Insurance

New Zealand Insurance Company v. Yuval

Case/docket number: 
C.A. 118/51
Date Decided: 
Thursday, June 4, 1953
Decision Type: 
Appellate
Abstract: 

The plaintiff, a Haifa merchant, insured with the defendant, a company having its head office apparently in New Zealand and a branch in London, a consignment of 100 watches despatched to him from Paris. The policy, made in Haifa and mentioning the London branch, was in English and contained a "lost-or-not-lost" clause. In fact the watches had been sent from Paris twenty days before the issue of the policy, but this fact was not disclosed to the underwriters. The consignment was stolen while in transit in France, and only seven watches were recovered. It was impossible to determine whether the theft had been committed before or after the date of the policy. The District Court gave judgment against the defendants for the value of 93 watches, holding that the information relating to the prior despatch of the watches had not been withheld by fraud on the plaintiff's part, and that there was no duty on him to volunteer it.

 

                Held, allowing an appeal and remitting the case to the District Court for further consideration:

               

                1. The question what was the law applicable to the contract, being one of conflict of laws to which no local law extended or applied, must be determined in accordance with the English common law by virtue of Article 46 of the Palestine Order in Council, 1922.1)

               

                2. Quaere, whether the English law rule is that in the absence of an agreement to the contrary a contract of marine insurance is governed by the law of the place where the underwriter carries on his business.

               

                Spurrier v. G.F. La Cloche 1902 A.C. 446 and

                Greer v. Poole (1879) 5 Q.B.D. 272 considered.

               

                3. There was no evidence before the court to prove either what was the country in which the underwriter carried on business or, assuming it to be England, what the provisions of the English law were. As distinct from a case in which English common law is applicable under Article 46, it is necessary to prove such law by expert evidence when it is to be applied as a foreign law.

 

                4. In the absence of evidence, it must be presumed that the law of the defendant's place of business is identical with the local law.

 

                5. A question of marine insurance is comprehensively answered by the Ottoman Maritime Code, 1863, and there is no occasion to turn to English law under Article 46. On the contrary, the Code must be interpreted in the light of the French law from which it was derived.

               

                6. By Article 193 of the Ottoman Mercantile Code 1) a contract of insurance will be cancelled in the event of the non-disclosure of a fact which, had it been known to him, would have prevented any ordinary, reasonable underwriter from consenting to the conditions included in the policy.

               

                Accordingly:

               

(a)          The question does not depend upon whether the assured knew or did not know of the loss of the watches, or whether he acted fraudulently or not.

 

(b) The "lost-or-not-lost" clause proved that the mere fact that the watches had already been despatched at the date of policy could not have affected the underwriters' estimate of the risk insured.

 

(c)           The question whether the non-disclosure of the fact that the watches were already in transit for twenty days at the time when the insurance was applied for affected the validity of the contract depended upon whether that period was so long in reference to the circumstances that an ordinary, reasonable underwriter would regard it as increasing the risk he had underwritten. That question should be answered by the District Court.

 

                Case remitted accordingly.

 

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

 

C.A. 118/51

 

 

NEW ZEALAND INSURANCE CO. LTD. AND ANOTHER

v.

IZHAK YOUVAL (SALZMAN)

 

 

In the Supreme Court sitting as a Court of Civil Appeal.

[June 4, 1953]

Before: Silberg J., Assaf J., and Landau J.

 

 

 

Conflict of Laws - Palestine Order in Council, 1922, Article 46 - English law to be applied - English law, when applied as foreign law and not by virtue of Article 46, to be proved by experts - Principle of identity of laws - Contract of marine insurance - Ottoman Maritime Code, 1863, s. 193.

 

                The plaintiff, a Haifa merchant, insured with the defendant, a company having its head office apparently in New Zealand and a branch in London, a consignment of 100 watches despatched to him from Paris. The policy, made in Haifa and mentioning the London branch, was in English and contained a "lost-or-not-lost" clause. In fact the watches had been sent from Paris twenty days before the issue of the policy, but this fact was not disclosed to the underwriters. The consignment was stolen while in transit in France, and only seven watches were recovered. It was impossible to determine whether the theft had been committed before or after the date of the policy. The District Court gave judgment against the defendants for the value of 93 watches, holding that the information relating to the prior despatch of the watches had not been withheld by fraud on the plaintiff's part, and that there was no duty on him to volunteer it.

 

                Held, allowing an appeal and remitting the case to the District Court for further consideration:

               

                1. The question what was the law applicable to the contract, being one of conflict of laws to which no local law extended or applied, must be determined in accordance with the English common law by virtue of Article 46 of the Palestine Order in Council, 1922.1)

               

                2. Quaere, whether the English law rule is that in the absence of an agreement to the contrary a contract of marine insurance is governed by the law of the place where the underwriter carries on his business.

               

                Spurrier v. G.F. La Cloche 1902 A.C. 446 and

                Greer v. Poole (1879) 5 Q.B.D. 272 considered.

               

                3. There was no evidence before the court to prove either what was the country in which the underwriter carried on business or, assuming it to be England, what the provisions of the English law were. As distinct from a case in which English common law is applicable under Article 46, it is necessary to prove such law by expert evidence when it is to be applied as a foreign law.

 

                4. In the absence of evidence, it must be presumed that the law of the defendant's place of business is identical with the local law.

 

                5. A question of marine insurance is comprehensively answered by the Ottoman Maritime Code, 1863, and there is no occasion to turn to English law under Article 46. On the contrary, the Code must be interpreted in the light of the French law from which it was derived.

               

                6. By Article 193 of the Ottoman Mercantile Code 1) a contract of insurance will be cancelled in the event of the non-disclosure of a fact which, had it been known to him, would have prevented any ordinary, reasonable underwriter from consenting to the conditions included in the policy.

               

                Accordingly:

               

(a)          The question does not depend upon whether the assured knew or did not know of the loss of the watches, or whether he acted fraudulently or not.

 

(b) The "lost-or-not-lost" clause proved that the mere fact that the watches had already been despatched at the date of policy could not have affected the underwriters' estimate of the risk insured.

 

(c)           The question whether the non-disclosure of the fact that the watches were already in transit for twenty days at the time when the insurance was applied for affected the validity of the contract depended upon whether that period was so long in reference to the circumstances that an ordinary, reasonable underwriter would regard it as increasing the risk he had underwritten. That question should be answered by the District Court.

 

                Case remitted accordingly.

 

Palestine cases referred to :

(1)          C.A. 123/41 - Gustav Weil v. Barclays Bank (D.C. & O.), Haifa Branch; (1941) 2 S.C.J. 354.

(2)          C.A. 259/41 - Leopold Baef v. The Palestine Building Syndicate, Ltd.; (1942) 1 S.C.J. 82.

(3)          C.A. 73/43 - L. v. L; (1943) 1 A.L.C. 245.

 

Israel cases referred to:

(4)          C.A. 37/48 - Bank Hapoalim Ltd. v. Ya'acov Kravtsov; (1948/9) 1 P. 44.

(5)          C.A. 130/50 - Amal Ltd. v. Yehoshua Shindler; (1952) 6 P.D. 710.

(6)          C.A. 37/49 - Gila Cohen Rapoport v. Sara Paldwrowski; (1950) 4 P.D. 645.

(7)          C.A. 51/49 - Yosef Yazdi and Others v. Rivka Yazdi; (1950) 4 P.D. 762.

(8)          C.A. 167/47 - Binyamin Minkowitz v Zalnan Fishtsner & Others; (1948/49) 1 P. 49.

(9)          C.A. 65/49 - Moshe Freisler v Fritz Weiss; (1951) 5 P.D. 878.

 

English cases referred to :

(10)        Spurrier and Another v. G.F. La Cloche; (1902) A.C. 446.

(11)        Greer v. Poole and Others; (1880) 5 Q.B.D. 272.

 

Solomon for the appellant.

Meridor for the respondent.

 

                SILBERG J. This appeal concerns marine insurance and the question that has been raised before us is :what is the position in law of an assured who keeps silent and does not disclose to the insurance company that the goods have already been sent from the place of despatch, that they have been lost en route, and that it is not known whether such loss occurred before the contract was made or thereafter. The difficulties of this case are increased by the fact that the policy contained the well known "lost-or-not-lost" clause and that it did not restrict the insurance to future risks only.

               

2. The material facts are set out below, and particular importance must be attached to the relevant dates :

 

                (a) In 1947 the plaintiff Mr. Izhak Youval (Salzman), began business as an importer of watches. His method of operation was to send gold ingots to Prance for the purpose of being worked and mounted, and filled by the Lanco Company into watches which be later re-imported into Palestine as finished goods. One of these orders was carried out in the middle of March, 1947. It concerned some 250-300 watches which were to be sent from France to Haifa in small batches. At the same time the plaintiff informed the Lanco Company that he had opened a bankers' credit in its favour in connection with this order. Several months passed and after a great deal of correspondence the company at last telegraphed to the plaintiff on June 20, 1947, that it was about to send him 100 watches and requested him to have them insured. And indeed after seven days - that is on June 27th, 1947 - the watches were despatched from a Post Office in Paris. The company then wrote to the plaintiff to that effect in a letter which had left Paris on July 5th and which reached the plaintiff between the 10th and 12th but not later than the 15th of the same month. On receipt of the letter the plaintiff transferred by telegram to the Lanco Company the cost-price of the watches in accordance with the bill which was attached to the letter. On the 16th of July, Mr. Israel Salzman - the son of the plaintiff and the manager of his business - went to the office of Hamisrad Hameouhad Leahrayout Ltd., the agents of the appellant, the New Zealand Insurance Co. Ltd. There he spoke to Mr. Frankel, the clerk in charge and requested him to insure 100 gold watches against loss and damage for up to 800 Palestine Pounds from the Post Office in Paris to Rehov Herzl, Haifa. Frankel agreed, Salzman paid the premium and the next day, that is on July 17, 1947, an insurance policy on behalf of the New Zealand Insurance Company was issued as requested and delivered to the plaintiff. At the time when Salzman requested the insurance to be effected he did not inform Frankel that the watches had already been sent from Paris; on the other hand he was not asked by Frankel whether the watches had already been sent or not. I shall deal with this point further in the course of this judgment.

 

                (b) Several months passed but the goods failed to reach their destination. The plaintiff inquired as to the meaning of this. The company tried to put him at his ease and investigations were made in France until finally - in February 1948 - it appeared that the watches had been stolen on the way and had disappeared, and that only seven of them had been recovered in Marseilles. From a letter which the plaintiff received towards the end of 1949 from the French Railways we learn that the person who stole the watches was found and arrested on or about July 26, 1947 but - as the Company adds regretfully - "the thief did not indicate the exact date on which the theft was committed."

               

                (c) The plaintiff applied to the agents of the Insurance Company and asked to be indemnified in respect of the damage (which according to the policy was payable in Haifa). The agents refused, their only ground being :

               

                "There is no evidence that the goods which were insured were still in existence when you requested the insurance to be made. It is obvious that a contract of           insurance can be made only in respect of existing goods and not on goods that are non-existent. Consequently we have to reject the claim."

 

                Because of this refusal the plaintiff lodged a claim before the District Court, Haifa, against the New Zealand Insurance Co. Ltd. and (alternatively) against the Hamisrad Hameouhad Leahrayout Ltd., and asked for judgment against them in respect of the damage in the sum of L.P. 8.- for each of the 93 watches that had been stolen and not recovered or the sum of L.P. 744.-in all, together with interest and costs. In paragraph 5 of the statement of claim the plaintiff writes :

               

                "5. The loss of the said 93 watches took place subsequent to July 17, 1947. Alternatively, the plaintiff claims that even if it should appear that the said watches were lost between June 27, 1947, and July 17, 1947, the first defendant is liable for the damage."

               

                The defendants' main defence, as set out in paragraphs 5 and 6 of their statement of defence, was as follows:-

               

"5. The date of validity of the said policy was from July 17, 1947, in respect of the said goods provided that the said goods were at that time in transit through the post from France to 44, Rehov Herzl, Haifa.

6. According to the plaintiff, the goods were sent by post from France on June 27, 1947. The defendant was not liable for any loss to the goods during the period between June 27, 1947 and July 17, 1947. lf the goods were lost then their loss took place before the date of the policy and no liability lay on the defendant in respect of goods that were not in transit in the post before the policy came into force."

 

In addition to the above, the defendants added a vague and laconic plea in their statement of defence. Paragraph 7 reads as follows:

 

"7. The insurance policy does not cover the case in question.''

 

                No explanation was given as to why or wherefore. To the simple reader this sentence is nothing but a mere abstract and a more concentrated resume of the pleadings set out in paragraphs 5 and 6 of the statement of defence which I have set out.

               

                (d) From the letter of Hamisrad Hameouhad Leahrayout Ltd. rejecting the claim and from the statement of defence of the defendants, it is clear that, at the begining, the dispute centred on one small point. It was confined to the question whether the insurance company was or was not liable for loss which had taken place before the insurance policy was issued. But during the trial in the District Court and as a result of the evidence produced by each side, the area of dispute was widened considerably - with the consent it would seem of both parties - and the defence of the defendants began to be concentrated on another point. Put very shortly it was this : that because young Salzman, when effecting the insurance, was silent about the goods having already been sent from the place of despatch and did not disclose this fact to the insurers, the Company was not liable to pay for the damage even if the goods were lost after the issue of the policy. From the point of view of the trial this change of front was legitimate and I am not prepared to consider it per se as being fatal to the defence. (Compare Bank Hapoalim Ltd. v Ya'acov Kraftsov (4), Amal Ltd. v. Yehoshua Shindler (5), and there is no difference in this connection between a cause of action and a ground of defence). But the lateness of the plea is an indication of the fact that the defendants themselves did not attach much importance to Mr. Salzman's failure to disclose the date of despatch of the watches. And the learned judge would do well, when the case is remitted to him, in the light of the directions at the end of this judgment, to give this point due consideration and the necessary weight, taking into account all the other factors.

 

                (e) The learned judge did not accept the pleas of the defendants and gave judgment against the New Zealand Insurance Co. for the amount claimed. He struck out the claim against the second defendants (Hamisrad Hameouhad Leahrayout) as it was entered alternatively - "only in the event of it appearing that the second defendant was authorised to act in the name of the first defendant in the said matter", (see paragraph 6 of the Statement of Claim) - and it appeared that the Company was in fact entitled to act in the name of the first defendant. The question which the learned judge put to himself in the fact instance was - did Mr. Salzman know on July 16, 1947, or did he not know that the goods were lost ? And he held that Mr. Salzman did not know of the loss of the goods. Salzman had not been asked by Frankel if the goods had been dispatched from Paris or not, and - in the opinion of the learned judge - Salzman was under no obligation on his own initiative to mention the date of despatch of the goods. The policy contained the clause 'lost or not lost' and the company was also liable for loss which had occurred before the contract was signed. It followed from these findings - and the learned judge gave judgment to that effect - that the company could not escape the liability it had undertaken towards the plaintiff. And it is against this judgment that the appellants are now appealing. Both parties are agreed that the insurance in question is marine insurance and has to be interpreted according to the general rules that apply to this particular branch of insurance.

 

3. Before I deal with the legal liability of the insurance company arising out of the policy I should like to mention a preliminary point which I regret to say was not sufficiently considered during the hearing. The question is : which law applies in order to discover where legal liability lies? The choice here is between the Ottoman Commercial Code - which was introduced locally by statute and which was based on the French Commercial Code - and the marine insurance rules of the English common law, or even perhaps - as we shall see further on - between these laws and both the common law and the statutory law of the foreign country to which the insurance company belongs. We listened to many ingenious arguments from counsel for the appellants, Mr. Solomon, but almost all of them were based on the well known rules of the English common law and only incidentally and en passant did he touch on some sections of the Ottoman Code. Mr. Meridor, on the other hand, was more cautious and more comprehensive but he too founded interesting arguments on the principles of the common law applicable in the English law of marine insurance. It seems to me with all respect, that both learned counsel have failed somewhat to give sufficient importance to the basic problem. They dealt with it - I would almost say - with reticence and this is a pity for without doubt they could easily have made a valuable contribution to the solution of this important question. In any case and whatever may be the result of this "reticence" of theirs, we are most grateful to both counsel for the wide range of their arguments, for they have thereby shown us interesting points of similarity and enabled us to examine and consider the differences - if any - of the various systems of law in their approach to the problem before us.

 

4. The question therefore is which law governs marine insurance in this case? And this question has two aspects.

                (a) In view of the fact that there are clear provisions in the local Ottoman mercantile law - that is to say, the Commercial Code, on this very subject, may we apply the English common law rules respecting insurance?

               

                (b) Considering that the contract in question is an insurance contract written in a foreign language, made with a foreign company whose place of domicile is in a foreign country (New Zealand or England) are we not bound in this case to apply the "national" law of the company, that is to say, the law in force in its "place of business"?

               

5. We shall first deal with the second question which is the more difficult of the two. For the answer to it can help us in solving the first problem. This is the question relating to private international law, and for its solution we must turn to the English Common Law. That is because on this subject there is no local law - apart from some rules in connection with personal status - and here Article 46 of the Palestine Order in Council automatically applies. Under this Article we are obliged in the absence of a local law, to apply the principles recognised by the English common law.

 

                But when we come to examine the English legal literature which deals with this branch of the subject we come across a special - almost peculiar - rule regarding the law that applies to such policies of insurance. The most forceful expression of the rule is found in the well known book on Private International Law by Wolff, second edition, p. 486, where it is said :-

               

                "Insurance contracts, except for contracts for re-insurance between companies, will in case of doubt be governed by the law of the insurer's place of business. The same is probably true of most other kinds of contracts that are concluded under typical conditions set up by great industrial, commercial, or railway companies, contracts 'where one will predominates, dictating its law not to single individuals but to an undetermined collectivity and leaving to those who want to enter into an engagement nothing more than unreservedly to accept the terms of the contract, to adhere to them' ...Such mass contracts, concluded under identical conditions ...can maintain their uniformity only if they are all governed by the same law, and there is a strong inference that this is the law of the place of the enterprise."

 

                A statement of much wisdom and weight ! But I am very doubtful if it truly and correctly sets out the position as it is in English law. The quotation in the above statement is taken from the French book of Saleilles, "De la declaration de la Volonte", and it certainly cannot be considered as an authority binding on our courts.

               

                Of greater weight is another authority which is cited by Wolff - that is the case of Spurrier v. G.F. La Cloche (10). But on examining the judgment itself we see that Wolff's opinion as it was expressed by him was not adopted by the English judges but that they made it subject to several qualifications which blunt its edge and deprive it of its potential sting.

               

                For what were the facts in that case? A resident of Jersey (one of the Channel Islands belonging to Britain) insured his stamp collection against loss and fire with an English company. The policy was in English and not French which is the language of this English island - and it was signed in Jersey by the agents of the company. The policy contained a condition to the effect that all disputes between the company and the assured regarding liability to pay for any damage or the amount or extent involved had to be submitted to arbitration in accordance with the Arbitration Act 1889, or any other amending act and that a decision of the arbitrators was a condition precedent to any claim for damages being made against the company unless the company admitted liability to pay the amount claimed. This condition precedent is illegal according to the laws of Jersey - because it restricted the jurisdiction of the courts - but valid according to English law. The question arose whether this was an "English contract" which had to be interpreted according to English law or a "Jersey contract" which had to be interpreted according to Jersey law ? The answer was that the contract was English. And this is what Lord Lindley said in his speech in that case :-

 

                "Their lordships are of opinion that, although this policy was made in Jersey, and any money payable under it would have to be paid to the assured in Jersey, the nature of the transaction, the language in which the policy is expressed, and the terms of the agreement and of the conditions, all show that the contract between the parties is an English contract and that wherever sued upon its interpretation and effect ought, as a matter of law, to be governed by English and not by Jersey law. The intention of the parties is too plain to be mistaken; the contract to pay out of the funds of the company is of itself very significant; and the reference to the English Arbitration Acts shews that the arbitration proceedings were to be conducted according to English law and no other." (Ibid., p. 450).

 

And the plaintiff's claim was dismissed in consequence.

 

                We see here something which very often happens in English judgments because of the well known reluctance of English judges to create "dangerous" precedents. The decision was based not on one but on many facts, so that the ratio decidendi of the judgment is in effect the result of all the facts taken together. We do not know what their lordships would have decided if the policy had been drawn up in the language commonly used in Jersey nor if the policy had not mentioned the English statutes although the language of the policy was English. As an authority, therefore, this judgment is meagre indeed and it cannot support the aside and sweeping generalisation as expressed above by Wolff in his book. It should also be noticed that the question in that case concerned the validity of a condition specified expressly in the body of the policy whereas Wolff's opinion, if correct, would mean that in connection with the whole problem of liability ensuing from the contract, one would be obliged as a matter of course to apply the "national" law of the policy - and for this proposition this English case is certainly no authority.

 

6. A similar rule to that propounded by Wolff is found in Dicey's book where Wolff is quoted (in one of the notes) as authority for it and an English judgment given in 1880 is cited in further support. I refer to Dicey's Conflict of Laws, sixth edition, p. 674 :

 

                "Rule 149 - A marine insurance policy issued by an underwriter carrying on business in England is governed by English law, except in so far as the policy stipulates that it be construed or applied in whole or in part according to the law of a foreign country."

 

As a comment on this rule it is said :

 

                "This Rule is an application of the general principle that in the absence of an agreement to the contrary, a contract of marine insurance in governed by the law of the country in which the underwriter carries on his business."

 

Immediately after this it is added:

 

                "This will, as a rule, also be the lex loci contractus and the lex loci solutionis."

               

                It is said here "as a rule", that is to say, not always. This means that in the opinion of Dicey the rule will also apply in the case where the lex loci contractus is different from the law of the country where the underwriter carries on his business. But what is the authority for this? We do not have to search long for it because the author himself tells us whence it comes. He directs as to a judgment given in Greer v Poole (11), and (in comment 1) says, citing the words of Lush L.J. :

               

                "It is no doubt competent to an underwriter on an English policy to stipulate, if he thinks fit, that such policy shall be construed and applied in whole or in part according to the law of any foreign state, as if it had been made in and by a subject of the foreign state, ...but, except when it is so stipulated, the policy must be construed according to our law, and without regard to the nationality of the vessel." (ibid. p. 674).

 

                Again we are bound to be not a little disappointed when we examine the original judgment and inquire into the facts as they appear from the pleadings and the judgment itself. An English merchant insured with an English firm of underwriters certain goods which were on a French ship proceeding from Lagos to Marseilles. The ship whilst on the high seas was involved in a collision which caused it, but not its cargo, damage and was towed to Gibraltar for examination and repairs. The owner of the ship, for lack of funds mortgaged both ship and cargo with a certain money lender to obtain the money necessary. The ship was repaired and proceeded to Marseilles. The money lender claimed back the loan and the owner of the cargo - the English merchant above mentioned - had to pay from his own pocket some money to release the goods from the money lender. The question arose whether the English underwriters were liable to pay these costs. The problem was this - was the loss a 'loss by perils of the seas' and therefore also included in the insurance covered by the policy, or was it not such a loss and therefore not covered by that policy? This is a question of law which is dealt with by both French and English law - only the French answer is positive and the English - negative. The question therefore is which law applies in this case? And the answer of the English court was that English law applied - because as appears in our citation 'the policy must be construed according to our law without regard to the nationality of the vessel', and the underwriters were consequently not liable to pay for this damage.

               

                Does this judgment support the sweeping statement that all English marine insurance policies even if effected abroad are to be interpreted according to English law? This does not seem to me to be the case. In all the facts mentioned in that case both by counsel for the parties and by the judge, there was not even the slightest hint that the insurance contract in question was made outside England. Had this been the case there would have been no doubt that counsel for the merchant-plaintiff would have pointed it out. Further the words which Lush J. used in parenthesis - "as if it had been made in a foreign state" - indicate that the policy was not effected in a foreign country. We are entitled therefore to presume that all the "factors" in that case were English: the merchant who was insured, the underwriters who effected the insurance, their place of business and the place where the contract was made - all except the ship, which had French nationality. The choice in that case therefore was not between the law of the place of business of the underwriters on the one hand, and the law of the place where the contract was made on the other, but between the law of the place where both the underwriters had their business and the contract was made, on the one hand, and the law of the country to which only the ship carrying the cargo belonged, on the other. Placed with this uneven choice there was no room for hesitation, and so the court ruled in favour of English law. In any case, one cannot take this judgment as authority - and perhaps Dicey himself did not mean - that an English policy will always be interpreted according to English law even if the contract of insurance was effected outside England.

 

6. But - and this is the last point which is decisive here - even if we were to adopt the method of Wolff and Dicey in solving this problem and be ready to accept all the consequences involved in it, we would still not be able to answer the question before us. This is simply because we do not know two facts - I repeat, two facts: (a) Where is the place of business of this company - is it in London or New Zealand? (b) What is the national law of the place of business of this company? Even if we were to suppose - and this would be highly arbitrary on our part - that as far as the assured in Palestine was concerned ''the place of the company's business" was its London branch, the name of which appeared at the bottom of the policy, we still do not know as a matter of law what is the law on marine insurance which is in force in England as well as what legislation on the subject has been enacted there at least since the year 1906. We have to be careful not to be confused by, and to avoid the mistake of relying purely on, outward similarities. If by following the rule proposed by .Wolff and Dicey, we have to ascertain the law which is in force in England on the subject, this will not be the English common law which, through article 46 of the Order in Council, has become our "own" local law, but the English law as a foreign law consisting of both common law as well as statutes.  This law we have to apply by reason of the principles of Private International Law because of the "foreign quality" of the company in the same way as we would have had to apply American law, for example, had "the place of business" of the company been in New York. This English law as a "foreign law" and especially the statutory part of it, cannot be considered as "a notorious fact that requires no proof." Even though it is "English" it has to be proved like all foreign law by evidence of experts and not by reference to text books. For the content of a foreign law is a question of fact and not a question of law (See Weil v. Barclays Bank (1); Baer v. The Palestine Building Syndicate, (2); L. v. L., (3); and no judge may decide what the foreign law is from personal knowledge except on the most simple points where proof by experts is manifestly unnecessary (See Dicey, ibid. p. 868). The problem here is certainly not one that can be considered as simple as this. Possibly, as regards English law, the position was different on this point when Palestine was a British Mandated territory. But now that Israel is an independent State there is no justification for this difference. We therefore cannot apply in this case foreign marine insurance law unless this law has been proved before the court below and this has not been done. And because this law has not been proved and as a matter of law we do not know what it is - indeed we do not even know where to look for it, whether in New Zealand or England - we will have to fill the void by adopting the well known fiction of Private International Law which is known as the principle of "identity of laws". As is well known, according to this principle the court must presume - generally speaking - that the foreign law which has not been proved is identical with the local law respecting the matter in question. (Dicey, ibid. Rule 194 pp. 866-867; Rapaport v. Paldwrowski (6); Yazdi v. Yazdi (7). We thus in effect return by a round about way to the local law which must apply, although formally we do so by introducing it in the garb of "foreign law".

 

7. Consequently whether the view of Wolff and Dicey is correct or not, in the appeal in this case at any rate, we must apply the local law because the "national law" of the policy, which is different from it, has not been properly proved.

 

8. We therefore come back to the first question : what is in first this local law? Is it local law in the narrow sense, that is to say, the Ottoman Law of Marine Insurance, or does it also include the recognised principles of the English common law which have become part of the "local law" in its widest sense through the directive of Article 46 of the Palestine Order in Council, as it has been interpreted? It seems to me that as far as this question is concerned there is no doubt whatsoever. Following precedents from the days of the Mandate, this court has ruled that the courts of this country are not required to apply the English common law "in respect of any legal problem requiring solution if the question can find some kind of answer in parallel provisions of the law of Palestine even though it is incomplete and faulty", Minkowitz v. Fishtner (8). And how much more so is this the case when the legal problem, as the one before us, has been provided for in the local law by a statute which is neither incomplete nor faulty? The main question to be answered in this appeal is what is the effect and consequence of silence on the part of the assured concerning the first that the goods had already been despatched? And this question of silence on the part of the assured is answered fully and exhaustively in a special section of a local statute - that is to say, section 193 of the Ottoman Maritime Code, 1863, which is in force in this country by virtue of the first part of Article 46 of the Palestine Order in Council. As is well known, this Ottoman Law adopted most of the principles of the corresponding French law (Second Book, Chapters 1-14 of the French Maritime Law 1807), and most of its sections were copied word for word. On this subject therefore French law is one of the sources of our own law and we can refer to it - without resorting to the evidence of experts - in order to clarify terms common to both. On the other hand, because of the very close similarity between the two laws, it is particularly important to notice those few instances where the text of the Ottoman law differs from that of the French law. (Compare the judgment of Agranat J. in Freisler v. Weiss (9).)

 

9. When we come to compare article 198 of the Ottoman Maritime Code with Article 848 of the French Commercial Code from which it was copied we notice at once just such a difference. This article of the Ottoman Code is different in that it has a further provision and contains half of a long paragraph which does not appear in Article 848 of the French Code.

 

                The relative articles of these two laws read as follows:

               

Article 848 du Code de Commerce (in French):

                "Toute réticence, toute fausse déclaration de la part de l'assuré, toute différence entre le contrat d'assurance et le connaissement qui diminueraient l'opinion de risque ou en changeraient le sujet, annullent l'assurance..."

               

Article 193 du Code de Commerce Maritime (Ottoman) :

                "Rend le contrat nul pour l'assureur, toute reticence, toute fausse déclaration de la part de l'assuré, toute différence entre le contrat d'assurance et le connaissement, qui diminueraient l'opinion du risque, ou en changeraient le sujet, et qui serait de nature à empêcher le contrat ou en modifier les conditions, si l'assureur eut été avert du véritable état des choses..."

               

                In translation the articles read as follows:-

               

Article 848 of the French Commercial Code:

               

                "Any silence, false declaration on the part of the assured (or) any difference between the policy of insurance and the bill of lading that is likely to diminish the assessment of the risk or to change the subject matter, cancels the insurance..."

               

Article 193 of the Ottoman Maritime Code:

                "The contract will be cancelled as far as the assured is concerned by reason of any silence, false declaration on the part of the assured, (or) any difference between the policy of insurance and the bill of lading that is likely to diminish the assessment of risk or to change the subject matter and which by its nature would have prevented the agreement being concluded of would have called for different conditions if the undertwriter had been informed of the true state of the facts..."

               

                This translation needs amplification because it lacks something - as happens in all translations - that something which is lost when the text of a passage is transmitted from one language to another. It is not necessary that the reticence, the declaration etc. should actually diminish the assessment of the risk. It is sufficient for them to appear as being "likely" to. This is in my opinion the nearest word that conveys in translation the meaning of the original language used by the authors of these two laws.

               

                Let us now compare the language of these articles. The words at the end of Article 193 of the Ottoman Code, which I have quoted in italics, do not appear at all in Article 848 of the French Code, as we have already noticed. And it is not for nothing that these words were added. It means - and one cannot escape from this conclusion - that the Turkish legislator was unwilling to invalidate an insurance policy by reason of silence, for example, except where not only would the silence, that is to say the non-disclosure of a fact, be likely to diminish the assessment of the risk, but where also the opposite, that is to say where the disclosure of the fact would "by its very nature" have prevented the conclusion of the agreement or changed its terms.

               

10. And one may well ask what is the meaning and significance of this additional condition? Logically speaking it is not certain that it would follow automatically from the very change in the assessment of the risk. For if the silence of the assured as regards the real facts have the effect on the underwriter of diminishing in his view the amount of the risk, then surely the opposite, that is disclosure of the real facts, must have the effect of increasing in his view the amount of the risk and his reaction would no doubt be either to refuse to insure because it would not pay him to do so or to change the terms in his favour by asking for a higher premium etc. The underwriter knows the terms of his policy well and presumably would not neglect his interests. And if so, how has the Ottoman legislator helped in this by amending Article 348 and what further provision has he added to the previous single condition it contained? On the other hand we cannot possibly ignore the clause that has been added and certainly this was not done just to make it look more attractive. We must, therefore, do our utmost to give the language some sort of practical significance and the only question is what and how?

 

11. It seems to me that our dilemma can be solved only in one way, that is by putting special emphasis on the words "which by its nature would" which appear in the clause that was added by the Ottoman legislator - either to introduce something new or to increase the emphasis, so as to remove doubts and avoid mistakes. What emerges is that the criterion must be objective and general and not individual and personal (that is to say taking into consideration the special mentality of a particular under-writer). The fact which the assured did not disclose should be of such a nature that had it been disclosed it would have prevented any reasonable underwriter from consenting to the conditions which had been agreed upon. This is the objective quality which if present makes a policy null and void even if the assured had no intention of deceiving. For "dolus" is not necessary to render a policy void on the ground of silence on the part of the assured, as a contract can be avoided on this ground even if the assured acted in good faith. According to the well known commentators Ripert, Lyon-Caén and Dalloz (Ripert, Précis de Droit Maritime, 6-ème éd. paragraph 594); Lyon-Caèn, Traité de Droit Commercial, 5-ème éd. paragraph 1447; Dalloz, Code de Commerce, Article 348) this is the position in French law. And on this point, at least, the French opinion is sufficient legal authority as to the way the term, as used in the Ottoman Law, should be interpreted because the whole conception of silence was copied by the Ottoman legislator from French law.

 

                The importance of the innovation or the emphasis in Article 193 becomes much clearer when this objective quality is absent. That is to say where even though the knowledge of the fact, which the assured had not disclosed, was most likely to increase the measure of the risk in the view of this particular under-writer, and so naturally either prevent the conclusion of the contract or cause a change in its terms, yet it was not a fact which by its very nature, generally and objectively speaking, was likely to have any influence on an ordinary reasonable under-writer. In such a case - this is the effect of Article 193 - the silence per se would not be a ground for cancelling the contract of insurance and only when other factors are added, such as, for example, an intention to deceive, will it become void or voidable in accordance with the accepted rules of the general law of contract. This is the only interpretation - so it seems to me - which it is possible to give to what has been added to Article 193 by the Ottoman legislator. Without it it is impossible to find any justification for the addition of this second qualification.

               

12 Having investigated the legal background of the problem, let as now consider the grounds of the appeal in the light of the above principles. We need deal, in my view, only with the following three points raised by the appellant.

               

                (a) That the learned judge was wrong in making the verdict depend on whether Salzman knew or did not know of the loss of the watches at the time when he applied for the insurance policy;

               

                (b) that the bare fact that the watches had already been despatched from Paris at the time when the insurance policy was applied for was important in itself as it was likely to have an influence on the assessment of the risk and that it was the duty of Mr. Salzman to inform Mr. Frankel of it even assuming that he (Salzman) did not know or even suspect that the goods had been lost;

               

                (c) the appellant's third point, pleaded in the alternative, was that even if the watches had not been lost before the 16th of July, the day when the policy was applied for, they had already been on the way for some 20 days and that therefore Mr. Salzman was in duty bound to disclose this fact to Mr. Frankel because this long delay alone would have increased the amount of the risk in the view of Frankel and would certainly have caused him to refuse to issue the policy as he expressly testified before the court.

               

13. With regard to the first point, I am of the opinion that counsel for the appellant is correct. As I have already pointed out under the conditions specified in Article 193, the cancellation of the contract because of the silence of the assured does not depend on the intention of the assured to defraud. The contract is cancelled as a matter of course even if the assured did not know or did not suspect that the goods had been lost. The learned judge was wrong therefore in his approach when he held that the deciding factor was whether the assured knew or did not know of the loss of the said goods.

 

14. On the other band I am not prepared to accept the second contention of counsel for the appellants. As Mr. Meridor rightly points out, the answer to this contention is contained in one of the terms of the policy itself. For as will be remembered the policy includes the "lost or not lost" clause. "lost or not lost" in this case means on the way from Paris to Haifa - for the basic purpose of the insurance was to cover the loss that might occur during the transit of the watches from the post in Paris to Haifa. The defendants too in their defence (paragraph 5) speak of the validity of the policy in connection with the transit of the watches from France to Haifa. Hence the language of the defence clearly indicates the possibility that the goods had already left Paris and that even so the underwriter agreed to take the risk on himself. Consequently, therefore, he cannot complain and say that the non-disclosure of this fact increased his estimate of the risk. In the circumstances the underwriter should have been more cautious in his assessment of the whole risk which he was taking on himself. A hint, and also authority for this, can be found by comparing the language of Articles 210 and 212 (second paragraph) of the Ottoman law to which Mr. Meridor has drawn our attention. It is very possible that the position in English law is different as counsel for the appellants claims, and it is also possible that it is exactly the same as counsel for the respondents maintains. In any case, for the reasons given above, English law does not apply here.

 

15. As regards the third point, whether it is correct or not depends on the answer to another question which the learned judge, because of his approach to the problem, did not find necessary to give - although he had enough evidence before him to enable him to decide one way or the other.

 

                In paragraph 11 of this judgment I explained the criterion that is given in Article 193 for annulling a contract of marine insurance on the ground of the silence of the assured. This criterion is objective and the question which the court has to put to itself is shortly this : Was knowledge of the fact which the assured had not disclosed likely to increase the assessment of the risk in the view of any reasonable underwriter and so naturally to prevent him from consenting to the conditions which had been agreed upon, or not ? In the context of the facts of this case, the question would be this: Was knowledge of the despatch of the watches from Paris some 19-20 days previously likely to increase the assessment of the risk in the view of a reasonable underwriter - and not just Mr. Frankel - when this ordinary underwriter was prepared to issue a "lost or not lost" policy and to accept responsibility also for past losses? The answer to this obviously depends on the answer to the question, what is the period of time which such a consignment usually takes to arrive at Haifa from Paris, and whether a delay of some 20 days on the way was likely or not to arouse suspicion in the mind of an ordinary underwriter that it had been lost. The learned judge could have decided that point as he had before him evidence from both parties. But he did not consider it necessary to do so as he had held the defendants liable by reason of the criterion he had chosen, as explained above. This is, in my opinion, the only question which is still left open and on the answer to it would depend the fate of the claim. As we cannot decide this point in this court the case will have to be remitted to the District Court for a decision to be given there in the light of the evidence it had brought before it.

               

                I am of the opinion therefore that the appeal must be allowed, that the judgment of the District Court be set aside and the case remitted to it for completion, subject to the following directions.

               

                That the learned judge who heard the case should decide on the evidence which he had before him - without receiving further evidence - whether the delay of 19-20 days in the months June-July 1947, whilst these watches were on the way from Paris to Haifa, was unusual or not. Should the learned judge, after hearing the parties, hold on the evidence before him, that the defendants had succeeded in proving that this delay was unusual he should give judgment in their favour. Should he hold otherwise - he should give judgment in favour of the plaintiff.

 

ASSAF, J.: I concur.

 

LANDAU, J.: I concur.

 

Appeal allowed, judgment of the District Court set aside, and case remitted.

Judgment given on June 4, 1953.

 

Boaron v. National Labour Court

Case/docket number: 
HCJ 5492/07
Date Decided: 
Tuesday, July 21, 2009
Decision Type: 
Original
Abstract: 

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

 

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

 

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

 

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

 

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

 

Petitions denied.

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

HCJ 5492/07

HCJ 7677/07

HCJ 4820/08

 

Petitioner in 5492/07:                     Smadar Boaron

Petitioner in 7677/07:                     Noah Kariv

Petitioners in 4820/08:                                                   1. Malka Stier

                                                                                2. Shulamit Gabay Galoni

                                                                                3. Cheli Juliet

 

v.

National Labour Court

National Insurance Institute       

 

The Supreme Court sitting as the High Court of Justice

[21 July 2009]

 

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

 

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

 

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

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

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

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

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

Petitions denied.

Legislation cited:

 

Basic Law: Human Dignity and Liberty.

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

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

Income Support Law, 5741-1980.

Inheritance Law, 5725-1965.

Interpretation Law, 5741-1981, s. 2.

Names Law, 5716-1956.

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

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

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

Israeli Supreme Court cases cited:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

 

Labour Court cases cited:

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

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

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

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

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

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

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

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

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

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

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

 

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

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

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

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

 

 

JUDGMENT

Justice E. Hayut

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

The petitioners

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

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

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

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

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

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

The judgments in the regional labour courts

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

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

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

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

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

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

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

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

The judgments in the National Labour Court

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

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

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

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

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

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

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

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

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

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

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

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

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

The parties’ arguments

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

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

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

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

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

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

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

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

Deliberation

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

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

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

135. A widow who has remarried

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

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

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

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

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

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

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

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

255. Payment of a grant

. . .

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

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

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

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

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

262. A widow or widow who has remarried

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

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

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

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

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

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

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

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

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

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

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

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

I cannot accept the petitioners’ argument in this matter.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Professor Shahar Lifshitz’ comments are also pertinent here:

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

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

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

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

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

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

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

 

Justice E. E. Levy

I concur.

 

President D. Beinisch

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

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

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

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

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

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

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

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

 

 

Vice President E. Rivlin

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

 

 

Justice A. Proccacia

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

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

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

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

 

Justice H. Melcer:

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

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

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

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

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

 

Justice E. Arbel

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

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

 

Decided as per Justice E. Hayut.

 

11Tishrei 5771.

19 September 2010.

 

Hassan v. National Insurance Institute

Case/docket number: 
HCJ 10662/04
Date Decided: 
Tuesday, February 28, 2012
Decision Type: 
Original
Abstract: 

This Petition challenges the constitutionality of section 9A(b) of the Income Guarantee Act. The main claim the Petitions raise is that section 9A(b) establishes an absolute presumption whereby those who own or have access to the use of a vehicle shall be seen as having an income at the amount of the benefit, and thus their right to the benefit of income guarantee is revoked. It was argued that this presumption unconstitutionally infringes the right to minimal dignified human existence.

 

The Supreme Court sitting as a High Court of Justice granted the Petitions and declared the unconstitutionality of section 9A(b) of the Income Guarantee Act.

 

President Beinisch:

 

The central purpose of the Income Guarantee Act is to support residents of the country who find themselves in situations where they cannot provide themselves with their basic needs. The point of departure embodied in the Act is that the primary way to accomplish and ensure a dignified human existence is through work. This assumption is reflected in two complementary aspects of the Act. First, income guarantee benefits are granted only to those who cannot support themselves on their own. Second, the purpose of the benefit is to sustain a person in the intermediate time period when they have found themselves without resources, but not to prevent them to once again be integrated into the workforce. The Act aspires to ensure that the benefit is a temporary, rather than permanent, alternative to employment.

 

These principles lead to the two main tests for establishing one’s right to the benefit: the income test and the employment test. The income test sets guidelines to quantify and evaluate the income of the person requesting the benefit. Its purpose is to examine whether this person has satisfactory income in order to meet basic life needs. The employment test conditions receiving benefits upon making every possible effort to find employment that provides an income that is higher than the benefit amount. The person requesting the benefit must lack satisfactory work or be unable to work, and to the extent the person is able to work, they must be willing to accept any work that is suggested by the Employment Services and which fits their health and fitness. In addition to these two substantive tests the Act also sets residency and age requirements.

 

Based on the purposes of the Income Guarantee Act regulations were put in place to define the implications of owning or using a vehicle for purposes of the right to the benefit. From the provisions as a whole it appears that a person seeking the benefit who owns or uses a vehicle and their circumstances are not covered by one of the exception established in the Act, is denied income guarantee benefits. In other words, those who own or use a vehicle are viewed as though they have an income at the amount of the benefit, and thus their right to the benefit is revoked. The issue is whether the above arrangement infringes upon a constitutional right, and if so – whether this infringement meets the requirements of the Limitations Clause. This central issue leads to “derivative” issues. A first of those is the question of what model of judicial review should be applied to examining the constitutionality of a statute that is claimed to have violated a socioeconomic right.

 

The constitutional analysis that has been acceptable in our system since the enactment of the Basic Laws in 1992, is separated into three primary steps. In the first step the question of the infringement is examined, where the Court examines whether the relevant statute infringes upon a right or rights that are enshrined in the Basic Laws. Should the answer be in the affirmative, the constitutional analysis moves onto the next step: examining the constitutionality of the infringement. This analysis is done by applying the requirements set in the Limitations Clause. An infringement that meets the requirements of the Limitations Clause is a permissible infringement. To the extent that it is found that the infringement does not meet the requirements of the Limitations Clause, it is the turn of the third step – the step of determining a remedy. In this step the Court considers the implications of unconstitutionality. This analytical separation has become a foundation of Israeli constitutional law. As opposed to the Respondents’ argument, the mere fact that we are concerned with the right to minimal dignified human existence does not justify a different judicial model of constitutional review.

 

According to the currently common approach, there is no foundation for clearly and strictly distinguishing between socioeconomic rights and political rights on the basis of the positive or negative duties of the state or on the basis of the issue of resource allocation. The seeming differences between the rights are primarily the product of historical evolution rather than of actual differences between the rights themselves. Indeed, “act” and “fail to act”, side by side, are an integral part of protecting all human rights, whatever they nature. But to the extent that there is a certain distinction between civil or political rights to socioeconomic rights, it still does not justify diverging from the acceptable model of review. Favoring the Respondents’ position may result in applying a different constitutional model in for the purposes of two different infringements of the very same right. Such selective application cannot stand on the artificial distinction between the rights. It has no source in the language of the Basic Rights, nor in the constitutional legal tradition of our system.

 

The right to minimal dignified human existence is at the core and the heart of human dignity. A minimal dignified human existence is a condition not only for protecting and preserving human dignity, but also for enjoying other human rights. As opposed to the Respondents’ arguments, the right to minimal dignified human existence ought not be seen as deriving from the right to human dignity, but it must be seen as the right that constitutes the real expression of human dignity. Of the range of meanings that can be attached to the term “human dignity” the most profound is that which goes to the intrinsic dignity of a person, to the minimal necessary conditions for human existence and survival. The income guarantee benefit granted under the Act is but one of the mechanisms that guarantee the protection of one’s right to a dignified existence, but it still holds a central place in protecting this right. It should be clarified that the point of departure is that the State has the duty to establish what are minimal conditions of existence and that the entirety of the welfare arrangements granted in Israel must satisfy the “cart” of conditions necessary for a minimal dignified existence. In this “cart” the income guarantee benefit takes central stage, and thus, revoking it leads inherently to an infringement of the right to a dignified human existence.

 

Section 9A(b) sets a fiction. The fiction is rooted in the presumption, which cannot be rebutted, that the amount of income “produced” by the vehicle is at least equal to the amount of the benefit. Therefore, the ownership or use of the vehicle alone is sufficient to lead to the benefit being revoked. This arrangement infringes upon the right to a dignified human existence because it sets a categorical rule that anyone who owns or uses a vehicle would not be entitled to the income guarantee benefit, and this regardless of the individual issue of whether such a person actually does have an income that could guarantee their right to a minimal dignified human existence. It should be emphasized that the difficulty of the absolute presumption is not a result of the mere need to own or use a vehicle as a component of assessing one’s income, but instead a result of the fact that this component becomes the exclusive element in assessing the income. The difficulty is exacerbated by the fact that the absolute presumption established in section 9A(b) conflicts with the manner in which it is acceptable to examine the right to an income guarantee benefit in Israel – through an individual test whose purpose is to assess the extent of the need for the benefit.

 

Thus section 9A(b) infringes upon the right to a minimal dignified human existence. Does this infringement pass muster under the tests of the Limitations Clause? Indeed it seems that this section meets the requirement for a worthy purpose. Preventing abuse of the state support and welfare system and the attempt to ensure that state support is provided only to those who are most in need of it are worthy social ends. And yet, it must be found that the infringement embodied in section 9A(b) is disproportionate. Indeed, the provisions of section 9A(b) passes the test of the rational connection, although somewhat barely. Still it does not pass the test of the least restrictive alternative. It is possible to point to several reasonable alternatives that could realize the constitutional purpose at the foundation of provision in section 9A(b) while more limitedly, if at all, infringing the constitutional right to minimal dignified existence. For existence, it would have been possible to set a rebuttable presumption.

 

The case at hand is an example of the challenges in applying blanket arrangements where the right to a particular form of state assistance is revoked. Blanket arrangements, by their very nature, do not consider the individual circumstances of each and every person. Though there are situations where individual examination would not realize the purposes of the legislation. In such circumstances there is no escape but to establish a blanket arrangement. However, this is not such a case. The Legislature was aware, in the Income Guarantee Act, of the importance in establishing an individualized consideration mechanism. This path is suitable for the significance of the relevant right, and the centrality of the income guarantee benefit in protecting the right. And indeed, the mechanism to assess income as established in the Act ensures that a rigorous individual examination of each person seeking the benefit would be performed. Since this is the legislative mandate, and an individualized assessment is performed in any event in order to examine the other components of a person’s income, there is no justification for moving to a blanket arrangement as to the ownership or use of a vehicle in particular.

 

All of the above is sufficient for a finding that the infringement of the provision in section 9A(b) upon the right to a minimal dignified existence is not proportional. It should still be clarified in terms of the narrow proportionality test that it is difficult to accept that conserving state resources alone outweighs the harm caused to individuals whose right to a minimal dignified human existence is violated. Although such means make the work of welfare services more efficient – blanket arrangements tend to always be simpler to apply and administer compared to individual examinations – however this goal must not be achieved at any cost. “Efficiency” is not the ultimate goal when we are concerned with violating the most fundamental and significant human rights that the State is entrusted with guaranteeing. This is the case generally, and it is the case specifically when examining the income of a person, which is performed in any event on an individual basis.

 

Finally: section 9A(b) of the Income Guarantee Act must be declared unconstitutional and struck down. The striking down of the section will come into effect in six months.

 

Justice Naor:

 

The difficulty results from the fact that section 9A(b) creates an absolute presumption that completely revokes the benefit from owner or users of a vehicle (aside from the exceptions stipulated in the Act). This absolute presumption may violate the most important of all constitutional rights – the right to a minimal dignified existence. This violation must be resolved. The solutions to be south are those which would assess the real circumstances of those requesting the benefit, without using the fictions embodied by absolute presumption, which do not always reflect the situation as it is.

 

Justice Vogelman:

 

The right to minimal dignified human existence is at the core of the constitutional right to dignity. The arrangement established in section 9A(b) violates this right in a manner that is not proportional. And yet: this is not to say that the State’s position that owning or using a vehicle may be a reliable indication as to one’s financial circumstance should be rejected. Rather – that setting an all encompassing arrangement by creating an absolute presumption that does not empower the authority to investigate the facts as they are and that restricts a person requesting the benefit from proving that the ownership or use of the vehicle are not tantamount to an income at the amount of the benefit in the special circumstances of one’s case, disproportionately violates the right of some of those who receive the benefit to a minimal dignified human existence.

 

Justice Arbel:

 

The methodology of the constitutional analysis applied to socioeconomic rights should be not different than that which is employed to examine other constitutional rights. There is not place to pull back on exercising judicial review on legislation that implicates the right to minimal existence as distinct from other basic rights.

 

The right to a minimal dignified human existence is rooted deep in the heart of the constitutional right to dignity. The arrangement whereby anyone who owns or uses a vehicle shall not be eligible for income guarantee benefits, regardless of whether they in fact have an income that would ensure their minimal dignified existence, is arbitrary. This is a categorical threshold requirement, which results in a disproportional violation of the minimal dignified existed of the person from whom the benefit is denied.

 

Indeed, to the extent that we are concerned with realizing the right in a manner that requires a broad and extensive allocation of resources, the need for restraint on the part of the Court is acknowledged. However in cases where the Court faces a disproportional violation of the socioeconomic rights of a particular group, in a manner that undermines the minimal existence conditions of this group, it must intervene despite the restraint to which it usually holds itself. This is the case here.

 

It must be emphasized that only the regulation of socioeconomic rights in a basic law would lay the proper normative foundation that could afford fundamental constitutional protections to such rights, would make explicit their supremacy and the commitment to respect them, and the sooner; the better.

 

Justice Hayut:

 

The right to a minimal dignified human existence is a social right that is included with the most important rights. As Justice Zmir wrote in HCJ Kuntram, it is imperative that no person is hungry so that they may enjoy, effectively and not only theoretical, their human rights.

 

Justice Rubinstein:

 

Miminal existence is the essence of the Income Guarantee Act. It represents a proper social approach whereby the public provides a safety net for every person in Israel lest they fall into poverty and hunger. This approach is deeply rooted in generations of Jewish tradition, and the State of Israel – as a Jewish and democratic state – would not be able to properly realize its values in the absence of establishing such a safety net.

 

Indeed, section 9A(c) details the exceptions designed to soften the relevant absolute presumption. But still – when viewing the cases in the petitions at hand, where people at the most harsh socioeconomic circumstances and where the use of a vehicle does not at all raise them into a position of a minimal dignified existence – it clearly seem they must be entitled to the safety net and revoking their income guarantee is disproportional to the extent that warrants intervention.

 

And it should be noted, the Court does not by any means come to say that keeping a vehicle shall not be a factor in assessing entitlement. The Court’s position is to ensure a minimal dignified existence through individual assessments, and we are concerned with a situation where there may be an inherent possibility for such assessment.

 

Even when we are concerned with social and economical rights, there is no place to diminish the stage of constitutional examination as to the balances of setting the scope of the right itself. As was the position of President Barak in the past, considering the public interest must be done within the framework of the requirements of the Limitations Clause. In our case, the public interest was found to be lacking.

 

Finally, Jewish law is saturated with duties of charity, and this is also of the values of the State of Israel as a Jewish and democratic state, as noted. This gives further force to the reasoning behind this decision.

 

Justice Joubran:

 

The right to a minimal dignified existence is a paramount right and it is the cornerstone to one’s right to dignity, at times even more compared to all other rights. It is known that poverty and distress create a vicious cycle from which it is difficult to come out. This is a reality that elicits a sense of isolation and a distance and suffocates hope for a change. Without minimal conditions one cannot exercise their liberty. Without minimal living conditions they cannot conduct completely autonomous and full life and they cannot become a contributing member of their society and their community. Therefore, this reality, of poverty and distress, is often tied to other gaps that divide society and lead to the development of resentment and hostility between those who have plenty and those who have not the most basic needs.

