Court with regard to respondents 2-4, and the deliberations will focus on the relationship between the first respondent and the first appellant and the question of the first respondent’s liability for the appellant’s damage in the absence of personal accident insurance.

The nature of the relationship between the first respondent and the first appellant

8.            The scope of the duties and undertakings for which the first respondent is liable to the first appellant insofar as his participation in the race is concerned, including the duty to insure him against personal accidents, necessarily derives from the nature of the relationship that existed between the parties at the relevant time. Therefore the decision on this issue is the basis and the premise for addressing all the other questions that are under consideration. The District Court held that the first appellant participated in the race as a part of a whole group of motorbike riders that was organized for this purpose on a private basis, independently of the first respondent, and that the first respondent paid for the participation of the first appellant in the race for the purpose of advertising the motorbike imported by it. The District Court also held that the relationship between the first appellant and the first respondent, in so far as it concerned his participation in the race, was one of sponsorship. After it defined the relationship between the parties as a relationship between a sponsor and an amateur race driver who took part in a race in a private capacity, the District Court went on to hold that in this relationship there was no express or implied undertaking in the contractual sphere on the part of the first respondent to insure the first appellant against personal accidents. The court was also of the opinion that in these circumstances the first respondent should not be held liable in torts. The first appellant, who disagrees with the findings of the trial court, argues that the relationship that existed between him and the first respondent for the purpose of his participation in the race should be defined as an employment relationship, or alternatively as an agency relationship, and he seeks to derive from this that the first respondent had a duty in the contractual sphere, or alternatively in the field of torts, to insure him against personal accidents for the risks in the race.

9.            How should we classify the relationship that existed between the first appellant and the first respondent in so far as the participation of the first appellant in the race is concerned? Was this, as the District Court held, a relationship between a sponsor and an amateur driver who participated in the race in a private capacity? Was this, as the appellants claim, an employment relationship or an agency relationship? Or is it perhaps possible to define the relationship that existed between the parties in this case in another way, on the basis of the evidence that was presented and the arguments that were heard?

The conclusion that there was no employment relationship between the first appellant and the first respondent, in so far as the first appellant’s participation in the race is concerned, is based soundly on the evidence that was before the trial court, and there is no basis for any intervention in this regard. The trial court held that two separate contracts were made between the parties: the first contract was made orally during the month of August 1994 and it addressed the participation of the first appellant in the race on behalf of the first respondent in order to promote the product that it had begun to import at that time; the second contract was made on 30 August 1994 and it addressed the employment of the first appellant by the first respondent as a mechanic, without any connection to the race. This second contract was enshrined in a written employment agreement that was made between the kibbutz (the second appellant) and the first respondent, in which the terms of employment of the first appellant were set out as aforesaid. This finding of the trial court that the participation in the race was agreed independently, without any connection to the employment of the first appellant by the first respondent as a mechanic, is based, as I have said, on the evidence and reflects the intentions of the parties that can be seen from that evidence. Thus the first appellant confirmed in his testimony that his participation in the race on behalf of the first respondent was agreed between them approximately a month before they agreed upon his employment as a mechanic; the written employment agreement does not address the first appellant’s participation in the race at all; and the first appellant even said in his statement to the National Insurance Institute of 29 June 1995 that he was not obliged to go to the race in the course of his work as a mechanic. The trial court was therefore correct in rejecting the appellant’s claim that there was an employment relationship between the first respondent and the first appellant with regard to his participation in the race. There was no such relationship between the parties when the contractual relationship concerning the participation in the race was created, nor was such a relationship created between them at a later stage when the first appellant began to be employed by the first respondent as a mechanic. Since I have seen fit to approve the findings of the trial court in this regard on their merits, I have no need to consider the arguments that the appellants raised against the trial court’s finding that collateral estoppel applies in this matter by virtue of the judgment of the Regional Labour Court. It will be sufficient to say that this finding does indeed raise considerable difficulties (see LCA 11049/03 Israeli Phoenix Insurance Co. Ltd v. Nidaf [1]).

10. I do not agree with the additional conclusion of the trial court that we are speaking in this case merely of a sponsorship. From the evidence we see that the first appellant was involved in sports driving as a hobby and accumulated knowledge and experience in riding all-terrain motorcycles, even though he did not make this a profession or a source of income. The goal that the first appellant sought to achieve when he made the agreement concerning his participation in the race with the first respondent was to compete in a competitive sporting challenge and to acquire additional experience in this field. The first appellant did not ask the first respondent for remuneration for his participation in the race; he asked for his expenses to be paid. He even testified that ‘at that time I wanted to go to every race that I could; and if the opportunity presented itself - I went.’ Moreover, when he was asked whether he would have looked for another ‘sponsor’ if he had not made the agreement with the first respondent, he answered: ‘I would have looked, but I would not necessarily have gone.’ From the viewpoint of the first appellant the agreement with the first respondent with regard to his participation in the race realized his independent aspiration to take part as a motorbike rider in an international race, while the expenses required for this purpose would be paid by the first respondent. The first respondent, for its part, published an advertisement of its intention ‘to send on its behalf three experienced all-terrain riders’ and after the interview process it chose only one rider, who was the first appellant. In parentheses it should be pointed out that in the group of riders that was organized for the race without any connection to the first respondent, of which the first appellant was a member, there was an additional rider called Hezzy Elon who also rode a KTM motorbike that he bought from the first respondent (the other members of the group rode other types of motorbike). But from the testimony of the third respondent we see that this rider did not go to the race on the first respondent’s behalf. In any case, the advertisement that the first respondent published testifies to the initiative and the active steps that it took in order to have motorbikes that it imported be involved in the race. This initiative and also the resources that it was prepared to invest and did actually invest for this purpose definitely show that the interest that it had with regard to the participation in the race goes beyond the normal conduct of a mere sponsor and this was reflected in the testimony of the first appellant. The first appellant testified with regard to his experience of the usual types of agreement with sponsors in this field, and from his evidence, which was not contested, it appears that the agreement between him and the first respondent with regard to the participation in the race definitely went beyond the usual practice in this field in agreements concerning sponsorship of a motorbike rider in return for advertising the business of the sponsor. In the case before us the first respondent provided the first appellant with the motorbike that he rode during the race and also paid for the direct expenses involved in his participation, including the registration fee for the race, the visa and border fees for going to Egypt, spare parts for the motorbike and also compulsory insurance for the use of the motorbike in Israel and Egypt. An employee of the first respondent, a mechanic by profession, was also sent by it to accompany the group of riders to which the first appellant belonged (an additional mechanic was sent by a rival Israeli importer of motorbikes).

11. The background to the agreement between the first appellant and the first respondent and the nature of the provisions of this agreement lead in my opinion to the conclusion that the relationship that was created between the parties for the purpose of the first appellant’s participation in the race was of a special kind. As I have already said, we are speaking neither of an employment relationship nor of a sports sponsorship relationship, and it appears that the most precise definition of the relationship between the parties in this case is one of a joint venture. The focus of the relationship was that the parties were interested in participating in the race in order to realize their respective interests. In order to further these interests, the first respondent and the first appellant agreed to cooperate with one another and to combine the sporting abilities of the first appellant and the economic resources of the first respondent that initiated the relationship and was prepared to be involved in the furthering of the venture in the very intensive manner described above. Support for the conclusion that we are dealing with a special agreement — a kind of joint venture — can be found in the fact that in the relationship between the parties the first respondent was entitled to enter into agreements with various sponsors in order to advertise their products through the first appellant during the race, and it actually did this in an agreement with Delek the Israel Fuel Corporation Ltd. The first respondent also provided the necessary equipment (the motorbike, spare parts and clothing) and also dealt with making the payments that were required so that the first appellant could participate in the race. It can therefore be said that in return for the economic involvement of the first respondent in the joint venture, the first respondent expected an economic return, whereas the first appellant contributed his sporting ability to the venture in the expectation of success in terms of sporting achievement.

Now that we have defined the nature of the agreement between the first appellant and the first respondent as a joint venture, we should go on to examine, against this background, the arguments raised by the appellants in the appeal before us. As we have already said, these arguments focus on the liability of the first respondent in the fields of contracts and torts for the economic damage caused to the appellants as a result of the fact that the first appellant did not have personal accident insurance, which entitles an injured person to insurance payments for medical disability and incapacity to work in his profession or the professions stated in the policy (see chapters 2 and 3 of the Insurance Contract Law, 5741-1981).

The contractual cause of action

12. In the contractual sphere I agree with the factual finding of the trial court that there was no express agreement between the parties that the first respondent would take out insurance for the first appellant’s participation in the race, as distinct from the compulsory insurances that the first respondent undertook to pay for the first appellant that, in so far as can be seen from the testimonies that were presented, did not include insurance cover for personal injury that might result from the actual participation in the race. Thus the request sent by the first appellant to the first respondent ‘to obtain insurance for one month’ did not refer to personal accident insurance but to the compulsory insurance for the motorbike only, as can be seen clearly from his testimony:

‘It says [in the request] to insure the motorbike for a period of a month… the request for insurance was not made as a result of the organizers’ document, but since the motorbike had already passed its licensing test and in order to move it from place to place and prepare it for the race, this was the first condition if we wanted to begin to move the project forward’ (emphases supplied).