 

 

The violation of the right to minimal dignified existence in this case, which results from the absolute presumption established by the Act, compels one to choose between holding a vehicle or using it – even if these do not necessarily indicate that one has sources of income which one has not reported – and receiving the benefit. This infringement is particularly severe in cases where the vehicle serves its owner or user for basic daily needs that are not detailed in the Act’s exceptions. There are many regions around the country where it is impossible to access the grocery store, medical services or educational institutions without a car. In this context, it should be noted, that although a vehicle is not necessarily a basic good that is included in the right to a minimal dignified existence, this right should be considered as imposing a duty upon the state to provide some form of transportation to its residents. This duty, which is the positive aspect of the right to freedom of movement, places a particularly heavy burden where the state wishes to revoke the ability to use a vehicle from residents who have no other form of transportation. Revoking the ability to use a vehicle in such areas is an extremely severe violation.

 

The section is unconstitutional because it does not meet the test of the least restrictive means. The burden to show that the legislative purpose is realized to a lesser degree were the alternative mechanism be adopted was not met by the Respondents. Having said this, even were the costs of particular assessments to increase, such increase is not expected to be very significant. This because in any event within the current mechanism the state operates a system of personal investigation in order to ensure the lack of use of a vehicle, whose costs are not insignificant. In any case, the Respondents have not even met their burden to demonstrate that the alternative means would realize the legislative purpose with significantly higher costs. Nor does the section pass the narrow proportionality test. The mechanism of income guarantee is one of the last assistance mechanisms in Israel for any person who cannot support themselves. We should exercise double and triple caution where one is denied this mechanism. The harm caused by a person fraudulently receiving a benefit to which they are not entitled is exceedingly smaller than the harm caused by leaving a person without minimal living conditions. 

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

The Supreme Court sitting as the High Court of Justice

 

 

HCJ 10662/04

HCJ 3282/05

HCJ 7804/05

 

Before:

The honorable President D. Beinisch

 

The honorable Justice M. Naor

 

The honorable Justice E. Arbel

 

The honorable Justice E. Rubinstein

 

The honorable Justice S. Joubran

 

The honorable Justice E. Hayut

 

The honorable Justice U. Fogelman

 

 

 

Petitioners in HCJ 10662/04:

1. Salah Hassan

 

2. Sawt el-Amel/The Laborer’s Voice – Defending the Rights of Workers and Unemployed

 

3. Adalah – The Legal Center for Arab Minority Rights in Israel

 

 

Petitioners in HCJ 3282/05:

1. Meirav Ben-Nun

 

2. Yael Be’er Salaman

 

3. Chen Hazan-Gilboa

 

4. Sigalit Bakar

 

5. Avigayil Avihu

 

6.  Mechuyavut -- Commitment to Peace and Social Justice

 

7. Itach – Women Lawyers for Social Justice

 

 

Petitioners in HCJ 7804/05:

Idit Edan

 

 

v.

 

Respondents in HCJ 10662/04:

1. National Insurance Institute

2. Ministry of Industry, Trade and Labor

 

 

Respondents in HCJ 3282/05:

1. National Insurance Institute

2. Minister of Social Affairs

 

 

Respondents in HCJ 7804/05:

1. National Labor Court

2. National Insurance Institute

 

 

 

 

Petitions to grant an order nisi

 

Date of hearing:

11 Heshvan 5772

(November 8, 2011)

 

On behalf of the Petitioners in HCJ 10662/04

Sawsan Zahr, attorney at law

 

 

 

On behalf of the Petitioners in HCJ 3282/05

Keren Shemesh Perlmutter, attorney at law; Netta Ziv, attorney at law

 

 

On behalf of the Petitioners in HCJ 7804/05

Eduardo Wasser, attorney at law

 

 

On behalf of the Respondents in HCJ 10662/04, HCJ 3282/05 and HCJ 7804/05

Chani Ofek, attorney at law; Orna Rosen-Amir, attorney at law; Carmit Naor, attorney at law

 

 

Judgment

 

President D. Beinisch:

 

Preface

1.          The petitions before us deal with the policy of the National Insurance Institute, under which the ownership or use of a vehicle precludes eligibility for an income support benefit. Initially, the petitions were directed against the entire gamut of arrangements that reflected that policy, as they were in effect in 2004, when the first petition was filed (HCJ 10662/04). After an order nisi was granted in the original petitions, the Income Support Law, 5741-1980 (hereinafter: the Income Support Law or the Law) was amended and the policy that was challenged in the petitions was established in section 9A of the Law. Following that development, the Petitioners requested leave to amend their petitions, challenge the constitutionality of section 9A of the Income Support Law. The main claim made in the petitions is that section 9A (b) establishes a conclusive presumption that anyone who owns or uses a vehicle is deemed to have an income the size of the benefit and, therefore, he is not eligible for an income support benefit. This presumption, by virtue of which the benefit is denied, is alleged in the petition to be an unconstitutional violation of the right to a minimum dignified subsistence.

 

The Petitioners

 

2.          The Petitioner in HCJ 10662/04 is married and the father of five children. The Petitioner has received an income support benefit since October 2001. The Petitioner submitted an application to the National Insurance Institute (hereinafter: the NII) to approve his use of a vehicle for the purpose of transporting his blind daughter without having to forfeit his income support benefit, to which he was entitled at that time. His request was refused because the Petitioner did not prove a medical need of the type that would enable him to possess a vehicle under the Law, while receiving an income support benefit. The petitioner was joined by Sawt el-Amel/The Laborer’s Voice and Adalah – The Legal Center for Arab Minority Rights in Israel (hereinafter: Adalah), which also represented the Petitioners in this petition.

 

3.          The Petitioners in HCJ 3282/05 are five single-parent women, who, due to the provisions in section 9A of the Income Support Law concerning the ownership or use of a vehicle and, prior to that, the parallel provision in the National Insurance Regulations, were denied the income support benefit. For that reason, Petitioners 1-3 were required to repay the amounts they had received as a benefit from the National Insurance, the claim for the benefit by Petitioner 4 was denied and monies were deducted from the benefit of Petitioner 5. The Petitioners were joined by Mechuyavut -- Commitment to Peace and Social Justice and Itach – Women Lawyers for Social Justice (hereinafter: Itach), which also represented the Petitioners in this petition. The Petitioner in HCJ 7804/05 was also a single-parent at the time the petition was filed, and her income support benefit was canceled when it was learned that she maintains a joint household with her ex-husband and makes frequent use of his vehicle.

4.          Each one of the women Petitioners before us has a harsh and complex life story. All are single-parents who were shouldering the burden of supporting and caring for small children at the time the petition was filed. Some of the Petitioners earned their livelihoods by working in jobs for meager pay and others had no livelihood at all and subsisted from the income support benefit and/or solely from child support payments. In their petition, the Petitioners claimed that the use of a vehicle enabled them to go to work and, for some of them, even lowered the cost of travel compared with public transportation. Petitioner 1, a single-parent of two who has a hearing handicap, required a vehicle for the purpose of caring for her children and for transporting the equipment she requires for her work. She alleges that the cancellation of the income support that she received from the NII led her to give up the vehicle in her possession and to stop working. However, when it came to light afterwards that she uses her parents' vehicle about three times a month, her income support benefit was canceled altogether, which left her and her children to live solely from child support payments and the child allowance totaling NIS 1,841 per month. At the time the petition was filed, Petitioner 2 lived in a remote town without any public transportation, and she required a vehicle to obtain basic services of food, health and education for her son, who suffers from a chronic disease. Over the years she had worked and received income support pursuant to the Income Support Law. When it came to light that she was regularly using a vehicle owned by her mother, her benefit was canceled retroactively and her debt to the NII was set at NIS 114,000. Petitioner 3 also required a vehicle due to lack of frequent public transportation to her place of residence. During the period of time in which she required the income support benefit, the business she owned failed, she divorced her husband and was caring for a-year-old baby. Her benefit was also canceled when it came to light that she was using her ex-husband's vehicle. The decision to cancel her benefit ultimately compelled her to move her place of residence to a central location where she could manage without the use of the vehicle. With regard to Petitioner 4, it was alleged that travel on public transportation required her to change four bus lines on every trip to her workplace and to take her child – who, at the relevant time, was a year old infant – along with her. The Petitioner's claim for the income support benefit was denied because of the vehicle that was placed at her disposal by her family, who financed most of the expenses. Petitioner 5 also required a vehicle to reach her workplace – various prisons in the north of the country, which are not accessible by public transportation. As long as she used her father's vehicle, and due to the father's medical disability, her income support benefit was not canceled. After her father sold his vehicle, and the Petitioner began to use the vehicle of one of her acquaintances, her income support benefit was canceled. Cancellation of the benefit compelled her to quit her job and submit a claim for a full income support benefit. That claim was approved and Petitioner 5 received an income support benefit for a period of time until she no longer needed it.

 

5.          The petitioner in HCJ 7804/05 was divorced and the mother of a little girl at the time the petition was filed. Her income support benefit was canceled after the NII came to the conclusion that she was running a joint household with her ex-husband (which, in itself, does not negate eligibility for an income support benefit, but requires examination of the eligibility of such a nuclear family) and, accordingly, the debt to the NII was said at about NIS 17,000. Afterwards, it transpired that the Petitioner also made frequent use of her ex-husband's vehicle and the Regional Labor Court ruled that even though there was not enough evidence of the existence of a joint household, the Petitioner should be denied the benefit due to the use of a vehicle. The National Labor Court agreed with the conclusions of the Regional Labor Court regarding the use of the vehicle, but added, above and beyond the necessity, that the gamut of evidence indicated the existence of a joint household (NII Appeal 300/03 Idit Idan– National Insurance Institute (unpublished, March 15, 2005)). In the petition, the Petitioner challenged the arrangement established in the law and requested that we vacate the judgment of the National Labor Court.

 

The normative basis

             Before we discuss the main claims raised by the parties in the petitions before us, we will describe the normative basis required for the matter.

 

The purposes of the Income Support Law

6.          The Income Support Law, which establishes the arrangement that is attacked in the petitions, was enacted in 1980. Its intricate provisions create the last safety net available to residents of the state who suffer privation. The main purpose of the law is to support residents of the state who find themselves in a situation in which they cannot obtain their basic needs. As established in the explanations to the Income Support Bill, "The purpose of the proposed law is to ensure every person and family in Israel, who are unable to provide themselves with the income required for subsistence, of the resources to obtain their basic needs" (Bill 1417 of September 30, 1979, 5740, at p. 2 (hereinafter the Income SupportIncome Support Bill); see also Abraham Doron and Johnny Gal “The Income Support System in Israel in a Comparative International Perspective," 58 Social Security 5, 5-6 (2000) (hereinafter: Doron and Gal); for details on all the welfare systems available to the needy population, see Ruth Ben Israel, Social Security, at 898-899 (2006) (hereinafter: Ben Israel)). That support is implemented by means of a differential benefit that is adapted to the age and family status of the applicant. Beginning in 2006, the benefit has been derived from a basic amount that is updated each year in accordance with the rate of the rise in the economy’s Consumer Price Index, which enables it to be updated and adapted according to the economic situation and the cost of living in Israel (see the definition of "the basic amount" in section 1 of the Income Support Law, and the benefit rates established in the second addendum to the Law. In the past, it was updated according to the average salary in the economy – see section 1 of the Law; Ben Israel, at p. 872).

 

7.          The basic presumption inherent in the Law is that the best way to achieve and ensure a minimum dignified subsistence is by working. This presumption reflects two complementary aspects of the Law: first, an assurance income benefit is given only to someone who is not capable of supporting himself on his own. The nature of the benefit, by definition, is residual: it is only given to a resident of the country who does not receive sufficient income from working, a pension or another source of income, and does not have sufficient resources to cover his basic subsistence (Income Support Bill at pp. 2-3). Second, the supplementary aspect of providing alternative income to an individual is to prevent a situation in which that income becomes, in itself, an incentive not to work. The purpose of the benefit is to provide the individual with subsistence during the intermediate period in which he finds himself without resources, but not to prevent him from reentering the job market. To the contrary – the state wants to encourage its residents to work, and not to remain needy and dependent on public support for a lengthy period of time. The Law therefore strives to ensure that the benefit will be a temporary – and not a permanent – alternative to working (cf.: Doron and Gal, at pp. 8, 23-24; Arieh Lieb Miller “Income Support Laws in Israel Compared with the Law in West Germany, Labor Law Yearbook A91, 92-93 (1989); Ben Israel, at pp. 843-845). It should be noted that along with the income support benefit, which is designed to help those who cannot support themselves, the Income Support Law also enables the provision of an income supplement benefit, which is designed to help individuals who have succeeded in finding jobs, but whose pay is low and is not sufficient for basic subsistence.

 

8.          The two main tests that establish a person's eligibility are derived from these principles: the income test and the employment test. The income test, which is the focal point of the petitions before us, delineates rules for quantifying and estimating the income of the benefit applicant. Its purpose is to examine whether the applicant has sufficient income to cover his basic subsistence needs, or he requires the benefit. The rules for examining different incomes, quantifying them and considering them in the decision on granting the benefit are established in Chapter D of the Law and the Income Support Regulations, 5742-1982 (Ben Israel, at pp. 872-874; National Labor Court Hearing 43/04-162 Haviv Dahan– National Insurance Institute, Labor Court Judgments 15 351 (1984)). The employment test makes eligibility for the benefit contingent upon the applicant's making every possible effort to find work that provides income, which exceeds the amount of the benefit (and, in the language of the Law, he has maximized his earning power). Therefore, the applicant must be lacking in sufficient work or be unfit for work (pursuant to a list of exemptions set forth in section 2 (a) of the Law and in the First Addendum): and if he is able to work, he must be willing to accept any work offered to him by the Employment Service that is compatible with the state of his health and physical fitness (Ben Israel, at 880; National Insurance Appeal 232/99, Idit Uri v. National Insurance Institute, Labor Court Judgments 38 157, 163-168 (2002); hearing no. 41/91-3 Ahias Meir – Employment Service, Labor Court Judgments 13 61 1981)). Therefore, the purpose of the employment test is double: it ascertains that the benefit applicant is, indeed, in need of assistance from the state and is not choosing a life of willful unemployment and, concomitantly, it refers the individual to obtaining assistance by finding work, thereby improving his chances of extracting himself from the cycle of poverty and advancing toward self-fulfillment and becoming self-supporting. The employment test therefore gives expression to the second purpose of the law, whereby state support of the individual is intended to be a temporary arrangement, by virtue of, and after which, the individual can recover and stand on his own two feet.

 

9.          In addition to these two substantive tests, the Law also specifies conditions of residency and age. The residency condition focuses on the boundaries of the social safety net for residents of the state who hold residency status for at least two consecutive years. The age condition limits the benefit to residents over 25 years of age, on the assumption that at a younger age, the person can usually support himself or he is still dependent on others – mainly members of his family – and, therefore, he should not be deemed as someone who requires support from the state. Alongside this rule, exceptions were established that also enable the benefit to be granted to someone who is below the threshold age. By their nature, those exceptions were designed to provide a response to situations in which the circumstances of the applicant’s life attest to the fact that he is incapable of supporting himself, notwithstanding his youth.

 

The ramifications of ownership or use of a vehicle for entitlement to the benefit

 

10.        Based on the purposes of the Income Support Law, the provisions of the law that were enacted establish the significance of ownership or use of a vehicle with regard to eligibility for the benefit. The main chapter dealing with the benefit and its rate is Chapter C of the Income Support Law. Section 5 (B) in Chapter C of the Law states:

Rate of

the benefit

The benefit for an eligible person who has an income shall be an amount equal to the difference between the benefit to which he would have been entitled under subsections (A) or (E) if not for the income, and the income.

 

This section reflects that the income test is conducted individually for each benefit applicant, in order to assess his eligibility for the benefit and the rate of the benefit that he will receive, if he is found to be eligible. "Income," for the purpose of calculating eligibility for the benefit and the amount of the benefit, is defined in Chapter D of the Law, in sections 9 – 12 (B). These sections enumerate a long series of data that must be taken into account when determining the income of a benefit applicant. Among these data, for example, the applicant's direct income is examined – including, e.g., other pensions paid to him, maintenance payments or payments made to someone undergoing vocational training, and "indirect" payments, such as income from property. Chapter D also enumerates income that will not be taken into account in the income test, among them, for example, the child allowance and grants to discharged soldiers. 

 

Among the provisions listed in Chapter D of the Law, the relevant provision to the matter at hand is set forth in section 9 (A) (5) as follows:

 

Income

9 (A). In this Law,

“Income” means income from sources set forth in section 2 of the Ordinance [the Income Tax Ordinance – D.B.], even if it was not generated, produced or received in Israel, including…

 

(5) Amounts that shall be deemed income from property that is a vehicle as stated in section 9A

(emphasis added – D.B.).

 

             Section 9(A)(5) therefore shows that in calculating the income of the benefit applicant, income from property that is a vehicle must also be taken into account. It should be emphasized that the Petitioners before us are not attacking the constitutionality of section 9(A)(5), i.e., the actual determination that a vehicle can be taken into consideration in determining a person's income. Their claims focus on the concrete arrangement determined in this matter in section 9A, which specifies the situations in which a vehicle will be deemed property from which monthly income is generated and the significance of this income on the rights to the benefit. The following is stated in section 9A(a) and 9A (b):

Special provisions in the matter of property that is a motor vehicle

9A. (a) In this section, "vehicle" means a motor vehicle as defined in section 1 of the Transportation Ordinance that is owned by the claimant or used by the claimant or his child who is with him, except for a motorcycle.

 

(b) In the matter of this Law, subject to the provisions of subsection (c), a vehicle is deemed property from which monthly income is generated in an amount that is no less than the amount of the benefit that would have been paid to the claimant if not for the provisions of this subsection.

(emphasis added – D.B.)

 

The insertion of the sections – section 5(b) and sections 9A (a)and 9A (b) – leads to the conclusion that anyone who owns or uses a vehicle is not eligible for an income support benefit, as his “income” from the vehicle is deemed equivalent to the amount of the benefit that would have been paid to him if he did not own or use a vehicle. The meaning, therefore, is that the benefit applicant is deemed to have an income that is above the income threshold that entitles him to the income support benefit and, therefore, as someone who does not need the assistance of the state. It should be noted that at the start of adjudication of the petitions before us, section 9A (b) did not contain the connection of use of a vehicle even though, de facto, the NII interpreted section 9A as also precluding the regular use of a vehicle. The section was amended in 2007, during adjudication of the petitions, and this interpretation was established in the Law, so that now, both ownership and use of a vehicle are deemed a presumption that precludes granting the income support benefit.

 

11.        Section 9A (c) continues and establishes a series of exceptions for which the income support benefit will not be denied to someone who owns or uses a vehicle. This section was also amended during adjudication of the petitions before us, so the range of exceptions set forth therein was expanded. Prior to the amendment, the exceptions focused on cases in which the vehicle is required by the benefit applicant for medical reasons. In 2007, two more exceptions were added to the Law (sections 9A (c) 6 and 9A (c) 7)), which enable payment of the income supplement benefit under certain conditions, even to someone who is working and using a vehicle, or to someone whose earnings ceased a short time before the time for which the benefit is claimed. Section 9A (c), which enumerates the exceptions to the rule of ownership or use of vehicle, states as follows:

9A. (c) A vehicle shall not be deemed property from which income is generated if one of the following conditions is fulfilled –

 

(1) (deleted)

 

(2) The claimant or a member of the claimant's family requires the vehicle for the purpose of medical treatment provided outside their home, pursuant to a prearranged treatment program or at least 6 times a month for a period of time exceeding 90 consecutive days, all pursuant to the rules and conditions established by the minister; in this matter, "family member" means someone whom the claimant drives to medical treatment, as stated in this section, who is the claimant's spouse, son, daughter or parent, provided that the family member as stated does not have an additional vehicle.

 

(3) The claimant, his spouse or child is disabled in his legs and receives payments from the state treasury for maintaining the vehicle and, with regard to someone who does not receive payments as stated – a qualified doctor, as defined pursuant to the provisions of section 208 of the Insurance Law, determined that he requires transportation due to his being disabled as stated, pursuant to the rules, conditions and the period of time determined by the minister.

 

(4) The child of the claimant is paid an allowance pursuant to the provisions of Part 6 of Chapter 9 in the Insurance Law.

 

(5) The vehicle registration was deposited with the authority authorized to issue that same registration, and as long as the registration is deposited, one of the following conditions is fulfilled:

 

    (a) The claimant is not capable of working at any job whatsoever due to illness, provided that the period of time in which the vehicle shall be deemed property from which no income is derived as stated in subsection (b) does not exceed six months from the date on which he submitted a claim for the benefit.

 

    (b) The vehicle is a tractor as stated in the Transportation Regulations, 5721-1961, provided that the tractor is not in use and the claimant has a farm that is not operational.

 

(6) The claimant has a monthly income from the sources set forth in section 2 (1) or (2) of the Ordinance [the Income Tax Ordinance – D.B.], in an amount that exceeds 25% of the average salary, and if he or his spouse have reached retirement age – in an amount that exceeds 17% of the average salary, the claimant does not have an additional vehicle and the vehicle meets one of the following conditions:

 

     (a) The engine volume does not exceed 1300 cc and in the month for which the benefit is paid, seven or more years have passed since its year of production.

 

     (b) The engine volume does not exceed 1600 cc and in the month for which the benefit is paid, twelve or more years have passed since its year of production.

 

(7) The claimant does not have a monthly income from the sources set forth in section 2(1) or (2) of the Ordinance [the Income Tax Ordinance – D.B.], or his income as stated is less than the amounts at the beginning of paragraph (6), provided that all the following conditions are fulfilled:

 

     (a) In the month for which the benefit is paid or the two months preceding it, the claimant was dismissed from his job; in this matter, “dismissed” includes resignation under circumstances that would entitle him to unemployment pay for the first 90 days from the date of termination of the job, pursuant to the provisions of section 166 (b) of the Insurance Law.

 

     (b) In the month for which the benefit is paid, the claimant does not have an additional vehicle, and his vehicle fulfills the provisions of paragraph 6(a) or (b).

 

     (c) In the ten months preceding the month in which the claimant was dismissed, the claimant was paid a benefit under this Law and the claimant fulfilled the conditions set forth in paragraph (6).

 

              Therefore, the meaning that emerges from all the aforementioned sections is that a benefit applicant who owns or uses a vehicle, and whose situation is not included in one of the exceptions, is not entitled to receive an income support benefit.

 

              The constitutionality of that arrangement is the issue to be decided in the petitions before us.

 

The Petitioners' arguments

 

12.         The Petitioners in HCJ 10662/04, the Petitioners in HCJ 3282/05 and the Petitioners in HCJ 7804/05 (hereinafter, for the sake of convenience, we will term all of them together: the Petitioners) submitted their arguments separately, but the petitions were heard together. Even though not all the Petitioners challenged the same aspect of the Law, there is a series of pivotal arguments that is common to all of them and we will focus on those below.

 

13.         The main argument that arose in the pleadings of the Petitioners is that section 9A (b) of the Income Support Law establishes a conclusive presumption that denies the benefit to someone who owns or uses a vehicle. According to the argument, this presumption violates the right to a minimum dignified subsistence, since it denies a person’s' right to an income support benefit even if, under the circumstances of his life, the user’s ownership of a vehicle does not attest to the fact that he possesses the means for a minimum dignified subsistence. The categorical denial, it was argued, prevents examination of whether the user’s ownership of a vehicle attests to an exceptional standard of living, and it applies whether the use or ownership entail only small expenses, or they are required for a minimum dignified subsistence. The Petitioners point out that such a need may arise due to illness, residence in a remote area with no public transportation connection, or due to a desire to go to work. It was further argued that the violation of the right to a minimum dignified subsistenceis increased in cases of denial of the benefit because the income support benefit lies at the core of the protection of human dignity. Therefore, when analyzing the violation of the right, it was argued that the lack of the benefit should not be balanced against other means that the state provides or may provide to its citizens, since other government support is not stable like the income support benefit and, in some cases, is also not established in law. The Petitioners in the three petitions did not argue that the ownership or use of vehicle is a vital component of a minimum dignified subsistence, but they did argue that the use of a vehicle can help them to lead normal lives: to appear at the employment bureaus, to search for new jobs, to access medical treatment, and to maintain social lives. The Petitioners in HCJ 10662/04 (who are represented by Adalah – The Legal Center for Arab Minority Rights in Israel), added that for the Arab recipients of the benefit, who constitute 26% of all the benefit recipients, the use of public transportation cannot serve as an alternative to the use of a vehicle, since most of the Arab villages have no regular and frequent public transportation at all.

 

14.         Another argument made in the petitions, particularly in HCJ 7804/05, is that the legislature did not address the question of what constitutes "use" of a vehicle, for which the income support benefit will be denied – even though it is now expressly established       in section 9A (a) of the Law. According to the arguments, the tests that were formulated in the rulings of the Labor Court greatly expanded the definition of the use so that, in fact, any use of a vehicle leads to denial of the benefit, even if it is not equivalent to the use made by an owner. It was further argued that the exceptions that were added to the Law in 2007 do not mitigate the violation of the right, for several reasons: first, because they are relevant to only a small number of needy people who earn at least 1,850 shekels a month (an amount equivalent to 25% of the average salary in the economy, as stated in the exceptions) and possess an old vehicle. Second, many benefit applicants utilize a vehicle that belongs to family members or acquaintances, and they cannot affect its value. Third, there are many groups that are not working at all but the use of a vehicle is still vital to running their own lives and fulfilling their parental duties. Finally, many benefit applicants, primarily women, do not hold permanent jobs and, therefore, their income varies from month to month in a manner that does not enable them to regularly rely on the existence of the exception. For all these reasons, the Petitioners argue that the exceptions added to the Law do not resolve the problem arising from the fact that a conclusive presumption has been established in the Law which denies receipt of the benefit.

 

15.         We will note that a dispute arose between the Petitioners and the Respondents on the question of the constitutional review that should be implemented in this case. According to the Respondents – whose position will be described in detail below – the mechanism of judicial review of the violation of social rights and the conditions of eligibility for social rights should be limited, and it should be separated from the judicial review of the constitutionality of civil and political rights. The Petitioners, particularly the petitioners in HCJ 3282/05, opposed the constitutional analysis model proposed by the Respondents. They argue that the proposed model – which endeavors to focus the constitutional examination on the stage of determining whether a right has been violated – does not allow for effective judicial review of laws that violate the right to a minimum dignified subsistence. Moreover, the Petitioners conceded the Respondents' detailed argument, whereby the interest protected by the Law should be defined as the interest of preventing a life of existential deprivation only in regard to those persons who find themselves in that condition because of reasons beyond their control, but they argue that that last  component of duress should not be added to the definition of the right itself. In their opinion, the requirement of duress must be examined as part of the examination of the purpose of the legislation and the proportionality of the violation, while an examination of the circumstances under which a person finds himself in a state of existential deprivation and an examination of the existence of the conditions justifying his extraction from that deprivation, must be made, only after it has been proven that the person is suffering from existential deprivation and that his right not to live in such a manner has been violated. The Petitioners further argued that since the examination of whether the benefit applicant suffers from existential deprivation because of reasons beyond his control is founded on a factual system that is based on various eligibility tests, which include, inter alia, an examination of the family's situation, the requirement to maximize earning power and to conduct a detailed test of income – there is also a practical logic in conducting it at this stage of examining compliance with the tests in the limitations clause, and not at the stage of determining violation of the right. To this the Petitioners added that the position whereby a condition of duress must be read into the definition of the right to a minimum dignified subsistencereflects the outlook whereby people choose a life of poverty and that the individual has a scope of autonomy in choosing his economic status. Such a position, it was argued, ignores the fact that people's economic situation is also derived from the social status into which they were born and to their ethnic, religious and sectoral affiliation. It was argued that emphasizing the individual's scope of choice in circumstances where his ability to choose is limited undermines the state’s obligation to adopt arrangements that narrow the social gaps.

 

16.         With regard to the conditions of the limitations clause, the Petitioners focus their arguments on the conditions of proportionality. With regard to the first subtest, it was argued that there is no rational connection between the use or ownership of a vehicle and the purpose of the law, since no income – even conceptual – could be generated from the use they made of the vehicle. The Petitioners pointed out the fact that from a factual standpoint, the family support that was given to the benefit applicant by placing a vehicle at her disposal several times a week cannot, for the most part, be converted into a monetary payment, and that such assistance is equivalent to the assistance provided by the family in minding and caring for the children – assistance that is given by means of existing personal and family capital. It was further argued that the fact that a conclusive presumption from which there could be no deviations had been established for a basic matter such as a subsistence benefit, is contrary to the natural rules of justice and, hence, is not proportional.

 

17.         The Petitioners further argued that the second subtest, the test of the means with the lesser violation, does not exist in this matter either. The main argument that was made in this matter is that with a conclusive presumption that cannot be refuted and from which there can be no deviations, the legislature should have chosen a means that allows for the assessment of the economic value of the use of a vehicle and deduction of that value from the amount of the monthly benefit. The Petitioner in HCJ 7804/05 emphasized that a person who works and receives a vehicle from his employer is entitled to deduct the value of the benefit generated by the vehicle pursuant to the rate for deducting the benefit in accordance with the income tax regulations, while someone who uses a vehicle that he did not receive from his employer, even if such use is required for his work, is denied that benefit completely. The Petitioners further argued that the law does not comply with the third test of proportionality either. They  argue that the Respondents' insistence on quantifying the family assistance given to the benefit applicants constitutes a negative incentive for family members to help one another, and attests to the state's shirking its responsibilities vis-à-vis the individuals. Additionally, the savings and efficiency attained by the sweeping denial of the benefit do not match the damage caused by denial of the benefit from those who need it for a minimum dignified subsistence.

 

18.         It should be noted that the Petitioners in HCJ 10662/04 chose to focus their petition on the claim of discrimination, whereby Amendment 28 to the Income Support Law, in which two exceptions that are set forth in sections 9A(c)6 and 9A(c)7 of the Law were added, discriminate between recipients of the Income support benefit and the income supplement benefit. This is because these sections enable recipients of the income supplement benefit, under the conditions set forth therein, to possess a vehicle without losing their benefit, and do not allow for a similar arrangement for recipients of the income support benefit. The Petitioners argue that this arrangement discriminates in an arbitrary and comprehensive manner between recipients of the income support benefit and recipients of the income supplement benefit, and violates the constitutional right to a minimum dignified subsistence, and the right to property by recipients of the income support benefit. This discrimination, it was argued, is not for a proper purpose. The Petitioners are not protesting the concrete arrangements set forth in these sections but, rather, are asking to apply it, mutatis mutandis, to the group of income support recipients as well.

 

The Respondents’ arguments

 

19.         The Respondents focused their responses and the affidavit in response on the question of whether section 9A (b) of the Law does, indeed, violate the right to a minimum dignified subsistence. According to the Respondents, section 9A (b) embodies the "pure" socioeconomic policy of the legislature. This policy, it was argued, is not given to judicial review because it establishes a series of social rights that have not reached the status of basic rights. Only a narrow and very limited part of this policy is covered by the constitutional right to dignity in the sense of the right to not live a life of existential deprivation caused by duress and, according to the Respondents, the current case does not fall within the boundaries of the right at all.

 

20.         The Respondents argue that a distinction should be made between the constitutional analysis in a claim of violation of a civil right and the constitutional analysis in a claim of violation of a socioeconomic right, in two main ways. First, the scope of the constitutional right should be limited and the interest protected by law should be narrowly defined as the interest of preventing a life of existential deprivation caused by duress. Second, the Respondents believe that the constitutional examination should be focused on the first stage and the question of whether the protected right has been violated at all should be examined. They argue that the importance of focusing on the stage of the violation is designed to delineate the boundaries of the right to a minimum dignified subsistence, and to ascertain that the judicial review is applied only to the core of the right, and not to its marginal parts, to which an economic policy can be applied that is not subject to constitutional judicial review. Accordingly, it was argued, the Court must examine only the existence of the rational connection between the conditions of the eligibility (i.e., the ownership or use of a vehicle) and the interest protected by the Law. This test is a test of relevancy – i.e., it is sufficient that there is some connection of relevancy (absence of arbitrariness) between the protected interest and the means for constitutional review so that the Law will stand the test of constitutionality. According to the Respondents, focusing on the first stage of the constitutional examination (i.e., at the stage of the violation) "does not render the constitutional analysis superfluous but, rather, moves the substantive tests that are implemented in the second stage, to the first stage of determining the existence of the violation" (affidavit in response on behalf of the Respondents, dated November 12, 2009, at p. 8).

 

21. As to the essence of the Petitioners' arguments, the Respondents argue that the rationale underlying denial of the benefit from someone who owns or uses a vehicle is the high cost and the significant expenses entailed in maintaining a vehicle. According to the Respondents, calculations of the monthly cost of maintaining a vehicle, based on the statistical models, indicate that the monthly expense is very close to the amount of the average benefit and, therefore, justifies denying eligibility for the benefit. This rationale encompasses the presumption, pointed out by the Respondents, that it is highly possible that the vehicle’s maintenance expenses are funded from the benefit recipient’s independent income, which he did not report to the National Insurance Institute at the time his eligibility for the benefit was examined. Hence, it was argued, since the income test is the main test for examining eligibility for the benefit, denying the benefit is justified where there is a basis for assuming that the benefit applicant has unreported sources of income. According to the Respondents, this rationale is also valid in cases in which the vehicle is not owned by the benefit applicant and another person pays for the ongoing expenses of maintaining the vehicle. In such a situation, they argue, the benefit applicant should be deemed to have been given the amount of the vehicle's value and the amount of the value of the vehicle's use by the vehicle's owner. The Respondents emphasize that in many cases, the vehicle is made available by family members, who are obligated under Israeli law to care for members of their family. Therefore, it was argued, we should not encourage a reality in which the public treasury finances the existential needs of a person, thereby enabling others to finance needs that are not of an existential nature.

 

22.         From the standpoint of the right to dignity, which is the main right under examination, according to the Respondents, the interpretive model for extending the scope of the right to dignity is the model of existential deprivation caused by duress. According to that model, the constitutional obligation of the state arises only where a danger is created that a person will be forced, because of reasons beyond his control, to live in existential deprivation. When an individual can be required to make a proper change from a normative standpoint, a range of choices opens up before him, which negates the assumption that he is forced to live in a state of existential deprivation. This interpretive model ascribes a limited and narrow meaning to the right to not be forced to live in existential deprivation, which relies, according to the argument, on the fact that that right is derived from the right to human dignity.

 

The questions that must be decided

 

23.         The petitions before us raise the constitutional question of the arrangement established in section 9A(B) of the Law. The main question to be decided by us is whether this arrangement – which means a universal denial of the right to the income support benefit for anyone who owns or uses a vehicle (and whose case does not fall within the realm of one of the exceptions set forth in the Law) – violates a constitutional right. If we find ourselves responding to this question in the affirmative, we must further examine whether that violation fulfills the requirements of the limitations clause and, therefore, constitutes a permitted violation. This pivotal question raises a series of "derivative" questions, which are also required for the decision. These encompass the question of the scope of the violated right, which is the right to a minimum dignified subsistence(or, by its other names: the right to minimal subsistence conditions or the right not to live in existential deprivation), and the question of the connection between it and the right to dignity. In the wake of the position presented by the Respondents, the question also arises as to what judicial review model should be applied in examining the constitutionality of a law that is alleged to violate social rights, and if, as argued by the Respondents, a different constitutional model should be adopted with regard to the violation of social rights. These are the questions that we will deal with first.

 

The stages of judicial review

 

24.        Since the enactment of the new Basic Laws in 1992, the generally accepted constitutional examination in our legal system is divided into three main stages (see, among many others: HCJ 6821/93, United Mizrahi Bank Ltd. v. Migdal Cooperative Village, IsrSC 49 (4) 221 (1995) (hereinafter: the Mizrahi Bank Case); HCJ 1715/97, Israel Investment Managers Association v. Minister of Finance, IsrSC 51 (4) 367 (1997); HCJ 6055/95, Tzemah v. Minister of Defense, IsrSC 53 (5) 241 (1999); HCJ 4769/95, Menahem v. Minister of Transport, IsrSC 57 (1) 235 (2002) (hereinafter: the Menahem Case); HCJ 1661/05, Gaza Coast Regional Council v. Knesset, IsrSC 59 (2) 481 (2005) (hereinafter: the Gaza Coast Case); HCJ 6427/02, Movement for Quality Government in Israel v. Knesset, IsrSC 61 (1) 619 (2006) (hereinafter: the Movement for Quality Government Case). In the initial stage, the question of violation is examined, during which the Court examines whether the relevant law violates a right or rights that are established in the Basic Laws. If the answer to this is negative, the constitutional examination comes to an end (see, e.g., the analysis of the question of violation of the right to dignity in HCJ 366/03, Commitment to Peace and Social Justice Society v. Minister of Finance, IsrSC 60 (3) 464 (2005) (hereinafter: the Commitment Society Case). If the answer is affirmative, meaning that the existence of a violation has been proved, the constitutional analysis proceeds to the second stage: examining the constitutionality of the violation.

 

             A constitutional examination of the violation of the basic right is conducted by applying the requirements established in the limitations clause in Basic Law: Human Dignity and Liberty and Basic Law: Freedom of Occupation. A violation that fulfills the requirements of the limitations clause is a permitted violation of basic rights. Such a permitted violation reflects the concept that basic rights are not absolute and, under certain conditions, may be violated (see, e.g., the Mizrahi Bank Case, at 433; Gaza Coast Case, at 545). A constitutional violation of the basic right concludes the stages of constitutional review and the law is declared to be constitutional. If it is found that a law violates a basic right in a way that does not fulfill the requirements of the limitations clause, the third stage commences, which is the stage of determining the remedy. In this stage, the Court determines the result of the unconstitutional law (see, e.g., HCJ 7505/98, Corinaldi v. Israel Bar Association, IsrSC 53 (1) 153, 162-163 (1999); Criminal Appeal 586/94, Azor Sports Center Ltd. v. State of Israel, IsrSC 55 (2) 112, 133-134 (2001)).

 

             As noted by President A. Barak in the Movement for Quality Government Case: “This division into three stages is important. It is of assistance in the legal analysis. It is intended ‘to clarify the analysis and focus the thinking’... It clarifies the basic distinction, which runs like a golden thread throughout human rights law, between the scope of the right and the degree of protection afforded to it and its de facto realization” (id., 670). This division into stages laid the foundations for a uniform judicial review of violation of all of the rights encompassed by the Basic Laws which, as a result, achieved a constitutional, supra-legal status. This division circumscribed the boundaries of constitutional discourse, as part of the limitations imposed by the establishing authority on the legislative authority’s use of its power to violate rights set forth in the Basic Laws. This division also created the analytical basis for a distinction between the conceptual scope of constitutional rights and the scope of the protection given to them by the limitations clause. In fact, given the many years that have elapsed and the large number of judgments dealing with constitutional analysis, it can be stated that this division has become a basic axiom of constitutional law in Israel.

 

25.        Nonetheless, the Respondents have devoted most of their energies to establishing the argument for adopting a different method of constitutional analysis for examining the petitions before us – a method of analysis that is affected by the fact that the right scrutinized by the constitutional examination is the right to a minimum dignified subsistence. Their main argument is that the judicial review of legislation alleged to violate that right should be limited, compared with the judicial review exercised for other rights, so that the examination would focus solely on the first stage – the examination of violation of the right. At the same time, the Respondents argue that considerations taken from the second stage of constitutional review should be “imported” into the first stage of the examination. In other words, the Respondents think it appropriate to make use of some of the tests in the limitations clause, even at the stage of examining the violation of the right.

 

             Several reasons for this argument were cited. First, the Respondents argue that the restricted format in which the right to exist with dignity has been recognized in our legal system – a minimum dignified subsistence – requires the application of stricter criteria than usual in examining the violation of a right, and that the Court should reduce the transition to the second stage of the constitutional examination. Second, the Respondents argue that the methodology used for the constitutional analysis of socioeconomic rights should be different from that used by the Court to examine other basic rights, because legislation that deals with allocating resources for socioeconomic issues does not usually involve constitutional aspects, while, on the other hand, it reflects determinations that concern pure policy. As such, the Court, as a general rule, should reduce the exercise of judicial review in legislation that affects the right to minimal conditions of existence, in contrast to other basic rights. Both of these reasons should be rejected.

 

The distinction between civil and political rights and socioeconomic rights

 

26.        First we will examine the Respondents' argument that a different constitutional model should be applied when we examine a social, or economic right, in contrast to a civil or political right. This argument requires us to address the nature of the rights and the historical background that led to the current development with regard to the status of the social rights.

 

             It is customary to classify the historical development of human rights into two "generations" of rights. The first generation encompasses human rights that are called "civil-political" and the second generation encompasses human rights that are called  "socioeconomic." At the heart of the first generation rights, which developed at the time of popular uprisings for democratization at the end of the 18th century, was the desire to limit the power of government. Accordingly, these rights are characterized by the fact that the obligation of the government facing them is “negative” in nature and proclaims that the government must not impair the life of the individual, interfere in his actions, or restrict his liberty. In the second generation, the social concept developed, whereby rights that impose “positive” obligations on the government to care for the individual, to protect him against violations of his rights by others and to promote his welfare must also be recognized (Yuval Shany, "Economic, Social, and Cultural Rights in International Law," Economic, Social, and Cultural Rights in Israel, 297, 302-304 (edited by Yoram Rabin and Yuval Shany, 2004) (hereinafter the book will be termed: Economic, Social, and Cultural Rights in Israel and the article will be termed: Shany); Guy Mundlak, "Socioeconomic Rights in the New Constitutional Discourse: From Social Right to the Social Dimension of Human Rights" (Yearbook of Labor Law 7, 65, 93 (1999) (hereinafter: Mundlak), Theodor Meron, On a Hierarchy of Human Rights, 80 AJIL 1 (1986). A kind of "intergenerational struggle" developed between the two generations of rights, over the priority to be given to each one of the generations in national and international law. In international law, this issue found expression in the splitting of the international human rights covenant into two separate covenants: the International Covenant on Civil and Political Rights, 1966 and the International Covenant on Economic, Social and Cultural Rights, 1966 (hereinafter: the Covenant on Social Rights). The two covenants were ratified by Israel in 1991.

 

27.        Behind the concept that there is competition between social rights and political rights, is the supposition that the two types of rights are inherently different from one another and are exercised at the expense of one another. One of the arguments akin to the arguments made by the Respondents in the petitions before us is that while social rights impose an "affirmative" obligation on the state, the political and civil rights impose a "prohibitive" obligation. The former, so the argument goes, must be limited in their implementation because they require the allocation of state resources, which ultimately come from the pockets and property of the state's citizens. In practice, a natural limitation applies to the exercise of those rights because they are always dependent upon the resources available to the government and their implementation is connected to allocation of the state's resources (see, e.g., HCJ 3071/05 Gila Louzon v. Government of Israel (not yet published, July 28, 2008) (hereinafter: the Louzon Case); and Ruth Gabizon “On Relations Between Civil-Political Rights and Socioeconomic Rights" in: Economic, Social, and Cultural Rights in Israel 23, 42 (hereinafter: Gabizon); Shany at p. 304)).

 

28.        Even though that is the traditional approach, it is not the only approach. Over the years, critical voices have been increasingly heard to the effect that the dichotomous classification of social rights as "positive" and political rights as "negative" is far from reflecting the practice of exercising human rights and that every human right actually has positive and negative aspects alike (C. Taylor, What’s Wrong with Negative Liberty? 2  Philosophy and the Human Sciences: Philosophical Papers 211, 215, 221, 228-229 (1985); S. Holmes and C.R. Sunstein, The Cost of Rights: Why Liberty Depends on Taxes, 35, 39, 44-48 (1999)). Thus, "defending civil-political rights may entail the imposition of positive obligations and public expenses no less than those required to protect socioeconomic rights, and handling socioeconomic interests may only require refraining from interfering." (Gabizon at p. 42-44; see also Aharon Barak, Preface, in Economic, Social, and Cultural Rights in Israel 5, 7). Take, for example, the right to life, which heads the list of civil and political rights in the Covenant on Political Rights. In order to preserve human life, the state is required "to implement actions” at the broadest scope: for that purpose military forces are established to protect the lives of the citizens from outside threats; for that purpose, police forces are established to protect the lives of the citizens from crime and the undermining of the social fabric; for that purpose the state is required to restrain its power and act with caution – and the means of caution cost a great deal of money in themselves. Similarly, the right of a person not to be discriminated against and not to be treated with prejudice also requires the allocation of considerable resources at times. Sometimes the right to equality is only of a negative nature but many times it imposes a positive obligation on the state to rectify discriminatory wrongs in the society and make facilities, services and public functions fully accessible to all members of the population (HCJ 4541/94 Miller v. Minister of Defense, IsrSC 49 (4) 94 (1995); HCJ 7081/93 Botzer v. Maccabim-Reut Local Council, IsrSC 50 (1) 19 (1996)). This is also the case with regard to other classic civil-political rights, such as the right of expression. For the purpose of exercising the right, the state is required to protect anyone who says things that are not to the public's liking and maybe attacked or threatened because of his words. Therefore, the police are required, as a matter of course, to allocate public resources for the purpose of safeguarding protests and marches and for the purpose of protecting the freedom of expression of public personages and political figures. This is also the case when the state itself has not prohibited expressing opinions, nor has it intervened or interfered with their expression (see in this context: HCJ 153/83 Levi v. Southern District Police Commander, IsrSC 38 (2) 393 (1984); HCJ 2557/05 Majority Camp v. Israel police (not yet published, December 12, 2006)). The most prominent example of the political right that requires the state to allocate resources might be the right to vote and to be elected, in which enormous resources are invested, from the actual holding of elections every few years to the resources required to ensure the accessibility for every person to exercise his right to vote (see, e.g., Gabizon, at p. 42). Therefore, these examples attest to the fact that even when the state itself is willing to fulfill its part and to refrain from action, it may still be obligated to take action to protect the exercise of civil and political rights. With that in mind and according to the accepted outlook today, there is no basis for distinguishing clearly and unequivocally between social rights and political rights based on the positive or negative obligations of the state or based on the question of allocating resources. The ostensible gaps between the rights are mainly the result of historical evolution and not of real differences between the rights themselves. Indeed, "affirmative" and "prohibitive" alongside one another are integral parts of the protection of human rights, whatever their nature may be.

 

29.        Moreover, insofar as there is a certain distinction between civil-political rights and social rights – if only in the scope of the positive obligations that is generally imposed on the state in each one of the groups of rights – the question still remains as to whether that justifies deviating from the constitutional review model that was established among us more than two decades ago? In my opinion, the answer to that is negative. There are several reasons for that conclusion.

 

             First, we must remember that precisely in the context of the right to dignity that lies at the heart of the petitions before us, the constitutional obligation imposed on the legislature is an expressly positive obligation, in accordance with section 4 of Basic Law: Human Dignity and Liberty, which establishes that "All persons are entitled to protection of their life, body and dignity" (for the two aspects of the right to human dignity, see the Commitment Society Case at p. 749 and also below). Against the obligation is the right, and alongside it is the judicial remedy, and those are not subject, in the Basic Law, to a constitutional examination that differs from the one given to the other rights established therein. Therefore, the distinction that the Respondents wish to make has no basis in the internal structure of the Basic Law.

 

             Second, it seems that the Respondents' arguments rely in principle on the claim that exercising the right to a minimum dignified subsistencerequires the allocation of resources that may "overflow" into areas which, in essence, are a policy decision that is not given to judicial review. But this reason also does not justify the application of a different model of judicial review of social rights. It is a well-known rule that the Court will not intervene in questions of pure policy, but it would be proper to examine the constitutionality of various actions, even if they have, or might have, budgetary ramifications. No one disputes the fact that the exercise of many rights entails budgets available to the state and the manner of their allocation. This is certainly the case with regard to the exercise of social rights (See the Louzon Case, paras 10-11 of my judgment). In effect, even the Covenant on Social Rights establishes that the state is not exempt from implementing the measures that are essential for exercising those rights, but it recognizes the fact that the state's ability to promote those rights depends on the resources at its disposal (see section 2 (1) and section 11 of the Covenant on Social Rights). Indeed, the positive protection of human rights – civil, political or social – tends, as a rule, to require ongoing sources of funding which may, by nature, be limited by, and dependent on, the financial situation of the state and the scope of the resources at its disposal (see: Barak Medina, The State's Duties to Provide Basic Needs: From a “Discourse of Rights” to a “Public Finance Theory” in Economic, Social and Cultural Rights in Israel 131; see also section 2 (1) of Covenant on Social Rights). But in a legal system in which the relativism of human rights is preserved, as in our system, the place for arguments about budgetary constraints and conflicting interests is generally in the second stage of the constitutional examination, which examines the purpose of the violation of the right and its proportionality. That stage provides a broad platform for justifying a violation of the right for reasons of lack of budgetary resources, and those considerations should not be transferred to the first stage of examining the essence of violation of the right.

 

             Third, accepting the Respondents' position may lead to the application of a different constitutional model with regard to two violations of exactly the same right. The right to human dignity is a prominent example of that because of the many facets of that right. "The right to human dignity," noted President A. Barak “… constitutes a collection of rights that need to be protected in order that dignity may exist…These rights are likely to be included within the framework of  “civil” (or “political”) rights, and even within the framework of “social” (or “economic”) rights (the Commitment Society Caseat p. 481). Indeed, the right to dignity encompasses a variety of rights. Some of them are derived from it and some of them express the basic meaning of the term "human dignity." In our legal system, the right to equality, under certain conditions, has been declared an integral part of the right to human dignity, as has the right to family life (see: the Movement for Quality Government Case; HCJ 7052/03 Adalah – Legal Center for Arab Minority Rights in Israel v. Minister of Interior, IsrSC 61 (2) 202 (2006); hereinafter: the Adalah Case). Alongside those rights, the right to a minimum dignified subsistencehas been recognized. Can some legal basis be found for the argument that a violation of one aspect of human dignity will lead to the application of one model of judicial review, and a violation of another aspect of human dignity will lead to another model of judicial review? Clearly, the answer to that is negative. Such selective application is inconsistent and has no part in the prima facie distinction between the rights, in the language of the basic laws, or in the tradition of constitutional law in our legal system.

 

30.        I also cannot accept the additional argument made by the Respondents that the narrow scope of the right to a minimum dignified subsistencejustifies narrowing the constitutional analysis to the first stage – the stage of the violation. First, the "safety belt" that is required, according to the Respondents, to prevent a situation in which the constitutional protection will be broadened and will be "stretched" to cover rights that are not established in the Basic Laws, exists in the narrow definition of the right. There is no theoretical reason to apply different and stricter rules of analysis to the right, which, in any case, is narrowly defined. Second, this argument – insofar as it is designed to indicate the difficulty of lifting the burden of the violation of a right that is narrowly defined – states the obvious. In any case, when a court exercises judicial review on legislation, at the first stage the burden of proving the fact that the law violates the right rests with the petitioners (see, e.g., the Commitment Society Case, at p. 484, 491-492; the Movement for Quality Government Case, at p. 671-672) and there should be no transition to the second stage of examination if no violation of the right has been found. Moreover, adopting the Respondents' approach means passing the burden of proof to the Petitioners almost completely. If we accept their approach, the Petitioners would have to prove both the violation of the right and the relevancy of the means that were chosen in the legislation. However, the burden of proving the relevancy or, in other words, the rational connection test, is generally that of the Respondents as part of the customary division of the burden in constitutional law. Changing the rules of the constitutional examination in the case before us means releasing the Respondents from the need to prove the constitutionality of the means that were chosen by them.

 

31.        The argument made between the lines by the Respondents, to the effect that the ambiguity of the social rights makes it difficult to pinpoint their violation and, therefore, justifies the application of stricter tests in the first stage of the constitutional review, should also be rejected. Like the arguments pertaining to the distinction between "positive" and "negative" aspects or between "affirmative" and "prohibitive" obligations, the arguments about ambiguity that are ascribed precisely to social rights should also be rejected. Ambiguity is not a problem reserved only for social rights (and it is doubtful whether the argument in itself is accurate: for developments in the concretization of the social rights in international law, see Shany, at p. 321-325). This court has struggled more than once with the issue of the scope and boundaries of political and civil human rights. Does freedom of expression also spread its protection over pornographic expression? Does affirmative action constitute a violation of equality or does it express a relevant distinction? What are the boundaries of the right to privacy in the workplace (see, e.g., HCJ 5432/03 SHIN, Israeli Movement for Equal Representation of Women, and 11 others v. Council for Cable TV and Satellite Broadcasting, IsrSC 58 (3) 65, 79, 82 (2004); HCJ 454/94 Israel Women's Lobby v. Government of Israel, IsrSC 58 (5) 501 (1994); Labor Court Appeal 90/08 Inbar – State of Israel – Supervisor of the Employment of Women Law (not yet published, February 8, 2011)). These are but a few examples of the inherent difficulty of examining the scope of rights of all kinds. The theoretical difficulty is basically interpretive. It does not pertain to the distinction between civil rights and social rights but, rather to the distinction between the essence of the right and its marginal aspects. The more the violation pertains to issues at the core of the right, the easier it is to discern the violation and the protection of the right will be expanded, and vice versa when we are dealing with the marginal aspects of the right. Pinpointing the "geometric location" of the violation of the right is in the purview of the court as an interpretive action, whether the matter involves civil rights or social rights.

 

             Indeed, decisions on the scope and boundaries of social human rights are sometimes complex and since they are new rights in our legal system they have not yet been given sufficient legal interpretation in this Court. Even the academic and legal discourse on social rights developed at a slower pace and there are many reasons for that, but this is not the place to discuss them. The ambiguity will, therefore, be removed as the Court addresses the interpretation of the social rights. Indeed, in the words of Prof. Guy Mundlak, “The problem is one of cause and effect. The more social rights are pushed outside the walls of judicial forums due to their inferiority and due to the problem of ambiguity, the more the ambiguity of their meaning will increase. The best way to clarify the ambiguity is by a judicial confrontation with the meaning embedded in those rights. This is not an unknown type of judicial task. It is hard to imagine private law in Israel without ambiguous terms that have been clarified comprehensively in case law, such as reasonableness, good faith and negligence” (Mundlak, at p. 99).