But according to the first appellant, even though it was not agreed between them expressly, it is possible to understand that the first respondent made such an undertaking from the circumstances of the agreement and from the matters that the first respondent undertook to handle with regard to the first appellant’s participation in the race. This argument of the first appellant gives rise to a difficulty because it invites the court to read undertakings into the parties’ agreement which they did not expressly agree to. This involves a violation of the principle of the freedom of contracts, whether they are written or oral, according to which the parties have the autonomy to determine the terms of the contract, and the content may be whatever they agree (s. 24 of the Contracts (General Part) Law, 5733-1973 (hereafter: the Contracts Law)). In the case before us no claim was raised that it is possible to supplement the terms of the agreement between the parties by virtue of s. 26 of the Contracts Law in accordance with a prevailing practice between the parties, or in accordance with the prevailing practice in contracts of this type, which is understandable in view of the fact that we are dealing with a one- time contract between the first respondent and the first appellant and with a contract that was not typical of what was customary in the racing world with regard to sponsorship, but with a type of joint venture whose terms were from the outset unique to the parties, as we have explained above. Notwithstanding, it is not denied that within the framework of the division of roles agreed upon by the parties, the first respondent undertook to take care of the expenses involved in the first appellant’s participation in the race. Is it possible to understand from this by means of interpretation that there was an undertaking to ensure that the first appellant was insured against personal accidents? I think not. Taking out personal accident insurance is not included in the immediate and direct expenses required for participation in the race, which the first respondent undertook as stated above. Our concern is with an additional expense that was intended to guarantee the first appellant an insurance payment in the event of disability as a result of an accident, if it occurred during his participation in the race. Such insurance, while desirable and appropriate in the circumstances of the case (and we will discuss this later within the framework of the tortious cause of action), was not necessary as far as the actual participation in the race was concerned. Therefore the contractual undertaking of the first respondent to pay for the first appellant’s participation in the race does not lead — on the basis of a purposive interpretation of that undertaking — to the conclusion that it should also include insuring him against personal accidents.

The tortious cause of action

13. An additional cause of action by virtue of which the appellants are seeking to impose liability on the first respondent for the damage caused to them because he did not have insurance against personal accidents is the tortious cause of action. The appellants argue in this context that the first respondent was negligent in that it did not take care to insure the first appellant or at least did not ascertain that the first appellant took care to insure himself against personal accidents. In this context we should emphasize that the existence of a contract between the parties does not necessarily rule out the possibility that one of them will be liable to the other in torts (see I. Englard, A. Barak and M. Cheshin, The Law of Torts — The General Doctrine of Torts (G. Tedeschi, ed., 1976), at p. 14; D. Friedmann and N. Cohen, Contracts, vol. 1, at pp. 81-82 (1991); R. Sanilevitz and D. Ronen, ‘Competition between the Contractual Cause of Action and the Tortious Cause of Action in Compensation Claims — A Comparative Look,’ Shamgar Volume (vol. 3, 2003) 93, at pp. 118-120; FH 20/82 Adders Building Materials Ltd v. Harlow and Jones GMBH [2], at pp. 268-269; A. Herman, Introduction to the Law of Torts (2006), at pp. 327-329; with regard to the various difficulties that this approach raises in the context of economic loss, see D. Ronen, ‘Pure Economic Loss from a Comparative Perspective,’ 44 Ha-Praklit 504 (1999), at pp. 506-510; T. Gidron, ‘The Duty of Care in the Tort of Negligence and Pure Economic Loss,’ 42 Ha-Praklit 126 (1995), at pp. 137, 139-144; East River Steamship Corp. v. Transamerica Delaval Inc. [17]). Many examples in which Israeli case law has applied the principle that the contractual cause of action and the tortious cause of action are not mutually exclusive can be found in those cases where an employment relationship or a legal representation relationship exists between the parties (see, for example, CA 37/86 Levy v. Sherman [3], at p. 462; CA 735/75 Reutman v. Aderet [4]; CA 153/04 Robinovitz v. Rosenbaum [5], at para. 5 of the opinion of the honourable Justice E. Rubinstein). In English law the prevalent outlook in the past was that, as a rule, the law of contracts takes precedence over the law of torts and therefore the scope of the liabilities and undertakings that the parties to the contract took upon themselves should not be extended by means of the law of torts. This outlook underwent a change as a result of the judgment of the House of Lords in Henderson v. Merrett Syndicates Ltd [19], which held that liability in torts would only be ruled out where it was contrary to the contents of the contract between the parties (see R.A. Buckley, The Modern Law of Negligence (third edition, 1999), at pp. 148, 153; J. Murphy, Street on Torts (eleventh edition, 2003), at pp. 210-212; W.V.H. Rogers, Winfield and Jolowicz on Tort (seventeenth edition, 2006), at pp. 10-13; see also Englard, Barak and Cheshin, The Law of Torts — The General Doctrine of Torts, supra, at p. 15). In the case before us, the agreement between the parties is silent on the subject of taking out personal accident insurance to insure the first appellant against the risks involved in the race, and therefore it can be said that the tortious cause of action exists alongside the contractual cause of action, even if we adopt the reservation that was determined in this regard in Henderson v. Merrett Syndicates Ltd [19].