 

             Therefore, the very fact that we are dealing with the right to dignity, which encompasses the right to a minimum dignified subsistence, does not justify applying a different judicial model for constitutional review. We will therefore turn to analysis of the alleged violation of the right to a minimum dignified subsistence, in an orderly manner.

 

Violation of the right

32.        In the first stage of the constitutional examination that is customary in our legal system, as stated, we must examine whether section 9A(b) of the Income Support Law violates the right to dignity and, in its framework, the right to a minimum dignified subsistence. The answer to that question requires us to interpret and determine the scope of the constitutional right to dignity in the context adjudicated by us and the provision that allegedly violates that right. We will begin, therefore, with the interpretation of the right to dignity; we will move on to interpretation of the provisions of section 9A(b); and, finally, we will examine the relationship between the right to dignity and the Income Support Law, and its ramifications for analysis of the violation of the right.

 

On human dignity and the right to a minimum dignified subsistence

33.        The right to human dignity is established in Basic Law: Human Dignity and Liberty (hereinafter: the Basic Law). The Basic Law establishes, as stated, both the prohibition on violating the right to dignity and the obligation to protect it:

Purpose

1.A

The purpose of this Basic Law is to protect human dignity and liberty, in order to establish in a Basic Law the values of the State of Israel as a Jewish and democratic state.

Preservation of life, body and dignity

2.

There shall be no violation of the life, body or dignity of any person as such.

 

 

Protection of life, body and dignity

4.

All persons are entitled to protection of their life, body and dignity.

 

 

Application

11.

All governmental authorities are bound to respect the rights under this Basic Law.

 

             A person’s right to dignity under the Law is a right with two facets: a negative facet, which proclaims that violation of the right must be prevented, and a positive facet, which imposes an obligation on the government authorities to protect the right. In the words of President A. Barak, "The two aspects, the negative (passive) aspect and the positive (active) aspect are different parts of the whole, which is the constitutional right to dignity. They both derive from the interpretation of the right to dignity, as enshrined in the Basic Law. Neither aspect takes precedence over the other” (the Commitment Society Case, at p.749).

 

34.        A series of judgments has already established that human dignity, in the constitutional sense, also encompasses and includes the right to a minimum dignified subsistence. This Court held that human dignity includes the right to a minimum dignified subsistence, both in cases that raised the negative aspects of the right and in cases that raised the positive aspects of the right (cf.: HCJ 161/94 Atari v. State of Israel (unpublished, March 1, 1994); Leave for CA 4905/98 Yosef Gamzu v. Na’ama Yishayahu IsrSC 55 (3) 360, 375-376 (2001); Leave for CA 5368/01 Pinchas Yehuda v. Attorney Yosef Teshuva, Receiver, IsrSC 58 (1) 214 (2003); HCJ 4128/02 Adam, Teva Va-Din – Israel Union for Environmental Defense v. Prime Minister of Israel, et al., IsrSC 58 (3) 503, 518 (2004); HCJ 5578/02 Rachel  Manor et al. v. Minister of Finance et al., IsrSC 59 (1) 729, 736 (2004) (hereinafter: the Manor Case) Administrative Petition Appeal 3829/04 Yisrael Twito, Chairman, Mikol Halev Association v. Jerusalem Municipality, IsrSC 59 (4) 769, 779 (2004); HCJ 1384/04 BetZedek Association – American-Israeli Center for Promoting Justice in Israel. Minister of Interior (unpublished, March 14, 2005); HCJ 4634/04 Physicians for Human Rights v. Minister of Internal Security, paragraph 12 of the decision of Justice A. Procaccia (not yet published, February 12, 2007); the Commitment Society Case, at p. 482-484). Indeed, the extension of human dignity to the right to a minimum dignified subsistenceis now understood and this position has already been established in our case law (see: A. Barak, Legal Interpretation – Constitutional Interpretation, 423 (1994) (hereinafter: Barak, Constitutional Interpretation): "Human dignity assumes a minimum of human subsistence… This concept is shared by all models with regard to human dignity").

 

35.        The right to a minimum dignified subsistenceis at the heart and core of human dignity. A life of starvation and homelessness and a constant search for help are not a life of dignity. A minimum dignified subsistenceis a condition not only for preserving and protecting human dignity, but also for exercising other human rights. There is nothing poetic about living in poverty and deprivation. Without minimal material conditions, a person cannot create, aspire, make his own choices and exercise his liberties. In the fine words of Justice Y. Zamir, “Human rights must not be just for those who have enough. Every person must have enough, so that he or she can enjoy human rights, in actuality and not just by law." (HCJ 164/97 Conterm Ltd. v. Ministry of Finance, Customs and VAT Division, et al., IsrSC 52 (1) 289, 340 (1998); and see also Gabizon at p. 45: "A person who struggles to attain minimal subsistence conditions does not have the real freedom to strive to achieve any goals").

 

36.        In their arguments, the Respondents claimed that the right to a minimum dignified subsistenceis a right derived from the right to human dignity and, as such, it does not enjoy the scope of protection given to the right to human dignity as a right that is expressly enumerated in the Basic Law. I believe that the right to a minimum dignified subsistenceshould not be deemed a right that is derived from the right to human dignity but, rather, should be viewed as a right that constitutes a genuine expression of human dignity. The right to a minimum dignified subsistenceis not, as argued by the Respondents, a right that expands the content and scope of the constitutional right to dignity but, rather, it is rooted very deeply in the core of the constitutional right to dignity (see the analogy used by Judith Karp: "The value ‘human dignity’ can be viewed as being surrounded by circles of content. As though the legislature had cast the ‘human dignity’ stone into the smooth waters of the lake of the Basic Law, and when it touched the water it created ever-widening circles that strike one another on their margins and are filled by one another, and each circle is the result of another, and they flow into one another and move away from their source until they fade away.” Judith Karp, "Questions on Human Dignity According to the Basic Law: Human Dignity and Liberty,” Mishpatim 25 129, 136 (1995); see also Hillel Sommer, The Non-Enumerated Rights: on the Scope of the Constitutional Revolution, Mishpatim25 257, 329-330 (5757)). Can the right to dignity exist without respecting a person's right to minimal conditions of human subsistence? Doesn’t a person’s right to not live in hunger, without a home and without the ability to cover himself with clothing express his human dignity? Indeed, among the many meanings that can be given to the concept "human dignity," particularly when emphasis is placed on the word "human," the most fundamental of them is the one pertaining to the unique dignity of man, to the most essential conditions of his survival. If we have defined the fundamentals of the right to dignity metaphorically, as reliant on the fact that man was created in God’s image, it appears that that image is harmed, first and foremost, if he is reduced to abject, humiliating poverty.

 

What is the connection between the Income Support Law and the right to a minimum dignified subsistence?

 

37.        What is the connection between the right to a minimum dignified subsistenceand the Income Support Law, whose purposes and structure we discussed above? As I noted above, the right to a minimum dignified subsistenceis inherent in the core of human dignity. The obligation of the government authorities is-à-vis the right is twofold, as indicated in sections 2 and 4 of the Basic Law, which state that they must preserve it from violation and ensure that it is protected. This obligation can be fulfilled in many ways. It is implemented by a variety of means, systems and arrangements in Israeli law – all closely connected to the resources available to the state and the manner in which they are allocated. Protection of the right is woven into the welfare legislation like a golden thread, inter alia, by providing state health insurance to every resident, free education, and providing public housing to the needy under certain conditions. The income support benefit provided under the Law is only one of the mechanisms that ensure protection of a person's right to a minimum dignified subsistence, however, it has a pivotal position in protecting the right. As an income-replacing benefit, it is designed to enable those who are eligible to receive it to procure what they need for their basic and minimal subsistence. In the absence of another means, such as purchase coupons or direct supply of vital commodities, it has no substitute. The importance of this is so great that I doubt whether it does not have ramifications for the protection and preservation of other human rights, such as the right to life (see: Yosef Katan, The Problem of Poverty: Causes, Components and Coping Mechanisms, Review of Professional Literature 7, 11-12, 45, 75 (2002); Lia Levin, A "coalition of exclusion": Non take-up of social security benefits among people living in extreme poverty. Access to social justice in Israel,225, 225 [sic] (2009)).

 

38.        In view of the network of welfare mechanisms available in Israel and the relative place of the Income Support Law in those mechanisms, it can be established that the Income Support Law is designed to complete the protection of the right to a minimum dignified subsistence(cf.: the words of President A. Barak in the Commitment Society Case, at p. 483-484). The law is designed to ensure the residents of Israel with the minimum resources they require to satisfy their vital needs when they are unable to do so themselves. The purpose of the law is, therefore, to ensure a minimum dignified subsistence. There is no debate about this purpose among the Respondents and the Petitioners. While the Income Support Law is not the only means utilized by the state for exercising the right to a minimum dignified subsistence, it is one of the main means for protecting it. The importance of the income support benefit in ensuring a minimum dignified subsistenceis the basic reference point for deciding the petition before us.

 

Does section 9A(b) violate the constitutional right to a minimum dignified susbsistence?

 

39.        Section 9A(b) relies on the test established in section 9A(5) of the Law, whereby a vehicle is property that must be calculated in the income test of a person applying for a benefit. This income, by its nature, is not considered income in the regular sense of the word, because it does not refer to income such as income generated from work or from income-yielding property. Income from a vehicle is conceptual income. It is based precisely on the concept of the expense that is required for the purpose of maintaining and using a vehicle and that expense is calculated as though it was part of the income of the benefit applicant – under the presumption that the person must have sufficient income to finance the expense.

 

However, section 9A(b) establishes a fiction. The fiction lies in the incontrovertible presumption that the amount of income "produced" from the vehicle is equal to at least the amount of the benefit. The meaning of this is clear: the very ownership or use of a vehicle is sufficient to lead to denial of the benefit. In such a case, the benefit applicant is held to be someone whose income attests to the fact that he does not require the safety net provided by the state.

 

40.        The question asked in the petitions before us is whether this arrangement violates the right to a minimum dignified subsistence. The answer to that is affirmative. The arrangement violates the right to a minimum dignified subsistencebecause it establishes a categorical rule whereby anyone who owns or uses a vehicle will not be eligible for the income support benefit, with no connection to the individual question of whether that same person does, indeed, have income in an amount that will ensure his ability to exercise his right to a minimum dignified subsistence. Hence, it is clear that when the income support benefit is denied to someone who needs it for the purpose of minimal subsistence, the right to a minimum dignified subsistenceis violated.

 

41.        No one disputes the fact that ownership of a vehicle or use of a vehicle may help in estimating a person's income. The Petitioners did not dispute the assertion in the Law that a vehicle is property from which income is generated, and justifiably so. A vehicle is, indeed, a possible means for estimating income. Accordingly, the ownership or use of the vehicle has a certain economic significance, which can be estimated and quantified for the purpose of including it in the test of a person's income. The problem that lies in the conclusive presumption is not actually the need for ownership or use of a vehicle as a component in estimating a person's income but, rather, in the fact that it becomes the only component in determining the estimated income. The ownership or use of a vehicle – because they are held to be income of at least the same amount as the benefit – obviate the need to examine a person's economic state more thoroughly. The meaning is, therefore, that ownership or use of a vehicle become threshold conditions for eligibility for the benefit. That threshold condition is unequivocal and incontrovertible. It is sufficient to prove ownership of a vehicle or regular use of another person's vehicle in order to deny the benefit.

 

42.        This result violates the right to a minimum dignified subsistencefor all the benefit applicants who, in actuality, do not have sufficient income for minimal subsistence. That is the situation, for example, in cases in which the benefit applicant does not have a vehicle of his own but makes some use of the vehicle of another person – a relative or acquaintance. In such a situation, for the most part, the benefit applicant does not bear the regular payments for maintaining the vehicle (such as payment of the insurance and vehicle registration), nor does he enjoy the potential income that exists by the very ownership of a vehicle. Where a person also uses the vehicle of another person and, at most, pays for token gasoline expenses, what is the justification for ascribing to him the whole gamut of costs borne by the owner of the vehicle? According to the Respondents, even in a case of use of a vehicle, those users should be deemed to have been given the value of the ownership in money. That claim is dubious, in my opinion. After all, it cannot be said that the possibility given to a person of using a vehicle that is owned by another attests necessarily to the fact that the vehicle owner has the ability to assist the benefit recipient in other ways. More than once, a person will enable another person to make use of property (including a vehicle) in their possession because, at that time, he does not need it for his own purposes, even if he is unable to give the other person direct assistance – financial or otherwise. In a situation in which a person makes use of the vehicle of a relative or acquaintance when they do not need it, without the vehicle being placed at his disposal for him to use on a regular basis, we cannot conclude that those who assist him necessarily possess the means to give that person alternative income equivalent in value to the vehicle, with its various expenses. At most, the family assistance can be deemed to be equivalent in value to income in the amount of the value of the actual use made of the vehicle which, in itself, may be significantly less than the value of the minimum income.

 

             As such, it emerges that the provisions of section 9A(b) of the Law may lead to denying the benefits to individuals who need it and do not have alternative source of income, nor the ability to obtain such sources from others. The fact that section 9A(b) of the Law ostensibly enables any use of a vehicle to deny eligibility for the benefit – and the National Labor court judgment interpreted this to mean that using a vehicle only twice a week will also lead to that result – strengthens that apprehension.

 

43.        The situation of the petitioners in HCJ3282/05 demonstrates the problem with the conclusive presumption and the violation that it causes. Most of the Petitioners did not own vehicles but made use of a vehicle that was made available to them by relatives or friends. Petitioner 1, for example, was denied the benefit after it was proven that she used her father's vehicle three times a month, and no more. After cancellation of the benefit, the Petitioner was left to support herself on NIS 1,800 a month from child support and child allowances. The benefit of Petitioner 2 was canceled after it transpired that she made regular use of a vehicle owned by her mother, notwithstanding the fact that she lived in a remote town without any public transportation. No effort was made to quantify the value of her use of the vehicle, in order to examine whether she was, indeed, given assistance in the amount of the benefit. Petitioner 3 was forced to move to another place of residence so that she would not have to make use of a vehicle, and only then was she found eligible for the benefit. All the Petitioners argued that they did not have alternative sources of income and they did not bear the expenses of maintaining the vehicle, except for extremely limited gasoline expenses.

 

             Among them all, it seems that the case of Petitioner 5 demonstrates, more than anything, the main difficulty inherent in the conclusive presumption and the negative results that its implementation may generate. Petitioner 5 worked for her livelihood and was found eligible for the income supplement benefit because her income from work was not sufficient. She used the vehicle to reach her job in various prisons in the North that are not accessible by public transportation. As long as she used her father's vehicle, her benefit was not canceled because of her father's disability. When her father sold his vehicle, one of her acquaintances enabled her to use his vehicle and this led to cancellation of the benefit. As a result, she was forced to resign from her job and submitted an application for a full income support benefit (instead of the income supplement that she had received beforehand). The result of canceling the benefit that was paid to Petitioner 5 was, therefore, not only a blow to her ability to stand on her own two feet, but also a violation of one of the purposes of the Income Support Law ­– encouraging people to go out to work.

 

44.        In the nature of things, we must assume that the aforementioned violation of the right to a minimum dignified subsistencedoes not extend to all the benefit applicants. Indeed, there may be benefit applicants who have sufficient income to supply their own basic needs and, therefore, canceling the benefit as a result of the conclusive presumption does not harm their ability to live with dignity. However, it can harm anyone to whom the aforementioned presumption does not apply and the use of a vehicle does not prove that he is not in need of income support. As a result, the conclusive presumption established in section 9A(b) violates the right to a minimum dignified subsistencewith regard to some of the benefit applicants, even if it does not violate the rights of all of them. This is a real and significant violation. Considering the pivotal place of the income support benefit in the network of welfare mechanisms in Israel, denying the benefit means denying the last safety net for those who need it the most.

 

45.        This harsh result is exacerbated by the fact that the conclusive presumption established in section 9A(b) is contrary to the customary manner of examining eligibility for an income support benefit in Israel – by means of an individual examination that is conducted for each and every benefit applicant, the purpose of which is to assess the extent of their need for the benefit. As part of the individual test, the NII examines, inter alia, the age of the benefit applicant, his income, his assets and the various payments made to him by the state. In the individual examination, the family unit to which the benefit applicant belongs is also examined and NII representatives examine the applicant's ability and desire to integrate into the job market. All these are designed to present the NII with a detailed picture that is as accurate as possible regarding the applicant's status, to ensure that the benefit is given to those who really need it. To enable the NII to stay abreast of the situation, section 20 of the Law also instructs the benefit applicants and recipients to notify the NII in writing within three days of any change that occurs in their family status and income, and any other change that might affect their eligibility for the benefit or the rate of the benefit.

 

             However, contrary to the individual examination of a person's income, the presumption set forth in section 9A(b) creates a categorical rule whereby the ownership or use of a vehicle is equivalent to income in the amount of the benefit. Irrespective of a person's actual income, from the moment it is proven that he owns or uses a vehicle, the NII deems him someone who has a sufficiently high income and, therefore, he does not require assistance. In practice, the ownership or use of a vehicle obviate the need for the other income tests established in the Law, and there is no real need for an individual examination of the benefit applicant and for examining his true economic ability, because, in any case, the same fiction that is inherent in section 9A(b) cannot be refuted by it.

 

             It is important to clarify that in our decision, that section 9A(b) of the Law violates the right to a minimum dignified subsistence, we did not address the definition of what a minimum dignified subsistenceis, what it includes, or what it should include. The starting point for our discussion is that the state has an obligation to determine what the minimum subsistence conditions are, and to establish the welfare system accordingly (see, in this context, the judgment of the German constitutional court BVERFG, A7: 1BVL 1/09, 1BVL 3/09, 1 BVL 4/09 from 09.02.2010. For an abstract of the judgment in English, seehttp://www.bundesverfassungsgericht.de/en/press/bvg10-005en.html). For the purpose of this discussion, we assume that that is, indeed, what was done for the purpose of determining the overall welfare system provided by the state, which also includes the Income Support Law, based on that determination. We therefore assume that the entire gamut of welfare arrangements provided in Israel supplies the "package" required for a minimum dignified subsistence. Within the "package" of welfare services, the income support benefit plays a pivotal role. Without it, and without other sources of income, the needy cannot attend to the most basic conditions of subsistence and, as such, its denial leads immediately to violation of their right to a minimum dignified subsistenceas part of their right to human dignity.

 

47.        It is also important to explain that this conclusion of ours is not meant to determine that a vehicle cannot serve as an estimation of income, and the Petitioners did not dispute the legislature's determination that a vehicle should be deemed property from which income is generated. This conclusion should also not indicate that ownership or use of a vehicle constitutes a condition for a minimum dignified subsistence. However, it should be recognized that a vehicle, under certain circumstances, is not a luxury and can help in the search for work and in getting to the workplace. This is particularly true in places in which public transportation is undeveloped. The violation created by the law does not lie in the concept of the vehicle as property for which the cost of the benefit from the ownership or use can be quantified. The violation occurs as a result of the conclusive presumption set forth in the Law, whereby any case of ownership or use is viewed as though the owner or user of the vehicle has income at a level that removes him from the circle eligibility for the benefit. Such a presumption ignores the individual data of each and every case, and ultimately leads to denial of the benefit without distinction, even from someone who, without having received it, could not have attained a minimum dignified subsistence. The result is, therefore, that section 9A(b) violates the right to a minimum dignified subsistence.

 

The argument of duress

 

48.        Before we go on to examine the compliance with section 9A(b), I think it proper to address one of the main points made by the Respondents in the written and oral arguments. When discussing the interpretation of the right to a minimum dignified subsistence, the Respondents argued extensively that another element should be read into the right, and that is the element of duress. In their opinion, the state's constitutional obligation to provide the safety net in the Income Support Law arises only when there is a danger that the person will be forced, because of reasons beyond his control, to live in existential deprivation. They argue that that situation obtains as long as there is no mode of action that the individual can take, which would prevent his reaching existential deprivation. In contrast, when a life of existential deprivation is the result of choice – a choice which, from a normative standpoint, would be advisable to demand that the individual implement – the state's constitutional obligation does not apply and, in any case, the right to a minimum dignified subsistencehas not been violated.

 

49.                   According to the argument, the need to examine the question of whether the individual was forced to live in existential deprivation or he had the option of making another choice is based on the narrow scope of the right to a minimum dignified subsistence, and it rests on three main elements: first, as a policy based on just distribution between the general public and all those receiving support, due to the fact that provision of the benefit entails taking from the public, it is appropriate to reduce the scope of the constitutional obligation. Second, a policy that promotes just distribution internally among those receiving support, requires releasing the state from the need to support those who can take care of themselves. Third, as a matter of policy, the Income Support Law aspires to increase participation in the job market. Hence, the right to benefit from the last safety net will be available only to someone who is forced to live in existential deprivation, i.e., someone who, even with reasonable diligence, cannot integrate into the job market.

 

According to the Respondents, the ownership or use of a vehicle are expressions of the range of choice available to the Petitioners in the petitions before us. According to the argument, each and every one of the petitioners – and anyone else in a similar situation – has the option of choosing between ownership or use of a vehicle (which would lead to denial of the benefit) and forgoing ownership or use of a vehicle (which would result in receiving the benefit). Therefore, anyone who, of his own free will, chose to maintain ownership of a vehicle or to continue to use the vehicle of another, cannot be said to have been forced to live in existential deprivation and, as such, the state is not obligated to provide him with the last safety net. This argument is based on the presumption inherent in the law – which we addressed above – whereby ownership or use of a vehicle has economic value that is estimated to be at least equivalent to the value of the benefit.

 

50.        The argument of duress appears, at first glance, to be captivating, but a closer look shows that there is no connection between the argument and the Petitions before us. Indeed, no one disputes that the state should only be obligated vis-à-vis someone who does not choose on his own to live in existential deprivation. This argument in itself was not at all disputed by the parties to the petitions before us. The Petitioners, like the Respondents, believe that the state is only obligated to distribute its resources to those in a state of existential deprivation by force and not by choice. But they objected to the inclusion of the duress requirement as part of the definition of the right to a minimum dignified subsistence.

 

51.        The requirement of duress is also accepted, in one form or another, in international law and, as argued by the Respondents, also in some of the countries that have established the right to a minimum dignified subsistencein their constitutions.

 

             For example, in interpretive comment 12 to the Covenant on Social Rights, paragraph 15 states that "Whenever an individual or group is unable, for reasons beyond their control, to enjoy the right to adequate food by the means at their disposal, States shall have the obligation to fulfill (provide) that right directly." (Committee on Economic, Social and Cultural Rights, General Comment 12, Right to adequate food (Art. 11), U.N. Doc. E/C/12/1999/5 (1999), at paragraph 15 (the first emphasis was added, the second emphasis was in the original, D.B.)). Even though the requirement of duress or "for reasons beyond their control" appears to be justified on a theoretical level, on a practical level the distinction between choice and lack of choice is not at all simple. The question of what constitutes circumstances that are the result of free choice and circumstances that are the result of duress and constraint is often complex. Where is the boundary between free choice and social structure? After all, the possibilities of choice are affected, inter alia, by the environment in which the person grew up – his family, economic and social status. This raises the question, which was also recognized by the Respondents, of how to identify the choices that should be decided in the autonomous sphere of the individual. These are complicated questions. They raise problems of various types, and they are not easy to decide. However, they do not arise in the matter before us because in the choice offered to the benefit applicants by the Respondents– vehicle or benefit – they do not attest to the existence or nonexistence of the element of duress. As we explained in detail above, according to the Respondents, and in accordance with the provisions of the Income Support Law, a vehicle serves as an estimation of income of at least the amount of the benefit. This means that the ownership or use of a vehicle proves that the benefit applicant has income in the amount of the benefit. As such, that benefit applicant is not eligible for the benefit because he cannot satisfy the income test set forth in the law, i.e., he is deemed to be someone whose income is higher than the threshold entitling him to the benefit. In that state of affairs, what is the advantage in the requirement of choice, which ostensibly serves to prove the existence or nonexistence of duress? If the conclusive presumption (the problematic nature of which we addressed above) is correct, and a person has income in the amount of the benefit, what is the difference if he chooses a vehicle or he chooses to do without it? Either way, he will not be found eligible for the benefit because of the income test. And if the conclusive presumption is incorrect, i.e., the existence of a vehicle is not sufficient to estimate a person's income and is insufficient to attest to his neediness, then what is its relevance in determining eligibility for the benefit? Why is it used at all in the income test? The purpose is not to prohibit men and women from driving a vehicle. If that is the case, why force a person to make the choice and give up the use of a vehicle if the vehicle does not prove his neediness? Hence, the question of coercion in itself is not up for discussion in the petitions before us.

 

Does the violation of the right meet the conditions of the limitations clause?

 

52.        Once we found that the provisions of section 9A(b) of the Income Support Law violate the constitutional right to a minimum dignified subsistence, we are compelled to examine whether the violation is lawful. That examination is conducted in accordance with the conditions set forth in the limitations clause in section 8 of the Basic Law: Human Dignity and Liberty, which states as follows:

 

Violation of rights       8. There shall be no violation of rights under this Basic Law except by a law befitting the values of the State of Israel, enacted for a proper purpose and to an extent no greater than is required, or by law as stated, by virtue of express authorization in such a law .

 

             The provisions of the limitations clause express our constitutional concept, whereby human rights are relative and no human right is absolute. Therefore, the legislature may, under certain conditions, violate constitutional rights. These rights are set forth in the limitations clause and express the balance in our constitutional law, between the constitutional rights of the individual and the needs, interests or rights that may justify the violation of those rights.

 

53.        Four cumulative conditions are specified in the limitations clause to examine the constitutionality of a norm that violates a human right, which is protected by the Basic Law: Human Dignity and Liberty. The first condition is that violation of the constitutional right is implemented under law or by virtue of express authorization in a law. The second condition is that the violating the law befit the values of the State of Israel. In that context, the intention is to the values of the State of Israel as a Jewish and democratic state, in accordance with the Purpose clause set forth in section 1A of the Basic Law: Human Dignity and Liberty (see HCJ 5026/04 Design 22 Shark Deluxe Furniture Ltd. v. Director of Sabbath Work Permits Department, Ministry of Labor and Social Affairs, IsrSC 60 (1) 38, 53 (2005)). The third condition specified in the limitations clause is that a violation of a constitutional right must be for a proper purpose. The fourth condition is that the violation must be to an extent no greater than required. If one of those four cumulative conditions is not fulfilled, it means that the violation of the protected constitutional right is unlawful and the piece of legislation that establishes the violation of the right is unconstitutional. We will therefore turn to examining whether the violation of the constitutional right to a minimum dignified subsistence, which is caused by the provisions of section 9A(b) of the Income Support Law, meets the conditions of the limitations clause.

 

54.        With regard to the first condition specified in the limitations clause, which requires that the violation of the constitutional right be "by law" – everyone agrees that section 9A(b) of the Income Support Law fulfills that condition. The Petitioners did not elaborate on the question of the existence of the second condition in the limitations clause – which requires that the piece of legislation befit the values of Israel as a Jewish and democratic state and, indeed, it does not raise any problems in the petitions before us.

 

55.        The third condition established in the limitations clause is that the piece of legislation that violates a protected constitutional right must be for a proper purpose. The purpose of the law will be deemed proper if it is designed to promote human rights or realize an important social or public objective (see the Menahem Case at p. 264). In the framework of that test, the nature of the violated right and the extent of the violation, inter alia, must also be taken into consideration, because the more significant the violation of the right, the more important and vital the social objectives must be to justify it (see HCJ 6304/09 Lahav – Bureau of Organizations of Self-Employed and Businesses in Israel v. Attorney General (not yet published, September 2, 2010), paragraph 107 of the judgment).

 

56.        The Respondents' position shows that the purpose of section 9A(b) of the Income Support Law is to ascertain that the state's support is given to those who need it, and to prevent a situation in which a person receives the income support benefit from the state when he actually has other income (including conceptual income). The Respondents wish to deduce the existence of that income from the fact that a person owns a vehicle or uses a vehicle on a regular basis and, therefore, he can ostensibly bear the ongoing costs entailed in the possession and use of the vehicle. The test of ownership and use of a vehicle are therefore designed to serve as an indirect estimate of the "real" income of an individual who claims that he is entitled to the income support benefit. The Respondents further argue that section 9A(b) of the Income Support Law leads to the fact that the support that a needy person receives from others (relatives or friends) will be channeled first and foremost into satisfying his existential needs, since Israeli law "does not encourage a reality in which the public treasury finances the existential needs of a person, thereby enabling others to finance other needs that are not of an existential nature" (affidavit in response at page 15).

 

57.        In my view, section 9A(b) of the Income Support Law fulfills the requirement of the proper purpose. Preventing the abuse of the state support and welfare system and endeavoring to ensure that the state support is given only to those who need it the most are proper social purposes. Indeed, the state's financial resources are not unlimited and it may try to ensure that the financial support that it provides will reach those who need it to the greatest extent. This is particularly true when the state support system is financed from public funds and expresses the mutual involvement among individuals in the society. Mutual involvement has two aspects: alongside the public support of a needy individual is also the legitimate requirement that individuals who have sufficient income for a minimum dignified subsistencedo not abuse the public support system and not become a burden on other individuals in the society. Moreover, as explained above, the calculation of the ownership or use of a vehicle for the purpose of testing a person's income is legitimate and there is nothing wrong, in principle, with weighting those characteristics in the income test established in the Law. The question is whether the assessment of income from ownership or use of a vehicle is implemented in a manner that does not violate, to a greater extent than necessary, the right to a minimum dignified subsistence. We will now address this issue, which is the pivotal question that arises at this stage of the constitutional examination.

 

58.        The fourth condition for examining the constitutionality of the provision of a law that violates a constitutional right, which is protected by the Basic Law: Human Dignity and Liberty, is that the right be violated "to an extent no greater than is required." This condition deals with the proportionality of the violation of the constitutional right. The proportionality requirement examines the relationship between the proper purpose of the Law, which has been found to befit the values of the State of Israel, and the means chosen by the legislature for the purpose of implementing that purpose. The proportionality of the violation of the constitutional right is established according to the three subtests that have been recognized in the case law of this Court. Only if the violation of the constitutional right meets the three subtests will the violation of the constitutional right be deemed a proportional violation.

 

             The first subtest in the cause of proportionality is the test of the rational connection. This test examines whether the means chosen by the legislature does, indeed, fulfill or contribute to fulfilling the purpose of the provision of the law whose constitutionality is in question. The second subtest is the test of the means with the lesser violation. This test examines whether the means that violates the constitutional right to the smallest degree was chosen among all the possible means for fulfilling the legislative purpose. The third subtest is the test of proportionality "in the narrow sense." This test examines the existence of a proper ratio between the benefit arising from the piece of legislation that violates the constitutional right, and the damage caused by the violation of that right (see, e.g.: the Movement for Quality Government Case at p. 706-708; the Gaza Coast Case, at p. 550).

 

             It is also important to note that the use of the three subtests described above does not necessarily lead to a situation in which the legislature is entitled to choose only one means (if any) to fulfill the (proper) legislative purpose. Generally, the legislature can choose the most suitable means for fulfilling that purpose from among a variety of proportional means. The range of possible choices available to the legislature in these circumstances is called the "range of proportionality," and the Court will intervene in the legislature's decision "only when the means chosen by him deviates significantly from the boundaries of the legislative maneuvering space available to him, and it is clearly disproportional" (see HCJ 2605/05 Academic Center of Law and Business, Human Rights Division v. Minister of Finance, paragraph 46 of my judgment (to be published, 19.11.2009) hereinafter: the Prisons Privatization Case).

 

59.        Is the legislative means chosen by the legislature in section 9A(b) of the Law – a conclusive presumption whereby the ownership or use of a vehicle is equivalent to income in the amount of the income support benefit – within the range of proportionality?"

 

             First we will analyze the first subtest of the proportionality, which is the rational connection test, in which we must examine whether section 9A(b) of the Income Support Law fulfills the legislative purpose for which it was enacted. It is important to note that this test does not require that the means chosen will fulfill the legislative purpose in full. It is sufficient that there is a "genuine correlation" between the means chosen and the purpose (see: the Movement for Quality Government Case at p. 508; HCJ 1030/99 MK Oron v. Speaker of the Knesset, IsrSC 56 (3) 640, 666 (2002)). Similarly, absolute certainty that the means chosen will fulfill its purpose is not required, but on the other hand, just a slight or theoretical probability cannot suffice either (see: the Adalah Case, at p. 323). The rational connection test is based to a large extent on the factual basis available to the legislature, as well as life experience and plain common sense (see Aharon Barak, Proportionality in Law – Violation of the Constitutional Right and its Limitations, 382 (2010) (hereinafter: Barak – Proportionality)).

 

             As stated, the legislative purpose of section 9A(b) is to ensure that the income support benefit is given to those who really need it and not to those who have sufficient income or the ability to generate such income. Can the conclusive presumption fulfill that purpose? In other words, can the ownership or use of a vehicle serve as a suitable estimate for identifying the individuals who have income (including potential income) aside from the income support benefit and, therefore, their minimum dignified subsistence may be fulfilled even without the benefit? The answer to this question is mainly affirmative however, it is not without some doubts. Indeed, the use of a vehicle is generally accompanied by significant expenses, even when the vehicle in question is old and also when the amount of travel is significantly less than the average in Israel. We can assume that in view of the significant expenses entailed in maintaining a vehicle (including insurance, gasoline and ongoing maintenance), the ownership or use of a vehicle may serve as a certain indication of the fact that the person has additional sources of income aside from the income support benefit or, alternatively, that that person is receiving assistance from others which is also equivalent to income.

 

60.        Therefore, the very ownership or use of a vehicle as an estimate of income and neediness is not arbitrary and unreasonable. The conclusive presumption set forth in section 9A(b) is a test that can fulfill the legislative purpose, if only because there is a "genuine correlation" between it and the purpose, even if there is no “absolute certainty” that the presumption has fulfilled its purpose. However, we cannot ignore the fact that there may be cases in which the ownership of a vehicle, and particularly the use of a vehicle by someone who is not its owner, does not attest to income that is equivalent to the income support benefit, for example, in circumstances in which the cost of maintaining the vehicle is lower than the rate of the income support benefit. The arguments of the respondents themselves indicate that certain circumstances are extremely possible: according to the calculation appearing in the affidavit in response, the average monthly cost of maintaining a used vehicle that travels 10,000 km a year (as at October 1, 2008) is NIS 1,161 for a vehicle with a 1300 mL engine, and NIS 1,324 for a vehicle with a 1600 mL engine. In contrast, the rates of the income support benefit on the same date range between NIS 1,537 for an individual under the age of 55, to NIS 2,574 for a couple under the age of 55 with two children. The last update notice of the Respondents indicates that the benefit rates are even higher now – between NIS 1,632 and NIS 2,044 for an individual, and between NIS 2,447 and NIS 3,549 for a couple with a child (the amounts are similar to those for a single parent with a child). Up-to-date data on the cost of using a vehicle were not provided. Even though we can assume that the cost of maintaining the vehicle has also increased in the time that has passed, the data that were provided shows that there may be a very significant gap between the cost of maintaining the vehicle and the amount of the income support benefit (which ranges between approximately NIS 200 for an individual who possesses a vehicle with 1600 mL engine, to NIS 1,400 for a couple with two children who possess a vehicle with a 1300 mL engine). This does not justify deeming maintenance of a vehicle, in and of itself, as attesting to income equivalent to the benefit. To this we must add the argument that we addressed above, that there may be cases in which the option given to the benefit recipient – to use a vehicle owned by another person – does not mean that the vehicle owner has the ability to assist the benefit recipient in other ways.

 

61.        Nevertheless, when it was found that the use of a vehicle can constitute a certain estimate of income, and because the rational connection test does not require complete fulfillment of the legislative purpose, and it also recognizes the possibility of the existence of some uncertainty with regard to the extent of fulfilling the purpose, I have reached the conclusion that in the circumstances of the matter, the provision in section 9A(b) of the Income Support Law intersects with the rational connection test (see Barak – Proportionality, at pp. 380-382), even if barely so. However, the doubts that arise about the correlation between the means and the purpose will accompany us to the next test of proportionality – the test of the means with the lesser violation of the right.

 

62.        The function of the second subtest of proportionality is to examine whether, among all the possible means for fulfilling the legislative purpose, the means that violates the constitutional right the least was the one that was chosen. The comparison is conducted with regard to other means that might also fulfill the legislative purpose. In this context, it is important to note that:

 

            The second subtest of proportionality does not merely examine whether there is a measure that violates the protected constitutional right to a lesser degree, but it requires us to examine whether that less harmful measure realizes the legislative purpose to the same degree or to a similar degree as the measure chosen by the legislature (see the Prisons Privatization Case, paragraph 46 of my judgment)

 

Moreover, the obligation imposed upon the legislature as part of the second subtest is not to choose a means that is absolutely the least harmful. The legislature must choose – among the reasonable options at his disposal for fulfilling the legislative purpose – the option that violates the constitutional right to the smallest extent. (see the Adalah Case, at pp. 324-325). In the case before us, the provisions of section 9A(b) of the Income Support Law do not satisfy this test for the simple reason that establishing a conclusive presumption whose result is the absolute denial of the income support benefit to someone who needs it for a minimum dignified subsistence, in circumstances in which means can be used that violate the right to a lesser degree (if at all) – is not proportional.

 

63.        As we have seen above there are individuals who fall into the realm of the conclusive presumption established in section 9A(b) even though the (proper) purpose of the section – preventing payment of the benefit to someone who has access to sufficient means to ensure a minimum dignified subsistence– does not apply to them. Those individuals also do not comply with the exceptions established for the presumption set forth in section 9A(b) of the Law. In the absence of suitable exceptions, establishing a conclusive presumption in which the ownership or use of a vehicle is equivalent to income that is at least in the amount of the income support benefit, does take into consideration the individuals who make use of a vehicle that is of less value – sometimes significantly less – than the value of income in the amount of the benefit. This is the case either because their expenses for maintaining the vehicle are less than the benefit to which they would be entitled if not for the vehicle, or because the assistance they are receiving from others by means of use of the vehicle cannot be converted into other assistance that would ensure their minimum dignified subsistence. With regard to those individuals, the question arises as to whether the purpose of the legislation in question could have been fulfilled in other ways, which violate the constitutional right to a minimum dignified subsistenceto a lesser extent.

 

64.        It appears that the answer to that question is affirmative. There are several reasonable possibilities that could fulfill the legislative purpose underlying the provisions of section 9A(b) of the Income Support Law, with a lesser violation, and even no violation at all, of the constitutional right to a minimum dignified subsistence. For example, a non-conclusive presumption could have been established that would give a benefit applicant, who possesses or uses a vehicle, the opportunity to prove that his ownership or use of vehicle does not attest to the fact that he has other income (or potential income). Alternatively, a mechanism that assesses the value of the use of a vehicle could have been established (when it does not involve a vehicle owned by the benefit recipient) according to the frequency of its use, and reducing the rate of the benefit accordingly and in a graduated manner.

 

             Another possibility available to the legislature (when the matter involves a vehicle owned by the benefit recipient) is to establish a hierarchy that takes the vehicle's value into account, so that the benefit would be denied only to someone whose vehicle exceeds a certain value which, together with the ongoing maintenance expenses, can reflect the financial status of the benefit recipient. This was done, for example, by the legislature in Germany. In the German welfare system, there are a number of social grants. The social grant that is conceptually closest to the income support benefit in Israeli law is given to someone who has the potential to return to the job market, and it is granted after a year in which the recipient is given a benefit that is close to the unemployment benefit provided in our system. That benefit – which is called "lack of employment benefit II" in German law – is established in The Second Book of the Code of Social Law (SGB ii). In accordance with German law, in making the decision on granting this benefit, all the property in the individual’s possession must be estimated. The grant is given to anyone whose property value does not exceed the amount specified in the law, which depends on the age of the benefit applicant (which ranges between €3,100 and €9,900). However, German law establishes that there are types of property that are not deemed part of the total property calculated for the purpose of granting the benefit. Among these assets are a "reasonable vehicle." In 2007, the German Supreme Court, which deals with social welfare matters, ruled in Bundessozialgericht, AZ: B 14/7b AS 66/06, 06.09.2010 that a vehicle whose cost does not exceed €7,500 constitutes a "reasonable vehicle," which is not taken into account in estimating the amount of the grant. When the value of the vehicle is higher than that amount, the difference between the value of the vehicle and the reasonable amount is calculated as part of all the property that is weighted in the grant evaluation. The reason for this arrangement, as indicated in German case law, is the importance ascribed to ownership of a vehicle as a means for promoting the individual's return to work and leaving the cycle of neediness. For that reason, the individual must be given the possibility of possessing a vehicle of reasonable value without losing the grant. It should be noted, however, that the attitude to a vehicle in the provision of other grants under German law changes according to the purpose of the grant (see, e.g., in this context, the judgment of the Saxon Administrative Supreme Court in the case Sächsisches Oberverwaltungsgericht, AZ: 4 D 228/09, 29.06.2010). Another possibility in this matter was raised by the Petitioner in HCJ 7804/05, who proposed offsetting the value of the benefit produced by the vehicle from the income support benefit according to the rate at which the benefit is deducted under the Income Tax Ordinance.

 

             In the nature of things, the aforementioned possibilities are only possible examples. They are not an exhaustive solution. We can even assume that within the legislative maneuvering space available to the legislature, there are other arrangements that could fulfill the legislative purpose, while violating the constitutional right to a minimum dignified subsistenceto a lesser extent. The main point is that these alternative means would also have fulfilled the proper purpose of preventing payment of a benefit to a person who has other income (including potential income) that ensures his minimum subsistence needs, while violating the protected constitutional right to a lesser extent. In this matter, I would like to emphasize the fact that the state refrains from providing data, statistical or otherwise, to show that other modes of examining, estimating and quantifying are not possible and cannot replace the conclusive presumption. Thus, no information was presented to us about the estimated costs of an arrangement for individual examination or arguments about other arrangements that were examined and ruled out due to one shortcoming or another. All that was argued was that the state is not able to supervise the individual use of vehicles – at the same time that extensive use is now made of private investigators who, in effect, are supervising the scope of vehicle use.

 

65.        In this context, I cannot accept the Respondents' argument that the fact that the basis for usage is not defined in the Law allows for flexibility that blunts the conclusive presumption. To my mind, the absence of the definition in the Law neither adds to nor detracts from this matter. If we say that the Labor Courts are free to interpret the term "use" – and even if we were to interpret the term in the framework of the petitions before us – that would not change the fact that from the moment a person is found to be using a vehicle, he is deemed to have income in the amount of the benefit. The problem, as I noted above, is not in quantifying the income from ownership or use of a vehicle. The problem lies in the fact that the ownership or the use – in accordance with the definition that was accepted by the Labor Courts – employ that same conclusive presumption whereby the eligibility of a benefit applicant is denied because he is deemed to have income equivalent to at least the amount of the benefit. Moreover, we cannot except the Respondents’ argument that section 9A(b) should not be deemed to have established a conclusive presumption because it specifies exceptions. Indeed, we welcome the fact that the legislature saw fit to add additional exceptions to the list of exceptions in the Law during adjudication of the petitions before us, but their applicability remains limited. The exceptions apply only to someone who is compelled to utilize a vehicle because of medical necessity or someone who is in the work force (who was recently dismissed) and is found eligible for payment of income support. As noted by the Petitioners in HCJ 3282/05, even if the exceptions were valid before their petition was filed, except for Petitioner 4, none of them would have been included in them because even the Petitioners who were working at that time did not meet the income threshold required by the exceptions in order to be eligible for exemption from section 9A(b).

 

66.        It seems that the case before us further demonstrates the problem inherent in applying universal arrangements to cases in which eligibility for any state assistance is denied. Universal arrangements, by their very nature, do not take into account the individual status of each and every person. They are based on statistical tests and an assessment that is applied in a uniform manner without distinction. They are inherently problematic because they can ignore the circumstances of concrete cases. The Court has addressed this problem more than once. Thus, in the case that adjudicated a universal arrangement, which denied the candidacy of anyone older than 35 for police service in the Israel Prison Service and in the Customs and VAT Division, the following was ruled:

 

            The employer will find it difficult to satisfy the ‘smallest possible harm test’ if he does not have substantial reasons to show why an individual examination will prevent the attainment of the proper purpose that he wishes to achieve (HCJ 6778/97 Association for Civil Rights in Israel v. Minister of Public Security, IsrSC 58 (2) 358, 367 (2004); and the further HCJ 5627/02 Ahmed Saif v. Government Press Office, IsrSC 58 (5) 70, 77 (2004); HCJ 2355/98 Israel Stamka v. Minister of Interior, IsrSC 53 (2) 728, 779 (1999); IsrSC 3477/95 Israel Ben Atiya v. Minister of Education, Culture and Sports, IsrSC 49 (5) 1, 15 (1996); the Adalah Case, at p. 325-330).

 

Indeed, there are cases in which an individual examination will not attain the legislative purpose. In such situations, there is no choice but to establish a universal arrangement. However, that is not the case in the matter before us. In the Income Support Law, the legislature, was aware of the importance of establishing a clear and individual mechanism. That is appropriate for the importance of the right in question, and the pivotal nature of the income support benefit in protecting the right (cf. in a closely related matter, which dealt with the denial of food stamps to the needy, the importance ascribed by the United States Supreme Court to reducing the scope of the violation and eliminating the universal arrangement: United States Department of Agriculture v. Moreno, 413 U.S. 528, 543 (1973); and see further: Employment Division, Department of Human Resources of Oregon v. Smith, 494 U.S. 872, 899 (1990); Aptheker v. Secretary of State, 378 U.S. 500, 504, 515 (1964)). Indeed, the mechanism for examining income, which is established in the Law, ensures that a meticulous individual examination will be conducted for each person who claims an income support benefit. Since that is the case, and an individual examination is conducted in any event to examine the other components of a person's income, I am not convinced that there is any justification for transitioning to a universal arrangement precisely with regard to the ownership or use of a vehicle.

 

67.       The state further argues that the comprehensive nature of the arrangement is justified, since it is difficult to quantify the cost of vehicle usage on an individual basis, because it cannot supervise the vehicle usage habits of each benefit applicant. We cannot make light of that problem. It can justify less harmful violations of the constitutional right, such as establishing a hierarchy for quantifying – even if imprecisely – the value of the vehicle usage, or establishing a non-conclusive presumption that transfers the burden of proof to the benefit applicant, to prove the exact nature of the use he makes of the vehicle. Indeed, a more precise estimation can be made – albeit not absolutely precise – of the value of the vehicle usage, in a way that will make it easier for the state to implement the income test without absolutely denying the individual's right to a minimum dignified subsistence, as is now done through the conclusive presumption established in section 9A(b) of the Law. The Respondents did not provide us with data showing that the problem they indicated cannot be resolved by alternative, less harmful means and, as such, there is no choice but to conclude that the universal arrangement that is expressed in the conclusive presumption is unjustified and the second test of proportionality is not satisfied in the petitions before us.

 

68.       Therefore, the conclusive presumption established in section 9A(b) of the Income Support Law, which leads to full denial of the benefits to anyone who possesses or uses a vehicle beyond the limited and non-exhaustive exceptions delineated in the Law, is an inflexible and unsuitable means that unnecessarily violates the constitutional right to a minimum dignified subsistence. Once we found that the provision in section 9A(b) of the Income Support Law does not satisfy the second subtest of proportionality, it is sufficient to determine that its violation of the right to a minimum dignified subsistenceis not proportional and, therefore, does not meet the conditions of the limitations clause of section 8 of the Basic Law: Human Dignity and Liberty.

 

69.       Nevertheless, and above and beyond the requirement, we will also address the third subtest of proportionality, which is the test of proportionality in the narrow sense. This test centers on the question of the ratio between the public benefit produced by the piece of legislation that violates the constitutional right, and the damage caused to the constitutional right by that same piece of legislation (see the Prisons Privatization case, paragraph 50 of my judgment). This is a test of moral balance that places the clashing values against one another and balances them by their weight (see the Adalah Case at p. 331).

 

             In the circumstances of the case before us, the state argues that the public benefits from the savings in state resources by simplifying the work of the welfare institutions and preventing the provision of public monies to those who are not entitled to the benefit and wish to defraud the welfare institutions. Opposite that is the damage caused to all those who are in need of the income support benefit for the purpose of fulfilling their right to a minimum dignified subsistence, but do not receive it because of the conclusive presumption. This is an extremely serious violation of the core of the right of someone who, in any case, is at the bottom of the socioeconomic ladder and needs the benefit as the last safety net against starvation and poverty. Under those conditions, it is hard to accept that the savings alone – which are partially attainable with less harmful means – exceed the harm caused to individuals whose right to live with minimum human dignity is violated. Indeed, we cannot deny that this means streamlines the work of the welfare services – universal arrangements always tends to be simple to apply and to implement, compared with individual rules of examination. However, the ends do not justify the means. As I have already noted in the past, " ‘efficiency’ (whatever the meaning of this concept is) is not a supreme value, when we are dealing with a violation of the most basic and important human rights that the state is obliged to uphold (see the Prisons Privatization case, paragraph 55 of the judgment). This is true, in general and in particular, when we are dealing with examining a person's income, which is implemented in any case – as noted – on an individual basis.

 

             For all the above reasons, the provision in section 9A(b) that leads to denial of the income support benefit to a person who possesses or uses a vehicle and does not comply with one of the exceptions established in section 9A(b) – is not proportional and, therefore, does not satisfy the test of constitutionality.

 

70.        As we have reached the finish line, and we have established that section 9A(b) cannot stand because of the disproportional violation of the right to a minimum dignified subsistence, there is no more need to discuss the argument of discrimination made by some of the Petitioners. We will also note that we do not accept the argument on the merits because there is a relevant difference between the group of income support recipients and the group of income supplement recipients, which is based on the nature and purposes of the Law.

 

The remedy

 

71.        We have found that the provision in section 9A(b) of the Income Support Law, whereby ownership or use of vehicle must be deemed income that is no less than the amount of the benefit, disproportionately violates the right to a minimum dignified subsistence. Denying the last safety net required to ensure a minimum dignified subsistenceto those who need it the most, and in a universal and comprehensive manner, contradicts the Basic Law: Human Dignity and Liberty. This calls for a declaration of the invalidity of section 9A(b) of the Income Support Law.

 

             In the nature of things, in view of the fact that the state will have to formulate an alternative arrangement in place of the arrangement whose repeal we are ordering, section 9A(b) should not be repealed immediately and it is advisable to give the legislature time to formulate a new arrangement. In view of the importance of the right in question and the mortal blow dealt, in the meantime, to someone in need of the income support benefit as the last safety net, who is not receiving it, that timeframe cannot be prolonged. Therefore, I propose to my colleagues that we order that the declaration of repeal go into effect on September 1, 2012, six months from the rendering of our judgment, and that it be effective from that date onwards. It should be noted that the new arrangement, whatever it may be, can be established in principle by authorization in primary legislation, but the individual arrangements can also be established in secondary legislation. In the interim, until a new statutory arrangement goes into effect, the NII would do well to establish interim arrangements that take into account the rulings in this judgment, including applying a narrow interpretation to the term "use" that is set forth in the Law.

 

72.        Before concluding, I would like to note that the Petitions before us were conducted at the level of the principles. We did not address the individual issues of the Petitioners and, in any case, we are not the appropriate judicial forum for such an examination, which requires proceedings from the outset, both before the NII and before the competent courts. However, considering the battle conducted by the Petitioners over many years to change the legal situation, and in view of the result they have achieved, it is fitting to enable the Petitioners, insofar as the issue is still relevant, to resubmit their cases to the NII. This is especially true with regard to the Petitioners whose eligibility was denied retroactively.

 

73.        In conclusion. I propose to my colleagues that we rule that the order nisi become an order absolute in the sense that we will declare the repeal of section 9A(b) of the Income Support law due to its unconstitutionality, which will go into effect within six months of this day, on September 1, 2012.

                                                                        The President

 

Justice M. Naor

 

I agree that an order absolute should be issued in the format proposed by the President. In my view as well, the difficulty lies in the fact that the presumption established in section 9A(b) of the Income Support Law, 5741-1980, is a conclusive presumption that leads to full revocation of the benefit to the owners or users of a vehicle (except for the exceptions listed in the Law). Indeed, the ownership or use of a vehicle can constitute an indication of one's financial situation. So can a high standard of living that is prima facie inconsistent with the declared sources of income (cf. in connection with bankruptcy: CA 404/87Vasing v. Verker, IsrSC 44 (2) 593 (1990)). Indeed, a conclusive presumption facilitates a fast and simple decision on the benefit application by the authority. That is its advantage. However, a conclusive presumption may violate the constitutional right which, in my opinion, is the most important of the constitutional rights – the right to a minimum dignified subsistence. A solution for the violation – even if it is a violation of the constitutional right in only some of the cases – must be found. The solution may lie in reversing the burden. There may be other solutions that are not necessarily based on the ownership or use of a vehicle. The solutions that must be explored are those that would examine the true status of someone who wishes to receive a benefit without using the fictions inherent in conclusive presumptions, which do not always reflect the actual situation.

 

                                                                        Justice

 

Justice U. Fogelman

 

I concur with the comprehensive judgment of my colleague, President D. Beinisch, and the comments of my colleague, Justice M. Naor.

 

             I concur with the ruling of my colleague, the president, and her reasoning, that there is no practical reason to apply a different model of constitutional review to the social human rights that are established in the Basic Laws, as distinguished from other basic rights.

 

             No one disputes the importance of the distinction between the various stages in the constitutional review model. The first stage, on which the state focused its arguments in the context of the Knesset's legislation before us, which is under constitutional review, is the stage that examines the existence of a violation of a constitutional right that is protected in the Basic Law: Human Dignity and Liberty. In the second stage, the protection provided by the Basic Law with regard to that violation is examined by means of the tests in the limitations clause. I accept the state's position that we must avoid over-expanding the sphere of the constitutional right. A sweeping expansion of the boundaries of the constitutional right in the first stage, and "automatic" transition to the limitations clause tests whenever there is a claim that a piece of legislation violates it, may lead, in the final analysis, to erosion of the protection granted by the Basic Laws (cf.: CA 6821/93 United Mizrahi Bank Ltd v. Migdal Cooperative Village, IsrSC 49 (4) 221, 471 (1995); HCJ 1715/97 Israel Investment Managers Association v. Minister of Finance, IsrSC 51 (4) 367, 419 (1997)). However, that is not the case before us.

 

             As noted by my colleague the president, this Court has already ruled that the right to dignity, which is established in sections 2 and 4 of the Basic Law: Human Dignity and Liberty, also extends to the right to a minimum dignified subsistence. I also believe that said right is at the core of the constitutional right to dignity. I also believe that the arrangement established in section 9A(b) of the Income Support Law, 5741-1980 violates the right to a minimum dignified subsistence, since it also leads to the categorical denial of the income support benefit to someone who does not have sufficient income for minimum subsistence. I also believe that the arrangement established in that section (the conclusive presumption that the ownership or use of a vehicle is equivalent to income in the amount of the benefit) is not proportional, since the purpose of the law can be attained by a means with a lesser violation, such as a presumption that is not conclusive. Please note: this does not rule out the state's position that the ownership of a vehicle and, in the appropriate cases, also the use of a vehicle, may constitute a reliable indication of a person's economic status. However, in establishing a universal arrangement by way of establishing a conclusive presumption that does not enable the authority to thoroughly examine the facts and prevents a benefit applicant from proving that ownership or use of the vehicle is not equivalent to income in the amount of the benefit in the special circumstances of his case, disproportionately violates the right of some of the benefit recipients to a minimum dignified subsistence.

 

For those reasons, I agree that the order nisi should be made absolute, as proposed by my colleague the president.

 

                                                                        Justice 

 

Justice E. Arbel

 

            Human dignity is a complex concept that encompasses many and varied values – some of a physio-existential nature, and some of an emotional-spiritual nature. Violation of human dignity may find expression in emotional humiliation and contempt, and it may find expression in denying physio-existential needs, without which a person cannot subsist with dignity. Take away the roof over a person's head, his food, water and basic medical treatment, and you have taken from him the ability to exist with dignity and to fulfill his existence as a human being (CA 9535/06 Abu Musa'ed v. Water Commissioner(unpublished)).

 

1.         In the petition before us, a question was raised regarding the constitutionality of the arrangement established in section 9A(b) of the Income Support law, 5741-1980, 991 LSI 30 (1980) (hereinafter: the Law or the Income Support Law), which states that anyone who owns or uses a vehicle is deemed to have income in the amount of the income support benefit and, therefore, is not eligible for the benefit. At the core of this issue is the question of whether this section violates the constitutional right to a minimum dignified subsistence.

 

          I concur with the comprehensive judgment of my colleague, the president, on the constitutional aspect therein and her determination that section 9A(b) of the Law disproportionately violates the constitutional right to a minimum dignified subsistence, for the reasons she cited. If I have seen fit to add my own words, it is only on a number of points.

 

2.       I agree with my colleague, the president, that the methodology of the constitutional review of socioeconomic rights should be no different from that utilized by the Court to examine other basic rights, as well as the fact that there is no reason to narrow the judicial review of legislation that affects the right to a minimum dignified subsistence, as distinguished from other basic rights.

 

3.          The source of the right to a minimum dignified subsistencelies in the nucleus of the basic right to human dignity which was given constitutional recognition in the Basic Law: Human Dignity and Liberty. The right to a minimum dignified subsistenceis found, as stated by the president, in the core and nucleus of human dignity. In my opinion, the right to a minimum dignified subsistenceis rooted deeply in the core of the constitutional right to dignity – to human dignity:

 

             Indeed, in Israeli law, it is becoming an entrenched view that that human dignity as a constitutional right also encompasses the right to minimum human subsistence, which includes shelter, basic food and elementary medical treatment, and that the state is obligated to ensure that a person’s standard of living does not drop below the threshold required to live with dignity (AdminA 3829/04 Yisrael Twito, Chairman, Mikol Halev – Kikar Lechem Association for Reducing the Social Gap in Israel v. Jerusalem Municipality, 59(4) IsrSC 769, 779 [2004]).

 

             The Income Support Law is a central means, among other welfare laws, which is designed to ensure a minimum dignified subsistence. The purpose of the Income Support Law is to ensure that every person and family in Israel, who are unable to provide themselves with the income required for subsistence, will receive the resources to supply their vital needs (see the Income Support Bill, 5740-1979, para. 2). The insertion of section 9A(5) and sections 9A(a) and 9A(b) in the Law leads to the fact that anyone who owns or uses a vehicle is not eligible for the income support benefit, because his "income" from the vehicle is deemed to be in the amount of the benefit that would have been paid if he did not own or use a vehicle. The result is that the very ownership or use of a vehicle is sufficient to lead to the denial of the benefit. The assumption is that the income of the applicant is high and attests to the fact that he does not need the safety net provided by the state. I agree with the president that this arrangement arbitrarily violates the right to a minimum dignified subsistence. The unequivocal rule under which anyone who owns or uses a vehicle is not entitled to an income support benefit, with no connection to the question of whether that person does, indeed, have income that would ensure his right to a minimum dignified subsistence, is arbitrary and is not based on an individual examination suited to the status of the applicant. Like the president, I believe that there may be cases in which the use of a vehicle does not necessarily indicate the fact that that person has independent income, due to which he is not eligible for the last safety net provided by the state, in whole or in part. That is the case when the vehicle serves as a tool for producing a certain income, but does not come under the exceptions in the Law, and when a person makes use of a relative's vehicle and bears only small expenses, when his relatives cannot help him in an alternative manner and in another way. As such, I concur with the conclusion that this is an expansive threshold condition which results in a disproportional violation of the right to a minimum dignified subsistenceof the person who is denied the benefit.

 

4.          My colleague, the president, criticizes the sharp division between civil and political rights and social and economic rights, between a "positive" right and a "negative" right. I agree with her that the division is not dichotomous and, in any case, the two types should be recognized as supra-constitutional rights in a democratic welfare state. Indeed, in contrast to the civil-political rights, the social rights pertain primarily to the conditions of a person's subsistence on the socioeconomic-cultural level. However, there is an inseparable connection between them because without the existence of social rights, a person would find it extremely hard to exercise his civil rights. Without food, water, housing, healthcare and education, it would be difficult for the individual to give content and true meaning to his civil rights. He would have trouble exercising the right to vote, to freedom of expression, to freedom of occupation and the right to property.

 

5.          Indeed, insofar as the matter involves exercising rights in a manner that requires the allocation of substantial resources, the need for restraint has been recognized by the Court. Thus it was ruled that when a case involves matters of budgetary policy connected to the state economy, the Court acts with great restraint in its judicial review for two main reasons: one – judicial interference in economic policy may have real ramifications for the stability of the economy and its proper functioning. Second – the issue of establishing economic policy is the responsibility of the public authorities, whose job it is to formulate it on the basis of their expertise and the relevant data in their possession, and they bear the public responsibility for the results (HCJ 4769/95, Menahem v. Minister of Transport 57(1) IsrSC 235, 263 [2002]; HCJ 4885/03 Israel Poultry Farmers Association v. The Government of Israel 59(29) IsrSC 14, 60 [2004]; HCJ 6407/06 Doron, Tikotzky, Amir, Mizrachi, Attorneys at Law v. Minister of Finance, para. 66 (unpublished, Sept. 23, 2007)).

 

             The restraint that the Court imposes upon itself in these matters stems from the perception that the distribution of the state's resources must be arranged comprehensively by the legislator, who has the required lateral view for handling such issues. A comprehensive arrangement by the legislator is also required in the matter of the social rights that have not yet been established in a Basic Law that enjoys a constitutional status. Recognizing these rights in the form of a Basic Law is particularly important in a democratic state that views itself as a welfare state and endeavors to ensure human subsistence to every person and a minimum dignified subsistencewithin the concept of "human dignity" (Ayala Procaccia, Supreme Court Justice Emeritus, “Social Rights in Law” delivered at the Knesset conference "Basic Law: Social Rights, Social Justice in the Knesset?"  to mark the International Human Rights Day (Dec. 6, 2011), http://www.acri.org.il/he/?p=18275).

 

6.          Social rights are recognized sporadically and gradually, either by way of the ordinary legislation of rights, which only deals with certain rights, or by way of case law, which develops slowly and randomly, in dependence on whether a petition is filed and merits recognition of a social right (see, e.g., HCJ 366/03 Commitment to Peace and Social Justice Society v. Minister of Finance (unpublished, Dec. 12, 2005); CA 4905/98 Gamzu v. Yeshayahu 55(3) IsrSC 360 [2001]; CA 9535/06 ; HCJ 11044/04 Solomatin v. Minister of Health (unpublished, Jun. 27, 2011); HCJ 1181/03 Bar Ilan  University v. National Labor Court (unpublished, Apr. 28, 2011); HCJ 3071/05 Louzon v. Government of Israel (unpublished, Jul. 28, 2008)). This situation still leaves dark pockets of poverty, hardship, discrimination and a lack of equality in the allocation of state resources.

 

7.          With the aforementioned in mind, the Court cannot refrain from conducting a constitutional review of the violation of these rights, in order to protect those who need it. The Court deems itself obligated to protect the rights of those who come through its gatesCVJH

, when those rights are violated by existing legislation. The Petitioners who assembled in the petitions before us are downtrodden and shoulder the burden of subsistence. They are at the bottom of the socioeconomic ladder and in need of the benefit as the last safety net against hunger and poverty. Because of some use or other that they make of a vehicle, usually not their own vehicle, the benefit is denied them. The result at which we have arrived in our judgment is, first and foremost, a response to their cry for help and the cries of others like them. We are not ignoring the fact that there are other groups in society in distress, aside from the petitioners before us, who are living below the poverty line at an even lower rung on the ladder. However, the matter of the petitioners is the one that has come before us and we must provide a response to it.

 

             The distress of one group cannot infringe and obscure the needs of another group. The Court can only address the matters that come before it. It does not choose these matters and does not catalog them. For that reason, inter alia, the aforementioned rule was established, regarding the restraint practiced by the Court when it discusses the distribution of resources to the various strata in society. However, in cases in which the Court discovers a disproportional violation of the social rights of a particular group, in a manner that undermines the minimum subsistence conditions of that group, it is obligated to intervene, notwithstanding the restraint to which it usually subjects itself. That is the case before us.

 

             In conclusion, I would emphasize again that it is important to ensure human subsistence to every person. Recognition of social rights in the form of a Basic Law is the only way to lay the proper normative foundation for providing basic constitutional protection for those rights, and for clarifying their supreme status and the obligation to honor them.  That should be done sooner rather than later.

 

 

                                                                        Justice

 

Justice E. Hayut

The right of every person to a minimum dignified subsistenceis, indeed, a social right that is enumerated with the most important constitutional rights. The judgment of my colleague, the President, analyzes with wisdom and sensitivity the issue that has been set before us in these petitions with regard to this right, and I concur with what is stated therein. In paragraph 35 of her judgment, my colleague, the president, quotes from the pertinent and apposite words written in this context by Justice Y. Zamir at HCJ 164/97 Conterm Ltd. v. Ministry of Finance, Customs and VAT Division, et al., IsrSC 52 (1) 289, 340 (1998), when he said “...Every person must have enough, so that he or she can enjoy human rights, in actuality and not just by law."  That message is echoed in a poem by poet Dalia Ravikovitch, "Declaration for the Future," which I have seen fit to present here:

 

Declaration for the future

 

A person, when he's hungry

or insecure,

he will make compromises,

he will do things

he never dreamt of in his life.

 

Suddenly he's got a crooked back,

and what happened to his back

that it got so crooked?

Loss of pride.

And his smile is frozen

and both hands filthy,

or so it seems to him,

from coming in contact with moist objects

whose touch he cannot escape.

 

And he has no choice,

or so it seems to him,

and it's a marvel

how for years he'll forbear,

 

and merely record the annals of his life

within,

year after year.

 

 

             Therefore, the result, according to which an order absolute will be issued in these petitions in the version proposed by my colleague, the President, is accepted by me

 

                                                                        Justice

 

Justice E. Rubinstein

 

A.          I concur with the opinion of my colleague, the president, and the comments of my other colleagues.

 

B.          Minimum subsistence is the core of the Income Support Law, 5741-1980. It represents a worthy social concept whereby the public spreads a safety net at the feet of any person in Israel so that he will not fall into the shame of hunger. The explanation to the law (Bills, 5740, 2), noted by the president, states that the purpose is "to ensure that every person and family in Israel, who are unable to provide themselves with the income required for subsistence, will receive the resources to supply their vital needs.” This concept has been well entrenched in Jewish tradition throughout the generations and the State of Israel, as a Jewish and democratic state, would not be able to adhere properly to its values if it had not designed such a safety net. It integrates into the social security system which is structured in the National Insurance Law (Consolidated Version), 5755-1995, and in other extensive social legislation. It is clearly one of the values of the State of Israel – the "value of the human being," which is mentioned in section 1 of the Basic Law: Human Dignity and Liberty – and it is found in the sphere of charity, from those same "foundations of liberty, justice and peace in light of the vision of the prophets of Israel," on which the state was founded according to the declaration of independence. Even without my citing references, no one would dispute the fact that someone who does not have enough for minimum subsistence has lost his dignity as a person, and he comes under sections 2 and 4 of the Basic Law: Human Dignity and Liberty. In Administrative Petition Appeal 3829/04 Twito v. Jerusalem Municipality, IsrSC 59 (4) 769, 779, Justice Procaccia wrote," Indeed, in Israeli law, the concept is taking root that human dignity as a constitutional right also encompasses the right to minimum human subsistence…and the state is obligated to ensure that a person’s standard of living does not drop below the threshold required to live with dignity.” See the references, id. I concurred with her opinion in that judgment, which was written in 2004, and my opinion has even strengthened since then. This purpose of the legislation justifies exercising fairness, which is doubtlessly a guiding factor for the Knesset and the public authorities.

 

C.          The question at hand focuses on whether the categorical provision – the conclusive presumption – in section 9A(b) of the Income Support law, i.e., "In the matter of this law, subject to the provisions of subsection (c), a vehicle is deemed to be property from which monthly income is generated, the amount of which is no less than the amount of the benefit that would have been paid to the claimant if not for the provisions of this subsection." Subsection (c) enumerates the exceptions that have been inserted over the years in amendments to the Law in 5761 and 5767, which were designed to soften the conclusive presumption, such as in the case of requiring a vehicle for the purpose of medical treatment or in cases of disability or other cases of limited income and a small or old car. I do not minimize those and it is clear that, over the years and after lessons learned, the legislature took steps toward helping those in need of income support in amendments to the legislation. Still, in reviewing the cases in the petitions before us, which were filed by people at the bottom of the socioeconomic ladder whose use of a vehicle does not raise them at all to the level of someone who has attained a minimum dignified subsistence if they are denied income support, it is clear that they must be entitled to a safety net, and denying them the income support, even if that is not done willingly, is disproportional in a manner that justifies intervention. I admit that I hesitated initially out of respect for the Knesset and the knowledge that, in its legislation, it has also softened the requirements with regard to vehicles, as stated. However, the constitutional examination with all its stages, as enumerated by the president and, ultimately, "the power of the locked door" facing the Petitioners, against the possibilities for individual examination, where such an examination is already built into the Income Support Law (see Part C), tips the balance in favor of the decision that we have reached. It should be emphasized that we are not trying to say, under any circumstances, that possession of a vehicle will not constitute a criterion for an eligibility test. Our approach lies within the realm of ensuring a minimum dignified subsistence by means of individual examination, and we are dealing with a situation in which, as stated, there is an existing and built in feasibility of individual examination, which is not unattainable.

 

D.          I believe that it is appropriate to write briefly about the vehicle and its place in human existence in Israel in our time. We are living in a dynamic reality, of which the legislature is also aware, in which something that was perceived as a luxury in the past, as the provenance of a select few, has become common to all. This can be said of the electric refrigerator, which has long since been called a "Frigidaire" after a certain model of refrigerators and which 60 years ago began to replace the ice boxes. At that time, it was considered a financial achievement by someone who purchased one. The same is true of the telephone for which my parents, may they rest in peace, waited their turn for about six years before they received one (they did not have any "connections") and, of course, the television which, since it appeared in Israel in 1968, was initially a luxury and a source of pride to anyone who purchased one. Eventually the personal computer, the mobile telephone and the Internet, which were not even imagined by our forebears, but by us as well, and now they are the provenance of the masses. It would be difficult to imagine our lives – and not just the lives of the wealthy, but far wider circles – without them. The vehicles that we are discussing in this matter are very similar.

 

E.          Indeed, in days past, a vehicle was a luxury to most people. In the high school in which I studied in the old north of Tel Aviv around 1960, only the school principal and the parents of one of the students in my class had a car. My parents were from the middle-class and they lacked nothing by the standards of that time, as was the case with most of my classmates, but they did not have a car nor even a driver’s license. The next generation – my generation – was the first generation of drivers and vehicles, and that was also the case in my wife's family and the families of most of my friends. Since then, a great deal of water has passed under the bridge and today it is hard to impart these stories to our generation, which is stuck in traffic jams and exasperatedly seeking parking spots in the cities. I have written these lines in order to emphasize that it is clear to everyone that a vehicle is no longer what it once was, even if it is not an existential matter as a rule.

 

F.          Indeed, these issues have also arisen in Knesset discussions in this very context. Amendments to the Income Support Law in 5761 and 5767 were implemented at the initiative of Members of Knesset (see the Income Support Bill (Amendment 13) (Motor Vehicle), 5758-1998 and the 5758 Bill, 350, and the Income Support Bill (Amendment 29) (Vehicle as Property That Does Not Generate Income), 5767-2006, Knesset Bills 5767, 119). In a meeting of the Labor and Welfare Committee on December 6, 1999, which discussed the 5758 Bill, MK Nissim Zeev said (p. 3) "Just as a Frigidaire was once something special, and a computer, today these things (vehicles – A.R.) are a routine part of life. However, the Ministry of Finance representative responded "I think that saying that a car is no longer a luxury…is view from an ivory tower.” In one of the discussions, the legal advisor to the National Insurance Institute noted (minutes of the meeting of the Labor, Welfare and Health Committee on October 31, 2011), "If we now say that subsistence includes a vehicle, we have to view the ramifications of that statement from the standpoint of the scope of payments. The perception of Israeli society may be that the time has come to view this as part of subsistence." In bringing the 5761 Bill for a second and third reading, the chairman of the Labor, Welfare and Health Committee, MK David Tal (January 1, 2001) noted that "The ownership of a vehicle in the circumstances discussed in the bill no longer constitutes a sign of wealth or luxury. In certain cases, the ownership of a vehicle is even crucial for subsistence, even if it involves a very poor family, for example, and families living on the periphery, for whom a vehicle provides the only possibility of reaching their workplace and keeping their jobs" (Record of the 15th Knesset, session 3, p. 2342). Likewise MK Taleb El-Sana (“Maintaining a vehicle these days is not a reason to deny the right” p. 2343)). On the other hand, Minister of Finance A. Shochat noted that this would contribute to creating circles of people who would not go out to work (2343). We see that the discussion in the committee and the plenum ranges between a more social oriented approach and an economics oriented approach, even though it would be reasonable to assume that everyone wants the circle of employment to expand, and the parliamentary reality which, by its nature, requires compromises, has created balances. As stated, a vehicle in itself is not necessarily and generally an existential matter, of course, and that should be emphasized. But the constitutional question is whether the results of the balances in the law are not disproportional, considering the matter before us, and the Court can only address what it sees – and, for the sake of constitutional proportionality, is there no room to turn the issue of the vehicle and its use into a criterion instead of a padlock? It seems that a vehicle as a criterion and as a basis of examination, instead of the locked door, is a proportional way that does not impair the minimum dignified subsistence in cases like the ones before us.

 

On the examination stage

 

G.          I concur with the president and my colleagues who believe that even when we are dealing with social and economic rights, there is no reason for moving the constitutional stage of examining balances to the stage of delineating the right itself. I concur with the position once voiced by President Barak, that the public interest must be taken into consideration in the framework of the conditions of the limitations clause… and not in the framework of determining the scope of the constitutional right itself" (HCJ 7052/03 Adalah v. Minister of Interior, unpublished, paragraph 105); A. Barak, Proportionality in Law – Violation of the Constitutional Right and its Limitations (5770) 102, 114). The founders of the Basic Law did not make any distinction between socioeconomic rights and other rights. We should remember that section 3 of the Basic Law: Human Dignity and Liberty, which deals with property rights – a socioeconomic right of the highest order – is at the same level as the other rights in the law which are of a different nature. Indeed, in HCJ 466/07 Galon v. Attorney General (unpublished) I had the opportunity to recall (in paragraph 8), that "Not every right or privilege that provides protection to one extent or another for human dignity in its broadest sense, comes within the realm of the constitutional right." Clearly the Court, which does not have a purse – or a sword – in the words of Alexander Hamilton, one of the fathers of political thought in the United States in its infancy (The Federalist 78), can only practice caution in imposing an actual financial expense upon the Knesset and the government. To that approach of such restraint we must adhere. However, the place of the examination is not at the stage of determining the scope of the right but, rather – as in every constitutional examination – at "the stage of the limitations clause," and, in this case, at the bottom line – proportionality – and that has been found to be defective.

 

On poverty and a minimum dignified subsistence in Jewish law

 

H.          It is impossible in such a matter not to cite the Jewish legal sources and the world of Judaism in this matter. The Bible is strewn with private and public obligations to the poor. This can be found in the Torah and repeatedly in the Prophets, and even more so in the Writings – and not just once or twice, but many times. Those that we will cite here are but a drop in the ocean. "You should not abuse a needy and destitute laborer, whether a fellow countrymen or a stranger in one of the communities of your land. You must pay him his wages on the same day, before the sun sets, for he is needy and urgently depends on it, else he will cry to the Lord against you and you will incur guilt" (Deuteronomy 24:14-15); and of the gifts of the field it is stated, “You shall leave them for the poor and the stranger, I the Lord am your God.” (Leviticus 19:10); the prophet Isaiah said (Isaiah 49:13) “For the Lord has comforted his people and will have mercy upon his afflicted.” The prophet Ezekiel says of the righteous man (Ezekiel 18:7) that "… he has given bread to the hungry and clothed the naked…"; It is written in Psalms "Happy is he who is thoughtful of the wretched, in bad times may the Lord keep him from harm" (Psalms 41:2); “…he hears the cry of the afflicted” (Job 34:28).

 

Below are words that I had occasion to write in Administrative Petition Appeal 3829/04 Twito v. Jerusalem Municipality (pp. 781-782):

 

    The public's obligation to its poor is established in the biblical ethos, which is cognizant of the fact that “… For there will never cease to be needy ones in your land” (Deuteronomy 15:11) i.e., poverty is a phenomenon that frequently accompanies human society. "It is to share your bread with the hungry, and to take the wretched poor into your home, when you see the naked, to clothe him and not to ignore your own kin” (Isaiah 58:7; I would add, as a personal note, that this passage is engraved on the tombstones of my grandmother and my mother, may they rest in peace). Food, shelter, clothing – these are man's obligation to others as kindness and certainly as obligations of the society. “The wretched poor,” says Midrash Raba, “are homeowners who have lost their dignity and their assets” (and there are other interpretations). If we wish, caring for the poorest of the poor will ensure that the human dignity – a basic right in our legal system – of the weakest part of society, is not violated. And the Babylonian Talmud states, “Rabbi Elazar said, ‘The effecter of charity (someone who causes others to give to the poor – A.R.) is greater than the doer, because it is stated, ‘The effect of righteousness is peace’” (Emphasis added – A.R.) (see also Maimonides, Gifts to the Poor, 10:6).

 

    (2) Social justice is an established element of Jewish law. It has been emphasized by the prophets of Israel: "Zion shall be saved in the judgment: her repentant ones, in the retribution" (Isaiah 1:27). Charity is established in the commandments but we should not confuse the concept of charity and kindness, which is a voluntary act, with the public-social obligation. The halachic approach to the public aspect is that "Charity is to be enforced;” in other words, people are required to give for charitable purposes, in amounts commensurate with their means (see the Shulchan Aruch, Yoreh Deah, Marks 247-248; and Aruch Le-shulchan of Rabbi Yechiel Michal Epstein. Russia, 19th-20th centuries, Yoreh Deah, particularly end of Mark 250).In the modern world, charity has been translated in part into the obligation of taxes which, aside from the expenses for security and other matters, also includes social issues. However, the individual is still obligated to pay a tithe, i.e., to give charity, and, in principle, he is restricted to not expending more than one fifth (two tenths) for that purpose. Law and charity are intertwined: "He has told you, O man, what is good and what the Lord requires of you: only to do justice and love goodness and to walk modestly with your God" (Micah 6:8); and our sages addressed this (Babylonian Talmud. Sukkah, 49b): ‘Rabbi Elazar said, to do justice – this is the law; to love kindness – this is the performance of kind deeds; and to go discreetly – this is taking out the dead and bringing a bride to the nuptial canopy,’ i.e., social obligations.

 

    (3) The author of the Book of Principles (Rabbi Yosef Albo, Spain, 15th century) notes that ‘Doing justice includes all the laws between man and his fellow man, and the love of kindness includes performing all types of kind deeds’ (article 3, chapter 30).  Indeed, the stranger, the orphan and the widow, the weaker parts of society from time immemorial ("Cursed be he who subverts the rights of the stranger, the fatherless, and the widow," Deuteronomy 27:19) are given massive protection in the Torah. And the most worthy charity for the needy is that which enables him to rehabilitate himself economically: "There are eight categories in giving charity as follows: In the highest category is one who strengthens a fellow Jew in need (who is poor – A.R.) by a gift, or loan, or offer of partnership, or employment. This sets him on his feet so that he does not require charitable aid" (Shulchan Aruch, ibid.,249, 6). See also the text of the Hafetz Chaim, Loving Kindness (to which I will return – A.R.

 

    (4) The approach is immersed in mutual responsibility: "Let a man consider that every moment he seeks his livelihood from the Holy One Blessed Be He, and even as he desires that the Holy One Blessed Be He shall hear his cry, so let him hear the cry of the poor. Let him further consider the fortune is a wheel that keeps turning in the universe, and the end of man is that he or his son or his son's son will come to a similar state (of neediness, Heaven forbid – A.R.) – men take pity on those love shown pity for others" (Rabbi Moshe Isserles, in his commentary on [Shulchan Aruch] ibid., 247, 3). See also the series of articles in edition no. 1 of Bema’aglei Tzedek – Paths of Righteousness, Journal of the Torah, Thought and Social Justice (Nisan 5764). It should be noted, however, that the needy person also has obligations (see Babylonian Talmud, Baba Metzia 78b).

 

    (5) The commandment of charity has public aspects, such as providing food for the poor (Baba Batra, 8b). ‘We have never seen or heard of a Jewish community that does not have a charity fund” (Rambam, Gifts to the Poor, 9, 13). See also Rabbi E. Afarsemon, Rabbi D. Wiskott and Rabbi Yechiel Ozeri, "Allocating Resources and Treatment Priorities in Public Medicine," Melilot, Volume I, 5758-1958, 11).

 

    (6) We can obviously see that the public's obligation vis-à-vis the needy among them is rooted in the Jewish legal ethos.

 

See also the words of former Justice M. Cheshin in AFH 11230/04 Twito v. Jerusalem Municipality (unpublished).

 

I.           The Rambam, in Hilchot Yom Tov, 6, 18, reminds everyone enjoying the jubilation of the holiday, “And when he eats and drinks, he must feed the stranger and the orphan and the widow along with the other wretched indigents.” On the classification of the poor and the tests of poverty in Jewish law, see Aviad Hacohen, Gladdening the Poor and Gifts to the Indigent in Parshiot Vemishpatim, Jewish Law in the Portion of the Week, 2011, 272-277; M. Weinfeld, Law and Justice in Israel and Among the Nations (5748). In his comprehensive book, Loving Kindness, the Hafetz Chaim discussed the public's obligation to maintain a charity fund in every city (chapter 16) and, inter alia, (p. 206) “and the collar hangs upon the necks of everyone… for the many who carry out the precept [of giving charity] are nothing like the few who carry out the precept”. At the end of the book, he also addresses the fact that “the requirement to perform acts of charity and righteousness varies according to the recipient and according to the giver” (p. 331).

 

In his preface to the book, the Netziv (Rabbi Naftali Zvi Yehuda Berlin of Volozhin) says: “The rule of charity is the existence of the world, and as it is written (Psalms 89:2), ‘Your steadfast love is confirmed forever’, and this is the duty of humankind and this is the form thereof... The people of Sodom were doomed to extinction because they did not support the poor and the needy and they behaved corruptly and inhumanly... Besides being commanded to do charity on the basis of one human being’s duty to another, we are also commanded to do so by the Torah.”

 

J.           And, indeed, as Dr. Michael Wygoda has noted in his comprehensive article, “Between Social Rights and Social Duties in Jewish Law” [Hebrew], in Economic, Social and Cultural Rights in Israel (Y. Rabin, Y. Shany, eds., 5765-2004) 233, 249-250, the duty of helping the weak “has not merely remained the duty of the individual; rather, it has become one of the principal duties of society and the community; in the words of Moses Maimonides (Gifts to the Poor, 9, 3), ‘We have never seen nor heard of an Israelite community that does not have a charity fund’”; the institution of the charity fund began in the days of the Mishnah; see discussion and references, ibid. see also Y.D. Gilat, “‘Open Your Hand to the Poor and Needy Kinsman’ – The Precept of Charity: Legal Obligation or Generosity” [Hebrew], Parashat Ha-Shavua 179, and in his words there: “... The precept of charity entails two things: the precept of charity by the individual, which is based on the generosity of the giver, and is not to be enforced; and the ‘public’ duty of charity, which is founded on the mutual consent of the city’s residents, and is often also forcibly collected”; see references, ibid.

 

Respect for fellow human beings in Jewish ethical theory

 

K.          Jewish ethical theory emphasizes a point listed in the Mishnah (Aboth 6:6) among the 48 things by virtue of which the Torah is acquired: “bearing the burden with the other” – the duty of lending one’s heart and one’s hand to sufferers, and, in the words of the interpreter, Rabbi Pinchas Kehati, “he sympathizes with his fellow and helps him, whether physically or financially or with good counsel and proper instruction”. This concept was strongly expressed by Rabbi Yerucham Levovitz, the mashgiach (spiritual counselor) at the Mir Yeshiva between the two World Wars, in his articles which appeared in his book, Knowledge, Wisdom and Ethics [Hebrew], Volume I (5727-1967). In his words, “Respect for fellow human beings is the highest point” (2, 33); it is (34) “the middle post which runs from one end to the other, encompasses the entire Torah, all of which is but a matter of respect, respect for the Deity and respect for fellow human beings”; and furthermore (35), “that this matter of respect for fellow human beings, respect for the image of God, this is the form of the entire Torah”. Bearing the burden with the other, in his words (27), is “to feel his fellow’s sorrow in every possible way... because feeling a person’s sorrow, feeling all of his pains... requires a great deal of heartfelt attention and observance, to the point of bending oneself down to feel the burden of the weight”. And in another place (50): “that bearing the burden is the virtue of empathizing with all of the sufferer’s sorrow and agony, being troubled by all of his troubles, and feeling as if those stabbing pains are stabbing into his own flesh”. I shall add that Rabbi J.D. Soloveitchik sees the image of God in respect for fellow human beings (The Lonely Man of Faith, 15).

 

L.          What is before us is a halachic duty, and not only a mere “ethical counsel”; and this applies in cases where binding norms – laws – “are sometimes pushed aside and given the status of an ‘ethical counsel’, which is ostensibly less binding” (see my article, “Halachah and Ethics for Everyone: The Life and Work of the ‘Hafetz Haim’” [Hebrew], Blessing for Abraham (a compendium of articles in honor of Rabbi Prof. A. Steinberg), 5768-2008, 461, 467). This also gives rise to the duty toward the poor, “sufficient for whatever he needs” (Deuteronomy 15:8), which was interpreted in the Talmud (Babylonian Talmud, Kethuboth 67b) as “You are commanded to maintain him, but you are not commanded to make him rich” – although, in certain cases, the duty extends to providing a certain degree of comfort, as in the case of persons who have lost their assets, as described there; see Maimonides, Gifts to the Poor, 7, 3: “You are commanded to give to the poor man according to what he lacks”; and with regard to eligibility for charity in this regard, see Rabbi N. Bar Ilan, “The Eligibility of the Poor for Charity” [Hebrew], Tehumin II (5741-1981), 453; Rabbi S. Aviner, “Your Luxuries Do Not Come Before Your Fellow’s Life” [Hebrew] , Tehumin LXIX (5769-2009) 54; Rabbi S. Levi, “Giving Charity to a Poor Person Who Is Able to Earn a Living” [Hebrew], ibid., 57.

 

Guaranteed minimum income – charity by the public

 

M.         Guaranteed minimum income is in the nature of charity and righteousness done by the legislators – that is, the public – for the needy. The Torah (Deuteronomy 15:7-8) teaches us: “If, however, there is a needy person among you, one of your kinsmen in any of your dwellings in the land that the Lord your God is giving you, do not harden your heart and shut your hand against your needy kinsman. Rather, you must open your hand and lend him sufficient for whatever he needs.” Maimonides, in his legal treatise Gifts for the Poor (7, 1), says: “It is a positive commandment to give charity to the poor of Israel according to the needs of the poor, as far as the giver can afford”; it should be noted that this precept also applies to resident aliens (Leviticus 25:35), as well as to “your kinsman”.

 

N.          Maimonides further says (ibid., 10, 1): “We are obligated to be more observant of the commandment of charity than of any other positive commandment, for charity is the sign of the righteous of the seed of Abraham, as Scripture states: ‘For I have singled him out, that he may instruct his children [...] by doing what is just and right’ [Genesis 18: 19]. And the throne of Israel cannot be established and the true faith cannot stand, except for charity, as Scripture states: ‘You shall be established through righteousness’ (Isaiah 54:14). And Israel will not be redeemed except for charity, as Scripture states: ‘Zion shall be saved in the judgment; her repentant ones, through charity’ (Isaiah 1:27).” See also Sefer Ha-Hinnuch [the Book of Education, a list of the 613 positive precepts of Judaism], Precept No. 479 (“to give charity according to one’s means”) and Precept No. 66 (“lending to the poor – the root of this precept is that God desired that God’s creatures be accustomed to and trained in the characteristic of kindness and mercy, for it is a praiseworthy characteristic”).

 

On the importance of doing and encouraging work

 

O.          In the present case, at least one of the Petitioners (paragraph 5 of the judgment by Supreme Court President Beinisch) was forced to resign from her work under circumstances which involved “the attribution [of use] of the car”. We have seen, however, that the highest level of charity in Judaism – and, as set forth above, there are eight such categories of charity – is helping a poor person find work; see also Aruch ha-Shulhan, Laws of Charity, 249, 15, by Rabbi Yechiel Michal Epstein (Russia, 19th-20th centuries), who adds: “And in our time, in many cities, there are societies which assign Jewish boys to craftsmen [to learn a trade], and this is a very great thing, as long as they supervise them to ensure that they walk in the paths of God, pray every day, and be faithful to Heaven and to their fellow human beings.”

 

P.          And Rabbi Judah the Hassid (Book of the Hassidim, 5635-1875) said: “There is charity which is not recorded as charity, but is considered by the Creator, Blessed Be He, as excellent charity. For example, a poor man who has an object to sell or book that no one wants to buy, and a person buys it from him, or a poor man who wants to write... There is no greater charity than this, that he should make efforts at writing and you should let him do so...”. The importance of giving one’s fellow human beings not only respect, but work as well, is also indicated by the interpretation given by the Sages and by Rashi [Rabbi Shlomo Yitzhaki] to Exodus 21:37, “When a man steals an ox or a sheep, and slaughters it or sells it, he shall pay five oxen for the ox, and four sheep for the sheep”. Rashi explains: “Rabbi Johanan ben Zakkai said: ‘God took pity on human dignity. An ox walks on his own feet, and the thief did not suffer the indignity of carrying him on his shoulders – he pays five; a sheep, which he carried on his shoulders – he pays four, because he suffered indignity.’ Rabbi Meir said: ‘Come and see how great the power of work is: an ox, which he took away from its work – five; a sheep, which he did not take away from its work – four.’” See also N. Rackover, The Greatness of Respect for Fellow Human Beings: Human Dignity as a Supreme Value [Hebrew] (5759-1999), who cites, inter alia, the regulations of “not shaming those who have not” (pp. 145-148); see also E. Frisch, “Rashi’s Interpretation of the Payment of Four and Five – a Diachronic and Synchronic Study (Education to Values through the Teaching of Commentary)” [Hebrew], Peraqim VII (5741-1981), Schein College of Education, Petach Tikva, 155, 159-160, with respect to work and the importance thereof; see also Wygoda, ibid., 261 ff. Accordingly, if anyone finds a possibility for a poor person to earn a bit of a living, even if it involves some slight use of a car, this should not block the poor person’s way to a guaranteed minimum income; it is sufficient for the car to constitute one of the criteria for examination, in line with the outcome of our ruling.

 

Summary

Q.          Jewish law is saturated with the duties of charity, which begin with the individual and continue with the public. This is one of the values of Israel as a Jewish and democratic state, as set forth above, and the ruling in the present case emphasizes this point.

 

Before closing

 

R.          This ruling was handed down on the last day of Supreme Court President Dorit Beinisch’s term in office. Throughout the years of her public service – almost 50 years, in the Office of the Attorney General and the Supreme Court – she made many contributions to administrative and constitutional law in Israel. Among other positions, she served as Director of the Department of High Court of Justice Cases and the Attorney General of Israel, as a Justice and as the President of the Supreme Court. These lines express appreciation for her work and the blessing which it conferred upon Israeli law – inter alia, as a trailblazer for women, as the first woman to serve as Attorney General of Israel and as the President of the Supreme Court. Supreme Court Vice President Menachem Elon, when he retired, stated that the Hebrew word for “retirement” (gimla’ot) comes from the same root as the Hebrew word for “redeemer” (hagomel); and, indeed, those who retire in good health and are satisfied with the work they have done may praise the Redeemer of Israel [a reference to the Deity] for having come out in peace. I would like to wish President Beinisch much satisfaction in her future endeavors as well.

 

Justice

 

Justice S. Joubran:

 

1.          After reading the comprehensive opinion of my colleague the president, I saw fit to add my opinion to hers and to state, as she did in her opinion, that section 9A (b) of the Income Support Law, 5741-1980 (hereinafter: the Income Support Law) violates the constitutional right to a minimum dignified subsistenceto an extent that exceeds the required and, therefore, it should be repealed. In view of the importance of the issue at hand, and the legal questions that arise, I will add a few brief comments.

2.          Human rights, civil and social alike, have had a pivotal place in the Israeli legal system since its inception. Human rights, as an integral part of the basic principles of the legal system, were borne in mind by the Court when it interpreted the law, even before the Basic Laws on human rights were enacted. They were also borne in mind by the legislative authority, which gave legal validity to many of those rights, either in its guise as a legislative authority or in its guise as a founding authority. In this context, it should be noted that, as the president stated in her opinion, the distinction between civil rights and socio-economic rights originates in the historical development of the two systems of rights, and is not a substantive distinction (paragraphs 26-29 of her opinion). Clearly, each one of the human rights imposes "affirmative" obligations and "prohibitive" obligations on the state, in accordance with the context and circumstances of the matter. There is, therefore, no difference between the right to freedom of expression, the right to equality and the right to life – and the right to health, the right to education and the right to a minimum dignified subsistence. However, all human rights differ from one another in their extent and the scope of the legal and constitutional protection afforded them.

 

3.          It is well known that human rights, civil and social, are not absolute rights and they must be balanced – among themselves, and with opposing interests and values. The task of balancing the various human rights, and balancing human rights and other social values, is not a simple matter. The legislative authority is frequently faced with this balancing endeavor, and it must do its job while keeping in mind all the constitutional norms pertaining to the matter, as well as the public's interest. The legislative authority has the ability to gather the data and to examine the issue in depth, while considering all the direct and indirect ramifications of its decision, and it is the authority that most closely reflects the will of the people at any given time. In that framework, it is not for the Court to replace the legislative authority. The role of the Court is a narrow one and its only duty is to ensure that the legislative act honors the constitutional principles of the law, which reflects the basic views of the Israeli public. In that context, in our legal system, the limitation clause established in the Basic Law: Human Dignity and Liberty and the Basic Law: Freedom of Occupation, has been recognized as an auxiliary tool to be borne in mind by the legislative authority when it endeavors to strike a balance between the violation of a protected constitutional right and the public’s interests and needs. It should be noted that, like the president, I believe that there should be no distinction, in the constitutional examination, between the manner of examining the protection of constitutional "civil" rights and the manner of examining the protection of constitutional "social" rights (see paragraph 29 of the president's opinion).

4.          Like civil rights, the social rights have been developed in Israeli law by the legislative authority and the courts. In another matter, in connection with violation of the right to equality, I noted that "The particular law creates a legal framework that reflects the manner in which the legislators decided that it was advisable to contend with a constitutional violation in a given context" (Leave for Civil Appeal 8821/09 Parhansky v. Layla Tov Productions Ltd. (not yet published, November 16, 2011); see also HCJ 721/94 El Al Israel Airlines Ltd. v. Danielowitz, IsrSC 58 (5) 749, 778-779 (1994)).  That also holds true for social rights. In a long series of legislative acts, from the first days of the state, the Knesset formulated the relationship between the social rights and competing social interests. Thus, the legislature determined the scope of the right to health, inter alia, in the State Health Insurance Law, 5754-1994, the scope of the right to education in legislation such as the Compulsory Education Law, 5719-1949, and so forth. As part of the formulation of the social rights in Israel, a long series of social laws were enacted which establish arrangements that protect the right to a minimum dignified subsistencein accordance with the welfare policy in the State of Israel. These arrangements include disability and old age pensions, financing and operating public welfare services and many others. The Income Support Law was also enacted in the framework of this array of legislation. This law establishes the last social security system designed to assist someone who is unable to secure his own subsistence. In this manner, the Knesset established one of the mechanisms that it deems fitting for exercising the right to a minimum dignified subsistence.

5.          For many years, before the enactment of the Basic Law: Human Dignity and Liberty, this large-scale task of formulating the socioeconomic rights of the citizens and residents of the State of Israel was the responsibility of only the legislative authority and the executive authority. While the actions of the executive authority were subject to judicial review, even before enactment of the Basic Law, the actions of the legislative authority were protected from judicial review, and the main contribution of the judicial authority to formulating the rights established in the Law was made by developing the law and its interpretation. Enactment of the Basic Law: Human Dignity and Liberty, which gave expression to the constitutional concept of the Knesset in its role as a founding authority, granted a constitutional – supra-legislative status to the right to human dignity. The change in the legal status of the right to dignity required the Court to develop the Israeli constitutional law, while meticulously maintaining the duty of mutual respect between the branches of government. The Court was required to infuse content into the constitutional right and also to examine the weighty questions that arise when a piece of legislation is examined through the tests of the limitation clause.

 

6.          In this framework, the right to exist with dignity has been adjudicated before this Court in several cases, and there is seemingly no need to elaborate on its importance. Thus, it was stated that "… the human right to dignity is also the right to conduct one‘s ordinary life as a human being, without being overcome by economic distress and being reduced to an intolerable poverty. This is the outlook according to which the right to live with dignity is the right that a person should be guaranteed a minimum of material means, which will allow him to subsist in the society where he lives." (HCJ 366/03, Commitment to Peace and Social Justice Society v. Minister of Finance, IsrSC 60 (3) 464,. 482 (2005); and see also HCJ 5578/02 Manor v. Minister of Finance, IsrSC 59 (1) 729, 738 (2004)). The right to a minimum dignified subsistenceis what enables a person's material existence. As such, this right is of utmost importance and constitutes the cornerstone of a person's right to dignity and, sometimes, even to all the other rights. We know that poverty and hardship create a vicious cycle from which it is difficult for even the strongest to extricate themselves. This is a reality that creates feelings of alienation and lack of identification and smothers the hope for change. Without minimum living conditions, a person cannot exercise his freedom. Without minimum living conditions, a person cannot live a full and autonomous life and cannot become an active part of his society and his community. The following was written in this context:      Living in extreme poverty is analogous to a prolonged war of existential survival. Human beings who are forced, for various reasons, to live in the shadow of profound economic deprivation are constantly occupied with the attempt to find their next source of nourishment, a roof under which they can live and their ability to contend with extreme weather conditions… Many research papers indicate the fact that life in extreme poverty is closely connected to negative phenomena, both for the people existing in its shadow and for the society as a collective within which heavy economic deprivation exists… Societies in which extreme poverty exists contend with particularly high rates of domestic violence, drug abuse, debt and petty crime (Lia Levin, A "coalition of exclusion": Non take-up of social security benefits among people living in extreme poverty," 225, Access to Social Justice in Israel, Johnny Gal and Mimi Eisenstaedt, Ed., 2009)).

 

            Moreover, this reality of poverty and hardship has been threaded more than once through the other schisms that divide the society and cause the development of hostility and animosity between those who have plenty and those who cannot obtain even the most basic commodities.

 

7.         As part of the legal formulation of the right to a minimum dignified subsistence, there are two main questions facing the legislators, by which the right is also examined by the Court. First, the question of the scope of the right is examined. In other words, the question of defining the threshold for minimum subsistence – the existence of which the state is obligated to ascertain among all its residents. Second, the question of whether the means that were formulated to ascertain that all residents of the state enjoy that level of subsistence are examined, to see if they are fulfilling their role properly.

 

8.         In the present proceeding, only the second question requires our decision, since the Petitioners made no claim regarding the amount of the income support benefit. The question, therefore, pertains only to the manner of identifying those entitled to the income support benefit. The Respondents’ argument in this context is that maintaining or using a vehicle attests, in an absolute and universal manner, to the fact that the vehicle owner or user is not entitled to the income support benefit. This is because the conclusive presumption established in the Law reflects the assumption that the financial burden of maintaining a vehicle cannot be met by means of the income support benefit alone, and that the vehicle owner has additional income that has not been reported. In the context of vehicle usage, the meaning of the argument is that a benefit applicant did not correctly report his options for financial assistance in his immediate environment. My position, like the position of the president, is that this conclusive presumption violates the right to a minimum dignified subsistenceand is a violation that cannot stand.

 

9.         It should be noted that my opinion, like the opinion of the president, that there is nothing wrong with examining the assets of a benefit applicant for the purpose of evaluating his economic ability and to ascertain the veracity of his claims in everything pertaining to his financial status (paragraph 41 of her opinion). However, it is worth emphasizing in this context that the sole purpose of examining the assets is to check the real income of the benefit applicant. The manner in which a person spends the amount of the benefit lawfully given to him is completely within his discretion. Even though the state provides someone who is unable to provide for himself with a minimum dignified subsistence, it is not entitled to violate his autonomy and his choices by intervening in the way in which the benefit is used. If a person can reduce other expenses and save some of the benefit monies that are lawfully allocated to him in order to keep or use a vehicle, that fact cannot nullify his rights to the benefit as long as such savings do not attest to concealed assets and income.

10.       Violation of the right to a minimum dignified subsistencein this case, which stems from the conclusive presumption established in the Law, forces a person to choose between possession or use of a vehicle (even if those do not necessarily attest to the fact that he possesses unreported sources of income) – and receiving the benefit. This violation is particularly grave in cases in which the vehicle serves its owner (or someone who uses it) for basic daily needs, which are not included in the exceptions set forth in the Law. There are many areas of the country in which, without a vehicle, people cannot reach the grocery store, the health clinic or educational institutions. In that context it should be noted that even though a vehicle is not necessarily a basic product that is included in the right to a minimum dignified subsistence, it would be advisable to view this right as obligating the state to provide some means of transportation to its residents. This obligation, which is the positive aspect of the right to freedom of movement, places a particularly heavy burden where the state wishes to deny the use of a vehicle to residents who have no other means of transportation. Hence, denying the possibility of using a vehicle in those areas is an extremely grave violation. It should further be noted in this context that I have not disregarded the Petitioners' argument that the areas in which access to public transportation is particularly scarce are the peripheral areas and, in particular, the regions of Arab villages, and that too could cloud the issue of the constitutionality and proportionality of the section. In any case, once we determined in this proceeding that this section should be repealed due to its violation of the right to a minimum dignified subsistence, I need not delve deeply into this issue.

 

11.        As my colleague, the president, has elaborated on the details of the violation caused by the section, and as I have also briefly mentioned the extent of this violation, I will only add a few words with regard to the disproportionality of the section. It should be noted that there is no disagreement between the president and me with regard to the proper purpose of the section, which is preventing fraudulent receipt of the benefit, based on the general purpose of the Law, which is providing a benefit that will allow for a minimum dignified subsistenceto someone who cannot obtain it for himself. Similarly, and in my opinion, the Law conforms to the values of the State of Israel and there is a rational connection between the means set forth in the Law and the purpose that it endeavors to promote.

12.        In her opinion, my colleague, the president, states that the section does not pass the second subtest of the requirement for proportionality, which is the test of the less harmful means. In her opinion, an individual examination of the benefit applications can lead to fulfilling the purpose to the same extent with less violation of the right to a minimum dignified subsistence. The question of the manner of examining the second subtest has yet to be fully clarified in the case law of this Court. In general, there are those who assert that the guiding principle in examining this subtest is that the alternative means must fulfill the purpose of the legislation to the same extent (see: Aharon Barak, Proportionality in Law – Violation of the Constitutional Right and its Limitations, 399 (2010); HCJ 7052/03 Adalah v. Minister of Interior, IsrSC 61 (2) 202, 344 (2006) and at similar costs (see HCJ 466/07 MK Zehava Galon v. Attorney General (unpublished, January 11, 2012) (hereinafter: the Dual Citizenship Law case), in paragraph 38 of the judgment of Justice E. E. Levy)). In my view, in the case at hand, we cannot establish with certainty that an individual examination meets that threshold. Even without the Respondents providing actual data in the matter, it is clear to all that an individual examination would cost more than a general denial of the benefit. Similarly, it is reasonable to assume that the chance of receiving the benefit fraudulently increases where the presumption is not conclusive.

 

13.        I discussed the difficulty inherent in this concept of the subtest in the Dual Citizenship Law case:

 

             In this matter, the question may arise about the extent to which the alternative means must fulfill the purpose of the law –must the fulfillment be complete and identical or can we suffice with a high extent of fulfillment, albeit not identical (id., paragraph 12).

 

            And regarding the costs, I noted in HCJ 1213/10 Nir v. Speaker of the Knesset (not yet published, February 23, 2012) that:

 

             In my opinion, the concern is that the requirement of identical fulfillment without additional costs is liable to empty this subtest of content and to lead, almost always and inherently, to the conclusion that no means has a more proportional alternative (id., paragraph 48).

 

And that also holds true in the case before us, in which this issue arises. In this matter, I have seen fit to concur with the president's opinion, and to determine that the Law is unconstitutional for the reason that it does not pass the test of the less harmful means.

 

14.       With regard to the extent of fulfillment of the purpose, it seems that the purpose of the section is fulfilled to a lesser extent in the framework of individual examination. However, examination of the alternative means on the backdrop of the Income Support Law as a whole, shows that the alternative means may fulfill the purpose of the Law to an extent that is not less (and perhaps even more) than the manner in which it is fulfilled by means of the present section. As stated, the purpose of the Income Support Law is to allow anyone who is eligible for income support to receive the benefit. The presumption established in this section is an auxiliary mechanism for identifying those entitled to the benefit. Notwithstanding the fact that that mechanism prevents those who are not eligible from receiving the benefit, it also prevents many of those who are eligible from receiving it. As such, the mechanism established in this section impairs fulfillment of the internal purpose of the Law. The question before us, in the context of the second test of proportionality, is whether, on the whole, the purpose of the legislation is fulfilled to the same extent. In other words, we must examine whether the excessive violation in fulfilling the purpose of the particular law (which arises from excessive exclusion), which stems from the presumption, exceeds the violation that would be created by fulfilling the purpose of the same law if individual examination were to be adopted. The burden of proving that the purpose of the law would, indeed, be fulfilled to a lesser extent if the alternative mechanism were to be adopted, was not met by the Respondents in the case before us. Furthermore, even if the costs of the particular examination would make the mechanism for implementing the Law more expensive, that extra expense is not expected to be very significant because, in any case, with the current mechanism, the state operates a system of personal monitoring in order to ascertain the nonuse of a vehicle, which entails expenses that are not negligible. In any event, the Respondents also did not meet the burden of proving that the alternative means would fulfill the purpose with significantly higher costs.

 

15.       Finally, I believe, as does the president, and for the same reasons, that the section does not meet the third subtest, which is the test of proportionality in the narrow sense. As noted above, the income support mechanism is among the last of the assistance mechanisms available in Israel for a person who is not capable of supporting himself. As such, it is advisable to employ extreme caution when a person is denied this last protective mechanism. It is clear that the damage caused by a person who fraudulently obtains a benefit to which he is not entitled is immeasurably smaller than the damage that would be caused by a person being left without the minimum means of subsistence. It should be noted in this context that it is a well-known phenomenon that precisely the neediest are those who have trouble meeting the threshold of proof required for receiving state assistance, and the state is obligated to endeavor, to the best of its ability, to reduce the number of people entitled to the benefit who do not receive it (see, inter alia, Netta Ziv, "Law and poverty – what is on the agenda? Proposal for a legal agenda for those who represent people living in poverty," Alei Mishpat, D 17 (5765); Amir Paz-Fuchs, "Over accessibility and under accessibility to socioeconomic rights, "Din Vedevarim, E 307 (5770)). It should further be noted that even though there is always a fear that people who are not entitled to the benefit will receive it, in the case of the income support benefit, this concern is relatively limited. This benefit, even if it constitutes the breath of life for those who need it, does not allow for a life of wealth and abundance, and I doubt whether many would be willing to live at the minimum subsistence level if they are able to live at a higher standard of living, only for the purpose of exercising their eligibility to the benefit. In any case, even if someone would do such a thing, that is the reason that the authorities are given broad powers to investigate the benefit applicants and, if necessary, to prosecute anyone who defrauds the state authorities.