Negligence on account of not taking out insurance within the framework of a joint sporting venture

14. Before we examine the question of the first respondent’s liability in torts for not taking out personal accident insurance, we should first say that there is no merit in the argument that the tortious cause of action raised by the appellants constitutes a new claim that is not permitted at the appeal stage. This cause of action was brought before the trial court and was mentioned by it in the judgment (p. 10 of the judgment), even though it did not see fit to discuss it at length. On the merits of the matter, the question is whether it is desirable to impose on someone, by virtue of the tort of negligence, a duty to take out insurance for someone else where the law does not demand this. Indeed, in a case of this kind, the alleged liability does not derive from negligence that caused the direct damage, but from negligence that resulted in there being no insurance cover for the direct damage, when it occurred. This is the position in our case, where we are speaking of activity involving inherent risks that are not necessarily the result of negligence. Sports driving, even if done with reasonable care, involves risks. In practice, most branches of sport — and especially competitive sport — involve a degree of risk even if proper precautionary measures are taken. Therefore the question in our case is whether someone, who is involved in a sporting event and derives a benefit from it, should be made liable to insure his participants even when there is no statutory duty to do so.

I will examine this question below.

15. Let us first say that when speaking of activity that involves considerable risks that cannot be negated even by taking reasonable precautions, taking out insurance may be a proper and even a required normative standard. Policy considerations that justify determining such a normative standard are based mainly on the consequences that may result from a lack of insurance for activity of this kind in the ethical, economic and social spheres. There is a real likelihood that engaging in dangerous activity may result in significance injuries for which no one will be liable in torts within the framework of the tort of negligence, since from an overall perspective we are speaking of activity that is reasonable and even desirable. Insurance provides an important ‘safety net’ in this context. Indeed, it is especially when we are speaking of organized activity that involves considerable risks that the parties who derive a benefit from the activity can be expected to ascertain that insurance is taken out. It should be remembered in this context that apart from the personal cost that the injured person will be likely to pay if he is injured and pays for the damage out of his own pocket, there is also a social cost, since an injured person in such a case will almost certainly become a burden on society as a whole or on the community to which he belongs. This shows the importance of insurance, which provides a solution to these difficulties by spreading the risk inherent in the dangerous activity among the group of persons that benefit from it. Spreading the risk in this manner is just and efficient and allows the direct damage caused as a result of the dangerous activity, as well as the ‘secondary’ indirect damage that accompanies it, to be minimized (see Y. Elias, Insurance Law (vol. 1, 2002), at pp. 3-5; S. Weller, The Insurance Contract Law, 5741-1981 (vol. 1, 2005), at pp. 43, 45-47; for a distinction between primary damage and secondary damage in the context of torts law, see I. Gilead, ‘Liability and Insurance in Cases of Damage Caused by Terrorist Attacks — Economic Analysis,’ in Terrorism, Tort Law and Insurance: A Comparative Survey (B.A. Koch, ed., 2004) 238, at pp. 241-242).

16. Insurance is an integral part of the way in which modern society contends with risks. In various contexts the legislature saw fit to enact a provision of statute that obliges the relevant parties to take out insurance in favour of a potential victim (see s. 2 of the Motor Car Insurance Ordinance [New Version], 5730-1970; s. 2 of the Immunization Victims Insurance Law, 5750-1989; r. 4(5) of the Aviation Services Licensing (Aviation Schools) Regulations, 5731-1971; Sports Diving (Imposing an Insurance Liability on Divers) Regulations, 5740-1980; and in English law see R. Lewis, When You Must Insure — Part 1, New Law Journal  8  October (2004) P1474). The law of torts for its part has chosen various legal systems to handling activities that involve considerable risks by imposing a system of strict or absolute liability. In this regard see, for example, the wording of the Restatement of the Law, Third, Torts: Liability for Physical Harm (Proposed Final Draft no. 1, April 6, 2005) §20, which is entitled ‘Abnormally Dangerous Activities’:

‘(a) An actor who carries on an abnormally dangerous activity is subject to strict liability for physical harm resulting from the activity.

(b) An activity is abnormally dangerous if:

(1) the activity creates a foreseeable and highly significant risk of physical harm even when reasonable care is exercised by all actors; and

(2) the activity is not one of common usage.’

The purpose of this arrangement is to impose upon someone, whose activity creates a serious and unusual risk of physical injury to his neighbours, the liability for damage that is caused as a result of the realization of that risk, something that is not possible within the framework of the tort of negligence because the damage cannot be prevented by reasonable measures (see and cf. Restat. 2d of Torts §519-520). It should be noted that one of the exceptions to this provision concerns the choice of the injured person to be involved in the dangerous activity in return for some benefit (see Restatement of the Law, Third, Torts: Liability for Physical Harm (Proposed Final Draft No. 1, April 6, 2005) §24). An arrangement of strict or absolute liability may in turn be combined with an insurance arrangement, whether by virtue of an express provision of statute or by virtue of the incentive that such an arrangement creates, from the viewpoint of the potential tortfeasors, who face the threat of being liable even if they act carefully. It should be noted that the increased or absolute liability, together with the incentive to take out insurance, is not limited to someone who actually carries out the dangerous activity, and sometimes it will be justified to impose it on other parties, such as the promoter or funder of the activity, for various reasons such as an ability to prevent the damage. 

17. The social and private interest in obligating those who benefit from dangerous activities to take out appropriate insurance exists inter alia with regard to sporting activity, which as we have said inherently involves considerable risks to sportsmen. Sports racing is an obvious example of this. I think that the importance of insurance that is intended to compensate for personal injuries that may be caused as a result of dangerous sporting activity cannot be overstated (T. Kevan, D. Adamson & S. Cottrell, Sports Personal Injury: Law and Practice (2002), at pp. 259-264; D. Pilpel, Sports from a Legal Perspective (1994), at pp. 272-274). The clear social interest that appropriate insurance be taken out with regard to injuries that arise from sporting activity found expression in s. 7(a) of the Sports Law, 5748-1988, which provides:

‘(a) A sports club, sports organization, federation and union shall insure the sportsmen who take part in sporting competitions that are organized by them or on their behalf.’

On 29 December 2005 the Sports Driving Law, 5766-2005, was published. It comes into effect on 15 March 2007. This law regulates the field of sports driving in various respects and it establishes, inter alia, penal provisions with regard to anyone who uses or causes or allows another to use a competitive vehicle without appropriate insurance. In this regard s. 15 of the Sports Driving Law provides:

‘Insurance obligation      15. (a) A person shall not use, nor shall he cause or allow another person to use, a competitive vehicle that has been given a competitive vehicle licence, unless there is a valid insurance policy for the use of that competitive vehicle by him or the other person, which was issued by an insurer, in accordance with provisions that shall be determined by the minister, after consulting the Supervisor of Insurance, which insures the owner of the competitive vehicle and its rider as follows:

                (1) Against liability for rescue, evacuation, medical treatment, assistance, nursing services and rehabilitation services that will be given to the driver of the competitive vehicle for personal injury that he suffers as a result of sports driving that took place in accordance with the provisions of this law;

                (2) Against liability for personal injury that is caused to a person by a competitive vehicle as a result of sports driving, apart from the driver of the competitive vehicle.

                (b) Notwithstanding the provisions of subsection (a), the minister may, after consulting the Supervisor of Insurance, determine types of competitive vehicles, fields of sports driving and types of approved race tracks, with regard to which the duty to take out insurance under this section shall be the liability of the licence holder under sections 8 or 9, as applicable.

                (c) In this section, ‘insurer’ — according to the meaning thereof in the Supervision of Insurance Transactions Law, 5741-1981.’

Section 23(c) of the law provides that anyone who breaches the provisions of the aforesaid s. 15 is liable to imprisonment for one year or a fine. The provisions of the Sports Driving Law do not apply in our case because the events that are the subject of the appeal took place approximately twelve years before the law came into effect. Moreover, the law relates mainly to sports driving in Israel (see s. 2(c) of the Sports Driving Law; the draft Sports Driving Law, 5765-2004, Draft Laws 2004, 474, at p. 476), whereas the incident in the appeal before us occurred in Egypt. Notwithstanding, this legislative development indicates that sports driving is one of those dangerous activities that we should ensure take place with insurance cover for those taking the risks, and the legislature has taken care to ensure that persons using competitive vehicles have a suitable insurance policy by imposing the duty to take care of this on whoever benefits from this activity (and not on drivers in general — see ss. 34-35 of the Sports Driving Law, which excludes sports driving from the application of the Motor Vehicle Insurance Ordinance and the Road Accident Victims Compensation Law, 5735-1975). It should be noted that s. 30(b) of the law provides that ‘the driver of a competitive vehicle shall not have a cause of action under the Torts Ordinance [New Version], against another driver of a competitive vehicle, for damage that is caused to him as a result of sports driving, unless the aforesaid damage is caused to him by the other driver intentionally’ — i.e., between the drivers inter se compulsory insurance replaces the law of torts. It is not superfluous to point out in this context that in our case the organizers of the race compelled the participants to take out Israeli and Egyptian compulsory insurance and they recommended — and it should be noted that this was only a recommendation — that they take out personal accident insurance.