            

16.        In view of everything stated above, I concur with the opinion of the president.

                                                                        Justice

 

             Decided as stated in the judgment of President D. Beinisch, that the order nisi will become an order absolute in the sense that we declare the repeal of section 9A (b) of the Income Support Law, 5741-1980, due to its unconstitutionality. The repeal will go into effect within six months of this date, on September 1, 2012.

 

In the circumstances of the matter, there is no order for costs.

 

Given this day, 5 Adar 5772 (February 28, 2012).

 

 

The President   Justice      Justice      Justice

 

 

Justice             Justice      Justice

 

 

_________________________

Thiscopy is subject to editorial and textual changes10041690_N04.docAB

InformationCenter Tel; 02-65936666, websitewww.court.gov.il

Menorah Insurance v. Jerusalem Candles Ilum

Case/docket number: 
CA 9311/99
Date Decided: 
Sunday, January 20, 2002
Decision Type: 
Appellate
Abstract: 

Facts: Appellee 6 (landlord), leased an industrial building to appellee 1 (Jerusalem Candles).  The building and its contents were badly damaged by fire. The landlord, who was insured by appellant (Menorah) against fire risks, was compensated by Menorah as per the insurance policy. Menorah sued the tenant and The Phoenix (the tenant’s insurance company – appellee 3), in an action of subrogation. In the district court, the latter two parties requested that the suit be summarily dismissed as, so they claimed, lessor and Menorah had waived, in the lease and in Menorah’s policy, their right of subrogation against tenant. The district court accepted this argument and dismissed the suit. Appellant now appeals that decision.

 

Held: The Court held that the appellant, as per both the lease contract and the parties’ insurance policies, had waived its right of subrogation against the tenant. 

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

 

                                                                                                                CA 9311/99

 

  1. Menorah Insurance Company Ltd.

v.                     

  1. Jerusalem Candles Ilum (1987) Ltd.
  2. Magma Industries (Ilum) Ltd.
  3. The Israel Phoenix Insurance Company Ltd.

 

Formal Respondents:

4.  Moked Amishav Ltd.                       

5.  Clal Insurance Company Ltd.

  1. A.Z. Baranowitz Real Estate and Rental Ltd.
  2. Shefa Manpower Systems Ltd.
  3. David Bagdadi

 

The Supreme Court Sitting as the Court of Civil Appeals

[January 20, 2002]

Before President A. Barak, Vice President S. Levin, and Justice M. Naor

 

Facts: Appellee 6 (landlord), leased an industrial building to appellee 1 (Jerusalem Candles).  The building and its contents were badly damaged by fire. The landlord, who was insured by appellant (Menorah) against fire risks, was compensated by Menorah as per the insurance policy. Menorah sued the tenant and The Phoenix (the tenant’s insurance company – appellee 3), in an action of subrogation. In the district court, the latter two parties requested that the suit be summarily dismissed as, so they claimed, lessor and Menorah had waived, in the lease and in Menorah’s policy, their right of subrogation against tenant. The district court accepted this argument and dismissed the suit. Appellant now appeals that decision.

 

Held: The Court held that the appellant, as per both the lease contract and the parties’ insurance policies, had waived its right of subrogation against the tenant.

 

Statutes Cited:

Insurance Contract Law, 1981, §§ 62, 62(a), 62(d)

 

Israeli Supreme Court Cases Cited:

[1]CA 32/84 Migdal – Insurance Company v. Kramer and Associates, IsrSC 41(2) 603

[2]CA 5360/93, CA 5366/93 Hasneh Israeli Insurance v. Signa Insurance, IsrSC 50(2) 611

[3]CA 3948/97,  Migdal Insurance v. Menorah Insurance, IsrSC 55(3) 769

[4]CA 206/99 A. Dori Engineering Works  v. Migdal Insurance, IsrSC 55(5) 566

[5]HCJ 846/93 Barak v. The National Labor Court, IsrSC 51(1) 3

[6]CA 779/89 Shalev v. Selah Insurance, IsrSC 48(1) 221

[7]CA 2341/91 United Mizrahi Bank v. Migdal Insurance, IsrSC 48(1) 389

[8]FHC 577/86 Zerad v. Shaul, IsrSC 40(4) 113

[9]CA 3351/92 Marshi v. Blan, (unreported decision)

 

United States Cases Cited:

[10]Sutton v. Jondahl, 532 P.2d 478 (Okl. App. 1975)

[11]56 Associates ex rel. Paolino v. Frieband, 89 F. Supp. 2d 189 (D.R.I. 2000)

 

British Cases Cited:

[12]Mark Rowlands  v. Berni Inns [1986] 1 Q.B. 211 (C.A.)

[13]Lambert v. Keymood [1999] Lloyd’s Rep. I.R. 80 (Q.B.)

 

Canadian Cases Cited:

[14]Amexon Realty v. Comcheq Services [1998] 155 D.L.R. (4th) 661

[15]T. Eaton Co. v. Smith [1977] 92 D.L.R. (3d) 425

 

Israeli Books Cited:

[16]D. Friedman, The Law of Restitution (2nd ed. 1998)

[17]A. Yadin, The Insurance Contract Law (1981) in Interpretation of Contract Laws (G. Tadeschi ed. 1984)

 

[18]A. Barak, Damages, in Tort Law – The General Doctrine of Torts (G. Tedeschi ed.,  2nd ed. 1977)

 

Israeli Articles Cited:

[19]U. Procaccia, The Subrogation Clause in Motor Vehicle Insurance Policies, 11 Mishpatim 125 (1981)

 

Foreign Books Cited:

[20]John Lowry & Philip Rawlings, Insurance Law: Doctrines and Principles (1999)

[21]E.J. MacGillavray, Insurance Law (N. Legh-Jones ed., 9th ed. 1993)

[22] John Birds, Modern Insurance Law (3rd ed. 1993)

[23]John A. Appleman & Jean Appleman, Insurance Law and Practice (revised) (1972)

[24]K. Sutton, Insurance Law in Australia (2nd ed. 1991)

 

Foreign Articles Cited:

[25]James M. Fischer, The Presence of Insurance and the Legal Allocation of Risk, 2 Conn. Ins. L.J. 1 (1996)

 

Appeal from the judgment of the District Court of Tel Aviv/Jaffa on May 3, 2000 in CC 1023/95 (Judge R. Mashal (Shoham)). Appeal denied.

 

On behalf of appellant—M. Kaplinski

On behalf of appellees 1-3—G. Nashitz

On behalf of appellees 4-5—E. Stein

On behalf of appellee 6—M. Kaplinski

On behalf of appellee  7—G. Michlis

On behalf of appellee  8—N. Lerrer

 

JUDGMENT

Justice M. Naor

The tenant of a property negligently caused fire damage to the property and its contents. The landlord’s insurance company compensated the landlord for his loss, and subsequently brought a subrogation action against the tenant. The central question considered by the district court was whether the landlord and his insurance company had waived the right to maintain an action of subrogation against the tenant. The district court answered this question in the affirmative, and dismissed the subrogation action. The parties appealed the decision. I hold that the action was properly dismissed.

Facts

 

1. A.Z Baranowitz Real Estate and Rental Ltd. owns many properties, including a 6,000 square meter industrial building, consisting of three floors and a basement, in Petah Tikva. Jerusalem Candles Ilum (1987) (which later changed its name to Magma Industries (Ilum)) [hereinafter – the tenant], rented the ground floor of the building (approximately 1,425 square meters) from Baranowitz on October 22, 1991 and, on October 21, 1993,  rented an additional 813 square meters.

 

2. On Saturday October 29, 1994, at approximately 7:00, a fire broke out in the building. The building and its contents were severely damaged.  It was necessary to demolish and rebuild an entire wing of the building.

 

3. Baranowitz was insured by Menorah Insurance Company, who is the appellant in this case. The insurance policy (policy number 03-09-0005023-94-0), including its appendix and its attachments, provided coverage against fire risks. Magma was insured against fire risks by the Israel Phoenix Insurance Company. As per the insurance policy, Menorah paid Baranowitz $1,300,000 US in New Israeli Shekels (“NIS”) for damages to the building and loss of profits. Menorah and Baranowitz signed a settlement agreement.  In the agreement, Baranowitz declared that it would make no further claims against Menorah pursuant to the policy, and that “without detracting from the generality of the above, it is agreed that the said payments constitute a full and final settlement of all the claims of all those insured by the policy for the said damage and all related or deriving from it.” Menorah, for its part, declared in the settlement agreement that it waived all claims against Baranowitz regarding the policy and the damage “except cooperation to the extent needed in order to realize Menorah’s right to indemnification pursuant to the policy (no indemnification claim shall be brought against parties toward whom Menorah has waived its right of indemnification).”

 

4. In principle, while disregarding for now the specific provisions of the lease and of Menorah’s policy (the interpretation of which is under contention), an insurer who compensates an insured has a right of subrogation, pursuant to section 62(a) of The Insurance Contract Law, 1981, which provides:

 

If the insured, due to an insurance event, has a further compensation or indemnification right against a third party, not pursuant to an insurance contract, this right is transferred to the insurer, subsequent to his payment of the insurance benefits to the beneficiary and to the extent of the benefits he paid.

 

An identical provision appears in the Menorah policy (clause 13(a) of the policy’s general clauses).

 

6. Menorah filed a subrogation action against Magma and Phoenix in the District Court of Tel-Aviv/Jaffa. Menorah claimed that Magma was responsible for the damage caused by the fire; Magma and Phoenix responded by sending third party notices (some of whom sent notices to fourth parties), in order to implead them. One of the third parties impleaded by Magma and Phoenix was Baranowitz itself. In the third party notice that the defendants submitted against Baranowitz, they claimed that, if it is determined that Menorah has a right of indemnification against Magma, then Baranowitz is in breach of his contractual obligation toward Magma in the lease agreement. As per the agreement, Magma must ensure waiver of the right of subrogation As such, Baranowitz should indemnify Magma in any amount which Magma would be obligated to pay Menorah. Menorah and Baranowitz were represented by the same lawyer – Mr. Kaplinski. This indicates that there is no conflict of interests between the two parties.

 

7. Magma and Phoenix moved for summary dismissal of the claim against them. They claimed that, according to both the lease between Baranowitz and Magma, as well as according to Menorah’s policy, Baranowitz and Menorah had “waived” their right of subrogation against Magma. They also claimed that Magma’s insurance policy with Phoenix contained a similar waiver of claims for Baranowitz’s benefit. The question whether there was a waiver of the right of subrogation – and if so, to what extent – was the question before the district court, and it is the question at issue before us.

 

8. During the pre-trial proceedings, the parties reached a procedural agreement to bifurcate the proceedings, so that it could first be determined whether claimant had a cause of action against any of the respondents pursuant to the lease or to Menorah’s policy. The trial court, since it summarily dismissed the claim and held that the right of subrogation had been waived, did not discuss respondents’ third party complaint against Menorah. Menorah now appeals this decision. Alternatively, Menorah argues that if there was a waiver, it pertained solely to the rented property and not to the damage to the whole building.

 

9. There is a close connection between the motion for summary dismissal and the third party notices that Magma and Phoenix sent to Baranowitz.  Both involve a triangular relationship between the landlord, the landlord’s insurance company, and the tenant. Both involve the interpretation of the same documents. In fact, this case is circular: the landlord received compensation from its insurer. The insurer is suing the tenant and the tenant, in turn, is suing the landlord.  It is possible that, due to the bifurcation of the proceedings (or to other reasons known to the parties), prima facie, the parties did not present all the evidence they could have and should have. Both parties refrained from calling witnesses involved in the negotiation of the rental terms, in the underwriting, and in the drafting of the settlement agreement  Based on the evidence (which was, as noted, meager), and especially on the interpretation of the documents presented and on the economic objective of the lease provisions, I have, as noted, reached the conclusion that the claim was properly dismissed, and that Menorah has no cause of action against respondents. As such, the appeal should be denied.

 

10. Since the claim was not examined on its merits, the trial court did not determine whether the fire broke out as a result of Magma’s negligence. Pursuant to the accepted rules regarding motions for summary dismissal, I will assume, for the remainder of the discussion, that Magma negligently caused the fire,(as Menorah claimed in its suit). This is, of course, merely an assumption.

 

The Provisions of the Lease and of the Policies

 

11. Clause 15 of the lease between Baranowitz and Magma provides:

 

The tenant agrees, at its own expense, to insure, with an insurance company, the contents of the rental property, including fixtures, accessories, equipment and all other contents, as well as third party liability insurance for property and body, with the landlord to be seen, for these purposes, as a third party.  Tenant’s insurance policy will include a waiver of the insurance company’s right to indemnification from the landlord. The landlord agrees, at his own expense, to insure the rental building, the air conditioning systems and plumbing of the rental property. The landlord’s insurance policy will include  a waiver of his insurance company’s right to indemnification from the tenant.

 

All policies will be calculated in current U.S. dollar values or indexed to the monthly consumer price index.

 

All the insurance policies will be for the benefit of both the landlord and tenant. Any negotiations with insurance companies over incurred losses will be held by the tenant in coordination with the landlord.

 

The landlord will have veto power over the negotiation procedure and over the outcome of negotiations regarding damage to the rental property, including fixtures and installations of the property.

 

All payments received from the insurance companies or in any other way for damages to the landlord will be paid first and foremost to the landlord, for reparation of the damages owed to him, only after which can the tenant receive the remainder of the sum in compensation for his damages, if such were in fact incurred. The tenant agrees to submit the abovementioned policy to the landlord no later than ten days after the close of the agreement.

 

(emphases added).

 

12. I shall foreshadow my conclusions, by hinting that Magma and Phoenix argue – and their argument was accepted by the trial court - that the purpose of the lease was to distribute the risk between the landlord and the tenant, such that  the landlord would insure the the building and the tenant would insure the contents of the property, while each would waive their claims of subrogation against the other in their insurance policies. The trial court also held that this is an accepted practice in buildings with many tenants. Magma and Phoenix claim that the lease should be used as an aid for the interpretation of Menorah’s insurance policy, since it is presumed that the parties ensured that their insurance policies would realize their contractual obligations.

 

13. Clause 13 of Menorah’s insurance policy is a verbatim copy of Clause 62 of The Insurance Contract Law, which provides:

 

Subrogation

 

a) If the insured, due to an insurance event, has a further compensation or indemnification right against a third party, not pursuant to an insurance contract, this right is transferred to the insurer, subsequent to his payment of the insurance benefits to the beneficiary, and to the extent that those benefits were paid.

 

b) The insurer is not permitted to use the right transferred to him pursuant to this clause in a manner that would infringe upon the insured’s right to collect indemnification or compensation from a third party above and beyond the benefits he received from the insurer.

 

c) If the insured received compensation or indemnification from the third party, which is due to the insurer pursuant to this clause, he shall transfer it to the insurer. If the insured enters into a settlement agreement, waives a right or takes other action which infringes upon the right that was transferred to the insurer, he must compensate the insurer for it.

 

d) The provisions of this clause will not be applicable if the insurance event was unintentionally caused by a person from whom an insured reasonable person would not claim compensation or indemnification due to familial relations or employer-employee relations.

 

14. Our discussion regarding Menorah’s policy will focus on clause (m) in the specifications regarding comprehensive fire insurance coverage [hereinafter – the Waiver Clause]:

 

 

Waiver of Subrogation

 

It is hereby agreed that in addition to clause 13(d) of the general terms of the policy, the provisions of the subrogation clause will not be applicable if the insurance event was caused by agents of the insured, stockholders of the insured, members of the board of directors of the insured; against Insurance Companies Ltd., Bar Beton Ltd., those renting or leasing space from the insured, as well as against Bezeq the Israel Telecommunication Corp., Ltd. and The Israel Electric Company.

 

(emphasis added)

 

15. The “Extensions and Special Conditions” section of Magma’s insurance policy with Phoenix (clause 20) also includes a subrogation waiver:

 

Waiver of Subrogation Rights

 

20. The insurer hereby waives any claims of subrogation  against the owners, managers, employees, parent company, or subsidiary companies of the insured; against companies whose owner is the same as that of the insured party; and against any other party to which the insured waived his claims in writing or to which he guaranteed, in writing, indemnification, or production of a waiver of the right of subrogation against said party.

 

Denial of the Insurer’s Right of Subrogation as an Exception to Accepted Legal Rules

 

16. It is a general principle that a negligent person who caused damage must compensate the damaged party for the damage caused by his fault. Sometimes the damaged party has an insurance policy that covers the incurred damage. The fact that the damaged party is insured, and that the insurer paid him, does not usually exempt the party who caused the damage from bearing the consequences of his actions. Clause 62 of The Insurance Contract Law grants the right of subrogation to the insurer who paid the insured, and he is entitled to sue the party who caused the damage. The right of subrogation is an accepted right in the law of other countries as well.  See U. Procaccia, Subrogation in Motor Vehicle Insurance Policies, 11 Mishpatim 128-29 (1980) [19]. For a comparison between the rights of subrogation, assignment, and restitution see D. Friedman, The Law of Restitution 260 (2nd ed. 1998) [16]. It is accepted to say that in a subrogation situation, the new creditor “stands in the shoes of his predecessor.” See, e.g. CA 32/84 Migdal – Insurance Company v. Kramer and Associates [1]. Sometimes it is said that the insurer and the insured “are one.” John Lowry & Philip Rawlings, Insurance Law: Doctrines and Principles 203 (1999) [20]. In the situation where the insured cannot sue the party who caused the damage, due to an agreement between them, the insurer cannot sue the him either: nemo dat quod non habet.

 

A negation of the insurer’s right of subrogation may be anchored in the law or it may be anchored in a contract.  When the right of subrogation is denied we have an exception to the following two principles: the principle that the party who negligently caused damage should bear the consequences of his actions, and the principle that the existence of insurance in the hands of the damaged party does not exempt the party who caused the damage.

 

17. The right of subrogation may also be negated pursuant to statute or common law. Section 62(d) of The Insurance Contract Law provides that the provisions relating to subrogation will not apply in a case where the insurance event was caused by a person from whom, due to familial relations or employer-employee relations, a reasonable person would not claim compensation or indemnification. In the opinion of Professor Yadin, clause 62(d) is not a numerus clausus. Rather, the two relationships specified in it – familial relation or employer-employee relation – are examples of a more general category, and do not bar application of the provision to other relations in that category  See A. Yadin, The Insurance Contract Law 157 (1981) [17]. I will return to this issue below.

 

18. At times, the right of subrogation may be denied pursuant to the terms of the contract between the damaged party and the party who caused the damage, and sometimes it is denied due to a contract between the insured and the insurer. Our consideration of the negation of the right of recourse will focus on a situation where the injured party and the party that caused the damage agreed, before the damage occurred, to exempt the latter from responsibility. Once this agreement is made, the damaged party has no claims against the party who caused the damage.  Thus, neither does the insurer have claims against the party who caused the damage: the insurer “stands in the shoes of the damaged party.” If the damaged party conceals the existence of his agreement with the party who caused the damage from his insurer, it may release the insurance company from its obligation toward the damaged party. See A. Barak, Damages, in Tort Law – The General Doctrine of Torts 404 (G. Tedsky ed.,  2nd ed. 1967) [18].

 

19. The trial court based its ruling primarily on the meaning of the “waiver clause” in Menorah’s policy, as according to its approach, the lease serves as the contextual background for the interpretation of that policy. I intend to demonstrate that the lease, Menorah’s policy, and Phoenix’s policy all create a complete and harmonious arrangement. The interpretation of the documents, each on its own, and certainly when they are read together, leads to the conclusion that the damaged party and the party that caused the damage agreed, previous to the occurrence of the damage, to distribute the risk between them, such that the landlord would insure the building on the rental property and the tenant would insure the contents of the rental property, with a reciprocal waiver of the right of subrogation. Both insurance policies contain provisions relating to the waiver of subrogation. Their language is different, but the policies reflect (in respect to fire damages) the agreement between the parties in the lease. The evidence indicates that the lease was sent to Menorah before it was underwritten. The two sides should be presumed to be acting in good faith, and thus the insurance policies reflect the agreement in the lease. Compare CA 5360/93, CA5366/93 Hasneh Insurance v. Signa Insurance, [2] at 611 (Strasberg-Cohen J.).

 

20. Let us put aside the interpretation of the documents for now. Let us turn to comparative law, so that it may assist us in our understanding of the economic objective of the system of contracts. It is the meager evidence regarding the subjective intentions of the parties which makes it important to demonstrate that the agreements are standard ones. Subsequently, we will return to the agreements and their interpretation.

 

 
Comparative Law

 

21. Often, the party who causes the damage and the injured party meet for the first time at the event in which the damage is caused. The damaged party has insurance, and the insurer compensates him for the damages. The general principle is, as we have said, that the insurer is entitled to recourse against the party who caused the damage, pursuant to the right of subrogation.

 

In some cases, the damaged party and the party who caused the damage are not strangers.  A landlord and his tenant, for example, or a contractor and sub-contractors, or a buyer and seller, may have had contractual relations prior to the tort. Due to their contractual relations they each have an interest in the same asset. Once the insurance event occurs, the damaged party is compensated by his insurer. Comparative law reveals many cases, in the context of such contractual relationships, of the damaged party having insurance, and these cases examine the consequences of such insurance for the damaging party’s liability. A common issue in these cases is, if the damage was caused by one of the parties to the contract, whether the parties intended to waive the right of subrogation. Let us review a few of these examples. In light of the issues raised by this appeal, we shall focus especially on landlord-tenant relations.

 

22. The case law we will cite sometimes describes complex or multiparty situations. In our case there are four parties: the tenant, the landlord, and the two insurance companies. In order to simplify and to prevent unnecessary repetition, we will first describe a simple model which involves only three parties. This model, including the names of its participants and its systems of contracts will accompany us hereinafter.

 

23. Let us assume that Reuven and Shimon, sign a contract, which is intended to realize a shared economic objective.  The contract pertains to certain property (such as a rental agreement). Let us call this agreement “the basic contract.”  Reuven approaches an insurance company (hereinafter – the insurance company) and insures the property. From this point forward, we shall no longer call Reuven by his name, but rather we shall call him “the insured.” One day, Shimon negligently causes damage to the property of the insured (from this point forward, we shall no longer call him Shimon, but rather “the party who caused the damage”). The damage constitutes an “insurance event” according to the policy. The insured turns to the insurer, the insurer compensates the insured, and the insurer subsequently sues the party who caused the damage, pursuant to the right of subrogation. The party who caused the damage wishes to defend against the insurer’s suit and asserts that the basic contract protects him from such a suit. It seems, from a review of case law of other countries, that the question of whether it is correct to interpret the basic contract as a denial of the right to maintain an action of subrogation has greatly engaged the courts of various legal systems.

 

Canadian Law

 

24. An instance similar to our own appears in Canadian Law, in the judgment of the Court of Appeal for Ontario in Amexon Realty v. Comcheq Services [1998] 155 D.L.R. (4th) 661 [14]. In this case, a fire broke out in a rental property; the insurer fully indemnified the landlord and sued the damage causing tenant, pursuant to the right of subrogation. In the basic contract, the landlord agreed to insure the property against fire damages, and the tenant agreed to pay a pro rata part of the insurance premium.  The tenant further agreed to make necessary repairs to the rental property, with the exception of fire damages. The insurer’s subrogation suit was summarily dismissed. The court reviewed some of the decisions of the Supreme Court of Canada, the most recent of which was T. Eaton Co. v. Smith [1977] 92 D.L.R. (3d) 425 [15]. Many of the cited cases concerned claims made by insurers who, pursuant to their right of subrogation, sued tenants whose negligence caused fire damages. The Supreme Court of Canada made it clear that, under such circumstances, the outcome of the suit depends on the provisions of the basic contract and not on the provisions of the insurance policy, since the insurer stands “in place” of the insured, and does not have more rights than the insured toward the tortfeasor. In that case, the Supreme Court of Canada held that the terms of the lease freed the tenant from the risk that his future negligence would cause damage to the insured. As such, in Amexon [14], the Court of Appeals held that the basic contract there provided that the insured should turn to the insurer – and not to the damaging party – for compensation.

 

British Law

 

25. In Britain, the guiding case is Mark Rowlands v. Berni Inns [1986] 1 Q.B. 211 (C.A.) [12]. In Rowlands, the basic contract (which was also a rental agreement) contained a clause which provided that the landlord would insure the rental property for fire damages and use the insurance benefits to repair the property. The tenant agreed, in the basic contract, to share the costs of paying the insurance premiums. The contract further provided that the tenant would not be under an obligation to repair the rental property even if his negligence caused the insurance event (the fire). The court held that the insurer, who paid the insured, would not be able to receive compensation from the damage causing tenant, despite the fact that the latter was not mentioned in the insurance policy. According to the court, it was clear from the rental agreement that the insurance policy was issued for the benefit of the tenant as well. The party who caused the damage participated in payment of the insurance premium, and the rental contract released him from responsibility for the fire damages. For an analysis of the judgment, see J. Lowry & P. Rawlings, Insurance Law: Doctrines and Principles 402 (1999) [20]; E.J. MacGillavray, On Insurance Law (N. Legh-Jones ed., 9th ed. 1993) [21]; John Birds, Modern Insurance Law 290 (3rd ed. 1993) [22]. 

 

26. Rowlands [12] was later analyzed in the decision of Lambert v. Keymood.[1999] Lloyd’s Rep. I.R. 80 (Q.B.) [13]. In Lambert, the court determined that the question whether a waiver of the right of recourse existed in the basic contract would be answered, first and foremost, by the intentions of the parties as reflected in the basic contract. In distinguishing the facts of that case from the facts in Rowlands, the court ruled that the lease before it did not suggest that the owner’s insurance was also for benefit of the tenant, and thus did not negate the insurer’s right of subrogation. In the first supplement to the 9th edition of MacGillavray, On Insurance Law (N. Legh-Jones ed,. 9th ed., 1997), it is noted that the court in Lambert correctly distinguished the Rowlands judgment. The question whether the parties intended to release the party who caused the damage depends on the basic contract, and the landlord’s insurance policy in the Lambert case was not made to the benefit of the tenant.

 

The United States

 

27. American Law is also characterized by similar differences of opinion regarding whether provisions in the basic contract should be interpreted as negating the insurer’s right of recourse.

 

I do not intend to review the many decisions handed down in situations where the basic contract was a rental agreement and the policy insured against fire damages. I will note two primary trends. The Oklahoma Court of Appeals, in Sutton v. Jondahl, 532 P.2d 478 (Okl. App. 1975) [10], held that, in the absence of an express stipulation otherwise, the tenant will be considered a “co-insured” in the landlord’s insurance policy. Therefore, the insurer cannot exercise the right of subrogation toward the damage causing tenant responsible for the fire. Sutton [10] was based on two rationales: that the rent payments reflect participation by the tenant in the landlord’s insurance premium, and that the tenant has an interest in insuring the building itself.

 

Many United States courts have adopted Sutton [10]. Many other courts, however, have rejected Sutton’s holding. See 6A John A. Appleman & Jean Appleman, Insurance Law and Practice (revised) §§ 4051-55 (1972) [23]. Recently, a federal court rejected the Sutton approach. See 56 Associates ex rel. Paolino v. Frieband, 89 F. Supp. 2d 189 (D.R.I. 2000) [11]. This latter court emphasized that no prior assumptions should be made regarding the intentions of the parties in the rental agreement. Tenants, like other people, will usually be responsible for the consequences of their negligence, and the landlord is entitled to recover from them.  The specific terms of the rental agreement should be examined on a case by case basis to determine whether the insurer, stepping into the shoes of the insured, has the right to sue the negligent tenant in a claim of subrogation.

 

28. For a critical view of courts which grant tenants a “quasi-insured” status in landlords’ insurance policies, see James M. Fischer, The Presence of Insurance and the Legal Allocation of Risk, 2 Conn. Ins. L.J. 1 (1996) [25]. Fischer argues that granting such a status sometimes constitutes a windfall to the negligent tenant.

 

29. An examination of the various decisions shows that, when the parties intended that the landlord’s insurance would also be for the benefit of the damage causing tenant, courts do not permit the insurer to institute an action of subrogation against the negligent tenant. The trend in both in England and the United States is that courts examine, without making prior assumptions regarding the parties’ intentions, the contract in question in order to determine whether the insurer waived his right of subrogation. The key question, in both case law and legal scholarship, is whether the intention of the parties in the basic contract was for the insurance to be made for the benefit of both parties.  As John Birds notes, in reference to Rowlands [12]:

 

It was clearly crucial to the result of the Mark Rowlands case that the terms of the lease made it clear that the insurance was for the benefit of both parties. Not all leases will be so worded.  It may be that the reasoning can be extended to other relationships between persons interested in the same property, for example vendor and purchaser of land where the vendor’s policy expressly ensures for the purchaser’s benefit between contract and completion, and owner and hirer of goods where the owner has insured pursuant to a condition of the contract of hire.

 

John Birds, [22] at 292 (emphases added).

 

30. We have stated that at times, as a result of the provisions of the basic contract, the insurer will have no recourse to the party who caused the damage – in other words, the basic contract negates the right of subrogation. A provision regarding the negation of the right of subrogation may be included in the basic contract, in the insurance policy or, as in this case, in both the contract and the insurance policy. The insured has an obligation to notify the insurer that he has waived the right of subrogation. If the insured does not do so, he risks a charge of nondisclosure. A waiver of the right of subrogation, which increases the insurer’s risk since he will have no recourse for compensation in case of an insurance event, naturally has an effect on the premium.

 

31. There are many advantages to an educated and deliberate waiver of the right of recourse. One of them is avoiding double insurance. See K. Sutton, Insurance Law in Australia 205 (2nd ed. 1991) [24].  There are also other ways of avoiding double insurance, such as coinsurance. In many cases double insurance occurs due to inattentiveness on the part of the insured parties. Double insurance usually occurs unintentionally See CA 5360/93, 5366/93 Hasneh Insurance v. Signa Insurance, [2] at 611. At times, parties to a joint venture (such as a construction project involving many parties) insure themselves separately for identical risks. If an insurance event does not occur, the parties may never find out that they are each paying insurance premium separately for the same coverage. With proper planning this situation can be avoided.

 

32. The issues of double insurance may raise complex legal issues once the insurance event occurs. See CA 3948/97,  CA5449/97 Migdal Insurance [3]; CA 206/99 A. Dori Engineering Company v. Migdal Insurance [4]. In CA 3948/97 Justice Or gave an example of double insurance: a landlord insures his property for fire damages and the tenant renting or guarding that property insures it with an insurance policy that covers fire, and which also covers damages to the landlord’s interest in the property. This is an example of double insurance, which can result in the insurance premium being paid twice without the knowledge of the parties. Double insurance, aside from raising complicated legal issues, also has monetary consequences.

 

33. The proper planning of risk management, such that one party involved in a complicated deal insures the property while the right of recourse toward others is waived, may prevent double insurance. Up to this point we focused on examples in which the basic contract was a lease. A waiver of the right of recourse is also common in the case of primary contractors and sub-contractors. The American Institute of Architects recommended that its members use a standard formula for a waiver of the right of subrogation in situations where architects, contractors, sub-contractors and others work together on a complicated project. See Michael R. Bosse, Understanding the Scope of Waiver-of-Subrogation Clauses, in 21 The Risk Management Letter Issue 7 (2000). As explained there, waiver-of-subrogation agreements will likely prevent unnecessary litigation and encourage cooperation between the parties taking part in the project.  A waiver of the right of subrogation is also common in buyer-seller relationships, see Fisher, [25] at 96, and in other situations where two or more parties have an interest in a joint property or project.

 

The Contracts at Issue in this Appeal

 

34. Let us return to our interpretation of section 15 of the rental agreement, which is the basic contract in our case. Let us once again quote it in part:

 

The tenant agrees, at its own expense, to insure, with an insurance company, the contents of the rental property, including fixtures, accessories, equipment and all other contents, as well as third party liability insurance for property and body, with the landlord to be seen, for these purposes, as a third party.  Tenant’s insurance policy will include a waiver of the insurance company’s right to indemnification from the landlord. The landlord agrees, at his own expense, to insure the rental building, the air conditioning systems and plumbing of the rental property. The landlord’s insurance policy will include  a waiver of his insurance company’s right to indemnification from the tenant.

 

All policies will be calculated in current U.S. dollar values or indexed to the monthly consumer price index.

 

All the insurance policies will be for the benefit of both the landlord and tenant . . .

 

(emphases added).

 

As noted, clause 15 reflects a typical deal between landlords and tenants, which is common in many countries. Magma brought Moshe Katalanik, who has been operating in the insurance business in Israel since 1978, as an expert witness. According to Katalanik’s opinion it is an common practice, when a property has many users – as in a building, an office building, or an industrial building – to divide the insurance premium between landlord and tenants. The prevailing custom is that the landlord insures the entire building and its main systems, and each of the tenants insures the contents of the property in their separate possession. It is accepted to include, in rental agreements, a clause which expressly provides that the tenant and the owner will include, in the insurance policies, a clause by which the insurers waive the right of subrogation. According to the expert opinion, this practice – that every tenant takes out insurance for his property in the framework of a mutual system of waivers of subrogation – is one of the main principles of the management of properties with multiple users.

 

35. Menorah and Baranowitz found fault with the trial court’s decision to accept the opinion of Katalanik, who was never present on the property, and who took no part in the drafting of the leases or the underwriting process. In my opinion, the trial court had the authority to rely on the opinion of Katalanik, who testified regarding an accepted commercial practice. I mentioned previously that there was no testimony presented by those involved in the negotiations toward the signing of the rental agreement or in the underwriting. Thus, we have no evidence regarding the “subjective intent” of the parties. See HCJ 846/93 Barak v. The National Labor Court, [5] at 3 (Barak, V.P.). In the absence of evidence regarding the parties’ subjective intent, we have no choice but to seek “the objective purpose of the agreements as fair parties protecting typical interests form it.” CA 779/89 Shalev v. Selah Insurance, [6] at 221. In interpreting the insurance contract we must pay due attention to the “objective of the specific insurance contract according to the insurance objective it is meant to provide.” CA 2341/91 United Mizrahi Bank v. Migdal Insurance, [7] at 389 (Levine J.). Katalanik’s testimony regarding the typical accepted commercial practice can cast light upon the interpretation of the rental agreement and the insurance policy. Furthermore, the practice we observed in the law of other countries accords with Katalanik’s opinion.

 

36. As we have seen in the law of other countries, the question whether the proper interpretation of the basic contract is waiver of the right of subrogation has been raised repeatedly. As noted, the key question is whether the parties’ intention in the basic contract was that the policy taken out by the landlord would also be made “for the benefit of the tenant,” who would later cause damage to property. In our case, it was expressly stated in clause 15 of the rental agreement that the landlord must insure the building on the rented property such that the insurance policy would include a condition providing insurer’s waiver-of-subrogation toward the tenant, and that the insurance be “for the benefit of … the tenant.” It seems that whoever drafted the lease before us made sure to make the parties’ intentions unquestionably clear. If I may hazard a guess, this was done with full knowledge of the issues raised by the case law and the scholarly literature, and with an awareness of the key question: is the insurance policy made for the benefit of both the landlord and tenant? In the rental agreement before us, the parties left no room for doubt or interpretation. The rental agreement explicitly provides that the landlord’s insurance will also be made for the benefit of the tenant (and vice versa).

 

37. Thus, my conclusion is that the basic contract between the two parties – the rental agreement – barred the possibility of the landlord’s insurance company’s recourse to the damage causing tenant pursuant to the right of subrogation. Prima facie, the discussion could have ended here, since the insured cannot transfer to his insurer more than he has. However, as I noted, we have before us a harmonious web of agreements. I will now proceed to analyze the waiver clause in Menorah’s policy.

 

I have not forgotten that Menorah claims, alternatively, that the waiver applies to the rental property alone, and not to the entire building. This plea will be more comfortably discussed after we contend with the waiver clause.

 

Menorah’s Policy – The Meaning of the Waiver Clause

 

38. Let us once more quote the waiver clause in Menorah’s insurance policy (clause (m) of the specifications for extended fire insurance):

 

Waiver of Subrogation

 

It is hereby agreed that in addition to clause 13(d) of the general terms of the policy, the provisions of the subrogation clause will not be applicable if the insurance event was caused by agents of the insured, stockholders of the insured, members of the board of directors of the insured; against Insurance Companies Ltd., Bar Beton Ltd., those renting or leasing space from the insured, as well as against Bezeq the Israel Telecommunication Corp., Ltd. and The Israel Electric Company.

 

39. Unfortunately, as is often the case in insurance policies, this clause is not notable for its clarity. Its language made it possible for Menorah to argue that the connection to the subrogation clause is merely coincidental, an interpretation whose internal logic is dubious. According to its argument, the provision deals with the situation of “joint tortfeasors.”

 

40. In order to understand Menorah’s argument, we will use the term “people connected to the insured” for those mentioned in the clause as “agents of the insured, stockholders of the insured, members of the board of directors of the insured.” We will also use the shorthand term “parties appearing at the end of the clause” in place of “Insurance Companies Ltd., Bar Beton Ltd. and those renting or leasing space from the insured, Bezeq the Israel Telecommunication Corp., Ltd. and The Israel Electric Company.” Menorah’s interpretation of the waiver clause is that the right of subrogation is waived when one of the people who are connected to the insured and one of the parties appearing at the end of the clause are joint tortfeasors.

 

This interpretation first came up – as a surprise – in the testimony of Menorah’s witness Mr. Caftori:

 

Q. I return once more to clause 13 of the policy [the waiver clause], in your opinion, does the wording of the clause leave no room for doubt, or is a different opinion possible?

 

A. As I see it, it leaves no room for doubt. The clause expressly states that the waiver is only for a very limited matter – when there are joint tortfeasors.

 

Q. Where do the words “joint tortfeasor” appear?

 

A. True, the words do not appear, yet the meaning is clear that indeed the reference is to joint tortfeasors, and that is the meaning of the waiver of subrogation.

 

Q. Who has to commit the tort jointly with whom?

 

A. Agents of the insured, as well as those renting space from the insured.

 

Q. Do you not think that your interpretation requires the wording of the clause to be “agents of the insured, together with …?”

 

A. One can always phrase a sentence differently. We have the right to institute a claim of subrogation against a tenant if he was negligent. Had an employee of Baranowitz, however, dropped a cigarette butt and there was a gas leak in Jerusalem Candles, and as a result a fire broke out – in that situation there is a waiver.

 

Q. Do you agree that someone reading the clause, who does not know the intention, cannot see your interpretation as the correct one?

 

A. I can only state my opinion.

 

See pp. 10-11 of the transcript.

 

The example given by Caftori in his testimony for the application of the waiver clause – that there is no right of subrogation if one of Baranowitz’s shareholders was smoking a cigarette and there was a gas leak caused by Magma, and thus the damage was caused – bears witness against itself, that it is an incorrect interpretation of the waiver clause. The example would be most rare. Moreover, the words “joint tortfeasors” do not appear in the clause, and this interpretation of the waiver clause “hangs by a thread.”

 

41. In my opinion, despite its cumbersome language, the interpretation of the clause is simple. It has two parts; each one enumerates a group of exceptions to the waiver clause. The clause should be read in the following manner:

 

a) The provisions of the waiver clause will not apply if the insurance event was caused by people who are connected to the insured.

 

b) The provisions of the insurance clause will also not apply against:

 

  1. Insurance Companies Ltd.
  2. Bar Beton Ltd.
  3. People renting or leasing property from the insured.
  4. Bezeq the Israel Telecommunication Corp., Ltd.
  5. The Israel Electric Company.

 

42. Regarding people connected to the insured, we refer back to clause 13(d) of the policy (which is a verbatim copy of clause 62(d) of the Insurance Contract Law). The clause provides that the provisions of this clause (the subrogation clause) will not apply if the insurance event was unintentionally caused by a person from whom an insured reasonable person would not claim compensation or indemnification, due to familial relations or employer-employee relations between them. We mentioned the interpretation of Professor Yadin, according to which this  list is not a numerus clausus. The case law has not yet settled the question whether this is a numerus clausus or not. If Professor Yadin’s interpretation is correct – it may be that this clarification is superfluous.  It seems that the drafter did not rely on what might be determined by the case law, and took caution to clarify that which needed clarification,. The first part of the waiver clause tells us that there will be no right of subrogation if the insurance event was caused by people connected to the insured. Compare the language of the waiver-of-subrogation clause in Phoenix’s insurance policy, as quoted above in para. 15.

 

43. In the second part of the waiver clause (beginning with the word “against”) the clause specifies a number of further parties toward whom the right of subrogation is waived. Among them are parties renting space from Baranowitz. Magma rents space from Baranowitz and, as such, the the provision of the subrogation clause does not apply to it.

 

44. Thus, we find a good fit between the interpretation of the rental agreement, discussed above, and the insurance policy. Menorah witness Caftori confirmed that the policy was the fruit of negotiations between Baranowitz and Menorah, and that Baranowitz had an insurance consultant “who tailored the policy and fit it to the  specific requirements.” See p. 6 of the transcript. Caftori also confirmed that, to the best of his knowledge, there is no contradiction between the policy and Baranowitz’s obligations. See p. 7 of the protocol.

 

45. In the settlement agreement, Baranowitz agreed to help realize Menorah’s subrogation right pursuant to the insurance policy. However, after this obligation appears a parenthetical note that a subrogation suit shall not  be brought against parties toward which Menorah waived the right of indemnity. Thus, I have reached the conclusion, as mentioned, that Menorah waived the right of subrogation against Magma.

 

46. I quoted Phoenix’s policy above. The waiver-of-subrogation clause in that policy is worded simply and not in the complicated way that Menorah’s waiver clause is worded. In this clause, the insurer (Phoenix) waives the right of subrogation against any party against which the insured (Magma) waived its right to action in writing. Magma waived the right of subrogation against Baranowitz, in writing, in the rental contract. In the rental contract, the tenant and the landlord each separately took it upon themselves to have insurance policies that distribute the risk between them, while including a reciprocal waiver of the right of subrogation. The fit between the provisions of the rental agreement and the provisions of the insurance policy is required by Baranowitz’s obligation of good faith. Baranowitz, as noted, was assisted by an insurance consultant. It agreed to ensure a waiver of the right of subrogation, and it fulfilled its obligation: Menorah waived its right of subrogation against those renting space from Baranowitz. Despite this, Menorah tried its luck in the present suit, while providing an interpretation of the waiver clause of the policy which is, to put it lightly, artificial and forced. This attempt was properly dismissed.

 

The Alternative Claim: Menorah’s Waiver of its Right of Subrogation Was Given Regarding the Rental Property Only and Not Concerning the Entire Building

 

47. Menorah claims, apparently in the alternative, that the scope of the waiver of the right of the right of subrogation is limited – the waiver only refers to the rental property and not to the entire building. According to its argument, the decision of the trial court creates an “absurd” result, by which Menorah’s waiver applies to the entirety of the property insured in Menorah’s policy, property whose worth is estimated at $12,900,000. It would be difficult to refrain from noting that this amount is deceptive. The amount refers to many properties under Baranowitz’s ownership, and not only to the property under consideration in this case.

 

48. Menorah refers to definitions of “the building” and “the rental property” in the preface to the lease contract, in order to support its alternative argument:

 

Whereas a 6,000 square meter, four (4) story industrial building is built on the property (hereinafter – the building)

 

 

Whereas it is the tenant’s desire to rent, from the landlord, the entire 1,425 square meter ground floor of the building, as well as parking spaces in the perimeter of the building, all as marked in the attached scheme, marked as “Annex A” and constituting an inseparable part of this contract (hereinafter – the rental property) under conditions and for consideration detailed hereinafter in this agreement, and the landlord agrees to this….

 

Subsequently, Magma rented an additional space of 813 square meters.

 

As noted, in section 15 of the rental agreement, Baranowitz agreed to insure the “the rental building” at his own expense (emphasis added).

 

Menorah claims that the language of clause 15 of the rental agreement unequivocally indicates that the waiver by the landlord was given only regarding the structure of the rental property, and not regarding the entire building. In other words, the argument is that the waiver refers only to the outer walls, ceiling and floor of the two spaces which Magma rented. It does not refer to other parts of the building (whose total area is 6,000 square meters), which were not rented to Magma.

 

As this discussion commences, it should be noted that Menorah  does not rest this alternative plea on any provision of its insurance policy. It relies solely on the provisions of the rental agreement. There are no grounds, in the waiver clause of the insurance policy, for the distinction which Menorah is trying to make between the ”building” and the “rental property”.. Menorah’s interpretation creates disharmony between the rental agreement and the insurance policy. As has been clarified, the policy was intended, inter alia, to realize the provisions of the rental agreement, and it is correct to interpret the two documents as fitting one another. There is no logic to the claim that Menorah’s policy includes a subrogation right waiver which is more encompassing than necessary according to the lease. There is no economic sense in the argument that Menorah waived more in the insurance policy than what Baranowitz bound himself to waive in the rental agreement.

 

49. Furthermore, on the merits, as we turn to interpret the rental agreement itself, I do not accept Menorah’s argument that the waiver in the rental contract was restricted to those parts of the building that are considered “the rental property.” I arrive at this conclusion both on the basis of a literal interpretation of clause 15 of the lease and also – and this is my principal reason – on the basis of its objective.

 

Rejection of Menorah’s Interpretation: Literal Interpretation of the Rental Agreement

 

Clause 15 of the rental contract does not use the term “building,”, which is defined in its definitions clause. It refers to the landlord’s obligation to insure the “rental building” at his own expense. What is the “the rental building?” The words “rental” and “building” appear adjacently, and the literal meaning is: the structure of the rental property. The question at issue is whether the structure of the rental property means the outer walls, ceiling and floors of the rented space, or whether it means the entire 6,000 square meter structure.

 

50. I am of the opinion that the “rental building” is not “the rented structure” Baranowitz took upon itself to insure the entire building structure, while waiving its right of subrogation toward Magma in the case that Magma causes damage to any part of the building.

 

The word “rental property,” as defined in the preface, would in any case, include the outer walls, ceiling and floor. Magma is not renting empty spaces that are not enclosed by walls, floor and ceiling; it is also renting the walls surrounding the rented property. The term “rental building” is not identical to the term “the rental property”. Had it been the intention of the parties that the owner insure only the “rental property” (including its outer walls, floor and ceiling) for the tenant’s benefit, it would not have been necessary to use the words “rental building”; it would have been sufficient to write the “rental property”.

 

 Rejection of Menorah’s Interpretation: Purposive Interpretation

 

51. Menorah’s interpretation is not consistent with the economic objectives that the parties wished to achieve in the rental agreement. In clause 15 of the rental agreement, the parties showed themselves to be risk averse. They wished to reach a comprehensive arrangement, by which the risks would be transferred from them to the shoulders of the insurance companies, while also distributing the risk between the latter. Menorah’s interpretation creates a “limping” arrangement. According to Menorah’s interpretation of the arrangement, the tenant does not release himself from the common risk of a fire spreading from the rented property in his possession to other parts of the building, which are not in his possession. A spreading fire does not keep to borders; it does not limit itself to the walls surrounding the rented spaces. Its nature is to spread and cause damage, and it can harm the entire building structure. Regarding this risk, the tenant finds himself exposed (if we accept Menorah’s interpretation). As we will soon see, Phoenix’s policy does not insure any part of the structure, but rather only its contents. According to Baranowitz’s interpretation, if a fire breaks out in the space that Magma rented and harms part of the building structure not rented by it, Magma will find itself exposed to a subrogation claim.

 

52. Menorah’s interpretation is not consistent with the reasonable expectations of the parties to the rental contract. It is not consistent with the accepted practice regarding the “basic contracts” accepted in this type of deal, which we discussed above. The principal and economic objective behind clause 15 is that the property be insured for the benefit of both parties to the rental agreement, while at the same time distributing the burden of insurance between them. Compare CA 846/93 [5]. Menorah’s interpretation does not attain this objective. Only an interpretation by which the landlord must insure the entire building, for the benefit of the tenant as well, achieves the economic objective of the parties.

 

53. Contrary to Menorah’s claim, Magma cannot make an insurance claim against its own insurance company, Phoenix, for the damages to the building. In the risk distribution agreed upon by the parties to the rental agreement, Baranowitz was to insure the building structure, and Menorah was to be the sole “address” for compensation for damages incurred to the building structure. Phoenix took upon itself to insure only the contents of Magma’s rented space.

 

54. Menorah, who claims that the damage to the space rented to Magma is covered by Phoenix’s policy, refers us to clause 24 of that policy, which provides:

 

The Liability of the Tenant

 

The following provisions will apply in any case of loss or damage, due to the insured risks, to the buildings rented by the tenant:

 

  1. If the insured chooses to reinstate or replace the loss or damage, the abovementioned reinstatement clause will apply.
  2. If the insured cannot, is not permitted to, or is not interested in repairing or replacing the loss or damage in the abovementioned way, then the coverage will be as follows:
    1. The insurer will indemnify the insured for any amount the insured is legally bound to pay the owner of the property due to the loss or damage, and
    2. The insurer will indemnify the insured for the loss of a protected right (as assessed by a real estate assessor) to maintain and operate his business on the premises in which the insurance event occurred (in all or in part) as a result of the insurance event.

 

The amount of compensation pursuant to this extension will not exceed the total value of the reinstatement value of the lost or damaged property.

 

This clause is included in a chapter entitled “Special Conditions and Extensions” in Phoenix’s fire insurance policy.

 

Menorah further refers us to a list in Phoenix’s fire insurance policy, which defines the “insured property:”

 

The Insured Property

 

Physical Damage To:

Insurance Amounts:

a) The contents, permanent equipment and improvements made to the rented property in the total amount of:

$ 500,000

b) Inventory of any type, , including, without derogation from the generality of the aforementioned: raw materials, products in stages of production, completed products, fuel, packaging materials and ancillary materials in the total amount of:

$450,000

 

All the insured property is the property of the insured and/or property in his possession or under his supervision: in rental, bailment, commission, guardianship, trust or partnership with others, and/or property for which the insured is responsible in the case of loss or damage caused by the risks included in this policy, while on the premises of the insured and in any other place within the boundaries of the State of Israel and the administered territories.”

 

On the basis of these clauses Menorah argues that the building (“the premises of the insured”) is covered by Phoenix’s policy. Thus, Magma and Phoenix foresaw the possibility that they would be obligated to pay insurance benefits to the owner of the property as a result of damage or loss caused to the building. From this Menorah asks us to deduce that the entire building is not included in the property that Baranowitz was obligated to insure, as per clause 15 of the rental agreement.

 

This argument was properly dismissed by the trial court. Phoenix’s policy is limited to coverage of damage caused to the possessions of the insured that are specified in the list. The list ensures that the property specified in clauses (a) and (b) will be insured by the policy even if it is not owned by Magma, but is rather in its possession due to rental or trusteeship, as long as it is situated within the perimeter of the building (the premises of the insured), the country or the territories of Judea, Samaria and the Gaza Strip. The property insured by Phoenix includes only that which is specified in the list. The only property insured by this policy which might be defined as “building structure” are any improvements made to the rental property, namely: the additions that Magma made to the rental property.

 

Thus, we should not conclude, on the basis of Phoenix’s policy, that, in effect, Magma insured the building. Consequently, we should not conclude, on the basis of this policy, that the “rental building” in clause 15 of the rental agreement is restricted to the outer walls surrounding the rented space. Although it is unnecessary for the reasoning of this judgment, I shall make the following additional comment: Had I believed that Menorah was correct in its interpretation of Phoenix’s policy, what we would have before us would be a case of double insurance; Menorah did not claim this. Its claim was that we should use Phoenix’s policy as an aid to interpret its own policy.

 

The Settlement Agreement

 

55. I quoted above the settlement agreement provisions relevant to the issue at hand. In the settlement agreement, Baranowitz agreed to cooperate, to the extent necessary, in order to realize Menorah’s indemnification right, but it was also noted that a suit of indemnification would not be filed against parties regarding whom Menorah waived the right of indemnification. As noted, no witnesses were called concerning the drafting of the settlement agreement. It was not explained against which relevant parties (in addition to Magma) Menorah had waived its right to file an indemnification claim.

 

As previously mentioned Baranowitz agreed, in the settlement agreement, to assist Menorah in the subrogation suit. The two shared legal counsel. It is hard to avoid the impression, that the suit which is the subject of this appeal was nothing but an attempt to turn to the party who caused the damage, despite the absence of the right, pursuant to the contractual system which bound the parties, to do so.

 

56. Regarding Menorah’s other arguments, such as the arguments it makes on the basis of clause 18 of the rental agreement, I can only add my assent to the reasoning of the trial court.

 

57. I have also found no fault in the ruling of the trial court (CApp 3204/00), which granted defendants’ request to amend a clerical error in its decision, as a result of which Menorah was obligated to pay defendants’ costs resulting from the need to file third party notices, as well. See FHC 577/86 Zerad v. Shaul, [8] at 114; CA 3351/92 Marshi v. Blan  [9].

 

Summary

 

58. If my opinion is accepted, we shall dismiss the appeal and obligate appellant to pay appellees’ expenses and lawyer’s fees in the total amount of 50,000 NIS.

 

 

President A. Barak

I concur.

 

Vice President S. Levin
 

I concur.

 

Held as per the opinion of Justice M. Naor.

January 20, 2002

 

 

 

Basset v. Hapol Compulsory Insurance Ltd.

Case/docket number: 
CA 370/63
Date Decided: 
Sunday, March 15, 1964
Decision Type: 
Appellate
Abstract: 

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

           

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

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

C.A. 370/63

           

 

MUSAH BASSET and CALEDONIAN INSURANCE CO. LTD.

v.

HAPOL COMPULSORY INSURANCE LTD.