18. The social and private interest in the existence of insurance will usually be furthered in the best way by means of clear provisions of statute such as those discussed above. But in the case before us it was not proved that there is a relevant statutory arrangement. In Israel, there is no strict liability provision that we can consider applying in this case. Therefore the petitioners ask us to go one step further and to impose an insurance obligation on the first respondent by virtue of the tort of negligence. This approach raises difficulties and should not be adopted. As I have already said, from a normative viewpoint it is unreasonable that a venture concerning participation in a motorbike race should be undertaken without personal accident insurance. Notwithstanding, choosing the framework of negligence as a means of creating an insurance obligation stretches the limits of the tort and raises a concern that negligence will gradually turn into a strict or absolute liability. This is because of the proximity between imposing a duty to take out insurance and imposing absolute liability which Prof. I. Englard discussed when he said ‘Absolute liability is in essence a reflection of the idea of insurance’ (see I. Englard, Compensation for Road Accident Victims (third edition, 2005), at p. 6). Indeed, determining an insurance obligation as a protected norm within the framework of the tort of negligence may blur the line that divides absolute liability from liability that is based on the principle of fault. The distinction that exists between these two regimes was discussed by this court in CA 485/60 Berman v. Marziof [6], at p. 1918, where it was said: ‘[someone with a duty of care] is not like an insurer, who is liable to compensate for the damage whatever its source’ (see also CA 371/90 Subhi v. Israel Railways [7], at p. 349; CA 4025/91 Zvi v. Carroll [8], at p. 790). Justice Witkon also uttered some remarks in this vein in CA 285/73 Lagil Israel Trampoline and Sports Equipment Ltd v. Nahmias [9], at p. 75, where he said:

‘It is common today to suggest to the supplier another solution to the dilemma. We ask what difference does it really make to the supplier that he is presumed to be negligent (even if he did not have a reasonable possibility of preventing the danger), since in any case he should be insured against third part risks, and thus he passes the risk on to all consumers or all taxpayers. In my opinion this is not a path that the court can follow. In this way we are in practice eliminating the concept of “negligence” (with all of its moral significance) and replacing it with absolute liability… and I am not at all sure whether this is desirable in all circumstances and in every case. The public’s resources are not unlimited. Public money is a resource of the economy, and when there are insufficient resources to satisfy all of the desirable social purposes, an order of priorities needs to be determined. It is clear that this is a matter for the legislature (or the government) to address, after it examines thoroughly the need for the service and the scope of the risk that it involves, the cost of insuring against absolute liability and the relative importance of this social burden in comparison to the importance of other burdens… I do not mean to argue that the court is not competent to consider a question that is entirely a matter of policy, but it is clear to me that this debate requires research and that we do not have the necessary tools for this (for the position that the legislature should be left to determine arrangements that impose increased or absolute liability, see also A. Barak, ‘Forty Years of Israeli Law — The Law of Torts and the Codification of Civil Law,’ 19 Hebrew Univ. L. Rev. (Mishpatim) 631 (1990), at p. 642; CFH 7794/98 Moshe v. Clifford [10], at pp. 738-739).

Choosing the path of legislation in order to determine an insurance obligation has an additional advantage over the path in which such a norm is determined within the framework of the tort of negligence: it would appear that the legislative path advances the interest of spreading the risk by means of taking out insurance more effectively. Imposing a duty of care as opposed to imposing a duty in statute means that the potential tortfeasor has the choice of the possibility of taking out insurance and the possibility of taking the risk involved in not purchasing insurance (a risk whose realization will render the tortfeasor liable to compensate the injured person in the absence of insurance). It cannot be ruled out that, in the absence of a statutory duty to take out insurance, the potential tortfeasor will choose the second possibility according to which he will be liable to pay for the whole damage when it occurs, for many different reasons (see Weller, The Insurance Contract Law, 5741-1981, supra, at p. 44; G. Calabresi, The Costs of Accidents (1970), at pp. 55-59; also see and cf. Weller, supra, at pp. 126-127; D. Schwartz and R. Schlinger, Insurance Law (2005), at pp. 113-114, 138). With regard to the possibility of finding the tortfeasor liable for punitive damages as an incentive to take out insurance and the disadvantages of this possibility, see and cf. CA 140/00 Estate of Ettinger v. Company for the Reconstruction and Development of the Jewish Quarter in the Old City, Jerusalem, Ltd[11], at pp. 562-567 {180-186}).