 

           

The Supreme Court sitting as a Court of Civil Appeal

[March 15, 1964]

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

 

 

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

 

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

           

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

 

Israel cases referred to:

 

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

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

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

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

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

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

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

 

English cases referred to:

 

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

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

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

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

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

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

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

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

(16)     The Koursk (1924) P. 140.

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

           

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

D. Friedman for the respondents.

 

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

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

           

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

 

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

 

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

 

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

 

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

 

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

 

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

           

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

           

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

           

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

 

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

 

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

 

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

 

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

 

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

 

And then (at p. 1278)

 

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

 

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

 

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

 

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

 

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

 

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

           

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

 

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

 

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

           

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

 

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

           

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

 

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

           

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

 

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

 

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

 

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

 

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

 

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

           

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

 

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

 

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

 

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

 

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

 

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

           

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

           

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

 

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

 

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

 

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

           

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

 

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

 

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

           

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

           

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

 

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

           

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

           

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

           

OLSHAN P.:              I concur.

 

BERINSON J.:           I concur.

 

            Appeal dismissed.

            Judgment given March 15, 1964.

Arieh Israel Insurance Company Ltd v. Kaplansky

Case/docket number: 
LCA 2281/05
Date Decided: 
Monday, November 12, 2007
Decision Type: 
Appellate
Abstract: 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

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

LCA 2281/05

 

Arieh Israel Insurance Company Ltd

v.

Adv. Moshe Kaplansky

 

 

The Supreme Court sitting as the Court of Civil Appeals

[12 November 2007]

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

 

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

 

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

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

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

 

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

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

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

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

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

 

Appeal allowed.

 

Legislation cited:

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

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

 

Israeli Supreme Court cases cited:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

 

American cases cited:

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

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

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

 

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

The respondent was represented by himself and A. Pardal.

 

 

 

JUDGMENT

 

 

Justice E. Arbel

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

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

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

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

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

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

Deliberations

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

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

The application of Article 6 of Chapter 1 of the Law

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

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

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

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

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

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

10. Sections 33-35 of the Law provide:

‘Agency for the contract

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

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

Agency for the insurance premiums

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

Agency for giving notices

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

From general principles to the specific case

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

 

 

Justice M. Naor

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

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

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

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

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

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

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

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

 

 

Justice D. Cheshin

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

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

 

 

Appeal allowed.

2 Kislev 5768.

12 November 2007.

 

Louzon v. Government of Israel

Case/docket number: 
HCJ 3071/05
Date Decided: 
Monday, July 28, 2008
Decision Type: 
Original
Abstract: 

This Petition challenges the exclusion of the medication “Erbitux” among the state provided health services, which are publically funded. The medication Erbitux is a new drug for the treatment of colon cancer.

 

The Supreme Court, sitting as a High Court of Justice, held as following:

 

It is doubtful whether the demand for public funding of new medications may find a hold in the hard core of the constitutional rights detailed in the Basic Law. Even under a broad interpretive approach with expand the constitutional scope of the right to dignity beyond the necessary minimum in the context of welfare and social security, it seems that only in extreme and unique circumstances there would be a constitutional duty for state authorities to fund a particular, specific drug. It seems that in this case, the Petitioners have not demonstrated a violation of a constitutional right.

 

The right to public health services stands independently as a constitutional right. The entirety of the arrangements established in the Patient’s Rights Act and the National Health Insurance Act lead to two primary conclusions: First, that the range of state provided health services does not aim to include the entirety of possible medical services, to the optimal extent and level to which the individual may require them. Second, in the current state of the law, or legal system recognized a constitutional right to public medical services at a greater extent from the minimal core of the basic health services necessary for humane existence of a society. At the core of the right are those health services, which the State must finance. At the outer layer are the remainder of the health services that are not included within the basic schedule of said services. The scope of the constitutional right to public health services beyond the basic schedule of services depends on the yearly Budget Act.

 

The Petition’s main arguments target the authority of the Schedule Committee and the way in which it applied its discretion when setting the contents of the schedule of health services within the existing budget. The role of the Schedule Committee is to advise the relevant bodies as to setting priorities between new medical technologies for the purpose of expanding the schedule. This task is difficult. Within this framework, the budgetary consideration is a legitimate and valid consideration for the Schedule Committee to consider. It is important to note that the Schedule Committee is a part of the public administration and in its operation it is bound by the rules of administrative law. In our case, no flaw has been found in the standards that guided the Schedule Committee in setting priorities between the new medical technologies.

 

We cannot even say that the Schedule Committee recommendations as to progressive allocation of the Erbitux drug are unreasonable to an extent that requires intervention. Nor does it constitute prohibited discrimination against other patients whom the drugs they require are included in the health services schedule. Under circumstances where public resources are not sufficient for all the needs and all those who require them, it is necessary to allocate resources according to priorities that by their very nature create differences between people and between groups. These differences do not constitute prohibited discrimination, as long as they are founded upon reasonable and legitimate considerations. 

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

                                                                                                                                           HCJ 3071/05

      

 

1.         Gila Louzon

2.         Adolf Edri

3.         "Last Border" Amuta for Cancer Patients

v.

1.         Government of Israel

  1. Minister of Health
  2. Minister of Finance
  3. Committee for Expanding the   Medicinal Services Basket appointed by the Council for National Health Insurance

 

 

HCJ 3938/05

1.         Yaakov Bar-On

  1. Uriel Gilon
  2. Zion Halifi
  3. Eliyahu Yitah
  4. Emile Huri
  5. Keren David
  6. Asher Miara
  7. Shlomo Ginosar

v.

1.         Ministry of Health

  1. Minister of Health
  2. Ministry of Finance

4.  Minister of Finance

 

HCJ 4013/05

1.         Yaakov Sheiber

  1. Haim Edelstein
  2. Shlomi Segal
  3. Hayat Yosepov

v.

1.         State of Israel

  1. Minister of Health
  2. Minister of Finance
  3. Industry and Trade Minister
  4. Supervisor of Prices and the Committee under the Price Supervision Law
  5. Committee for Expanding the  Medicinal Services Basket appointed by the Council for National Health Insurance
  6. General Health services
  7. Macabbi Health services
  8. Meuchedet Health Fund
  9. Leumit Health Fund

 

The Supreme Court sitting as the High Court of Justice

 (8 August 2005)

Before President D. Beinisch and Justices A. Grunis, M. Naor

 

Petition to the Supreme Court sitting as the High Court of  Justice

 

Legislation Cited

Patient's Rights Law, 5756-1996, s. 3.

Do Not Stand on Your Neighbor's Blood Law, 5758-1998

National Health Insurance Law, 5755-1995   

Value Added Tax Law, 5736-1976

 

Israel Supreme Court cases cited:

[1]     HCJ 6055/95 Tzemach v. Minister of Defense [1999] IsrSC 53(5) 241.

[2]     HCJ 4128/02 Man, Nature and Law - Israeli Society for the Protection of the Environment v. Prime Minister of Israel [2004] IsrSC 58(3) 503.

[3]        HCJ 494/03 Physicians for Human Rights v. Minister of Finance [2004] IsrSC 59(3) 322.

[4]     LCA 4905/08 Gamzo v. Isaiah [2001] IsrSC 58(3) 360.

[5]     HCJ 5578/02 Manor v. Minister of Finance [2004] IsrSC 59(1) 729.

[6]     HCJ 2557/05 Mateh Harov v. Israel Police (2006) (unreported).

[7]     HCJ 4769/95 Menahem v. Minister of Transport [2002] IsrSC 57(1) 235.

[8]     HCJ 366/03 Commitment to Peace and Social Justice Amuta v. Minister of the Interior (2005) (unreported).

[9]     HCJ 2599/00 Yated Association of Children with Down Syndrome v. Ministry of Education [1999] IsrSC 56(5) 834.

[10]   HCJ 7351/03 Rishon Le-Zion Municipal Parents Committee v. Minister of Education, Culture and Sport (2005) (unreported).

[11]   CA 5557/95 Sahar Insurance Company Ltd. v. Alharar [1997] IsrSC 51(2) 724.

[12]   HCJ 2344/98 Macabbi Health Services v. Minister of Finance [2000] IsrSC 54(5) 729.

[13]   HCJ 9163/01 General Health Services v. Minister of Finance [(2002] IsrSC 55(5) 521.

[14]   HCJ 1554/95 Supporters of Gilat Amuta v. Minister of Education, Culture and Sport [1996] IsrSC 50(3) 2.

[15]   HCJ 2725/92 General Health Services v. State of Israel [2004] IsrSC 59(1) 781.

[16]   HCJ 1829/02 General Health Services v. Minister of Health [2003] IsrSC 58(1) 406.

[17]   HCJ 7365/95 Bolous Brothers – Marble and Granite Production Ltd v. Investments Centre [1996] IsrSC 50(2) 89.

[18]   HCJ 3472/92 Brand v. Minister of Communications [1993] IsrSC 47(3) 143.

[19]   HCJ 3627/92 Israel Fruit Growers Organization Ltd. v. Government of Israel [1993] IsrSC 47(3) 387.

[20]   HCJ 2453/06 Israeli Medical Association v. Attorney General (2006) (not yet reported).

[21]   HCJ 4004/07 Turonshvili v. Ministry of Health (2007) (not yet reported).

[23]   HCJ 4613/03 Shaham v. Ministry of Health [2004] IsrSC 56(6) 385.

[24]   HCJ 1113/99 Adallah v. Minister for Religious Affairs (2000) (unreported).

[25]   HCJ 2974/06 Israeli v. Committee for Expanding the Health Services Basket (2006) (not yet reported).

[26]   HCJ 3997/01 Neopharm Ltd. v. Minister of Finance (2001) (unreported). 

[27]   HCJ 7721/96 Israeli Insurance Assessors Association v. Inspector of Insurance ]2001] IsrSC 55(3) 625.

[28]   HCJ 82/02 Kaplan v. State of Israel, Ministry of Finance, Customs Division [2004] IsrSC 58(5) 901.

[29]   CA 8797 Anderman v.Objection Committee of District Committee under the Planning and Construction Law, 5725-1965, Haifa [2001] IsrSC 56(2) 466.  

[30]   HCJ 10/00 Raanana Municipality v. Inspector of Transport, Tel-Aviv and Central Districts [2001] IsrSC 56(1) 739.

[31]   CCT 8/02 Minister of Health v. Treatment Action Campaign [2002] (10) BCLR 1033.

[32]  CCT 32/97 Soobramoney v. Minister of Health [1997] (12) BCLR 1696.

 

JUDGMENT

 

President D. Beinisch

The petitioners in these three petitions suffer from various forms of cancer. The petitioners’ doctors referred them for medicinal treatment, and when these petitions were filed, the petitioners’ required medications were not included in the basket of health services that receives public funding under the provisions of the National Health Insurance Law, 5754-1994 (hereinafter: “National Health Insurance Law” or "the Law"). The petitioners had difficulty in purchasing the medications independently, and this was the basis for their petition to this Court requesting that we instruct the respondents to include their medications in the publicly-funded health services basket (hereinafter: “the basket” or "the health services basket"). The petitioners argue that the decision to omit these medications from the health services basket approved for 2005 violated their constitutional rights, it was unreasonable, and it discriminated against them adversely vis-à-vis other patients whose required medications were included in the basket.

As will be clarified below, Government Decision no. 406 concerning a budgetary supplement to the health services basket was adopted on 27 August 2006. Following the budgetary supplement, the medications constituting the subject of the petitions in HCJ 3071/05 (hereinafter: HCJ Louzon) and HCJ 3938/05 (hereinafter: HCJ Bar-On) were included in the basket. On the other hand, the medication discussed in petition HCJ 4013/03 (hereinafter: HCJ Sheiber) was not included in the basket, and remains for our consideration.  

The factual background preceding the filing of the petitions

1.    The health services basket as defined in s. 7 of the National Health Insurance Law includes the health services that all Israeli residents insured under the Law are entitled to receive from the sick funds, by means of funding sources that are the responsibility of the State. Below we will discuss the arrangements prescribed by the National Health Insurance Law and the means for determining the contents of the health services basket. At this stage we note that in 2005, when the current petitions were filed, the Ministry of Health had received requests for the addition of about 400 new medicines and technologies to the health services basket. These requests, together with the professional literature and the processed data pertaining to each request, were submitted to the Public Committee for the Expansion of the Health Services Basket (hereinafter: the Committee.) The Committee held a number of meetings, following which it prioritized the medications in an order that was influenced, inter alia, by the Committee’s assessment of the urgency of the various medications.  

The Committee’s recommendations were presented to the Government on 21 March 2005 in the framework of a debate on the budget for the addition of new technologies to the health services basket. On 13 April 2005 the Government passed a decision approving the addition to the basket of the medications and technologies listed in a table appended to its decision. This decision also determined that “…the cost of the 2005 health services basket will express the addition of technologies at an annual cost of NIS 350 million in accordance with the prices of the average health cost index of 2004….” The budgetary supplement made possible the addition to the health services basket of some of the medications recommended by the Committee. Nevertheless, certain medications for various forms of cancer were excluded from the health services basket, not having been accorded sufficient priority by the Committee. This was the background to the filing of the three petitions to this Court.

The course of events in the three petitions

2. The petition in HCJ Louzon was filed by patients suffering from cancer of the colon, and by an amuta [non-profit organization] established for the purpose of helping them. According to the petition, doctors who treated the petitioners had referred them for treatment with Avastin, but as this medication was not included in the health services basket, the petitioners were forced to purchase it independently. The medication was particularly expensive, and the petitioners were unable to continue financing it. They therefore petitioned this Court, requesting it to instruct the respondents to include Avastin in the health services basket, in the category of treatment for colon cancer.

The petition in HCJ Bar-On was filed by several petitioners suffering from prostate cancer that had progressed to the metastatic stage, which is resistant to hormonal treatment. Their doctors recommended Taxotere; this medication, too, was excluded from the 2005 health services basket.  Against this background, the petition was filed asking the Court instruct the respondents to include Taxotere in the requested category, along with other remedies.

The four petitioners in HCJ Sheiber were suffering from colon cancer and needed Erbitux, a medication which was similarly excluded from the health services basket of 2005. Owing to the high cost of the medication, this Court was requested to order that Erbitux be included in the health services basket in the category of treatment for colon cancer; the petitioners also sought additional remedies, which we will discuss below.

3.  Soon after the petitions were filed, they were scheduled for an early hearing. On 4 April 2005 the petition in HCJ Louzon was heard by President A. Barak and Justices A. Procaccia and M. Naor. That session concluded with the Court deciding to grant the order nisi sought in the petition.  On 24 May 2005 the petitions in HCJ Bar-On and HCJ Sheiber were heard by Justices E. Rivlin, E. Rubinstein and S. Joubran, and at the end of the hearing the Court decided to grant the request of the petitioners in HCJ Bar-On to file an amended petition. The Court further decided to grant an order nisi regarding some of the remedies sought in HCJ Sheiber.

After the amended petition was filed and responded to in HCJ Bar-On, and after the filing of responding depositions in the other petitions,  all three petitions were scheduled for hearing on 8 August 2005 before this panel (President D. Beinisch, Justices A. Grunis and M. Naor). At that time, the issue of funding the basket surfaced on the public agenda, and a public campaign was waged to increase the budget so as to enable the inclusion of new technologies in the basket. We deemed it appropriate to defer our judgment, pending the possibility of the petitions being resolved without the need for this Court’s intervention.

Indeed, in the State's update to this Court, it stated that on 9 April 2006 the Israeli Government decided to expand the health services basket by including new technologies, thus adding the sum of NIS 165 million to the 2006 basket. At this stage it became clear that the medications forming the subject of these petitions were not included in the budgetary supplement decided upon by the Government.  A second update submitted by the State a few months later stated that the Government had decided upon an additional expansion of the health services basket by including new technologies to the 2007 budget, at an annual yearly cost of NIS 237.28 million, which would be brought forward to the 2006 budget (Government decision No. 406). As a result of this decision, as of 20 September 2006, Avestin was added to the category of first-line treatment for metastatic colon cancer which was the subject of the first petition in HCJ Louzon. In addition, the Taxotere medication was also labeled as a first-line treatment of metastatic prostate cancer which was resistant to hormonal treatment – the subject of the HCJ Bar-On.

As noted earlier, the Erbitux medication constituting the subject of the Sheiber petition was not ranked highly enough by the Committee, and even after the budgetary supplement for the year 2006, it was excluded from the health services basket. The Government subsequently decided to increase the budgetary funding for the 2008 health services basket: initially a supplement of NIS 380 million was approved and finally an overall sum of NIS 450 million was approved. Even after the budgetary supplement, however, the Erbitux medication in the category of colon cancer remained outside the basket.

HCJ Bar-On and HCJ Louzon

4.    As mentioned, following the budgetary supplement that expanded the 2006 health services basket, Avestin and Taxotere were added to the requested categories in the 2006 health services basket. This meant that a practical solution was found for the main remedy requested in HCJ Louzon and HCJ Bar-On, even though unfortunately, this was only after most of the petitioners had already passed away.

On 27 September 2006, counsel for the petitioners in HCJ Bar-On, Adv. Sigal Zeft, informed us that since Taxotere had been included in the health services basket, the petitioners were waiving further hearing of their petition. As for HCJ Louzon, counsel for the petitioners, Advs. Orna Lin and Michal Stein, informed us on 3 October 2006 that despite the inclusion of Avestin in the category of metastatic colon cancer in the 2006 health services basket, they still felt their petition should be heard. In their view, the inclusion of Avestin in the health services basket did not obviate the fundamental arguments raised in the petition against the Committee's mode of operation and the manner in which it exercised its discretion, and a decision should be made on these arguments.  Regarding this assertion, it must be said that in general, this Court will not rule on a petition that previously related to an actual issue but has, in the circumstances, become superfluous. The High Court of Justice has already ruled that “…if the case constituting the subject of a petition is resolved, by itself or by judicial decision, the Court will no longer be prepared to consider the legal question it raises” (HCJ 6055/95 Tzemach v. Minister of Defense [1], per Justice I. Zamir, at para. 3). It is not disputed that as of 2006, there has been a solution for the remedy sought in HCJ Louzon regarding the inclusion of Avestin in the health services basket. This being the case, we see no need to rule on the series of questions raised in that petition. All the same, it is noteworthy that some of the questions raised by counsel for the petitioners in HCJ Louzon concerning the violation of the petitioners’ constitutional rights and concerning the manner in which the Committee exercised its discretion were also raised by the petitioners in HCJ Sheiber. These issues will be discussed below.

Therefore, and in view of the inclusion of Avestin and Taxotere in the requested categories of the 2006 health services basket, the order nisi granted in the Louzon case will be cancelled and the petitions in HCJ Louzon  and HCJ Bar-On will be withdrawn with no order for costs. The petition in HCJ Sheiber therefore remains for our decision.

HCJ Sheiber – the pleadings of the parties

5.       Two main remedies were requested by counsel for the petitioners, Adv. David Sasson, in HCJ Sheiber. First, this Court was requested to order the addition of Erbitux, in the category for treatment of colon cancer, to the list of approved medications in the health services basket. Secondly, the petitioners requested an order that action be taken in one or more of the ways specified in the petition, with the aim of reducing the price that cancer patients are required to pay for medications not included in the health services basket.

In their petition, the petitioners raised several main arguments. First, it was argued that the right to health is part of the right to life and bodily integrity, and the right to human dignity, which are anchored in Basic Law: Human Dignity and Liberty (hereinafter: "the Basic Law"). The claim is that the non-inclusion of the Erbitux medication unlawfully violated the petitioners’ constitutional rights, contrary to the conditions of the reservations clause. Secondly, the petitioners challenged the way in which the Committee exercised its discretion. In this context, they stressed that they were not challenging the budgetary framework determined by the Government for funding the healthcare basket. Their main argument was that the framework for funding the basket should be based on a format that provided equal funding for all life-saving or life-prolonging drugs, without preferring any particular medication at the expense of another. In this context, it was further asserted that by not including Erbitux in the health services basket, appropriate weight was not assigned to the value of saving human life, and this constituted discrimination against the petitioners in relation to other patients whose required medications were included in the basket.  

A significant part of the petitioners’ claims turned on their proposals for reducing the cost of medications not included in the health services basket, in order to help patients in financing the purchase of these medications independently. In this context, the petitioners proposed a number of solutions, including: cancellation of value added tax and other indirect taxes levied on the sale of life-saving medications; the centralized purchase by the Ministry of Health and/or the Sick Funds of life-saving drugs not included in the health services basket, in a manner that would reduce the prices for those patients who required them.

6.    Counsel for the State, Adv. Dana Briskman and Adv. Einav Golomb, whose responses were comprehensive and erudite, argued that the HCJ Sheiber petition should be denied. Regarding the petitioners’ claim concerning the unlawful violation of their constitutional rights, counsel for the State referred to the responding deposition filed in HCJ Louzon. According to the State, in the matter at hand, this Court should exercise judicial restraint and the utmost caution in the present context, and refrain from deriving a general constitutional right to health and medical care from the framework rights anchored in Basic Law: Human Dignity and Liberty.

As to the petitioners’ arguments concerning the manner in which the Committee exercised its discretion, the State responded that a decision on ranking new medications and technologies was a complex one, involving a broad spectrum of considerations, and that it was subject to the budgetary restrictions that were set in accordance with the Government’s overall scale of priorities.  Erbitux, it was argued, is a new medication, and it is not yet known whether it improves the symptoms of colon cancer patients or prolongs their lives.  Bearing this in mind, the Committee deemed that it could not be given higher priority than other medications which had been proven to be life-prolonging. The argument is therefore that the recommendation was adopted after a thorough, informed, and in-depth decision-making process, which was conducted in accordance with the law; as such there are no grounds for interfering with it.

With respect to the petitioners’ proposals to reduce the price of medications not included in the health services basket, it was argued that these proposals should be rejected in limine in view of the failure to exhaust all alternative avenues and to apply initially to the relevant authorities. The State addressed the various proposals on their substance, and presented its reasons for rejecting the petition as it related to them.

7.    The four Sick Funds in Israel are also respondents to the petition. In their responses, they argued that they are not relevant respondents to the petitioners’ request to include Erbitux in the health services basket, since under the provisions of the National Health Insurance Law, it is not the Sick Funds that determine the contents of the basket, and their role consists exclusively of the provision of the services included therein. Regarding the petitioners’ proposal for the Sick Funds to carry out a centralized purchase of the medications not included in the health services basket in order to reduce the price for their members – it was argued that the National Health Insurance Law does not obligate the Sick Funds to carry out a centralized purchase. Nevertheless, some of the Sick Funds indicated in their response that they would not oppose a centralized purchase of medications not included in the health services basket, but their consent was contingent upon the prior regulation of all aspects and questions involved in the matter.

8.    The petition in HCJ Sheiber therefore raises various issues pertaining to the health services basket in Israel. Our discussion of these questions will proceed as follows:  first, we will consider the petitioners’ argument that non-inclusion of Erbitux in the health services basket unlawfully violates their constitutional rights. We will then discuss the petitioners’ objections to the manner in which the Committee exercised its discretion in determining the contents of the health services basket. Finally, we will address the petitioners’ various proposals for reducing the prices of the medications not included in the basket.

The constitutional status of the right to health

9.    The petitioners asserted that the Committee ranked the new medications and technologies in a manner that violated their constitutional right to health, thereby contravening the conditions of the reservations clause.  The petitioners conceded that the right to health is not explicitly prescribed in the basic legislation, but claimed that it derives from the right to life and bodily integrity as well as from the right to human dignity, both of which are anchored in Basic Law: Human Dignity and Liberty.

In addressing these arguments of the petitioners, we will note at the outset the difficulty involved in defining the internal scope of the right to health, since prima facie it covers an exceedingly broad domain. In principle, the right to health can be viewed as a collective term for a cluster of rights related to human health, some of which enjoy constitutional status in our legal system. For example, the right to health includes the right to preservation of the patient’s privacy and protection of his autonomy by disclosure of all medical information concerning him and obtaining his consent to any treatment administered to him. The right to health likewise includes the right not to be discriminated against with respect to access to medical treatment. It also includes additional aspects that affect people’s health, such as public awareness and access to information on health-related matters, access to acceptable food and drinking water in suitable sanitary and environmental conditions that are not harmful to human health, and other matters as well (see: Committee on Economic, Social and Cultural Rights, General Comment 14, The Right to the Highest Attainable Standard of Health, U.N. Doc. E/C.12/2000/4, at www.unhchr.ch/tbs/doc.nsf/(symbol)/E.C.12.2000.4.En (hereinafter: General Comment 14 of the U.N. Committee on Economic, Social and Cultural Rights). Considering the many aspects of the right to health, there would seem to be no basis for examining the constitutional status of the right as one composite whole; rather, the rationales for the various rights and interests protected in its framework should be considered, in accordance with their relative social importance and with the strength of their connection to the constitutional rights enumerated in Basic Law: Human Dignity and Liberty (see and compare: Justice D. Dorner on the “right to a decent environment" in Man, Nature and Law v. Prime Minister [2], para. 2).  

10.   This petition is concerned with the right to health-care, and more precisely with the right to receive publicly funded medical/medicinal treatment.  Inarguably, the right to medical treatment is not explicitly mentioned in the framework of the basic laws concerning human rights. As is known, the attempts to enact basic legislation that would confer explicit constitutional status on social rights, including the right to health and medical treatment, have thus far failed (see e.g.: Draft Basic Law: Social Rights, HH 5754, 337; see also the proposal of Law and Constitution Committee, “Broadly-Accepted Constitution", ss. 17, 18A - www.knesset.gov.il/HUKA ; see further and cf: "Constitution by Agreement", Proposal of the Israeli Democracy Institute, ss. 32, 34 - www.e-q-m.com/clients/Huka/huka_01.htm. Taking this into consideration, the question of the degree to which the right to medical treatment enjoys constitutional status in our legal system is far from simple. This is especially the case in relation to the “affirmative” aspect of the right, which imposes upon the state a positive duty to act, the essence of which is responsibility for the public funding of health services in Israel.  One of the central dilemmas in this context would appear to lie in the definition of the internal-constitutional scope of the right to medical treatment in general, and the right to publicly-funded health services in particular.

This Court has already ruled that the right to inclusion in the national health insurance system, per se, does not enjoy constitutional meta-legal status (see HCJ 494/03 Society of Physicians for Human Rights v. Minister of Finance [3] (hereinafter: Physicians for Human Rights v. Minister of Finance), para. 18).  Alongside the aforementioned ruling, the view has been expressed in our case-law that “a person without access to elementary medical treatment is a person whose human dignity has been violated” (per President A. Barak in LCA 4905/08 Gumzo v. Isaiah [4], para. 20). It has also been determined that “… the social right to the provision of basic health services can be anchored in the right to bodily integrity under s. 4 of the Basic Law” (per President A. Barak in Physicians for Human Rights v. Minister of Finance [3], paras. 16, 18; emphasis added – D.B.). Furthermore, the view was expressed that the right to medical treatment in a medical emergency involving immediate physical distress, being a right grounded in s. 3(b) of the Patient's Rights Law, 5756-1996, may be included in the category of protected rights in the framework of Basic Law: Human Dignity and Liberty (ibid, para. 18).

Thus, it emerges from the case-law of this Court that the constitutional rights enumerated in Basic Law: Human Dignity and Liberty are likely to include various aspects from the areas of welfare and social security, including health care. However, our case-law has yet to consider directly the question of which “basic health services” are included within the parameters of the constitutional rights enumerated in the Basic Law, and whether a constitutional right to health services that extends beyond the basic level required for human existence in society should be read into these constitutional rights.  This dilemma is reflected in the pleadings of the parties in the case before us. On the one hand, the centrality of health to the maintenance of decent human existence, to the welfare of the individual and to his ability to realize all other human rights is undisputed. Where medicinal treatment with any particular potential for saving, prolonging or improving the patient’s quality of life is concerned, significant weight should be assigned to the value of the sanctity of life, the integrity of body and soul, and human dignity, all of which are central values with constitutional standing in our legal system. Regarding the receipt of publicly-funded medical treatment, the legislation of the State of Israel is characterized by a commitment to a public health system grounded in the principle of mutual responsibility and concern for the society’s indigent, as indicated by the provisions of the National Health Insurance Law, which we will address below.

On the other hand, as mentioned above, the right to public health services in the present context means imposing a positive duty on the state, the main substance of which is responsibility for public funding of medical-medicinal treatment. Naturally, the issue of the constitutional scope of that right involves general distributive questions that derive from the nature of the socio-economic regime governing a society and the scope of public resources at the state’s disposal (cf: HCJ 5578/02 Manor v. Minister of Finance [5], para. 9, per President A. Barak). Indeed, the human rights recognized in our system, which are generally referred to as “civil and political rights”, also impose upon the State “positive” duties of protecting the realization of a right, and not just “negative duties” of not violating the right. Quite often the state’s duty to protect the realization of civil and political rights also includes a “positive” duty that involves the allocation of substantial resources (see e.g. in the context of freedom of speech and demonstration: HCJ 2557/05 Mateh Harov v. Israel Police [6], per President A. Barak, at para. 14 ff.). Even so, it seems that the right to publicly funded health services, like other rights connoted as “social-economic rights”, has a dominantly "positive" character that arouses greater concern for questions of policy on social resource distribution, in accordance with the determination of a national scale of  priorities (see Guy Seidman and Erez Shaham, “Introduction: Medicine and the Law and What’s Between Them,” 6 Law and Business  13, at p. 27 (2007) (hereinafter: Seidman and Shaham).

Since its earliest days, the accepted view of this Court has been that the Court should be wary of intervening in the formulation of overall economic policy and in the determination of national priorities; the general rule is that the executive and the legislative branches shoulder the public and national responsibility for the State economy (see my comments in HCJ 4769/95 Menahem v. Minister of Transport [7], para. 13, and references cited there). Bearing this in mind, and in the absence of an explicit anchoring of social rights in basic legislation, the question that arises is to what extent can judicial-interpretative tools be used to construe the rights enumerated in Basic Law: Human Dignity and Liberty as including a right with a correlative duty to provide public healthcare services on a larger scale than that of the minimum requirements for decent human existence in a society (regarding this matter, cf. the majority opinion, as per President A. Barak, with which I concurred, in HCJ 366/03 Commitment to Peace and Social Justice Amuta v. Minister of the Interior [8], paras. 14-16 - that the constitutional right to human dignity includes the protection of the “minimum” for decent human existence, as opposed to the minority view of Justice E. Levi (ibid,  paras 1- 3), according to whom human dignity includes protection of “appropriate living conditions”; for a view in favor of a  broad interpretation of the  constitutional right to human dignity in the realm of welfare and social security, see e.g. Yoram Rabin, The Right to Education, at p. 370 (2002) and references cited; for other views see: Ruth Gavison, “The Relations between Civil-Political Rights in Israel and Socio-Economic Rights,” Economic, Social and Cultural Rights in Israel, 25, at pp. 34-35 (eds. Yoram Rabin and Yuval Shani, 2004); Rivka Weil, “The Health of the Budget or the Health Budget – Which Takes Preference from a Constitutional Perspective?” Law and Business 6, 157, at p. 169ff (2007) (hereinafter: Weil); Yoav Dotan, “The Supreme Court as the Protector of Social Rights” Economic, Social and Cultural Rights in Israel, at p.69 (eds. Yoram Rabin and Yuval Shani)).

 It will be pointed out below that recognition of a constitutional right to publicly funded health services raises the question of the degree of constitutional protection of that right. In other words, even assuming that the right is included, be what may the scope, in the framework of the constitutional rights enumerated in Basic Law: Human Dignity and Liberty, this does not mean it is absolute; like other rights, the right to publicly funded health services must be balanced against other competing rights and interests. Accordingly, if a constitutional right to public health services is established, the question to be considered is how to interpret and apply the conditions of the reservation clause under circumstances in which it is proved that there was a substantive violation of that right, and what are the appropriate tools for giving effect to those conditions. (On the distinction between the internal scope of a constitutional right and the extent of protection accorded to it, see Aharon Barak, Legal Interpretation, Vol. 3, Constitutional Interpretation (1995), at p. 371ff.

11.  These dilemmas are complex, and they trigger questions relating to various aspects, which I will not discuss here. I will simply mention that the right to health has indeed gained recognition in various international conventions, and it is included in the constitutions of a number of states around the world.  Nevertheless, the delineation of the internal scope of the right and the extent to which it is protected remain vague, and they are characterized by a cautious approach that considers the budgetary capabilities of each state and the principle of the progressive realization of the right. For example, in 1946 the Constitution of the World Health Organization (WHO) recognized the basic right to health, but the scope of this right is defined as “the highest attainable standard of health" [emphasis added – D.B]; (see also: Eyal Gross, “Health in Israel: Right or Commodity?” Economic, Social and Cultural Rights in Israel, 437, 442-443 (Yoram Rabin and Yuval Shani eds, 2004) (hereinafter: Gross).  As for the Universal Declaration of Human Rights of 1948: this Convention entrenches a number of social human rights, including the right to a decent standard of living which includes aspects of the right to health and to medical treatment.  At the same time, the Preamble to the Declaration states that these rights are to be realized by “progressive measures”.

One of the central international documents concerning the right to health is the International Covenant on Economic, Social and Cultural Rights of 1966, which was ratified by the State of Israel in 1991. Section 12 of the Covenant states that Party States to the covenant “… recognize the right of everyone to the enjoyment of the highest attainable standard of physical and mental health” [emphasis not in original – D.B], and that the States must take the required steps to ensure, inter alia, “the creation of conditions which would assure to all medical service and medical attention in the event of sickness.” Section 2 of the Covenant adds that each Party State will take steps “…to the maximum of its available resources, with a view to progressively achieving the full realization of the rights” (on other international conventions and documents on the right to health, see: Gross, at pp. 443-445).  Thus we see that the international conventions that recognize the right to health and medical treatment take budgetary constraints into consideration, and are cautious in determining the scope of this right and the degree of protection it is accorded.

On the internal constitutional level, the constitutions of many states, including Canada and the U.S.A, do not confer explicit constitutional status upon the right to health. The constitutional law of these states protects only limited aspects of this right. On the other hand, s. 27 of the South African Constitution confers explicit constitutional status upon the right of access to medical treatment. However, the South African Constitution adds that the state must take reasonable legislative and other measures, within its available resources, to achieve the progressive realization of each of these rights (for the text of the South African Constitution, see http://www.info.gov.za/documents/constitution/1996/96cons2.htm#27). It should be noted that the constitutions of India and Holland expressly entrench the right to promote public health, but this right is not enforceable by the judiciary and it is only a type of fundamental principle that is intended to guide the actions of the executive and the legislative authorities (see Gross, at pp. 462-463; Guy Seidman, “Social Rights: A Comparative Perspective on India and South Africa,” (347, at pp. 356, 370) (Yoram Rabin and Yuval Shani eds, 2004)).

A comparative analysis reveals that while the right to health and medical treatment is recognized on the international level and in the constitutions of several states world-wide, the scope of this right, the degree to which it is protected, and the manner of its realization vary from state to state, and are characterized by a cautious approach that is influenced, inter alia, by the availability of public resources and by the economic capabilities of each state (see Aharon Barak, “Introduction,” Economic, Social and Cultural Rights in Israel, 8-9 (Yoram Rabin and Yuval Shani eds, 2004)). In general, the question of the scope of public health services is not exclusive to Israel and it characterizes, in varying degrees, to all states in the world, for no state is capable of funding unlimited health services, which are constantly becoming more sophisticated and more expensive due to medical and technological developments.  The system for funding health services provided to the public also varies from state to state according to different models (private funding, public funding or a combination thereof), in accordance with the economic regime governing that particular state, its social priorities, and its budgetary capabilities (see Seidman and Shaham, at pp 40 - 42; on the system for funding health services in Canada, the U.S.A and England, see Yuval Karniel, “The Basket of Medications – Doctors, Judges and the Media,” Law and Business 6 (2007), at pp. 225, 231 (hereinafter: Karniel)). Our case-law has already held that “[e]ach state has its own problems. Even if the fundamental considerations are similar, the balance between them reflects the particularity of each society and that which characterizes its legal arrangements" (per President A. Barak in HCJ 4128/02 Man, Nature and Law v. Prime Minister [2], at para. 14). Against the background of the above, it can be said, in sum, that the definition of the scope of the constitutional right to public health services, the extent of its constitutional protection, and the provision of measures for its enforcement are complex issues. As such our treatment of the right in case law requires caution and moderation.

12.              The petition in HCJ Sheiber does not require a decision on the entire complex of questions pertaining to the constitutional status of the right to medical treatment in general, and the right to publicly funded health services in particular. This is because the petition is not concerned with the constitutionality of a Knesset statute; rather, it concerns the manner in which the competent authorities exercised their discretion in determining the contents of the health services basket. Bearing that in mind, I will confine myself to a short comment on the constitutional aspect as it relates to the circumstances of this case.

As mentioned, the petition in HCJ Sheiber is directed against the non-inclusion of Erbitux in the publicly funded health services basket. Erbitux is an innovative medicine for the treatment of colon cancer. As will be elucidated below, there is no consensus regarding the effectiveness of this medication in the saving or even the prolonging of life; the research data from studies of this medication are still disputed, and the medication is expensive. I therefore tend to the view that this particular medication, and other similarly experimental innovative medications, would not fall within the rubric of the basic health services required for minimal human existence in society. Indeed, for patients suffering from life-threatening illnesses, any medication that offers some chance to save or at least to prolong their lives, even if only for a short time, is of critical, inestimable value. At the same time, from a broad social perspective and given the limitations of the public resources, I doubt whether the demand for public funding for these innovative medications has a handle in the hard kernel of constitutional rights enumerated in the Basic Law.

Furthermore, even according to an exegetical approach that extends the constitutional scope of the right to human dignity beyond the level of the basic minimum in the area of welfare and social security, it would appear that only in extreme and exceptional circumstances would the state be constitutionally obligated to fund a specific medication, one of many in respect of which applications are submitted for public funding. In this than necessary in national context, it is noteworthy that in view of their reluctance to intervene more -economic scales of priorities, courts the world over refrain from ruling that the lack of public funding for a concrete medical treatment amounts to a violation of the patient’s constitutional right.  (For exceptional circumstances in which it was ruled that a violation of a constitutional right had been proved, see and compare: Minister of Health v. Treatment Action Campaign, CCT 8/02 [31]. In that case, the South African Supreme Court obligated the Government to enable the distribution of medicinal treatment designed to prevent the transmission of the AIDS from mothers to their children, under circumstances in which the medicine was provided free of charge to the Government by the manufacturer).  Considering all the above, it would appear that in the petitioners’ case it has not been proven that a meta-legal constitutional right has been violated, and their rights must be thus be examined in accordance with the normative-legislative framework that will be discussed below.

The legal right to public health services

13.  As noted, HCJ Sheiber is not concerned with the constitutionality of Knesset legislation, and consequently I saw no need to rule on the complex of questions arising with respect to the constitutional status of the right to publicly funded medical treatment.  It should however be stressed that the right to public health services exists in its own right as a legal right, in other words, as a right that stems from Knesset legislation as interpreted in case law and in the spirit of the obligations of the State on the international-conventional level,  with no necessary connection between the aforementioned legal right and the constitutional rights enumerated in Basic Law: Human Dignity and Liberty (cf. the right to education: HCJ 2599/00 Yated Association of Children with Down Syndrome v. Ministry of Education [9], para. 6, per Justice D. Dorner and references there; HCJ 7351/03 Rishon Le-Zion Municipal Parents Committee v. Minister of Education, Culture and Sport [10],  para. 4 of my judgment). The question therefore arises as to the substance and scope of the legal right to public health services in Israel, and whether this right been unlawfully violated in the circumstances of the petitioners' case.

14.  The scope of the State's responsibility to ensure the access to and provision and funding of health services in Israel is set forth in our legal system in various pieces of legislation.  S. 3(a) of the Patient's Rights Law, 5756-1996 (hereinafter: "Patient's Rights Law"), entitled "The Right to Medical Treatment” prescribes as follows:

3.     (a)  Every person in need of medical care is entitled to receive it in accordance with all laws and regulations and the conditions and arrangements obtaining at any given time in the Israeli health care system.

S. 3(a) of the Patient's Rights Law explicitly provides that the scope of the right to medical treatment in Israel derives, inter alia, from the statutory provisions applying to the matter. It should be mentioned that s. 5 of the Patient's Rights Law, entitled “Proper Medical Care” supplements the provision of s. 3(a) in providing that: “A patient shall be entitled to proper medical care, having regard both to its professionalism and quality, and to the personal relations incorporated in it.”  S. 3(b) of the Patient's Rights Law further provides that –

          (b) In a medical emergency, a person is entitled to receive unconditional urgent medical treatment.

It should be stated immediately that the petitioners avoided basing their claims before us on the provisions of s. 3(b) of the Patient's Rights Law. Indeed, it would appear, prima facie, that under its current categorization, Erbitux could not qualify as urgent medical treatment for a medical emergency under the provisions of s. 3(b); it is a relatively new medication, intended to prolong life under circumstances of grave protracted illness; the research data regarding its categorization is disputed, and it is not included in the basket (see the ruling of the South African Constitutional Court, whereby the right to “emergency medical treatment” under s. 27(3) of the Constitution does not apply to dialysis treatment given for the sake of prolonging life in a chronic medical condition of a protracted illness: Soobramoney v. Minister of Health [32]). It should be mentioned that in the circumstances of the case before us, similar reasons underlie the non-application of the provisions of the Do Not Stand on Your Neighbor's Blood Law, 5758-1998 [Israeli Good Samaritan Law- trans], which the petitioners cited in their pleadings.

       15. Another major piece of legislation with ramifications for the substance and the scope of the legal right to public health services is the National Health Insurance Law. Prior to the enactment of this Law, health insurance in Israel was voluntary. There was no legal obligation to take out medical insurance, and a person not insured as a member of one of the Sick Funds was obligated to pay for all medical treatment that he received (on this matter see CA 5557/95 Sahar Insurance Company Ltd v. Alharar [11],  para. 12 per (former title) Justice Theodor Or). The National Health Insurance Law was designed to change this situation. The purpose of the Law was to create a compulsory health insurance system in order to guarantee health services for the entire Israeli population, while defining the funding sources of the public health system and their allocation. The National Health Insurance Law was based on recognition of the state’s responsibility for funding public health services for the general benefit, to be provided to the public by way of the Sick Funds, deriving from the state’s commitment to “principles of justice, equality and mutual assistance” as stated in s. 1 of the Law.

The substance and the scope of the legal right to public health services are laid down in s. 3 of the National Health Insurance Law, entitled "The Right to Medical Services", which provides as follows:

3. (a) Every resident is entitled to health services under this law, unless he is entitled to them by virtue of another law.

(b)  The State is responsible for the funding of the health services basket from the sources enumerated in section 13.

(c ) The Sick Fund is responsible to  any person registered with it for all of the health services to which he is entitled under this law.

(d) The health services included in the health basket shall be provided in Israel, according to medical discretion, of a reasonable quality, within a reasonable period of time, and within a reasonable distance from the insuree's residence, all within the framework of the funding sources available to the Sick Funds under section 13.

(e) Health services will be provided while preserving human dignity, protection of privacy and preserving medical confidentiality [emphasis not in original – D.B.]

From the provisions of s. 3 and the other provisions of the National Health Insurance Law, it emerges that a special relationship between the insured parties, the Sick Funds, and the State is established in that Law. The Law obligates the insured parties – consisting of all residents of the State – to pay insurance premiums at a progressive rate calculated in accordance with the insured party’s level of income, as specified in s. 14 of the Law. This gives expression to the principle of mutual responsibility, the aspiration being for each insured party to pay according to his ability and receive according to his needs, out of consideration for the weaker members of society (see: Report of the National Committee of Inquiry for Examining the Operation and Effectiveness of the Israeli Health System, vol. 1,  81 – 82 (1990) (hereinafter: Netanyahu Report); Carmel Shalev, Health, Law and Human Rights (2003), 202 (hereinafter: Shalev); on the principle of detaching the receipt of medical treatment from the ability to pay for it, and the gradual erosion of this principle over the years due to amendments introduced into the National Health Insurance Law, see Gross, at  p. 471 ff).

Under the provisions of the National Health Insurance Law, the Sick Funds are responsible for providing all their registered insured members with all of the health services under the Law, apart from a limited number of health services, the provision of which is the responsibility of the Ministry of Health (see s. 3(c) as cited above, and s. 69 of the Law). The health services that insured members are entitled to receive directly from the Sick Funds are mainly those health services included in the "health services basket" as defined in s. 7 of the Law.  It should be noted that prior to the enactment of the National Health Insurance Law, there was no uniform basket of services, and each Sick Fund exercised independent discretion in its determination of the healthcare services to be provided to its members, regarding both the composition and the scope of services. The National Health Insurance Law changed this situation by fixing a single basket that was binding upon all of the Sick Funds.

Whereas the Sick Funds are responsible for the provision of the services included in the public health services basket, the State is responsible for funding the basket. The National Health Insurance Law contains specific provisions relating to the calculation of the cost of the basket, and to the sources from which it is funded.  Section 9(a) of the Law fixes the “basic cost” of the basket; this is updated annually in accordance with an automatic-technical formula that is based on the rate of increase of the health cost index as specified in the Fifth Schedule of the Law. Once the cost of the basket for a particular budgetary year is set, the State is responsible for funding the basket by means of the funding sources listed in s. 13 of the law. Section 13 contains a list of sources for funding the healthcare services provided under the Law, including health insurance dues paid by insured members, sums of money collected by the National Insurance Institute, certain sums from the budget of the Ministry of Health, and others.  The funding sources for the basket include “additional sums from the state budget as determined annually in the Budget Law, and which supplement the funding of the cost of the basket borne by the Sick Funds …”. Thus, the annual Budget Law serves as a central funding source that supplements the other statutory funding sources of the health services basket.

It should be mentioned as an aside that over the years, there has been extensive criticism of the statutory mechanism for adjusting the cost of the basket. The main objection in this context is that the health cost index is inadequate for the purpose of adjusting the funding of the health services basket to the real increase in the cost of the basket which stems, inter alia, from the growth in the national population, the increase in the average age of the Israeli population, and the constant technological progress in the field of medicine (see Shalev, at pp 229 – 232, 269-270; Gross, p. 495 ff; Daphne Barak-Erez, “The Israeli Welfare State – Between Legislation and Bureaucracy,”  9 Labor, Society and Law   175, at p. 181 (2002); see also HCJ 2344/98 Macabbi Health Services v. Minister of Finance [12], per (former title) Justice M. Cheshin)). Over the years, the Finance Ministry rejected recommendations for the establishment of a substantive mechanism to supplement the technical mechanism currently fixed by the Law on grounds of budgetary constraints.  A number of petitions contesting this conduct were submitted to this Court, but ultimately this Court refrained from intervening in the aforementioned policy of the Finance Ministry, for the reasons outlined in the decisions (see HCJ 9163/01 General Health Services v. Minister of Finance [13], per (former title) Justice M. Cheshin; see also Macabbi Health Services v. Minister of Finance [12]). Various draft laws for establishing a substantive mechanism for adjusting the real cost of the health services basket did not evolve into legislation. This being the situation, the Government retains broad discretion in determining the amount of the annual supplement to the cost of the basket, above and beyond the supplement mandated by the health cost index. 

16.  The entire body of arrangements prescribed by the Patient's Rights Law and the National Health Insurance Law leads to two main conclusions regarding the substance and the scope of the legal right to public health services in Israel. First, given that the purpose of the National Health Insurance Law is to grant rights to all residents of Israel by way of a national health insurance, as opposed to private risk insurance; and given that the public health services included in the health services basket are subject to the funding sources listed in s. 13 of the Law, among them the Annual Budget Law - it is clear that the health services basket does not purport to include the entire range of possible medical services, at the optimal scope and level as may be required by an individual. This point was made by (former title) Justice T. Or, writing as follows:

‘…As we saw, the Health Law establishes a basket of services. It does not purport to provide all of the medical services that are or may be required by those insured by the Sick Funds…the existence of a health system is dependent upon its financial balance, and the existing financial sources do not guarantee the provision of all the possible medical services…

It thus emerges that the provision of medical services by the Sick Funds cannot always provide all of the medical services required by a sick or injured person who is insured by the Fund’(CA 5557/95 Sahar [11], para. 19).

Secondly, the purpose of the National Health Insurance Law and the body of arrangements it prescribes, and s. 5 of the Patient's Rights Law which determines the right to ‘proper medical service’ - necessitate the conclusion that at this point in time, our legal system recognizes a legal right to public health services that extends beyond the minimum core of basic health services required for decent life in a society.  Naturally, it is difficult, perhaps even impossible, to define precisely the scope of this legal right.  Nevertheless, we can speak of a right with a core and an outer casing. The core of the legal right to public health services includes all the public health services that the state is obligated to fund.  Section 7(a) of the National Health Insurance Law classifies these as the “basket of basic services” provided by the General Histadrut Sick Fund prior to 1.1.94 (just before the Law came into force); with the addition of the automatic technical adjustment in accordance with the health cost index as specified in s.9(b) of the Law (hereinafter: the basic basket). The public funding of this basic basket constitutes a defined statutory obligation in terms of its scope and quantity, and indisputably, the state is powerless to shake off this obligation by claiming that there is no budgetary coverage for its liability (see and compare: HCJ 1554/95 Supporters of Gilat Amuta v. Minister of Education, Culture and Sport [14], per (former title) Justice T. Or, at para 21; HCJ 2344/98 Macabbi Health Services v. Minister of Finance [12]; HCJ 2725/92  Macabbi Health Services v. Minister of Finance [15], per Justice S. Joubran, at para. 47).

Within the outer casing of the basic right to public healthcare services are all other health services that are not included in the framework of this basic basket. Pursuant to the provisions of the National Health Insurance Law, the right to extend the health services basket beyond the basic basket is a right of the type that (former title) Justice Cheshin dubbed “budget-dependent rights” (Macabbi Health Services v. Minister of Finance [15], paras. 35-40). By their very nature and essence, these rights are a function of the policy that has its source in the Annual Budget Law. Indeed, as explained above, s. 13 of the National Health Insurance Law states that the Annual Budget Law shall serve as a funding source that supplements the other sources of funding of the health services basket. This means that the Budget Law determines the additional funding for the addition of new technologies and medications to the health services basket, such that “without a budget there is no right” to the expansion of the basket (see and compare: Macabbi Health Services v. Minister of Finance [15], at p. 39). This arrangement may indeed be consistent with the conception endorsed by international conventions and in the legal systems of other states, whereby the scope and extent of realization of the right to health and medical treatment is subject to the economic capability of the state and the resources at its disposal (see para. 11 ibid).

17.    Under the current legal position, the scope of the legal right to public health services beyond the basic basket derives from the Annual Budget Law. At the same time, I should mention that the budgetary limitation is not a permanently unsurpassable ceiling.  The International Covenant on Economic, Social and Cultural Rights, which, as noted, was ratified by Israel in 1991, determined that the State Parties must take steps for the progressive realization of the right to health recognized in s.12 of the Covenant. The meaning of the obligation of progressive realization was discussed in General Comment 14 of the U.N. Committee on Economic, Social and Cultural Rights – which is the authorized interpretation of s.12 of the Covenant. General Comment 14 provides inter alia that in circumstances in which retrogressive measures are taken that impede the progress already achieved in relation to the right to health, the State party has the burden of proving that the measures are necessary in view of the State party's maximum available resources (see para. 32 of General Comment 14 ibid).  This, then, is the position on the level of the conception of the international undertakings. In the spirit of these principles the question that is likely to arise in our legal system is whether a serious reduction in the funding of the health services basket - including by way of significant cumulative erosion of the funding of the basket in the absence of a substantive mechanism for a real adjustment of its cost - transfers the burden to the State to show that this reduction is indeed justified and dictated by reality. The question is one of interpretation: the legal right to the expansion of the health services basket is indeed budget-dependent in accordance with the provisions of the National Health Insurance Law, but the question is whether it is appropriate to interpret its scope taking into consideration the principle of progressive realization, and in the spirit of Israel’s undertakings on the international level? This question is not currently under discussion and I prefer to leave it as pending.

18.    In the circumstances of this case, does the non-inclusion of Erbitux in the Health services basket unlawfully violate the petitioners’ legal right to receive publicly funded health services?  There is no dispute that Erbitux was not included in the basic basket as defined in s. 7 of the Law (see para. 16 supra). Therefore, the demand for public funding for Erbitux is “budget-dependent”. In this context it should be stressed that the petitioners in HCJ Sheiber refrained from challenging the budgetary framework allocated by the Government for the expansion of the health services basket, and rightly so under the circumstances.  In both his oral and written pleadings, counsel for the petitioners stressed that the petition is not aimed at increasing the budget earmarked for the health services basket; it is directed primarily against the authority of the Committee and the manner in which it exercised its discretion in determining the contents of the health services basket in the framework of the existing budget.

I will state right away that we have examined the petitioners’ arguments against the Committee’s authority and its mode of operation, and our conclusion is that there are no legal grounds for our intervention on that count; nor has it been proven, in the circumstances of the case, that the petitioners’ legal right to receive public healthcare services was unlawfully violated.  In order to elucidate our reasons for this conclusion, we will first consider the manner of determining the composition of the health services basket, the nature of the Committee and its subordination to the rules of public law. We will then proceed to discuss the petitioners’ arguments against the authority of the aforementioned Committee and the manner in which it exercised its discretion.

Determining the composition of the health services basket

19.  As mentioned, s.7 of the National Health Insurance Law defines the initial contents of the health services basket (the basic basket), in a manner that reflects the framework of health services that were provided by the General Histadrut immediately prior to the date on which the Law came into force. Naturally, in view of the rapid developments in the world of science, and taking into consideration the accelerated development of new medical technologies in the face of the steadily increasing needs of the Israeli population, it frequently becomes necessary to examine the possibility of adding new medications and technologies to the health services basket. In this context, s. 8(e) of the National Health Insurance Law prohibits the addition of medications and technologies to the health services basket in the absence of a suitable funding source to cover the additional cost involved (on the questions of interpretation raised by this section, see HCJ 1829/02 General Health Services v. Minister of Health [16], per Justice E. Grunis, para. 5). Section 8(b)(1) of the National Health Insurance Law further provides that any addition of new medications and technologies to the health services basket involving additional costs must be by virtue of a decision of the Health Minister, with the agreement of the Minister of Finance and the approval of the Government.