19. But despite the difficulties inherent in the approach whereby failure to take out insurance constitutes negligent conduct that gives rise to liability under the law of torts, I do not think it right to rule out this possibility in principle; each case should be examined on its merits and according to its circumstances. The fact that we are talking in this context of economic loss that is reflected in a pecuniary loss as a result of not receiving an insurance payment — ‘pure’ economic loss — also does not in my opinion rule out, always and in all circumstances, the duty of care. I agree in this regard with the opinion of Deputy President E. Rivlin in CA 3464/05 Paz Oil Co. Ltd v. State of Israel [12], at para. 7, where he said:

‘It is doubtful whether the fact that we may be talking here about “pure” economic loss, i.e., pecuniary loss that is not accompanied by physical damage to the person or property of the plaintiff, is capable on its own, in the circumstances of the case, of ruling out the duty of care. Admittedly in foreign case law there has sometimes been a reluctance to impose liability for this type of damage, for various reasons that mainly arise from a concern that it will lead to an uncontrollable increase in the number of persons entitled to compensation, the concern that the courts will be flooded with cases and the difficulty of assessing the amount of the damages (see D. Ronen, ‘Pure Economic Loss from a Comparative Perspective,’ 44 HaPraklit 504 (2000)). These considerations may fall within the scope of the policy considerations that are usually examined within the framework of the duty of care. As I have said, I doubt whether the nature of the damage in our case can rule out the duty of care (and see in this regard, for example, Jerusalem Municipality v. Gordon, supra, at p. 139; and with regard to negligent misrepresentation, see App 106/54 Weinstein v. Kadima Cooperative Society Ltd).’

(For classification of the damage see: Buckley, The Modern Law of Negligence, supra, at pp. 149, 153-154; Van Oppen v. Clerk to the Bedford Charity Trustees [20]; for the characteristics of economic loss and the aforementioned doubts, see Ronen, ‘Pure Economic Loss from a Comparative Perspective,’ supra, at pp. 504, 508-509, 522; Gidron, ‘The Duty of Care in the Tort of Negligence and Pure Economic Loss,’ supra, at pp. 128-130, 136-138; N. Cohen, ‘Strike Damage, Deliberate Negligence, Economic Loss and Causing Breach of Contract,’ 14 Tel-Aviv University Law Review (Iyyunei Mishpat) 173 (1989), at pp. 183-185; Winfield and Jolowicz on Tort, supra, at pp. 191-194).

Thus we see that each case should be examined in accordance with its characteristics and all of the factors that are relevant to the case, including considerations concerning the reasonableness of the conduct, the likelihood of the damage, the relationship between the tortfeasor and the injured party and the dependence of one on the other. The concern that the limits of the tort of negligence will be eroded should not be the determining factor in every case.  This is a consideration whose relevance and weight should be considered on a case by case basis. Moreover it would appear that there are certain situations in which it will be right to recognize a cause of action of negligence as a result of not taking out insurance. Thus, for example, the considerations weighing against the imposition of liability on the grounds of negligence lose their strength where there is a statutory duty to take out insurance (see and cf. LaClair v. Silberline Manufacturing Co., Inc. [18]; CC (TA-DC) 2474/86 Netzer v. Kanfonit Light Aircraft Co. Ltd [16], at pp. 476-478; on the connection between a statutory duty and the tort of negligence see: CA 145/80 Vaknin v. Beit Shemesh Local Council [13], at p. 139; CA 2906/01 Haifa Municipality v. Menora Insurance Co. Ltd [14], at paras. 17, 23, 27). Moreover, in circumstances where there is a relationship between the tortfeasor and the injured party and a dependence of one on the other, there may be a duty of care on the part of the tortfeasor to the injured person to protect his economic interests. It is possible that in such circumstances it will be possible to regard a failure of the tortfeasor to insure the injured party as a negligent omission. The aforesaid relationship and reliance element may exist, inter alia, where one party expressly promised the other that he would take out insurance for him or where this is required by the custom between the parties. By contrast, where the injured party chose to become involved in dangerous activity in return for benefits that it gives him, it will be difficult to argue in the absence of an express agreement that he relied on the other party to insure him.

20. In English law the lack of a special relationship between the tortfeasor and the injured person has indeed been a main consideration in two judgments in which the claim of negligence was raised in the wake of the failure to take out insurance. In a case that concerned an employment relationship (Reid v. Rush & Tompkins Group PLC [21]) and in a case that concerned the sporting activity of a school pupil (Van Oppen v. Clerk to the Bedford Charity Trustees [20]) it was held that even where a tortfeasor has a duty of care to ensure the physical safety of the injured person, he does not necessarily have a duty of care to ensure his economic welfare. Therefore the court rejected the claim that was raised in those cases that the defendants (the employer in Reid v. Rush & Tompkins Group PLC [21] and the school in Van Oppen v. Clerk to the Bedford Charity Trustees [20]) had a duty to take out insurance to cover economic loss arising from events for which they had no liability in torts.