20.    When there has been a decision to allocate a budgetary supplement to fund an expansion of the health services basket, how is it decided which new medications and technologies to include in the framework of the basket? As transpires from the State’s response, the adoption of decisions on this matter is subject to a complex process comprising several stages:

Each year the Ministry of Health sends out a “public appeal” for the submission of requests to include new medications and technologies in the Health services basket. The requests are submitted by a variety of bodies – professional, public, commercial and private. After collecting the requests, the process of gathering data and professional evaluation begins. This process is conducted by the Technologies and Infrastructure Administration in the Ministry of Health, with the assistance of additional professional bodies both inside and outside the Ministry of Health. Upon completion of this process, and after the formulation of the recommendation of the professional bodies in the Ministry of Health, the professional background material is transferred to the Committee.

This Committee conducts its deliberations regarding the requests submitted to it, taking into account all the professional material made available to it. From the State’s response, it emerges that at the initial stages of the Committee’s deliberations, each medication is evaluated and graded numerically in order to serve as an auxiliary tool for the basic classification of the various technologies. At the advanced and final stages of the deliberations, the Committee prioritizes the various technologies and recommends the adoption of a final scale of priorities among the technologies, taking into account the given budgetary framework.

The Committee’s recommendations regarding the ranking of new medications and technologies are presented to the plenum of the Health Council, which is authorized under the Law to advise the Minister of Health on changes in the basket. Following all these stages, and in the event that the recommendations are accepted by the Minister of Health, they require the consent of the Minister of Finance and confirmation of the Government, pursuant to s. 8(b)(1) of the Law, for the purpose of confirming the funding sources for the expansion of the basket.  At the end of the process the recommendations are anchored in an Order issued by the Minister of Health.

The Committee thus plays a central role in ranking the new medical technologies, and its recommendations affect the contents of the basket in the event of a budgetary decision being adopted for its expansion. We will now focus our attention on this Committee.

The nature of the committee and its subordination to the rules of public law

21.    The Committee is appointed by virtue of an administrative decision of the Minister of Health, and it operates on behalf of the Health Council, which is authorized to advise the Minister on matters pertaining to “changes in the health services basket, taking into account, inter alia, new technologies and their costs (s. 52(1)(b) of the National Health Insurance Law). The authority to appoint the Committee is found in s. 48(f) of the National Health Insurance Law, which provides that the Health Council, headed by the Minister of Health, is authorized to appoint committees from amongst its members, and to have recourse to experts who are not members. The appointment of the Committee might also be anchored in the general ancillary competence of the Minister of Health to voluntarily consult with others in the exercise of his authority, and to establish suitable bodies for the purpose of such consultation (see s. 17(b) of the Interpretation Law, 5741-1981; and see Itzhak Zamir, Administrative Authority, vol.1, at pp. 190-191, 246-247 (1996) (hereinafter: Zamir)).

The Committee's role, therefore, is to advise the relevant bodies on the prioritization of new medical technologies for the purpose of expanding the health services basket. Work of this kind undoubtedly requires expertise, experience and broad understanding in order to strike the appropriate balance between all of the relevant considerations, which are multi-disciplinary and complex, as will be specified below. With this in mind, the Minister of Health, in conjunction with the Minister of Finance, decided to include experts from different fields on the Committee: representatives of the doctors, representatives of the Sick Funds, economists, and public representatives. This composition of the Committee was designed to assist it in evaluating new medical technologies and accepting recommendations from a broad social perspective, taking into consideration the professional-medical aspects and the various public considerations involved in the addition of new medications and technologies to the medical services basket, all within the framework of the resources allocated by the Government to the health services basket for the relevant budgetary year.

22. It should be stressed that although the Committee is not a statutory body, and although it includes public representatives who are not personally subordinate to the appointing minister, the Committee is part of the public administration and its actions are governed by the rules of public administration (on the proposal to refer to bodies of this kind as "satellite bodies", see Zamir, at p. 413, 421). It should be mentioned that State counsel did not dispute this, and in their summations they assumed that the Committee was indeed bound by the rules of Administrative law. 

In view of the above, it is agreed that the Committee is obliged to act reasonably and fairly, basing itself on relevant considerations and the principle of equality, and conducting correct administrative proceedings in the spirit of the principles laid down in the National Health Insurance Law. Furthermore, in view of the Committee’s unique composition, its professionalism and its expertise regarding the sensitive and complex questions which it considers, it is given relatively broad leeway in the exercise of its discretion.  As a rule, this Court will not substitute itself for the  Committee, and will not rush to intervene in the Committee’s exercise of its discretion, as long as the latter's recommendations were the product of a correct process and as long as it did not deviate substantively from the framework of relevant considerations that it ought to have considered, or from an appropriate balance of these considerations within the parameters of reasonableness (cf: HCJ 7365/95 Bolous Brothers- Marble and Granite Production Ltd  v. Investments Centre [17], per  Justice I. Zamir, para. 4).

23.    In concluding this part of the hearing, I will say that from the outset, there was no obligation to anchor the actual establishment and operation of the Committee in legislation, in that it is a body established for advisory purposes, as explained above. Over time however, the Committee has become a factor that wields major influence on the updating of the contents of the health services basket, inter alia in view of the general tendency of the Minister of Health to endorse the Committee's recommendations on prioritizing the various medical technologies.  Considering the Committee's influence and the complexity of its work due to the gravity of the matters with which it deals, and in view of the pressures applied by various interested parties, this would seem to be an appropriate time to consider anchoring its activities in an appropriate statutory framework that would determine the manner of the Committee’s appointment, its composition, its powers and its work procedures. Such anchorage is likely to assist in the regulation of the Committee's activities, considering the particular sensitivity of the difficult and important issues with which it deals (see and compare: Guy I. Seidman, "Regulating Life and Death: The Case of Israel's 'Health Basket' Committee", 23 J. Contemp. Health L. & Pol'y 9, 30 (2006); Karniel, at pp. 234-235; regarding other advisory bodies established by force of an administrative decision and subsequently anchored in appropriate legislation, see: Zamir, at pp. 415-416). Those responsible for these matters would therefore do well to consider appropriate statutory regulation of the Committee and its activities.

Discussion of the petitioners’ arguments against the manner in which the Committee exercises its discretion

24.  The petitioners in HCJ Sheiber raised several major arguments against the manner in which the Committee exercises its discretion in general, and against its recommendation not to give Erbitux a high ranking on the scale of priorities in particular.  First,  they argued that the Committee overrated the budgetary consideration and that its recommendations, which translated into a relatively low ranking for life-saving or life-prolonging medications, were made unlawfully, due to the failure to ascribe the requisite importance to the value of saving human life.  Secondly, the petitioners challenged the criteria that guided the Committee in its prioritization of the new medical technologies.  The main argument in this context was that in the framework of the budget allocated for funding the basket, the funding should be based on an equal rate for all life-saving or life-prolonging medications, without preferring one medication over others and without attaching weight to the chances of recuperation offered by the different medications. Thirdly, it was argued that the exclusion of Erbitux from the health services basket amounted to unlawful discrimination because it discriminated against the petitioners vis-à-vis other patients whose essential medications were included in the basket.

25.    Having heard the parties and having examined the material in the file, our conclusion is that the petitioners’ arguments should be rejected. I will preface the discussion by clarifying that under settled case law, and as part of its obligation towards the public, a public authority is permitted, and even obliged, to consider budgetary constraints in exercising its discretion. This is especially the case when the law empowers the authority to determine alone, at its own discretion, the precise scope and limits of the entitlement to a public service, in a manner that requires fixing a scale of priorities in accordance with limited public resources. As stated by Justice S. Netanyahu:

‘No society has unlimited resources. No statutory authority operating in a society is permitted and able to ignore budgetary constraints and to provide services without any kind of accounting, no matter how important and urgent they may be …

Every authority is faced with the need to strike a proper balance between the scope, the manner and the degree to which it discharges its functions-obligations under the law on the one hand, and its obligation to maintain its budgetary framework on the other. It can never fully discharge all of these and fulfill all its functions optimally without taking budgetary restraints into account. It must establish its own scale of preferences and priorities, and guiding rules and criteria for their implementation; these must meet the test of reasonability, and be exercised on the basis of equality’ (HCJ 3472/92 Brand v. Minister of Communications [18], para. 4; see also HCJ 3627/92 Israel Fruit Growers Organization Ltd. v. Government of Israel [19], per Justice E. Mazza, para. 5).

            As clarified above, the National Health Insurance Law expressly prohibits the addition of services to the health services basket in the absence of a suitable source of funding. Consequently, the budgetary consideration is a legitimate and relevant one, which the Committee is entitled to consider in its prioritization of the new medical technologies.  Our case law has already held that "[o]ne cannot ignore the fact that even in a matter as sensitive as health, budgetary factors must be considered," (per Justice A. Grunis in HCJ 2453/06 Israeli Medical Association v. Attorney General [20], para.3; see also Justice M. Naor in HCJ 4004/07 Turonshwili v. Ministry of Health [21], para. 6).  This in no way implies contempt for the sanctity of human life; rather, it constitutes recognition of the inherent constraints of a reality in which budgetary resources are limited and must be divided amongst all of the national and social needs that make prioritization necessary.

26. Further to the above, it should be noted that the National Health Insurance Law is silent on the method of prioritizing the various medical technologies for purposes of expanding the basket.  Nevertheless, it is settled case law that the public body's authority to allocate limited resources may also entail the authority to determine the method of allocation and the scale of priorities (see HCJ 4613/03 Shaham v. Ministry of Health [23], per Justice E. Levy, para. 7).

The Committee's job of advising the Ministry of Health and the Health Committee on the prioritization of the various medical technologies is undoubtedly an exceedingly difficult, complex and sensitive task (on the dilemmas involved, see: Netanyahu Report, at p. 100). The State attached a document to its written pleadings in which it laid out the criteria set by the Committee for ranking the various technologies and medications it considered. These criteria include the following considerations: the effectiveness of the technology in treating the disease; the ability of the technology to prevent the disease; the ability of the technology to save life or prevent death; the prolonging of life and the anticipated quality of life; the existence of an alternative treatment and examination of the effectiveness of that alternative; experience in or outside Israel in the use of the technology; economic cost on the individual and national levels; the number of patients who stand to  benefit from the medication; the anticipated benefit of including the technology in the basket in the short and long terms, and others.

These are general criteria, and they were not ranked by the Committee in order of importance or weight.  The State’s position on the matter was that since the subject is a particularly complex one, the perspective must be broad and comprehensive and it is not possible to adopt rigid and unequivocal rules that would lead to the creation of a type of mechanical formula for resolving the public, economic, value-based and ethical dilemmas involved in determining the scale of priorities.  In this context, the State emphasized that the consideration of saving or prolonging life was accorded great weight by the Committee when ranking the medical technologies under discussion. Nevertheless, like the other above-mentioned criteria, the consideration of saving or prolonging life is neither exclusive nor determinant, due to the need to consider all the other relevant considerations such as the number of people requiring the medication, alternative treatments and their effectiveness, the patient’s quality of life, the overall cost in relation to other medications and others. In this context, the State added that the medications basket is not meant to include only medications that are designed to cure existing illness: it also includes a variety of other medications, such as medications with long term preventative qualities, medications that prevent complications and aggravation of existing illnesses, and medications that very significantly affect the quality of life, such as the prevention of serious disabilities and suffering.  

27.  After considering the matter, we have concluded that the criteria presented could not be faulted in any way that might create grounds for our intervention. In view of the complexity of the questions confronting the Committee and the fact that they involve a variety of aspects – legal, ethical, philosophical, moral, economic and others – it cannot be said that the criteria that served the Committee were irrelevant or unreasonable to a degree that necessitates the intervention of this Court. For example, it cannot be said that the consideration of the effectiveness of the medication and its contribution to the patient’s chances of recovery is an illegitimate one, as argued by the petitioners. In circumstances in which there is a limited budget, and the countless needs must be prioritized, the effectiveness of the medication is a legitimate factor which can and should be considered.  As for the criterion of the economic cost of the medications - as mentioned, the Committee is entitled to consider the budgetary aspect, and this has ramifications for the prioritization of the different medications.  Accordingly, the cost of the medications constitutes a relevant factor which the Committee is permitted to take into consideration.

We would add that in view of the complexity of the relevant considerations, and considering the need for a broad value-based, public perspective in order to find the golden path between the various needs, we felt that the fact that the Committee refrained from a rigid ranking of the criteria it invoked in order of their importance could similarly not be faulted so as to necessitate our intervention. It should be recalled that the Committee’s discretion is not based on minimum-achievement tests, the satisfaction of which creates an entitlement to public funding, but rather on complex and sometimes conflicting criteria by means of which the Committee is supposed to recommend which medications are to be included in the Basket and which rank lower on the scale of priorities. In view of the Committee’s unique composition, its expertise and its professionalism, it would appear that we cannot dismiss the State’s position whereby the Committee should be granted wide discretion that will allow it to assess the weight of the relevant considerations in their entirety from a broad and comprehensive perspective. Nevertheless, further to our recommendation in para. 23 above regarding the regulation of the activities of the Committee by way of an appropriate statutory source, it seems that suitable statutory anchorage of the criteria that should guide the Committee ought to be considered. In that framework, the question of whether it is possible and desirable to determine a hierarchy of the various criteria in order to guide the Committee in the exercise of its discretion should be considered as well.

28. As mentioned, the petitioner proposed adopting a different method of prioritization from the one currently used; this new method would grant equal funding to all life-saving or life-prolonging medications. The petitioners proposed that a certain percentage of the cost of all the medications be funded, without preferring any particular medication over another and without deviating from the existing budgetary framework.

Regarding this proposal, we will comment that no data relating to the feasibility of its implementation from a budgetary perspective has been presented to us. However, even if we assume, for argument's sake, that the petitioners' proposal for equal allocation to all the medications is a viable one - and as stated, no data was provided on this point – it is clear that this proposal too has its disadvantages and difficulties (for example, medications which are currently fully funded would, according to the petitioners' proposal, be only partially funded, thereby increasing the degree of self-participation in relation thereto).  Furthermore, there is substance to the State's claim that the petitioners' proposal is incompatible with government policy whereby priority should be given to certain medications, inter alia, in accordance with their quality and effectiveness. Prima facie, the petitioners' petition is similarly at odds with the basic conception underlying the National Health Insurance Law, i.e. that the medications basket should provide a solution not only for life-saving or life-prolonging medications but also for a broader range of medical technologies required for the health of the population. At all events, the question of how a scale of priorities should be determined in the allocation of public resources in the area of health services is controversial, admitting a variety of views. It is not up to us to recommend the adoption of one system of prioritization over another, as long as the current criteria comply with the provisions of the National Health Insurance Law, and are based on relevant and reasonable considerations, and as long as it has not been proved that the criteria substantively upset the proper balance between the relevant considerations, or that Committee substantively and clearly deviated from the bounds of reasonability.

29. As for the decision adopted in the particular case of the Erbitux medication, forming the subject of HCJ Sheiber, it emerges from the State’s response that this medication was registered in Israel's Drugs Registry on 10 May 2005.  Before that, Erbitux was marketed to metastatic colon cancer patients according to individual permits for use of the medication by virtue of s.47A(c) of the Pharmacists Ordinance (New Version) 5741-1981. The State claims that the scientific evidence relating to this medication is relatively preliminary, and it is not yet known whether the medication relieves the symptoms of patients of metastatic colon cancer or prolongs their lives.  This is reflected in the protocol of the meeting of the Committee from 1 January 2004, which states the following regarding Erbitux:

'The preparation is intended for the treatment of a small group of metastatic colon cancer patients. This is a new medication that was registered in the course of 2004 in the U.S.A and in other Western states.

….

The existing scientific evidence regarding the preparation is not abundant, and it does not prove that treatment with the medication definitely prolongs life, but rather that it generates an increased incidence of response and a reduction of the tumor mass.  It may be presumed that the reduction of the tumor mass would enhance the quality of the patient’s life, but will not necessarily prolong their lives.

Committee members proposed reducing the ranking of the preparation from A9 to A8 due to the absence of sufficient evidence regarding the life-prolonging component. Others claimed, however, that although the existing evidence is limited in scope, and it does not provide proper information concerning the life-prolonging aspect, there is nevertheless evidence of reduced tumor mass and improved response to treatment. Moreover, material regarding the preparation is accumulating. It was therefore suggested to define it as (A9-) which means a lower level of priority for inclusion in the basket than other treatment technologies in which the life-prolonging component is clearer (these were defined as A9)' (Protocol of Committee proceedings, dated 1.12.04, appendix RS/6 of the respondents’ response, 1-6, dated 20 May 2005 in HCJ Sheiber).

The Committee therefore decided to give the Erbitux medication a lower ranking as compared to the other technologies which had clearly been proven to be life-prolonging.  The protocol indicates that the Committee considered relevant factors, which included the effectiveness of the medication in the treatment of sickness and the question of whether there was proven capacity to prolong life. It should be stressed that the protocol subsequently states that “material regarding the preparation [Erbitux] continues to accumulate,” and that if additional significant evidence were to be received regarding, inter alia, its degree of effectiveness, it will be passed on to the Committee, and the medication will be brought up for further discussion. It may thus be presumed that to the extent that new scientific evidence is gathered regarding the effectiveness of Erbitux, renewed consideration will be given to the ranking accorded to this medication.

Considering all the above, it cannot be said that the Committee’s recommendation regarding the ranking of Erbitux is unreasonable to a degree that requires this Court’s intervention. Nor can it be said that the Committee’s recommendation regarding Erbitux constitutes unlawful discrimination against the petitioners vis-à-vis other patients whose required medications are included in the health services basket. Under circumstances in which the public resources are insufficient to satisfy all the needs and all the needy, resources must be allocated according to a scale of priorities, which naturally gives rise to distinctions between various individuals and various groups. These differences do not constitute unlawful discrimination, as long as they are based on relevant, reasonable considerations (see and compare: HCJ 1113/99 Adallah v. Minister for Religious Affairs [24], per Justice I. Zamir, para. 5). Any other approach would preclude any possibility of distributive decisions for purposes of allocation of public resources, even in circumstances in which the decisions were adopted on the basis of lawful considerations.  In the words of Justice E. Rubinstein:

'…[P]rioritization is essential under the circumstances of the health services basket –"The couch will always be too short for stretching out, and a handful will never satiate the lion". In a world of rapidly changing medical and technological scenes, often beyond recognition, but in which the costs of the technology and medications is high, there is no escaping the need to fix scales of priorities. It is hard to say, even in  painful cases such as this, that there is discrimination due to the prioritization' (HCJ 2974/06 Israeli v. Committee for Expanding the Health Services Basket [25]) [emphasis added – D.B.].

One can certainly understand the deep distress of the patients suffering from metastatic colon cancer, whose physicians have prescribed treatment with Erbitux and who cannot afford to purchase this medication. Nor can one be indifferent to the pain and cries of the sick. We are aware that unfortunately, our conclusion denies them what they seek. Nevertheless, at this point in time, and considering the existing data, we have no legal grounds for intervening in the scale of priorities that was fixed by the Committee with respect to this medication. This being the case, and in view of all the reasons discussed above, the petitioners’ request to order the inclusion of the Erbitux medication in the health services basket is denied.

The petitioners’ proposals for reducing the prices of medications not included in the basket

30.  A significant portion of the petitioners’ claims in HCJ Sheiber focused on proposals aimed at reducing the prices of medications not included in the health services basket. In this context, the petitioners applied for two remedies, in respect of which an order nisi was originally issued: the first was to order the cancellation of value added tax and other indirect taxes levied on innovative, life-saving medications that are not included in the health services basket; the second is to order the respondents – the Ministry of Health and/or the Sick Funds – to make centralized purchases of these medications, to help in reducing their prices for the consumers.

As for the petitioners’ request to order the cancellation of value added tax and other indirect taxes levied on medications for the disease of cancer, it emerges from the State’s response that the requested cancellation of V.A.T and other indirect taxes would require a legislative amendment in order to establish a statutory exemption for medications not included in the health services basket. In this context, it should be mentioned that over the past few years, a number of private members’ bills have been tabled for the amendment of s. 31 of the Value Added Tax Law, 5736-1976, with the aim of establishing an exemption from V.A.T for innovative, life-saving medications not included in the basket. These proposals did not reach the legislative stage because the Finance Ministry refused to deviate from the principle of tax uniformity and to subsidize the funding of these medications other than by way of direct support for the health services basket. At all events, the question of whether to grant a statutory exemption from V.A.T. and from other indirect taxes for new medications not included in the health services basket lies within the responsibility of the legislature and not of this Court.

31. The responses of the Sick Funds to the petitioners’ request to obligate the respondents to carry out a centralized purchase of new medications such as Erbitux in order to reduce the price for the consumers, indicate that some of them take a positive view of the idea of a centralized purchase, albeit conditional upon appropriate arrangements, legislative and otherwise, being made which would enable them to make the purchase.  Other Sick Funds felt that the centralized purchase of medications not included in the health services basket should be carried out by a central body unrelated to the Sick Funds. From the parties’ pleadings before us, it emerges that implementing the proposal of centralized purchase of the medications would give rise to legal problems, inter alia from the perspective of creating a restrictive arrangement. Furthermore, the centralized purchase of medications not included in the health services basket would involve a number of implementation-related questions, the answers to which are far from simple. What is the appropriate body to deal with the centralized purchase? How would it decide which medications to include in the purchase? Where would the medications be stored, and how would they be sold to the patients in need of them, and other similar questions.  At all events, it appears that the centralized purchase of new medications such as Erbitux, which are not included in the health services basket, would in certain cases contribute to the reduction of the price of these medications for patients requiring them, and thus ease their plight. Bearing this in mind, all the relevant aspects of this proposal should be examined by the Ministry of Health and the other relevant bodies, in order to consider the issue in depth.

32.  Finally, it should be noted that the petitioners in HCJ Sheiber requested that an order be given to issue a Supervisory Order pursuant to the Services and Commodities (Supervision) Law, 5756-1996, that would establish a ceiling price for Erbitux and for other similarly innovative medications. In the course of these proceedings, it emerged that a supervisory order of this kind had already been issued, and that the order also applies to medications not listed in the Drugs Register (see Supervision Order over the Prices of Commodities and Services (Maximum Prices for Prescription Preparations), 5761-2001; see also HCJ 3997/01 Neopharm Ltd v. Minister of Finance [26], in which a petition against the validity of the Order was dismissed). It was in consideration of this that no order nisi was given in the first place regarding that particular matter. It further bears note that in their pleadings before this Court the petitioners claimed that the Sick Funds should reorganize their funds, and utilize the budgetary balance for the purchase of life-saving medications. This claim was made in rather laconic and general manner, and we therefore did not deem it necessary to discuss it.

33.  I therefore propose to my colleagues to rule as follows:

(a)   In view of the addition of Avastin and Taxotere under the requested classifications to the Health services basket as of 2006, the order nisi given in HCJ Louzon shall be cancelled, and the petitions in HCJ Louzon  and HCJ Bar-On shall be deleted, without any order for costs.

(b)   For the reasons specified above, the order nisi issued in HCJ Shieber shall be cancelled and the petition denied, without an order for costs, bearing in mind the recommendations made in paragraphs 23 and 27 of my comments above regarding the regulation of the Committee’s activities by way of an appropriate legislative framework.

 

Justice A. Grunis

I agree.

 

Justice M. Naor

1.    I agree that the order nisi given in HCJ Louzon should be cancelled and the petitions in HCJ Louzon and HCJ Bar-On struck down, without an order for costs. I also agree to the cancellation of the order nisi issued in HCJ Sheiber, and to the denial of the petition without an order for costs.

2.    As my colleague the President has shown, the task of prioritization is a difficult one, quite often requiring us to turn our backs on the gravely ill, such as in HCJ Sheiber. Indeed, it is hard to face a person fighting for his life and leave him empty-handed. All the same, I see no possibility of intervening in this case.

From time to time petitions are filed in this Court relating to intervention in prioritization decisions (see HCJ 2974/06 Israeli v. Committee for Expanding Health Services Basket [25] and HCJ 4004/07 Turonshwili v. Ministry of Health [21] referred to by my colleague the President). In Israeli v. Committee for Expanding Health Services Basket [25] I concurred with the comments of Justice E. Rubinstein, as cited by the President in her opinion:

'…[P]rioritization is essential under the circumstances of the health services basket –"The couch will always be too short for stretching out, and a handful will never satiate the lion". In a world of rapidly changing medical and technological scenes, often beyond recognition, but in which the costs of the technology and medications is high, there is no escaping the need to fix scales of priorities. It is hard to say, even in painful cases such as this, that there is discrimination due to the prioritization. Indeed, the struggle over the limited cake is the reason for petitions that are filed in this Court, parallel to parliamentary and extra-parliamentary public struggles. '

            I repeated these comments in Turonshwili v. Ministry of Health [21], and I believe they are equally applicable to the case before us. In my view this Court has but a narrow margin for intervention in decisions of this nature. In order to render an appropriate decision on a prioritization matter, those making the decision (or recommendation) must have a broad picture. The prioritization applies to all the medications that are candidates for inclusion in the basket, all within the budgetary framework.  Naturally, a hearing before the High Court of Justice focuses on one individual (or a limited group of people), and on one medication which may have the potential to save his life. Each person is an entire world and the importance of saving human life is deeply ingrained in the values of the State of Israel as a Jewish democratic state – to stand by and not offer help is difficult. On the other hand, those charged with making the decisions (and recommendations) have a broader perspective. I am convinced that decisions regarding the basket and its composition are occasions for sleepless nights for all those who must decide or recommend. But I too, like my colleague the President, see no legal grounds for our intervention.  While the hearing in this case focused on the individual in need of the medication, in the background are many other patients whose voices were not heard, but whose plight is dire. A decision on the matter requires extensive knowledge, the weighing up of different data and a determination of their relative weight.  As such the problem is a “multiple focus problem”, using a term coined by Justice I. Zamir in HCJ 7721/96 Israeli Insurance Assessors Association v. Inspector of Insurance [27] at pp. 644-645:

‘The problems presented for resolution in the framework of judicial review of public administration fall into two main categories. The first category includes problems involving a confrontation between two central factors: norms, interests or methods…. Problems of this nature usually require answers which are yes or no, permitted or forbidden, either/or. As such they can be referred to as dual-focus problems, as if there were two heads to be chosen between. This kind of problem is classically suited to judicial review… a decision in this kind of case is generally an appropriate task for the court.

The second category includes problems consisting of a significant number of factors, norms, interests and paths, each of which merits consideration in the process of reaching a solution, and each of which should receive expression in the solution given…  This kind of problem is multi-focal…. A  problem of this kind does not admit of an answer which is yes or no, permitted or forbidden, either/or.  As such it is exceedingly difficult, perhaps even impossible, to render a decision that relies on a legal rule or a balancing formula…. This task is classically suited for an administrative authority, which has the required expertise and tools to solve the problem; it can act in a flexible manner, in consultation and coordination with the agencies involved in the matter. It is not a task that is suited for the court.

This does not mean that the court will refuse to give any attention to a multi-focus problem. It is competent to deal with these problems… but it will place restrictions on its treatment of these kinds of matters. On the one hand, it is not prepared to place itself in the position of the administrative body and to discharge the task imposed upon it….  On the other hand, in the case of an illegal omission, it is prepared to order the administrative body to exercise its authority….[S]imilarly, after the administrative body has exercised its authority it is prepared to examine the legality of its act, such as the legality of the entire plan, or a part thereof.’

President A. Barak made similar comments in HCJ 82/02 Kaplan v. State of Israel, Ministry of Finance, Customs Division  [28], at pp. 908-910:

‘The role of the court is to determine whether the arrangement devised by the administrative authority is legal or not. The administrative authority may devise several alternatives, all of which will be regarded as legal as long as they do not exceed the boundaries of that which is permitted in the exercise of discretion.’

(And see also CA 8797 Anderman v. Objection Committee of District Committee under the Planning and Construction Law, 5725-1965, Haifa [29] at p. 474; HCJ 10/00 Ra’anana Municipality v. Inspector of Transport, Tel-Aviv and Central Districts [30] at p. 756).

            There is a large number of solutions to the complex task of putting together the basket as explained by my colleague, each of which has its casualties. There is no optimal solution, nor is there a magic formula for weighing up the conflicting interests. The decision not to include the desired medication in the basket, on the basis of the extant information relating to it, does not exceed the bounds of reasonability, and we have no grounds for interfering with it; there is therefore no choice but to deny the petition.

 

Judgment as per the opinion of President D. Beinisch.

 

25th Tammuz 5768

28 July 2008

 

 

 

|National Health Insurance Law

s. 7...................................................................................................................... 5, 24, 27, 29

Arbitrux...................................................................................................................... 19, 22, 29

CA 5557/95 Sahar Insurance Company Ltd v. Alharar............................................ 3, 22

Constitutions

Canada United States...................................................................................................... 18

Constitutions  of the South African

South African Constiution, section 27.......................................................................... 18

Daphne Barak-Erez “Welfare Policy in Israel – Between Legislation to Beaurocracy” Labor, Society and Law 9 2002              25

HCJ  7365/95 Bolous Brothers – Marble and Granite Production Ltd................. 4, 33

HCJ  7365/95 Bolous Brothers – Marble and Granite Production Ltd (1996)........... 4

HCJ 1554/95 Amutat Supporters of Gilat v. Minister of Education, Culture and Sport      3, 27

HCJ 1829/02 General Health services v. Minister of Health................................... 4, 30

HCJ 2344/98 Macabbi......................................................................................... 3, 4, 26, 27

HCJ 2557/05 Mateh Harov v.Israel Police

HCJ 2557/05................................................................................................................. 3, 15

HCJ 2599/00 Yated Association of Children with Downs Syndrome v. Ministry of Education          3, 21

HCJ 2725/92  General Health services v. State of Israel.......................................... 4, 27

HCJ 3472/92 Brand v. Minister of Communications (1993) IsrSC 47 (3) 143............ 4

HCJ 366/03 Commitment to Peace and Social Justice Amuta v. Minister of the Interior

HCJ 366/03.......................................................................................................................... 3

HCJ 4769/95 Menahem v. Minister of Transport

HCJ 4769/95................................................................................................................. 3, 16

HCJ 494/03 Physicians for Human Rights v. Minister of Finance

HCJ 494/03.................................................................................................................... 3, 14

HCJ 5578/02 Manor v. Minister of Finance

HCJ 5578/02................................................................................................................. 3, 15

HCJ 6055/95 Zemach v. Minister of Defense

HCJ 6055/95.................................................................................................................... 3, 9

HCJ 6055/95 Zemach v. Minister of Defense (1999)........................................................ 3

HCJ 9163/01 General Health services v. Minister of Finance  (2002)......................... 3

Interpretation Law, 5741-1981

s. 17 (b)................................................................................................................................ 31

LCA 4905/08 Gamzo v. Isaiah

LCA 4905/08................................................................................................................. 3, 14

Macabbi Health services v. Minister of Finance (2000)

HCJ 2344/98 Macabbi....................................................................................................... 3

National Health Insurance Law.............................................................................. 3, 22, 24

9b......................................................................................................................................... 27

s. 48 (f)................................................................................................................................ 31

s. 52 (1) (b).......................................................................................................................... 31

s. 8 (b)(1)............................................................................................................................. 30

s.8 (e)................................................................................................................................... 30

the Law........................................................................................................................... 5, 15

National Health Insurance Law, 5754-1994

National Health Insurance Law....................................................................................... 5

National Health Insurance Law, 5755-1995...................................................................... 3

National Health Law............................................................................................................ 27

National Health Law, 5744-1948

s. 5........................................................................................................................................ 27

Patient's Rights Law.......................................................................................................... 2, 21

s.7............................................................................................................................ 21, 22, 26

Patient's Rights Law, 5756-1996

s.3........................................................................................................................................... 2

Soobramoney v. Minister of Health

Soobramoney v. Minister of Health.......................................................................... 4, 22

 

 

 

 

"[n]o person can deny, first that we are talking about an orderly decision-making process and second, that prioritization is necessary in the circumstances of the health services basket."

HCJ 7721/96 Union of Insurance Assessors v. the Inspector of Insurance 55(3) PD 625, 650 (2001).

Israel Oil Refineries Ltd. v. New Hampshire Insurance

Case/docket number: 
CA 4525/08
Date Decided: 
Wednesday, December 15, 2010
Decision Type: 
Appellate
Abstract: 

Facts: The Tel Aviv District Court granted a petition for the recognition of a judgment rendered by an English court, which had declared that an insurance policy issued by the respondent (New Hampshire Insurance) to an Israeli company, Oil Refineries Ltd. – the appellant – was void on the grounds that a substantial matter had not been disclosed to the issuer. The respondent brought the action in the English court after its sibling company (AIG Europe, which had underwritten the policy) had been served a third party notice in an Israeli proceeding brought against the appellant. The District Court ruled that the foreign judgment in favor of the respondent should be recognized pursuant to s. 11(a) of the Foreign Judgments Law, which provides for the direct recognition of foreign judgments under specified conditions.  Oil Refineries Ltd. appealed, on the grounds that the foreign judgment was issued in a proceeding initiated at a time that a parallel proceeding between the same parties had been pending in Israel. 

 

Held: (Justice Arbel) The Foreign Judgments Law establishes a track for the recognition of foreign judgments (including sub-tracks for direct and indirect recognition) as well as a track for the enforcement of such judgments. The relevant track here is the direct recognition track (s. 11(a)), but the Foreign Judgments Law stipulates (in s. 11(a)(3)), with regard to such recognition, that the relevant treaty must allow only the recognition of judgments that are enforceable pursuant to Israeli law, thus requiring the court to determine which of the conditions for enforcement are to be applied to the direct recognition track. The best possible interpretation, based on a purposive reading of the statute’s language, is to adopt an intermediate view of the interaction between the enforcement requirements and the direct recognition track. According to this view, not all the enforcement track conditions are to be applied, and only those that constitute the threshold requirements for enforcement under Israeli law – i.e., those conditions that further the purpose that underlies the stipulation of requirements for enforcement – are to be applied with respect to the judgment for which recognition is sought. 

 

Pursuant to this interpretation, the provisions of s. 6(a)(5), denying enforcement to a judgment rendered in a foreign court in which an action was brought while a parallel proceeding between the same parties was pending in an Israeli court, will apply here to the recognition of the English court’s judgment. The sub-section should be applied to the direct recognition track – both because logic dictates that section 6(a) should be applied as a whole, and because its purpose – to prevent abuse of the ability to initiate a second proceeding in another country in order to avoid an Israeli court’s judgment – conforms to the overall purpose of that track. Once the District Court had found that the foreign judgment had been rendered in a proceeding initiated while a parallel proceeding was pending in Israel, it should have applied s. 6(a)(5) and refused to recognize the English court’s judgment.

 

(Vice President Rivlin, concurring). Section 11(a)(3) of the Foreign Judgment Law allows for recognition of a foreign judgment when the relevant treaty does not obligate Israel to recognize judgments in a manner that deviates significantly from Israeli law; the statute requires that in order to be recognized, the foreign judgment must qualify under the provisions of the relevant treaty. Nevertheless, the Israeli court retains discretion in terms of its ability to determine whether the recognition of the judgment is in compliance with treaty provisions. With respect to the pending proceeding provision of s. 6(a)(5), the statutory language does not grant the court discretion with regard to the non-enforceability of judgments rendered in actions brought while there is a parallel pending proceeding in an Israeli court, but the relevant treaty leaves the matter of enforcing such judgments up to the deciding court’s discretion, Nevertheless, the treaty cannot be said to be one that deviates significantly from the relevant Israeli law. Pursuant to the statute, the Israeli court must take as its starting point the rejection of the judgment, while allowing the party seeking recognition to prove that circumstances justify a change from that initial position.  Here the appellant has not met that burden, and the foreign judgment should not be recognized. 

 

(Justice Rubinstein, concurring). The impact of the pending proceeding will be determined in accordance with the language of the treaty, rather than the language of the local statute. Although the treaty here confers discretion upon the court in this matter, that discretion should have been exercised so as to deny the judgment’s recognition, based on considerations of the litigant’s lack of good faith.  Furthermore, the stipulation in s. 11(a)(3) that the treaty require only the recognition of judgments that “are enforceable pursuant to Israeli law” is a reference to s. 3 of the Foreign Judgments Law, the specific section establishing the requirements for allowing foreign judgments to be enforced, and not to s. 6, dealing with defenses against enforcement.   

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

CA 4525/08

Israel Oil Refineries Ltd.

v.

New Hampshire Insurance Co.

The Supreme Court sitting as the Court of Civil Appeals

[25 January 2010]

Before Vice President E. Rivlin, Justices E. Arbel and E. Rubinstein

 

Appeal of the Judgment of the Tel Aviv-Jaffa District Court in E.J. 189/03 (Tel Aviv-Jaffa) (President U. Goren) issued on 31 March 2008

Facts: The Tel Aviv District Court granted a petition for the recognition of a judgment rendered by an English court, which had declared that an insurance policy issued by the respondent (New Hampshire Insurance) to an Israeli company, Oil Refineries Ltd. – the appellant – was void on the grounds that a substantial matter had not been disclosed to the issuer. The respondent brought the action in the English court after its sibling company (AIG Europe, which had underwritten the policy) had been served a third party notice in an Israeli proceeding brought against the appellant. The District Court ruled that the foreign judgment in favor of the respondent should be recognized pursuant to s. 11(a) of the Foreign Judgments Law, which provides for the direct recognition of foreign judgments under specified conditions.  Oil Refineries Ltd. appealed, on the grounds that the foreign judgment was issued in a proceeding initiated at a time that a parallel proceeding between the same parties had been pending in Israel. 

Held: (Justice Arbel) The Foreign Judgments Law establishes a track for the recognition of foreign judgments (including sub-tracks for direct and indirect recognition) as well as a track for the enforcement of such judgments. The relevant track here is the direct recognition track (s. 11(a)), but the Foreign Judgments Law stipulates (in s. 11(a)(3)), with regard to such recognition, that the relevant treaty must allow only the recognition of judgments that are enforceable pursuant to Israeli law, thus requiring the court to determine which of the conditions for enforcement are to be applied to the direct recognition track. The best possible interpretation, based on a purposive reading of the statute’s language, is to adopt an intermediate view of the interaction between the enforcement requirements and the direct recognition track. According to this view, not all the enforcement track conditions are to be applied, and only those that constitute the threshold requirements for enforcement under Israeli law – i.e., those conditions that further the purpose that underlies the stipulation of requirements for enforcement – are to be applied with respect to the judgment for which recognition is sought. 

Pursuant to this interpretation, the provisions of s. 6(a)(5), denying enforcement to a judgment rendered in a foreign court in which an action was brought while a parallel proceeding between the same parties was pending in an Israeli court, will apply here to the recognition of the English court’s judgment. The sub-section should be applied to the direct recognition track – both because logic dictates that section 6(a) should be applied as a whole, and because its purpose – to prevent abuse of the ability to initiate a second proceeding in another country in order to avoid an Israeli court’s judgment – conforms to the overall purpose of that track. Once the District Court had found that the foreign judgment had been rendered in a proceeding initiated while a parallel proceeding was pending in Israel, it should have applied s. 6(a)(5) and refused to recognize the English court’s judgment.

(Vice President Rivlin, concurring). Section 11(a)(3) of the Foreign Judgment Law allows for recognition of a foreign judgment when the relevant treaty does not obligate Israel to recognize judgments in a manner that deviates significantly from Israeli law; the statute requires that in order to be recognized, the foreign judgment must qualify under the provisions of the relevant treaty. Nevertheless, the Israeli court retains discretion in terms of its ability to determine whether the recognition of the judgment is in compliance with treaty provisions. With respect to the pending proceeding provision of s. 6(a)(5), the statutory language does not grant the court discretion with regard to the non-enforceability of judgments rendered in actions brought while there is a parallel pending proceeding in an Israeli court, but the relevant treaty leaves the matter of enforcing such judgments up to the deciding court’s discretion, Nevertheless, the treaty cannot be said to be one that deviates significantly from the relevant Israeli law. Pursuant to the statute, the Israeli court must take as its starting point the rejection of the judgment, while allowing the party seeking recognition to prove that circumstances justify a change from that initial position.  Here the appellant has not met that burden, and the foreign judgment should not be recognized. 

(Justice Rubinstein, concurring). The impact of the pending proceeding will be determined in accordance with the language of the treaty, rather than the language of the local statute. Although the treaty here confers discretion upon the court in this matter, that discretion should have been exercised so as to deny the judgment’s recognition, based on considerations of the litigant’s lack of good faith.  Furthermore, the stipulation in s. 11(a)(3) that the treaty require only the recognition of judgments that “are enforceable pursuant to Israeli law” is a reference to s. 3 of the Foreign Judgments Law, the specific section establishing the requirements for allowing foreign judgments to be enforced, and not to s. 6, dealing with defenses against enforcement.   

 

Legislation cited

 

Enforcement of Foreign Judgments Law, 5718-1958 – ss. 1, 6(a)(1)-(5), 6(b),  6(c), 11 (a)(1)-(4), 11(b), 11(c).

 

Israeli Supreme Court Cases cited

 

[1]       CA 3441/01 Anonymous v. Anonymous  [2004] IsrSC 58(3) 1.

[2]       CA 490/88 Coptic Motran of the Holy See of Jerusalem and Near East v. Adila [1990] IsrSC 44(4) 397.

[3]       CA 970/93 Attorney General v. Agam [1995] IsrSC 49(1) 561.

[4]       FH 40/80 Paul King v. Yehoshua Cohen [1982] IsrSC 36(3) 701.

[5]       HCJ 693/91 Efrat v. Director of the Population Register [1993] IsrSC 47 749.

[6]       CA 499/79 Ben Dayan v. IDS International Ltd. [2004], IsrSC 38(2) 99.

[7]       CA 423/63 Rosenbaum v. Julie [1964] IsrSC 18(2) 374.

[8]       LCA 1817/08 Teva Pharmaceutical Industries Ltd. v. Pronauron Biotechnologies  Inc. (2009) (unreported).

[9]       CA 3924/08 Goldhar Corporate Finance Ltd. v. Klepierre S.A. (2010) (unreported).

[10]     CA 7833/06 Pamesa Ceramica v. Yisrael Mendelson Engineering Technical Supply Ltd. (2010) (unreported).

[11]     CA 1137/93 Ashkar v. Hymes [1994]   IsrSC 48(3) 641.

[12]     CA 1268/07 Greenberg v. Bamira (2009) (unreported).

[13]     CA 10854/07 Pickholtz v. Sohachesky (2010) (unreported).

[14]     LCA 346/06 Hazan v. Club Inn Eilat Holdings Ltd. (2006) (unreported).

[15]     LCA 1674/09 Lechter v. Derek Butang (2009) (unreported).

[16]     CA 1327/01 Ephrayim v. Elan [2010] IsrSC 56(6) 775.

[17]     LCA 2733/07 Amiron S. T. L. Finance and Investment Ltd. v. Wallach (2007) (unreported).

Israeli District Court Cases Cited:

 

[18]     EnfC (TA) 408/00 Tower Air Inc. v. Companies Registrar (2004) (unreported).

[19]     CA (TA) 2137/02 AIG Europe (UK) Ltd. v. Israel Oil Refineries, Ltd. (2004) (unreported).

English cases cited:

[20]     Tuvyahu v. Swigi [1997] EWCA Civ. 965.

Jewish law sources cited:

Mishna Gittin, Chapter 4, Mishna 3.

Treaties cited:

Convention between the Government of Israel and the Government of the United Kingdom of Great Britain and Northern Island Providing for the Mutual Recognition and Enforcement of Judgments in Civil Matters – arts. 2(1), 3(2), 3(4), 3(5), 4(1).

For the appellants: Attorney Y. Shelef, Attorney P. Sharon, Attorney S. Sheffer

For the respondent: Attorney E. Naschitz

 

JUDGMENT

Justice E. Arbel:

This is an appeal of a judgment issued by the Tel Aviv-Jaffa District Court in EnfC 189/03 (per President U. Goren) on 31 March 2008, granting the respondent’s petition for recognition of a foreign judgment.

 1.   The respondent is the New Hampshire Insurance Company (hereinafter, also: “New Hampshire”), which is domiciled in the State of Delaware in the United States. In 1994, New Hampshire issued a third-party liability insurance policy to the appellant, Oil Refineries Ltd., which is engaged in, inter alia, the operation of oil refineries and the refining of petroleum and petroleum products (hereinafter: “ORL”). The insurance policy (hereinafter: “the policy”) was valid from 1 August 1994 through 31 July 1995. The issuance of the policy was brokered by PWS International Ltd., a brokerage firm registered in England, and it was underwritten by AIG Europe Ltd. (UK) (hereinafter: “AIG”), which is a sibling company to New Hampshire, also domiciled in England.

2.    On 29 June 1998, several farmers filed a suit (CA 2351/98) (hereinafter: “the Main Claim”) against ORL and other companies for agricultural damages that they claimed had been caused as a result of their use of defective light mazut fuel which had been manufactured by ORL and sold by the other companies. On 20 September 2000, ORL amended its third party notice in the Main Claim, joining AIG as a third party.

3.    On 16 October 2000, New Hampshire brought an action in an English court, seeking a judgment declaring that the policy was void based on the non-disclosure of a significant matter prior to its issuance. The significant matter was stated to be the claims for compensation that had been filed against ORL in 1990 in the Nazareth District Court by various flower growers, for damages caused to them from 1988 to 1989 due to the use of defective light muzat fuel manufactured by ORL. The English court allowed the claim and declared the policy to be void (hereinafter: “the foreign judgment”). ORL did not appeal the decision.

4.    On 30 September 2002, New Hampshire filed an action by way of an originating motion in the Jerusalem District Court (EnfC 1256/02), seeking recognition of the foreign judgment pursuant to ss. 11(a) and 11(b) of the Enforcement of Foreign Judgments Law, 5718-1958 (hereinafter: “the Foreign Judgments Law” or the “Statute”). The Jerusalem District Court ruled that the motion should be moved to the Tel Aviv District Court, which had jurisdiction to adjudicate it.

Deliberation in the District Court

5.    The Tel Aviv District Court heard the motion and held that the foreign judgment should be recognized pursuant to s. 1(a) of the Foreign Judgments Law, which outlines a track for the recognition of foreign judgments – the court having ruled out the applicability of a different track that allows for the incidental recognition of a foreign judgment and which is outlined in s. 11(b) of the Statute.

6.    The District Court determined that the Convention between the Government of Israel and the Government of the United Kingdom of Great Britain and Northern Island Providing for the Mutual Recognition and Enforcement of Judgments in Civil Matters (hereinafter: “the Convention”) applied. The court also held that the Convention’s provisions complied with the conditions established in ss. 11(a)(1) and 11(a)(2) of the Foreign Judgments Law – meaning that there was a treaty in effect between Israel and Great Britain that was applicable, and that Israel had undertaken to recognize the relevant type of foreign judgment.

7.    The District Court also discussed the issue of whether the condition set out in s. 11(a)(3) of the Foreign Judgments Law requires that in order for a foreign judgment to be recognized, the relevant treaty must comply with all the Statute’s conditions regarding the enforcement of a judgment. The court ruled that there was no such requirement, and held that in any event, s. 6(a) of the Foreign Judgments Law would not apply to the process of recognizing a foreign judgment through either the track outlined in s. 11(a) or the track outlined in s. 11(b). The court noted, among its reasons for reaching this conclusion, the legislature’s interest in separating the requirements for recognizing a foreign judgment from the requirements for enforcing such a judgment – an objective which ruled out the possibility that s. 11(a)(3) was meant to also include within it all the requirements for the enforcement of a foreign judgment that are contained in the Foreign Judgments Law. Additionally, the court found that the legislative intent had been that an undertaking given in the framework of a treaty for the mutual recognition and enforcement of civil judgments, such as the Convention under discussion, is sufficient for the purpose of compliance with s. 11(a)(3). The court also relied on the case law of this Court regarding an incidental recognition – case law which has established that the conditions for the recognition of a foreign judgment should be less than those required for the enforcement of such a judgment.

8.    The District Court held that the Convention’s conditions for recognition had been met, as required by s. 11(a)(4) of the Statute. The court acknowledged that at the time the legal proceeding first began in the English court there had been a pending proceeding between the same two parties in the Israeli court, and that thus, pursuant to art. 3(5) of the Convention, the court could have refused to recognize the foreign judgment rendered by the English court. Nevertheless, the court chose to recognize the foreign judgment on the basis of the principles and objectives that form the foundation of the laws of recognition – which include an interest in bringing the litigation of a matter to an end; the desire to do justice for the party winning the case; and a recognition that the country that had issued the foreign judgment was the proper forum for the adjudication of the matter. Additionally, the court clarified that there were grounds for recognizing the foreign judgment, as the foreign judgment could create an issue estoppel in Israel in light of the identity of the estoppel laws in Israel and in England.

9.    The District Court also held that the English court had jurisdiction to adjudicate the matter which was the subject of the foreign judgment, as required by art. 3(a)(2) and 4 of the Convention. The court based its determination on the consent element mentioned in art. 4(1)(a) of the Convention, which is sufficient to confer international jurisdiction on the English court. The presence of such consent was inferred from the fact that ORL did not appeal the result of the proceeding regarding the lack of the English court’s authority, for the purpose of leave to serve papers outside of the jurisdiction. The matter of ORL’s consent was also inferred from the fact that the main deliberation, after the conclusion of the proceeding regarding extra-territorial service, continued normally until the judgment was rendered, and ORL did not appeal that judgment either.

10.  The District Court rejected the appellant’s argument that public policy prevented the recognition of the foreign judgment, pursuant to art. 3(2)(d) of the Convention, due to the judgment having allegedly been obtained in bad faith and as an abuse of legal proceedings. The court held that the public policy ground should be narrowly construed in the context of recognition of foreign judgments and that it would be appropriate to reject a foreign judgment on such a ground only rarely – noting that this case was not one of those rare occasions in which a public policy defense would suffice.

This appeal followed.

The parties’ arguments

11.  The appellant argues that the District Court erred in recognizing the foreign judgment despite its determination that there had been a pending proceeding between the same parties at the time that the British proceeding was initiated. It argues against the court’s decision, which the court based on general principles of the rules regarding recognition of judgments, not to exercise its authority pursuant to art. 3(5) of the Convention dealing with the recognition of a judgment in a proceeding that was initiated at the time that another proceeding was already pending, when – under the circumstances of this case – the respondent had behaved improperly and in bad faith. According to the appellant, the respondent’s bad faith behavior in initiating legal proceedings also constitutes a violation of public policy, and therefore art. 3(2)(d) of the Convention would support the non-recognition of the foreign judgment as well. Additionally, the appellant argues that in this case the English court lacked jurisdiction, and that therefore the requirements of arts. 3(2)(a) and 4 have not been satisfied.

12.  The appellant also argues that the District Court erred in holding that s. 11(a)(3) of the Foreign Judgments Law does not include a requirement that the conditions stipulated for enforcement of a foreign judgment must also be satisfied in order for the foreign judgment to be recognized. The appellant argues that such an interpretation is contrary to the language of the section. Because of this interpretation, the court did not make any determination as to whether the foreign judgment complied with the conditions stipulated in ss. 3, 4 and 6 of the Statute. An examination of these sections, the appellant argues, would have led to the conclusion that the foreign judgment should not be recognized, because the respondent had not provided proof regarding the foreign law; because the English court lacked international jurisdiction; because the respondent had acted in violation of public policy; and because of the initiation of the foreign proceeding while another proceeding regarding the same matter was pending.

13.  The respondent, on the other hand, argues that the appeal should not be adjudicated on its merits since the matter has become purely theoretical and academic, as ORL is not entitled to any compensation or restitution pursuant to the policy, even if it is valid. Regarding the substance of the matter, the respondent argues that the appeal should be denied, based on the holdings of the District Court. In addition, the respondent argues that the District Court’s finding that there was a pending proceeding – between the same parties and regarding the same matter – at the time that the proceeding was initiated in England was erroneous, because, the respondent argues, AIG was the party in the proceeding that was pending in Israel, while New Hampshire was the party in the proceeding that produced the foreign judgment. Thus, the respondent argues, the parties were not identical, as is required pursuant to both the Statute and the Convention.

 

Discussion and decision

14.  First, the respondent’s argument that the deliberation regarding this case is purely theoretical and academic must be rejected. It appears that there is a real dispute between the parties regarding the consequences of the policy’s validity, and therefore it cannot be said that this is a purely theoretical matter. In any event, this question could arise in the future in other contexts, and I therefore find it appropriate to discuss the appeal on its merits.

15.  The key issue in this case is the relationship between s. 11(a) of the Statute and the other provisions of the Statute, and whether the conditions stipulated in the Statute for the enforcement track will also apply with respect to the recognition track. Before turning to a discussion of this issue, we need to establish a foundation and describe the normative rules that apply in connection with the recognition of a foreign judgment.

Recognition of a foreign judgment

16.  As is customary under Israeli law, a foreign judgment is not recognized automatically, and an absorption proceeding is required in order for it to become enforceable and recognized (CA 3441/01 Anonymous v. Anonymous [1], at pp. 11-12; CA 490/88 Coptic Motran of the Holy See of Jerusalem and Near East v. Adila [2], at p. 404; A. Shapira “Recognition and Enforcement of Foreign Judgments,” 4 Tel Aviv Univ. L. Rev. (Iyyunei Mishpat) 509 (1976) (hereinafter: “Shapira 1”), at pp. 509-510; C. Wasserstein Fassberg, “Finality for Foreign Judgments,” 18 Hebrew Univ. L. Rev. (Mishpatim) 35 (1988), at p. 37). The manner in which a foreign judgment is absorbed in Israel is regulated in the provisions of the Foreign Judgments Law.