In Naylor v. Payling [22] the English Court of Appeal considered whether a landowner had a duty to ensure that an independent contractor employed by him on the land had taken out insurance for damage to third parties that might be caused as a result of the contractor’s negligence. In discussing the distinction between a freestanding duty to do this and a duty derived from the general duty of employing a competent and qualified contractor, Justices Waller and Neuberger expressed their opinion that as a rule no freestanding duty as aforesaid should be recognized apart from in special circumstances — cases where the employer is himself under a duty (whether statutory or not) to insure himself, or where the employer accepts that he should insure himself. Justice Waller went on to hold that an additional condition for the existence of such a freestanding duty is that the contractor is employed in a hazardous activity. But in that case, the court went on to hold, the circumstances justifying the imposition of such a duty did not exist. From the decision of the English Court of Appeal in Naylor v. Payling [22] it is possible, with the requisite caution, to infer that when the special circumstances mentioned above do indeed exist, it cannot be ruled out that there will be an independent or freestanding duty to ensure the existence of insurance as a cause of action in negligence (but see Winfield and Jolowicz on Tort, supra, at pp. 407-408). As I have already said above, I too am of the opinion that the recognition of this duty is not based on sweeping rules but on the application of policy considerations that lie at the heart of the tort of negligence, which include reasonableness, reliance expectations, the neighbour principle and avoiding excessive deterrence and overextending the limits of the tort.

From general principles to the specific case

21. Does the first respondent have a duty of care to the first appellant with regard to taking out personal accident insurance? In order to answer this question we should examine the relationship between the parties and the duties that arise from it against a background of the normative position set out above. In this case the first respondent did not have a statutory duty to take out insurance. We have also seen that the insurances that were a precondition for participating in the race were taken out, whereas the insurance that we are discussing — personal accident insurance — was a recommendation of the organizers. This recommendation was sent to the sportsmen themselves but the first appellant chose to ignore it. In the circumstances of the case there is no basis whatsoever for the argument that a special relationship existed between the parties or that the first appellant relied on the first respondent in a way that imposes on it a duty of care to insure him. The essence of the contract between the parties (a joint sporting venture) does not in itself indicate such a relationship or reliance, since we are speaking of a contract between two parties of equal bargaining power where each of them was free to negotiate the terms of the contract or alternatively to choose to enter into a contract with another party (a sportsman or sponsor, as applicable). Moreover, in so far as the insurance is concerned, the relationship between the parties was not characterized by one party being more knowledgeable or being more able to prevent the damage that was caused, thereby giving rise to reliance on the part of the other. Even from the viewpoint of sharing the benefits, we are speaking of a venture in which both parties were expecting to derive an advantage, one in the economic sphere and the other in sporting achievements. Moreover it would appear that in the circumstances of the case and in view of the division of functions between the parties in the venture that they wished to promote, the first appellant does not have a convincing argument as to why the first respondent should be liable to take out personal accident insurance, rather than the first appellant himself. In this context it should be recalled that the first appellant participated in the past on more than one occasion in motorbike races, and he was able to make a proper assessment of the risks involved in them and the economic loss that he was likely to suffer if he was injured and did not have insurance. It should also be recalled that his argument that he asked the first respondent to ensure that he had personal accident insurance was rejected by the trial court on the facts. In these circumstances it would appear that imposing a duty of care on the first respondent to take out insurance would be going too far. Therefore the argument that the first respondent is liable for the appellant’s damage by virtue of the tort of negligence because of the lack of insurance should be rejected.

Conclusion

22. For the reasons set out above I would propose to my colleagues that we deny the appeal, but because of the special circumstances of the case I would further propose not to make an order for costs.

 

Justice M. Naor

I agree with the opinion of my colleague Justice Hayut. The tragic incident before us in this case shows the need for parties who have a common interest in a project or a property to determine the question of insurance coverage for personal injuries or damage to property. Preplanning avoids both underinsurance and double insurance (see and cf. CA 931/99 Menorah Insurance Co. Ltd v. Jerusalem Candles Ilum (1987) Ltd [15], at p. 564).

My colleague mentioned (in para. 16 of her opinion) several statutory provisions that contain a binding duty to take out insurance. Such provisions are dispersed in legislation and regulations in a sporadic and haphazard manner. I am of the opinion that the legislator should address the question of the proper scope of the duty to take out insurance and in what areas it should apply, in order to prevent situations like the one in which the appellant finds himself, where an accident has occurred and it is not covered by insurance.

 

 

Justice A. Grunis

I agree with the opinion of my colleague Justice E. Hayut and also with the remarks of my colleague Justice M. Naor.

 

 

Appeal denied.

17 Adar 5767.

7 March 2007.

 

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