17.  The Foreign Judgments Law establishes two tracks for the absorption of a foreign judgment in Israel – one involving the enforcement of the foreign judgment and the other involving its recognition. A petition for the enforcement of a foreign judgment is in effect a petition for the enforcement of an existing debt between the parties, while the recognition of a foreign judgment is needed in situations that do not fit into the enforcement framework and in which the party requires a recognition of the foreign judgment itself and of the rights which it confers. Justice M. Cheshin noted the following with regard to the distinction to be made between the two tracks:

‘The distinction made between enforcement and recognition is not coincidental nor is it an arbitrary one. Its source is in the difference between the type of judgments that are enforceable and those which are intended to be recognized directly, and in any event, in the difference between an act of enforcement and an act of direct recognition. Indeed, as my colleague has remarked, and as has been accepted as the rule and is the view taken by scholars, enforcement – at its core – deals with obligations imposed on one person vis-à-vis another (in personam obligations), while recognition does not involve the imposition of any debts and it is what the word signifies; it recognizes rights which can include property rights, including rights vis-à-vis the entire world – rights erga omnes – although these are not the only rights that can be covered by these judgments’ (CA 970/93 Attorney General v. Agam [3], at p. 572).

18.  Furthermore, the Statute establishes two sub-tracks within the recognition track. The first is outlined in s. 11(a), and it allows for a foreign judgment to be recognized as part of a proceeding that is initiated especially for that purpose (hereinafter: “the direct track”); the second is outlined in s. 11(b) of the Statute and enables the recognition of a foreign judgment as a matter which is incidental to another matter being adjudicated, and for the purpose of that adjudication only (hereinafter: “the indirect track”). Justice Goldberg described the distinction between the two tracks as follows:

‘When one party alleges a finding contained in a foreign judgment in order to create an issue estoppel in a local litigation, the allegation is of an incidental recognition of the judgment. This is to be distinguished from direct recognition, which is necessary when the foreign judgment constitutes the ground for the cause of action in the local court, or when what is required is a declaration that the foreign judgment is to be enforced’ (Coptic Motran v. Adila [2], at p. 404).

19.  The legislature appears to have taken note of the substantive difference between the recognition and the enforcement tracks, and therefore established different procedures for these two tracks for the absorption of foreign judgments in Israel. Among the main differences between the two tracks is the fact that the Statute, as stated, provides for two sub-tracks for the recognition of a foreign judgment – the direct track and the indirect track – as compared to the single track established for the enforcement of foreign judgments; and the requirement stipulated in the Statute that there be a bilateral or multilateral agreement for the purpose of direct recognition of a foreign judgment, a requirement which is not prescribed for the enforcement track.

20.  Section 2 of the Statute provides that the authority to enforce a foreign judgment arises only in the framework of the Statute’s provisions. The case law has dealt with the question of whether a foreign judgment can be recognized other than in that framework, and when the conditions stipulated in the Statute have not been met. In Attorney General v. Agam [3], this question was answered in the negative. The Court held that a foreign judgment could not be recognized outside of the tracks established in the Statute, even though the implications of such a rule create a certain difficulty. As Justice Goldberg wrote:

‘There will be those who argue that the result we have reached – that a foreign order of inheritance can be absorbed in our law only through one of the tracks in the Enforcement Law – is not a desirable one, and that its significance is that foreign judgments from an entire area of law can be neither recognized nor enforced’ (ibid. [3], at p. 569).

It should be noted that the source of the difficulty in allowing foreign judgments to be recognized only in the framework of the Foreign Judgment Law is that recognition through the direct track requires the existence of a treaty with the country in which the foreign judgment was rendered. This requirement significantly limits the possibility for direct recognition of foreign judgments since – at present – Israel is party to only four bilateral treaties (with Austria, the Federal Republic of Germany, Great Britain and Spain). We note that the indirect track does not provide a satisfactory solution for this difficulty in all cases. Thus, for example, in terms of the absorption of a foreign order of inheritance, the indirect track cannot be used, as the applicant’s only interest is in the absorption of the foreign judgment itself – directly, and not as an aside to another matter (see Attorney General v. Agam [3]). In Anonymous v. Anonymous [1], President Barak considered the possibility of changing the rule:

‘This result is both undesirable and harsh. It is doubtful whether the language of the Statute or its purpose requires it . . . Section 11 of the Statute, as originally drafted, did not refer at all to the possibility of direct recognition. This section is an addition to the Enforcement of Foreign Judgments Law . . . until that time, the parties would, as a matter of course, request recognition of a foreign judgment outside of the Statute. Nothing in the amendment’s legislative history indicates that there was a desire to transform the direct recognition track into an exclusive track. In addition, as s. 2 of the Statute provides:  “No foreign judgment will be enforced in Israel other than pursuant to this Statute.” The section refers to enforcement and not to recognition, and even regarding enforcement it has been held that the enforcement of a foreign judgment will be permitted through a suit brought on the basis of the judgment, which is not pursuant to the Statute . . . It therefore appears that the time has come to rethink the validity of the Agam rule . . .’ (Anonymous v. Anonymous [1], at pp. 14-15).

In their case law, the trial courts have also expressed the view – which has not yet been discussed by this Court – that a foreign judgment may be recognized other than pursuant to the provisions of the Foreign Judgment Law if certain conditions are met. Thus, for example, the possibility of such recognition has been mentioned in insolvency proceedings (EnfC (TA) 408/00 Tower Air Inc. v. Companies Registrar [18]). However, it would appear that the case before us does not necessitate an in-depth examination of this important question, as it was not discussed by the District Court and the parties did not raise it in their pleadings. We nevertheless join in President Barak’s call, made in the judgment in Anonymous v. Anonymous [1], for full and complete legislative regulation of the issue of recognition of foreign judgments.

21.  In any event, since in this case the District Court ruled out the use of the indirect track, and as the parties are not appealing that part of the District Court’s holding, we need only discuss the direct track. As noted above, this track is established in s. 11(a) of the Foreign Judgments Law, which itself includes four sub-sections:

11. (a)  An Israeli court or tribunal will recognize a foreign judgment regarding which the following conditions have been met:

(1)  A treaty with a foreign country applies to it;

(2)  Israel has undertaken, in that treaty, to recognize foreign judgments of its type;

(3)  The undertaking only applies to foreign judgments that are enforceable pursuant to Israeli law;

(4)  The judgment satisfies all the conditions in the treaty.

Section 11(a) was added in 1977, some 19 years after the Statute was first enacted, and until that time the indirect track was the only track available pursuant to the Statute for the recognition of foreign judgments. The addition of the section was intended to establish a direct track for the recognition of foreign judgments within the framework of the Statute. The new section created a number of difficulties, among them, as stated, the section’s requirement that Israel have entered into a treaty with the foreign country (see also Attorney General v. Agam [3] and Anonymous v. Anonymous [1]). An additional difficulty created by the section was the manner of its drafting. Thus, for example, Justice Mannheim noted that there is no substantive difference between the three conditions included in the section, and in his view “it appears that it would be both possible and desirable to draft these three sub-sections more coherently and with less complexity” (S. Mannheim, “Direct Recognition of Foreign Judgments, By Force of the Statute,” 7 Tel Aviv Univ. L. Rev. (Iyyunei Mishpat) 703 (1980), at p. 704). An even greater linguistic problem arises in connection with s. 11(a)(3):

Section 11(a)(3) provides as follows: “The undertaking only applies to foreign judgments that are enforceable pursuant to Israeli law.” Two problems arise from this language in the section: first – what is the significance of the subjection of enforceability pursuant to the section to the provisions of the Enforcement Law (since in light of the unequivocal language of s. 2 of the Statute, no foreign judgment may be enforced in Israel other than pursuant to the Enforcement Law); second – what is the significance of the fact that this subjection refers not only to the judgment itself but also to the “undertaking” (which, in light of the language of sub-section (2), is Israel’s undertaking, given in the above-mentioned treaty, to recognize certain foreign judgments)’ (ibid., at p. 704).

The limited number of treaties to which Israel is a party, alongside the ambiguous wording of the sub-sections, has led to a situation in which only a few petitions have been submitted for recognition through the direct track, and thus even though more than thirty years have passed since the amendment was enacted, this Court has not yet discussed this issue in depth (C. Wasserstein Fassberg, Foreign Judgments in Israeli Law – Deconstruction and Reconstruction (1996), at p. 53). The time has now come to clarify the matter and to determine which conditions are to be applied for the purpose of recognizing a foreign judgment pursuant to the direct track.

Examination of the conditions for the direct recognition track

22. As stated, the Statute presents four conditions relating to the direct recognition track. The first condition is that there must be a treaty to which Israel and the country in which the foreign judgment was rendered are parties. The second condition is a requirement that in the context of the agreement, Israel has agreed to recognize foreign judgments of the relevant type, such as pursuant to a provision in the treaty requiring that Israel must recognize foreign judgments in civil matters. The third condition in the section is that the undertaking must apply only to foreign judgments that are enforceable in Israel. The fourth and final requirement in the section is that the relevant treaty conditions have been satisfied.

23.  Since in this case there is a treaty between Israel and England, and because it provides, in art. 2(1), that it will apply to judgments in any civil proceeding, the conditions established in s. 11(a)(1) and in s. 11 (a)(2) have been fulfilled. We have thus arrived at s. 11(a)(3), and the question arises as to its proper interpretation. What was the legislature’s intention in using the term “enforcement” in the framework of s. 11(a)(3), which deals with the conditions established for the recognition track? Was the intention, as the appellant argues, to apply all of the conditions relating to the enforcement of foreign judgments to the procedure for the direct recognition of foreign judgments? Or is it the case, as the District Court believed, that a purposeful interpretation of the section should be used in order to restrict its application, so that not all of the conditions appearing in the Statute with respect to the enforcement of such judgments will apply to the direct recognition track? We note that if we adopt the District Court’s approach, we must examine the actual significance of the requirement in s. 11(a)(3) of the Foreign Judgments Law, and determine the content that should be included within it.

 

 

Interpretation of s. 11(a)(3) of the Foreign Judgments Law     

24.  In order to interpret a section in a statute, we must examine it in a number of stages. First we must examine the statutory language and identify the linguistic options available for such interpretation. Only an interpretation that is grounded in the statutory language and which falls within the accepted linguistic possibilities may be used (A. Barak, Legal Interpretation (vol. 2, ‘Statutory Interpretation,’ 1993), at p. 82). At the second stage, we must investigate and disclose the purpose and objective of the legislation. A statute will be given the meaning which, among the linguistic possibilities, realizes the statute’s purpose (FH 40/80 Paul King v. Yehoshua Cohen [4], at p. 715). The statute’s purpose is comprised of its subjective and objective purposes. The subjective purpose is the purpose that the enacting legislature seeks to realize at the time that the statute was enacted. The objective purpose of statutory material is the purpose that the legislation is intended to achieve in a democratic, modern, society (HCJ 693/91 Efrat v. Director of the Population Register [5], at p. 764). In the last stage, if the legislative material has various purposes, we must exercise judgment in order to balance these various purposes, after assigning the proper weight to them. Note that the judge’s determination at this stage will be reached within the framework of limitations established in the earlier stages. This balancing is to be carried out on the basis of, inter alia, the statutory language, the legislative intent, the social background, the legal background, and the basic principles (Barak, Legal Interpretation, supra, at p. 92).

Literal interpretation

25. As noted above, s. 11(a)(3) of the Statute establishes a requirement that the “undertaking only applies to foreign judgments that are enforceable pursuant to Israeli law”. It appears that from a linguistic perspective, the language of the section could encompass more than one possibility, due to the ambiguity of the term “enforceable”. The use of this term effectively creates an entire spectrum of linguistic possibilities regarding the application of the conditions for the enforcement of foreign judgments to the direct recognition track. Generally speaking, we can point to three main possibilities regarding the section. The first, as the appellant argues, would provide that all conditions stipulated for the enforcement of foreign judgments should be applied to the direct recognition track. This is a maximalist position. The second, a minimalist view, would interpret the term “enforceable” as referring only to the enforceability of judgments that have the same basic nature as the particular foreign judgment, meaning judgments that fall within the area of law to which it belongs – such as civil judgments, criminal judgments, etc. According to this interpretation, the foreign judgment would only need to meet the basic definitional requirement appearing in s. 1 of the Statute: “a judgment rendered by a court in a foreign country regarding a civil matter, including judgments ordering the payment of compensation or damages to an injured party, even if not rendered in a civil case.” The third possibility is an intermediate one, pursuant to which the foreign judgment would need to meet the basic requirements for the absorption of a foreign judgment in Israel. These requirements would constitute a sort of set of “red lines”, at the basis of which is an interest in preventing the abuse of the legal process.

Thus, at the next stage, we must study the statutory purpose and choose the most appropriate option for interpretation, in light of that purpose.

Purposive interpretation: subjective purpose

26. The purpose of the legislative amendment that added s. 11(a) in 1977 was to enable compliance with bilateral and multilateral treaties. Before the amendment, Israel faced an obstacle in terms of entering into bilateral and multilateral treaties, so long as the matter of direct recognition in the State of Israel had not been formally organized by statute. The explanatory note to the draft law stated the following: “Section 11 constitutes an obstacle with respect to Israel’s accession to these treaties. In order to overcome this obstacle, it is proposed to give force to these treaties . . .” (Draft Enforcement of Foreign Judgments (Amendment No. 2) Law 5737-1977, Draft Laws 246). Thus, it cannot be that an amendment which was intended to give force to bilateral treaties would lead to a situation in which those treaties could not be implemented because of numerous conditions included within the framework of the track for direct recognition of a foreign judgment – or to the creation of an asymmetry between the provisions of the Statute and those of a treaty. This means that the maximalist interpretation – according to which all the conditions stipulated for the enforcement of foreign judgments are imposed in connection with the direct recognition track as well – is not consistent with the subjective purpose. An additional indication that this interpretation is inconsistent with the legislative intent can be found in s. 11(c) of the Statute, which provides that “[t]he provisions of s. 6(b) and (c) will apply in proceedings involving the recognition of a foreign judgment pursuant to this section.” Assuming that s. 11(c) applies to the direct track (see M. Shava, “Direct Conversion of a Foreign Judgment in Israel and the Rules Applying To It,” 35(2) Ono Coll. L. Rev. (Kiryat HaMishpat) 40 (2002)), the maximalist interpretation would render its language irrelevant – because, since s. 6(b) and s. 6(c) of the Foreign Judgments Law are a part of the provisions relating to the enforcement of foreign judgments, that would, according to the maximalist interpretation, apply to the direct track anyway, and there would be no need to specifically note that fact in s. 11(c).

 

Objective purpose

27. From the perspective of the objective purpose of the Statute as well, it would seem that the maximalist interpretation – according to which all the provisions regarding enforcement of foreign judgments contained in the Foreign Judgments Law would also apply to the direct recognition track – leads to several seemingly absurd results. First, this interpretation leads to an absurdity regarding the relationship between the enforcement track and the recognition tracks. The enforcement of a foreign judgment, by its nature, contains within it the recognition of that judgment, since a foreign judgment must be recognized before it can be enforced (Wasserstein Fassberg, Foreign Judgments in Israeli Law, supra, at p. 153). And as Professor Shapira has written, “the enforcement of a foreign judgment necessarily requires its recognition, but not every recognition of a judgment will necessarily lead to its enforcement. This means that a court will, as a matter of course but also as a matter of necessity, recognize every foreign judgment that it enforces, but it is not compelled to enforce every judgment that it is prepared to recognize” (A. Shapira, Recognition and Enforcement (vol. A), at pp. 511-512). Thus, necessarily, the conditions that apply to the recognition track will be less than those that apply to the enforcement track, or at least equal to them. Indeed, Justice Ben-Porat has held regarding the indirect track  “ . . . that the legal provisions regarding recognition will not be stricter than the terms for enforcement, since if the foreign judgment is of a quality that establishes that it should be enforced, it would, a fortiori, be suitable for recognition . . . according to my view, it is not possible that the Statute’s conditions for recognition would be stricter than the conditions for enforcement . . . ” (CA 499/79 Ben Dayan v. IDS International, Ltd. [6], at p. 105).

28. Second, the maximalist interpretation will lead to an absurd result regarding the relationship between the direct and indirect recognition tracks. The reason for this is that the holding in Ben Dayan v. IDS International, ibid., [6] was that the indirect recognition track does not require compliance with all the enforcement conditions in the Foreign Judgments Law, while the maximalist interpretation suggests that full compliance with all the Statute’s enforcement conditions is required for the direct recognition track. This is an illogical position, since the main track – the direct recognition of a foreign judgment – would then involve the need to prove the fulfillment of many more conditions than would be required for the secondary and alternative indirect recognition track. This situation would create additional burdens for both litigants and the courts, as reliance on an earlier recognition of a foreign judgment in any future litigation arising in connection with that judgment is possible only when the recognition has been accomplished through the direct recognition track. In contrast, when the indirect track is used, the deliberation regarding the foreign judgment’s recognition is only incidental to the adjudication of the main matter, and a court will therefore need to re-adjudicate the issue of that recognition in any future litigation that arises. This means that the indirect track necessitates a new deliberation regarding the recognition of the foreign judgment each time the matter of its recognition arises, instead of enabling one substantive deliberation in a single proceeding (see M. Shava, “Direct Conversion of a Foreign Judgment in Israel,” supra, at p. 44). An interpretation that imposes stricter requirements for the more efficient direct recognition track creates a situation in which litigants will prefer the less efficient indirect track because compliance with its conditions will be easier.

29. On the other hand, a minimalist interpretation providing that only s. 1 of the Foreign Judgments Law is relevant to the direct track is also problematic. If this approach is followed, a foreign judgment could theoretically qualify for recognition in Israel even though it had been obtained through fraud or was rendered by an entity which had no jurisdiction to do so, because the “red lines” provisions established in the Foreign Judgments Law with respect to the enforcement track would not be applied to the direct recognition track. It is important to note that the treaties to which Israel is currently a party have provisions that are similar – if not identical – to those that appear in the Foreign Judgments Law and which apply to the direct recognition track pursuant to s. 11(a)(4), which requires compliance with the provisions of the relevant treaty. Nevertheless, it would seem to be appropriate to leave in place the “security net” of the red lines that had been established by the legislature regarding the enforcement of a foreign judgment – so that they will always apply, regardless of the language of a specific treaty, even with respect to the recognition of a foreign judgment through the direct track.

30.  I have concluded from the above analysis that in terms of a purposive view, an intermediate interpretation is to be preferred over either a maximalist or a minimalist interpretation. It is therefore necessary to examine which of the statute’s provisions that apply to the enforcement track should also be applied to the track for the direct recognition of foreign judgments according to an intermediate interpretation. The only sections of the Statute to be applied should be those which, in the legislature’s view, constitute a type of threshold requirement or a set of red lines regarding the enforcement of foreign judgments. The remaining provisions – those that are substantively related to the enforcement track only – should not be applied to the direct track. Additionally, the provisions to be included must be examined with reference to an additional basic distinction between the enforcement and the recognition tracks. According to the Foreign Judgments Law, a treaty is not required in order for a foreign judgment to be enforced, and it is therefore not necessary that a particular foreign judgment comply with the provisions of any treaty. Thus, it would be logical that all the conditions for enforcement, included those that are beyond the basic threshold requirements, should be organized in a statute. In contrast, regarding the direct recognition of foreign judgments, countries should be allowed a range of freedom with respect to the manner in which the recognition of foreign judgments is arranged, through agreements that they reach amongst themselves. Therefore, the only conditions to be applied to the direct recognition track should be those basic requirements without which it is not possible to recognize any foreign judgment whatsoever.

Application of s. 6 to the direct recognition track

31. In this case, the question arises as to whether s. 6(a) of the Foreign Judgments Law also applies to the direct recognition track. (The appellant’s other arguments relate to grounds for recognition regarding which there is an overlap between the provisions of the law and those of the Convention, and it is therefore clear that these grounds will apply with respect to the foreign judgment in this case.) As to section 6(a) of the Foreign Judgments Law, captioned “Defense Against Enforcement”, it provides as follows:

6.   (a)  A foreign judgment will not be declared enforceable if one of the following has been proven to the court:

(1)  The judgment was obtained through fraud;

(2)  The opportunity given to the defendant to make arguments and to bring evidence, prior to the issuance of the judgment, was not, in the view of the court, reasonable;

(3)  The judgment was rendered by a court that lacked jurisdiction to issue it pursuant to the rules of international private law that apply in Israel;

(4)  The judgment is in conflict with another judgment that has been issued regarding the same matter between the same litigants, and which remains in force;

(5)  At the time that the action was brought in the court in the foreign country, another action regarding the same matter and between the same litigants was pending before an Israeli court or tribunal.

This section thus establishes a threshold condition with respect to the enforcement of foreign judgments. The purpose of this section is to prevent the possible abuse of proceedings for the enforcement of such judgments. The defenses included in this section form a sort of set of red lines regarding the issue – such that if one of them is crossed, the enforcement of the foreign judgment in Israel will not be allowed. Therefore, in accordance with the intermediate interpretation, this is a section that should apply to the direct track as well. Thus, for example, s. 6(a)(1), which refers to a defense against the enforcement of a foreign judgment based on it having been obtained through fraud, should be applied to the direct recognition track, as it is clear that a foreign judgment that was obtained through fraud should be neither enforced nor recognized. This rule, it would seem, should serve as a framework for all of the bilateral treaties to which Israel becomes a party – a condition without which there should be no treaty, and the importance of which this Court has emphasized in the past (Anonymous v. Anonymous [1], at pp. 17-18; Wasserstein Fassberg, Foreign Judgments, at pp. 55-56; A. Shapira, “Recognition and Enforcement of Foreign Judgments,” 5 Tel Aviv Univ. L. Rev. (Iyyunei Mishpat) 38 (1976) (hereinafter: “Shapira 2”), at pp. 42-43). The other sub-sections of s. 6(a) also constitute basic rules regarding the recognition of foreign judgments. Section 6(a)(2) refers to a situation in which the defendant did not have a reasonable opportunity to argue the case during the course of the foreign proceeding. Section 6(a)(3) refers to the requirement that the foreign judgment must have been rendered by a court that had jurisdiction to do so pursuant to the rules of private international law followed in Israel. Section 6(a)(4) refers to a situation in which the foreign judgment conflicts with a judgment rendered in the same matter between the same parties and which remains in force. All these are basic conditions which, from a purposive view, must undoubtedly be imposed on the recognition track as well, according to the interpretation analyzed above. “And it has already been held that the recognition rules must be influenced by the enforcement rules such that a harmonious relationship will be established among them” (Ben Dayan v. IDS International [6], as cited by President Barak in Anonymous v. Anonymous [1], at p. 17).

32. Unlike the other sub-sections of s. 6(a) of the Foreign Judgments Law, there is a certain ambivalence as to whether or not s. 6(a)(5) should be applied to the track for the direct recognition of foreign judgments.  This sub-section creates a defense against the enforcement of a foreign judgment if “[a]t the time that the action was brought in the court in the foreign country, another action regarding the same matter and between the same litigants was pending in an Israeli court or tribunal.” The ambivalence is due to the fact that on its face, the sub-section is not equal in its severity to the other red lines that are established in s. 6(a). In my view, the sub-section should be applied to the direct track, notwithstanding this distinction – both because of linguistic interpretation issues and because of the purposive aspect. From a linguistic perspective, it is logical to apply all of s. 6(a) of the Foreign Judgments Law as a single unit rather than breaking it up into its components, and it appears that this is what the legislature had actually intended. There is nothing in the Statute’s language that provides a basis for separating between the different sub-sections of s. 6(a). Regarding the purposive aspect, I believe that the purpose of s. 6(a)(5) is a proper one, in terms of there being a need for a requirement that any foreign judgment comply with it as a preliminary condition for its recognition. The objective of the section is to prevent a situation in which a litigant against whom a proceeding has been initiated in Israel would have the option of responding by simultaneously appealing to a foreign forum regarding the same subject and regarding the same matter – in order to reach what is from his perspective a better result –  and then concluding the process in the foreign forum and finally seeking to have the foreign judgment recognized in Israel (Shapira 2, supra, at pp. 55-56; Wasserstein Fassberg, “Finality for Foreign Judgments,” supra, at pp. 22-23). The achievement of this objective is relevant to both the process of enforcing foreign judgments and the process of recognizing them. Thus, in my view, this section must be included within the core set of rules that restrict a court’s flexibility with respect to the recognition of foreign judgments.

33. Nevertheless, this sub-section needs to be interpreted in a purposive manner which is in conformity with the objectives of the direct recognition track’s, such that the recognition of a foreign judgment will be denied only in cases that constitute an abuse by one of the parties of the possibility of being able to make use of two different proceedings in two different countries. Thus, for example, in this case, such an interpretation would lead to the conclusion that there is no real conflict between s. 6(a)(5) of the Foreign Judgments Law and art. 3(5) of the applicable Convention. Article 3(5) of the Convention provides as follows: “Where the court applied to is satisfied that, at the time when proceedings were instituted in the original court in the matter in dispute, proceedings as to the same matter between the same parties were pending before any court or tribunal of the country of the court applied to, the latter may refuse to recognise the judgment of the original court.”  Article 3(5) of the Convention does grant the court discretion – discretion which does not arise under s. 6(a)(5) of the Foreign Judgments Law – to decide whether it will exercise its right to refuse to recognize the foreign judgment when there is a pending proceeding. Nevertheless, I believe that by using a purposive interpretation, and through the use additional legal tools, it is possible to outline a complete overlap between the circumstances in which a court must exercise its right to refuse to recognize a foreign judgment in accordance with the Convention, and the circumstances in which a court will determine that s. 6(a)(5) of the Foreign Judgments Law should not be applied. An example of this would be a case in which a company that had initiated a proceeding in a foreign forum had no knowledge of a third party notice that had been served upon its sibling company but which was effectively directed at the company itself, in a proceeding in the country in which the petition for recognition has been brought. In such a situation, art. 3(5) of the Convention should be applied such that the court, because of the circumstances, would decide not to exercise its right to refuse to recognize the judgment. At the same time, under these circumstances, the court would be required – even pursuant to s. 6(a)(5) of the Foreign Judgments Law – to hold that a pending proceeding defense would not be allowed, since in such a case the parties in the two proceedings would not actually be identical, as they are required to be pursuant to the language in that section. An additional example would be a case in which the party that initiated the proceeding in the foreign forum is the party that later bases its defense on the existence of a pending action, after the foreign forum had ruled against it. In such a situation, a court would likely, pursuant to art. 3(5) of the Convention, exercise its discretion and decide to recognize the foreign judgment. In such circumstances, the court could, pursuant to s. 6(a)(5) as well, use an estoppel ground against the party raising the defense.

From the general to the particular

34. In my view, since the District Court has held that in this case there had been a pending proceeding in Israel between the same parties and regarding the same matter at the time that the proceeding was initiated in the foreign forum, it should have applied s. 6(a)(5) of the Foreign Judgments Law, and it should therefore have refused to recognize the foreign judgment in this case.

I note further that the respondent’s argument that there were actually different parties in the proceedings in Israel and in England must be rejected. The District Court’s holding clearly indicates that New Hampshire knew of the existence of a pending proceeding in Israel, and even filed its suit in England as a result of the existence of this proceeding and in order to use the foreign judgment within the context of the Israeli proceeding. The initiation of the proceeding in the foreign country was the first and the easy opening for New Hampshire and for AIG – a step they took without having made any attempt to exhaust the possible legal measures in Israel. Thus, for example, they could have argued in an Israeli court that clause 13 of the insurance policy contained a stipulation of jurisdiction, pursuant to which all disputes were to have been resolved in English courts only – a point I raise without expressing an opinion as to whether such a stipulation would have been valid (Y. Zussman, Civil Procedure (vol. 7, 1995), at pp. 41-42). Regarding this matter, I note that Attorney Paul Cha’s testimony, given on behalf of New Hampshire and quoted extensively in the District Court’s opinion, appears to indicate that New Hampshire and AIG had acted improperly vis-à-vis the appellant. Thus, for example, AIG represented itself as the insurer for the policy in one proceeding, while in another proceeding, New Hampshire represented itself as the insurer. In light of these matters, the lower court was justified in holding that under the circumstances of the case, even though the parties in the two proceedings were technically different parties, they should nevertheless be viewed as being identical, from a substantive perspective.

35. Because I have determined that s. 6(a)(5) of the Foreign Judgments Law applies to the circumstances of this case, there is no need for a discussion of the appellant’s arguments relating to non-compliance with the Convention provisions. I nevertheless note, as a matter that is beyond what is necessary, that the foreign judgment in this case does not comply with the Convention’s conditions, as s. 11(a)(4) of the Foreign Judgments Law requires, and thus, in light of the District Court’s holdings and the circumstances of the case, it should have refused to recognize the foreign judgment pursuant to art. 3(5) of the Convention.

Therefore, if my view is accepted, the appeal should be allowed and the recognition of the foreign judgment should be withdrawn. The respondent will pay attorney’s fees in the amount of NIS 20,000, along with the costs of the litigation.

 

 

 

Vice President E. Rivlin

 

  1. I have read the learned opinion of my colleague, Justice E. Arbel, and I agree with the result that she has reached. I nevertheless wish to add and explain my position regarding the interpretation of the Enforcement of Foreign Judgments Law, 5718-1958 (hereinafter: “the Foreign Judgments Law” or “the Statute”).

The original language of the Statute established two tracks for the absorption of foreign judgments: the enforcement track, which granted the court authority to order the enforcement of a foreign judgment in Israel; and the indirect recognition track, which enabled a court to incidentally recognize a foreign judgment in the course of the adjudication of a matter within its jurisdiction, with such recognition being valid for the purpose of that matter, “if the court sees that it is right and just to do so” (s. 11(b) of the Statute). The Statute as it was drafted at the time did not establish a direct recognition track which would enable a court to issue a judgment that declared the full recognition of a foreign judgment. It was believed that the absence of a direct recognition track meant that the legislature did not wish to interfere with the English common law rules, which had been followed in Israel prior to the enactment of the Enforcement of Foreign Judgments Law (see Mannheim, “Direct Recognition of Foreign Judgments,” supra, at p. 704). Section 11(a), which was added to the Statute in the Enforcement of Foreign Judgments Law (Amendment No. 2) 5737-1977 (hereinafter: “the Statutory Amendment”), created a third track within the Statute – the track for the direct recognition of foreign judgments, in situations in which the State of Israel has, through a treaty, committed itself to recognizing foreign judgments of the relevant type, and has made that commitment to the country in which the foreign judgment was rendered.

  1. However, very few petitions for direct recognition have been adjudicated since the Foreign Judgments Law was amended. The Statute’s requirement that such recognition be dependent on the existence of a treaty has led to a situation in which petitions for direct recognition are adjudicated only rarely.  This is because the State of Israel has signed only very few treaties relating to the recognition of foreign judgments, and most of these apply to civil and commercial judgments, which by their nature primarily include obligations that are capable of being enforced and which do not necessitate any use of the direct recognition track. This Court has ruled in the past that foreign judgments may not be recognized other than in the framework established in the Statute – and thus, when there is no treaty between Israel and the country in which the judgment was rendered, there is still no possible application of the direct recognition track. (See Attorney General v. Agam [3], and for criticism of the rule in Agam, see Anonymous v. Anonymous [1]). Additionally, as my learned colleague Justice Arbel has noted, the vague language of s. 11(a) creates substantial difficulties in terms of its implementation. Thus, “[the path] opened by s. 11(a) is so narrow and full of obstacles that it is doubtful it will ever be used” (Mannheim, “Direct Recognition of Foreign Judgments,” supra, at p. 710). In light of this, there are few cases in which the court is likely to decide the matter of the application of the track established for the direct recognition of foreign judgments, and this Court has not yet examined s. 11(a) thoroughly  (see Wasserstein Fassberg, Foreign Judgments in Israeli Law, supra, at pp. 51-52). The case before us presents a rare opportunity to discuss our interpretation of s. 11(a).

The s. 11(a) condition – the undertaking

  1. Section 11(a) establishes the conditions for the direct recognition of a foreign judgment:

11. (a)  An Israeli court or tribunal will recognize a foreign judgment regarding which the following conditions have been met:

(1)  A treaty with a foreign country applies to it;

(2)  Israel has undertaken, in that treaty, to recognize foreign judgments of its type;

(3)  The undertaking only applies to foreign judgments that are enforceable pursuant to Israeli law;

(4)  The judgment satisfies all the conditions in the treaty.

Two central problems arise in the context of the interpretation of s. 11(a)(3):

‘[F]irst – what is the significance of the subjection of enforceability pursuant to the section to the provisions of the Enforcement Law (since in light of the unequivocal language of s. 2 of the Statute, no foreign judgment may be enforced in Israel other than pursuant to the Enforcement Law); second – what is the significance of the fact that this subjection refers not only to the judgment itself but also to the “undertaking” (which, in light of the language of sub-section (2), is Israel’s undertaking in the above-mentioned treaty, to recognize certain foreign judgments)’ (Mannheim, “Direct Recognition of Foreign Judgments,” supra, at p. 704).

My colleague Justice Arbel focused on the interpretation of the first difficulty – the significance of the stipulation that foreign judgments may be recognized only subject to the conditions for enforcement that are established in Israeli law. In my review of the interpretation of s. 11(a), I wish to discuss the second obstacle regarding its interpretation – the meaning of the subjection of the undertaking to the requirements for enforcement. My colleague’s starting point, according to which the requirement applies to the foreign judgments for which recognition is sought – is not an obvious point. It appears to me that we cannot ignore the fact that the section relates its requirements to the undertaking that the State of Israel has given, and not to the foreign judgment  for which recognition is sought.

The language of the Statute provides that “the undertaking applies only to foreign judgments that are enforceable pursuant to Israeli law” (emphasis added). The word “undertaking” appears first in sub-section (2), where the section refers to the undertaking that Israel has given in the treaty with the foreign country. The “undertaking” in sub-section 2 is therefore an undertaking pursuant to an international treaty dealing with the issue of the enforcement of foreign judgments. Thus, it appears that the simple literal interpretation of s. 11(a)(3) is that the condition established in that sub-section for the direct recognition of a foreign judgment is that the treaty pursuant to which the recognition of the foreign judgment is being sought must apply only to foreign judgments that are enforceable pursuant to Israeli law. As is known, when a court is required to interpret legislative material, it may not attribute to that material any meaning that deviates from the range of linguistic possibilities (A. Barak, Legal Interpretation, supra, at p. 82). The natural and normal interpretation of the section is that the requirement of conformity to the Israeli law of enforcement will apply to the treaty through which the State of Israel has given an undertaking, and this is the interpretation that is consistent with the statutory language.

4.     The correctness of this interpretation is made clearer in light of the original text of the proposed amendment of the Enforcement Law, and in light of the explanatory material that accompanied it. According to the proposed amendment, s. 11(a) was intended to serve as a continuation of s. 13, which deals with the Minister of Justice’s authority to enact regulations regarding the operation of the Statute. The original proposed text of the section was the following: 

‘If a treaty with a foreign country provides that Israel undertakes to recognize foreign judgments as described in the treaty, and the undertaking applies only to foreign judgments that are enforceable pursuant to Israeli law, the Minister of Justice may, with the approval of the Knesset’s Constitution, Law and Justice Committee, order that such foreign judgments be recognized if they satisfy all the conditions in the treaty’ (Draft Enforcement of Foreign Judgments (Amendment No. 2) Law 5737-1977, Draft Laws 246).

The explanatory notes to the proposal stated that “a condition for the use of this authority [the Minister of Justice’s authority to give force to the Treaty – E.R.] will be that Israel has not, in the relevant treaty, undertaken to recognize foreign judgments that cannot be ordered to be enforced pursuant to the existing law”.  The intention behind this amendment to the Statute was thus to avoid the situation that had existed until that time, when the only track available pursuant to the Statute was the indirect recognition track – a track in which the matter of the recognition of the foreign judgment was left to the absolute discretion of the court, in each and every case. Under those circumstances, doubt arose as to whether the State of Israel could make any commitments to recognize foreign judgments, since there was no certainty that these judgments would be recognized by the Israeli courts (see the deliberations for the first reading of the Draft Law, Knesset Proceedings 80, 427). The original intention of the section was that it would give the Minister of Justice the power to absorb international treaties into Israeli law by giving force to an unlimited number of judgments. Since the intention was that the Minister’s authority would not be limited to a particular judgment, it was not possible to focus the enforceability requirement such that it would apply to the judgment for which recognition is sought, and instead the enforceability requirement could refer only to the entire treaty (Mannheim, “Direct Recognition of Foreign Judgments,” supra, at pp. 707-708). The authority conferred upon the Minister was nevertheless limited to a power to recognize only those treaties that conform to Israeli law and which do not require Israel to recognize foreign judgments that are not enforceable. For some reason, which is not made clear in the explanatory notes to the Draft Law or in the Knesset Proceedings, the text of the amended Statute was changed such that the power to recognize foreign judgments was granted to the courts rather than to the Minister of Justice. However, the statutory language regarding the enforceability requirement remained in place and with it the section’s purpose – to limit the recognition of treaties that do not conform to Israeli law concerning the enforcement of judgments. In light of this, the correctness of an interpretation that views s. 11(a)(3) as presenting conditions regarding the treaty, rather than in connection to the judgment for which recognition is being sought, becomes clearer. (And see also Wasserstein Fassberg, Foreign Judgments in Israeli Law, supra, at p. 51: “When there is such a treaty, the conditions for recognition are the terms of the treaty. There is no substantive statutory condition for the recognition of such a judgment . . .”).

The s. 11(a) condition – “that are enforceable”

5.     Thus, what is the significance of the requirement that the undertaking given in the treaty with the foreign country apply only to foreign judgments that are enforceable in Israel? My view in this matter, like the view of my colleague, Justice Arbel, is that the phrase “that are enforceable” cannot be interpreted in a manner that strips it of all content and which mandates the acceptance of all treaties – even those that are in conflict with the requirements of the Foreign Judgments Law (as stated in para. 29 of Justice Arbel’s opinion). I also agree that the term should not be construed very narrowly – i.e., in a manner that requires that each treaty include every one of the conditions for enforcement pursuant to Israeli law, and that recognition of foreign judgments pursuant to a treaty will not be possible whenever the treaty diverges from the provisions of Israeli law, even if only in some minor way (as stated in para. 26 of my colleague’s opinion). This type of narrow interpretation would mean that the use of the term “enforceable” signifies that “it would seem that in order to create a situation in which the section cannot be utilized at all, it would be sufficient that the treaty directs the courts to recognize a judgment  in any case that does not fit into the narrow confines of the Enforcement Law” (S. Mannheim, “Direct Recognition of Foreign Judgments,” supra, at p. 707). Thus, according to the narrow interpretation, whenever an agreement makes it possible to recognize a judgment that cannot be enforced in Israel and which does not comply with all the conditions for enforcement pursuant to Israeli law – the foreign judgment may not be recognized. Thus, for example, in a case such as the instant one, in which the Convention leaves room for discretion in the event of a pending proceeding, and does not require that the foreign judgment not be enforced, the foreign judgments to which the Convention applies will not be recognized (even if the foreign judgment itself meets the statutory requirements, such as when there was no pending proceeding involving the same matter). This interpretation leads to a situation in which s. 11 cannot be used at all, and the application of the direct recognition track will lack even the most minimal content, and it is therefore inconsistent with the Statute’s objectives. (See also Wasserstein Fassberg, Foreign Judgments in Israeli Law, supra, for a description of the differences between the provisions of the various treaties that Israel has signed, and the provisions of the Enforcement Law, supra, at p. 49.)

6.     Another possible interpretation is that the statute requires that the provisions of the treaty be consistent with the norms for the enforcement of foreign judgments, such that the “enforceability” requirement is understood to disallow recognition of treaties that require the Israeli courts to deviate substantially from the conditions for enforcement prescribed by Israeli law. The purpose of the amendment was to enable the absorption of international treaties into Israeli law, with s. 11(a) intended to serve as the channel through which treaty provisions relating to the direct recognition of foreign judgments would be absorbed (see Wasserstein Fassberg, Foreign Judgments in Israeli Law, supra, at pp. 51-52). When this interpretation is used, the section effectively creates “red lines” that are intended to limit the government’s ability to approve treaties that do not conform to the values of Israeli law. This interpretation does not empty the Statute of all content, and it also conforms to both the Statute’s language and its objective. An interpretation that creates too many obstacles which prevent the absorption of treaties and judgments is not in harmony with the purpose of this legislation. It is therefore appropriate to understand s. 11(a)(3) such that it prohibits a court from recognizing a foreign judgment pursuant to a treaty that obligates Israel to recognize judgments that deviate substantially from the provisions of Israeli law.

According to this interpretation, the conditions set out in s. 11(a) apply only to the treaty pursuant to which the recognition of a foreign judgment is being sought, while the Statute does not add any conditions that apply to the foreign judgment itself. If the foreign judgment is covered by the provisions of the applicable treaty, and so long as that treaty does not require Israel to enforce foreign judgments that deviate substantially from those that are enforceable pursuant to Israeli law – the court will recognize the foreign judgment. However, this does not mean that the court cannot make its own determination regarding the foreign judgment or that it has no discretion regarding the recognition of the foreign judgment itself. The court remains the final arbiter with regard to whether the treaty conditions have been met. Israeli law becomes involved in the absorption of foreign judgments through the requirement that the judgment must be subject to a treaty that is consistent with Israeli law. The court’s ability to exercise discretion is also needed because the conditions established for enforcement pursuant to Israeli law – in light of which the court determines whether the treaty is deserving of recognition – themselves grant the court a certain range of discretion. The discretion that the court exercises when it decides whether to grant the remedy is derived from Israeli law, and is exercised in its spirit. In effect, it may be presumed that the legislature chose to confer upon the court the power to grant direct recognition of foreign judgments, rather than to empower the Minister of Justice to do so, precisely because of an understanding of the need for the exercise of judicial discretion regarding this matter.

From the general to the particular

7.     As stated, this case involves a foreign judgment rendered in a country with which the State of Israel does have a treaty, and in which it undertook to recognize foreign judgments of this type. Does the treaty apply only to foreign judgments that are enforceable in Israel? I believe that the answer to this question is affirmative. The Convention Between the Government of Israel and the Government of the United Kingdom of Great Britain and Northern Ireland regarding the Mutual Recognition and Enforcement of Judgments in Civil Matters, Israel Treaties 22, at p. 55 (hereinafter: “the Convention”), necessarily includes most of the conditions for the enforcement of foreign judgments that are included in the Foreign Judgments Law. The Convention provides that a judgment will not be recognized or enforced if it has been obtained through fraud (art. 3(2)(c) of the Convention and s. 6(a)(1) of the Statute); if a judgment was given by a body lacking authority to render it (art. 3(2)(b) of the Convention and ss. 6(a)(3) and 3(1) of the Statute); if the defendant has not been given a reasonable opportunity to defend against the action (art. 3(2)(b) of the Convention and s. 6(a)(2) of the Statute); or if the recognition of a judgment could harm  the security of the State or is inconsistent with public policy (art. 3(2)(d) of the Convention and ss. 3(3) and 7 of the Statute). However, the Convention does not contain any provision that is parallel to s. 5 of the Foreign Judgments Law, which establishes a limitations period of 5 years for the enforcement of foreign judgments. However, as stated, I believe that it is not necessary that there be an absolute identity between the terms of the relevant treaty and those of the Enforcement Law. The shortened limitations period is not part of the essential “core” of the Statute – and consequently its absence from the Convention should not be viewed as a deviation that prevents the absorption of the Convention within Israeli law.

8.     The Convention’s terms are different from those of the Statute with respect to an additional matter, which is relevant to our case – the fact that the Convention allows the court to exercise discretion concerning the recognition of a foreign judgment even if there is a pending proceeding: 

‘Where the court applied to is satisfied that, at the time when proceedings were instituted in the original court in the matter in dispute, proceedings as to the same matter between the same parties were pending before any court or tribunal of the country of the court applied to, the latter may refuse to recognise the judgment of the original court’ (art. 3(5) of the Convention. Emphasis added – E.R.).

In contrast, the Statute provides that if “[a]t the time that the action was brought in the court in the foreign country, another action regarding the same matter and between the same litigants was pending before an Israeli court or tribunal” – the foreign judgment will not be declared to be enforceable (s. 6(a)(5) of the Statute). Similarly, even in a case in which the foreign judgment is in conflict with a different judgment that has been rendered regarding the same matter and between the same litigants – the Convention allows the court to exercise judgment, while the Statute provides that in such a case the foreign judgment will not be recognized (art. 3(4) of the Convention and s. 6(a)(4) of the Statute). Does this mean that the Convention cannot be recognized at all because of its deviation from the “narrow confines” (in Mannheim’s words) of the Statute? As stated, my view is that the Convention should not be disqualified entirely on the ground that it allows for the exercise of discretion where the Statute establishes an inflexible rule, so long as it does not deviate from the core provisions of the Statute. The discretion that the Convention allows is consistent with the Statute’s provisions regarding the enforcement of foreign judgments, and is also consistent with its spirit. My colleague Justice Arbel, based on her own reasons, also reaches the conclusion that art. 3(5) does not conflict with s. 6(a)(5). In my view, and with the necessary changes, the core principles of the Statute are clearly reflected in the Convention, such that it is consistent with the Statute and includes all the red lines that are set forth in it.

9.     In light of this, the lower court retained the right to exercise discretion in terms of deciding whether to recognize the foreign judgment, even though it was rendered at a time that a parallel proceeding was pending in Israel. However, in the context of this exercise of discretion, the court must strive to achieve conformity between the Statute’s requirements for the enforcement of foreign judgments and its requirements for recognition. This conformity must express, inter alia, the assumption that forms the court’s starting point in deciding whether to recognize a foreign judgment that had been issued even when there was another parallel pending proceeding in Israel. The Statute provides, as stated, that a foreign judgment will not be enforced if, at the time the action was brought in the foreign court, there was a proceeding between the same litigants and regarding the same matter which was pending in Israel. Amos Shapira has noted the logic of this rule:

‘A foreign judgment that has been obtained under circumstances that indicate that a local proceeding was ignored or that an attempt was made to bypass it will not be given force in Israel. A litigant who makes light of a pending local proceeding or who maneuvers in order to avoid it has committed an abuse of legal proceedings and undermines the primary principles of fairness in the judicial process. The Israeli court will not assist such a party in implementing a judgment obtained abroad, so as not to assist in the commission of the misdeed’ (Shapira 2, at pp. 55-56,; see also Wasserstein Fassberg, Foreign Judgments in Israeli Law, supra, at pp. 22-23).

These remarks, made in connection with the enforcement of foreign judgments, apply as well to the issue of direct recognition. In either case, the issue is a possible impairment of the local court’s authority and an abuse of existing legal proceedings – whether through the enforcement of the foreign judgment or through its recognition in a manner that gives it effect under Israeli law. There is no difference, for this purpose, between a judgment that is enforceable and which a litigant seeks to enforce, and a judgment that does not involve any operative obligation and which a litigant seeks to have recognized directly in Israel. There are those who believe that there is no persuasive reason for distinguishing between the requirements for recognition and the requirements for enforcement, or that the distinction made by the Statute is not based on any substantive differences between the two tracks. (For further discussion, see Wasserstein Fassberg, Foreign Judgments in Israeli Law, supra, at pp. 153-154.)

There is thus a reasonable basis for applying the same logic both to the enforcement of foreign judgments and to their direct recognition, so that in the event of a “pending proceeding”, the court’s starting point should be the non-recognition of a foreign judgment. In order for a judgment to be recognized in such a situation, the court will need to be persuaded that there are sufficiently strong reasons that justify its recognition, even though a parallel proceeding was pending in an Israeli court at the time the foreign proceeding was initiated. The burden of proving the existence of such grounds is imposed on the party seeking the recognition of the judgment.

10.   It seems to me that under the circumstances of this case, there are good reasons not to recognize the foreign judgment. The respondent, using the name New Hampshire, initiated the proceeding in the foreign court only a short time after it was joined as a third party in the proceedings in Israel, where the named defendant was AIG – although it is clear that for the purposes of the proceedings before us, the companies are identical. On the other hand, when the respondent sought recognition in Israel of the foreign judgment that had been issued in its favor – it was willing to acknowledge the identity between the parties and sought to base a legal argument on that identity. The respondent’s actions indicate an attempt to avoid the litigation that was pending in Israel. The District Court, which reached a different conclusion, had reviewed the key theories that form the foundation for the recognition of foreign judgments, and considered those factors that relate to the need to bring an end to litigation and to increase the efficiency of such proceedings. These considerations arise whenever the recognition of a foreign judgment is needed, and they are independent of the particular facts of a specific dispute. The fact that the non-recognition of a foreign judgment means it will be necessary to conduct a new proceeding in order to adjudicate questions that have already been decided in the context of the foreign judgment is not sufficient to justify a sweeping recognition of the foreign judgment. In certain cases, there may be efficiency grounds that would actually justify the non-recognition of certain foreign judgments, when there is a need to reduce, from the beginning, the incentive to initiate additional proceedings in a foreign country.

An additional factor that the District Court took into consideration was the possibility that the res judicata rule would apply to the dispute. Such a possibility is, however, unlikely. Without a judicial act that recognized it, a foreign judgment has no validity in and of itself (see for example Anonymous v. Anonymous [1], at pp. 11-12; Shapira 2, at p. 509; CA 423/63 Rosenbaum v. Julie [7]). So long as the judgment that was rendered in the foreign country lacks force under Israeli law, no res judicata has arisen in any proceeding in Israel (see also Wasserstein Fassberg, “Finality for Foreign Judgments,” supra, at pp. 52-53). Thus, the question as to whether a res judicata has been created will depend on whether there is a foreign judgment that is valid in the State of Israel, and not vice versa. Additionally, the argument that in the case before us the English court was the appropriate forum for the adjudication of the matter does not, of itself, justify the initiation of proceedings in the foreign court while ignoring the Israeli proceeding. If a litigant believes that the State of Israel is not the proper forum for the adjudication of a matter, the litigant can make that argument within the context of the proceeding in the Israeli court that has already commenced its deliberation of the case – as a measure that respects that Israeli court’s authority.

Indeed, as I have noted, the range of possibilities for the recognition of foreign judgments can be broadened, and the narrow opening allowed for the absorption of such judgments within the current Statute is not enough. However, the expansion of this opening need not reach, specifically, those cases in which recognition makes it possible to bypass proceedings that are pending in Israel. Instead the framework needs to be expanded by making the Statute more accessible in situations in which there is some benefit achieved through the recognition of the foreign judgment, with the expansion being based on an overall view of Israel’s commercial and legal needs.

Therefore, and since I have not been persuaded of the presence of any grounds that justify recognition of the foreign judgment that is before us – I also believe, as does my colleague Justice Arbel, that the foreign judgment should not be recognized. I agree with the opinion of my colleague Justice Arbel, that the appeal should be allowed and the recognition of the foreign judgment should be withdrawn.

 

 

Justice E. Rubinstein

A.    I have read my colleagues’ comprehensive opinions, and I also agree with the result proposed by my colleague Justice Arbel and joined by my colleague Vice President Rivlin.

B.    Article 3(5) of the “Convention Between the Government of Israel and the Government of the United Kingdom of Great Britain and Northern Ireland Regarding the Mutual Recognition and Enforcement of Judgments in Civil Matters”, Israel Treaties 22, at p. 55, provides as follows:

Where the court applied to is satisfied that, at the time when proceedings were instituted in the original court in the matter in dispute, proceedings as to the same matter between the same parties were pending before any court or tribunal of the country of the court applied to, the latter may refuse to recognise the judgment of the original court.

Since, at the time that the original action was brought (16 October 2001) in the English court (the “Original Court”), a third party notice had already been filed (on 20 September 2000) against AIG in the proceeding that was already pending in the Tel Aviv District Court (“the Court of Application”), the Convention grants the District Court discretion to determine that it will not recognize the foreign judgment. (The mechanism – “the pipeline” for the injection of the treaty terms into Israel’s internal law – is s. 11(a)(4) of the Enforcement of Foreign Judgments Law, 5718-1958 – hereinafter: “the Statute”; regarding the identity of the parties, see para. 34 of Justice Arbel’s opinion and para. 10 of the Vice President’s opinion.) The District Court (President Goren) described in detail – primarily in the legal sense – why, notwithstanding the court’s discretion to refuse the petition for recognition, such recognition was in fact appropriate (paras. 22-25). I nevertheless agree with the views of my colleagues (as stated in the paragraphs mentioned above).

C.    I would further note that the Convention grants discretion when there is a claim that there is a parallel pending proceeding, and it may be that there is a certain difference here between the provisions in the Convention and the provisions of s. 6(a)(5) of the Statute.  The Statute uses seemingly sweeping language – “will not be declared to be enforceable”:

‘A foreign judgment will not be declared to be enforceable if one of the following is proven to the court:

 . . .

(5)      at the time that the action was brought in the court in the foreign country, another action regarding the same matter and between the same litigants was pending before a court or tribunal in Israel.’

 (See para. 8 of the Vice President’s opinion; and in contrast, regarding the revocation of the discretion, see also LCA 1817/08 Teva Pharmaceutical Industries Ltd. v. Pronauron Biotechnologies, Inc. [8].) In my view, which I will expand upon below, to the extent that there is a difference between the language of s. 6(a)(5) and the provision in the Convention, it is the route that is outlined in the Convention (discretion) that should be followed when the subject is the recognition of the foreign judgment. Since the Convention grants discretion, the exercise of such discretion should also involve serious consideration of the good faith of the party requesting the recognition (compare CA 3924/08 Goldhar Corporate Finance Ltd. v. Klepierre S.A. [9]). Regarding our case, my colleague the Vice President responded to the matter of the respondent’s attempts to “avoid the litigation that was pending in Israel” (para. 10). These attempts would also appear to include the claims that the respondent raised in the context of the deliberation regarding service on the respondent’s counsel (CA (TA Dist.) 2137/02 AIG Europe (UK) Ltd. v. Israel Oil Refineries Limited [19]).

The impression received from the respondent’s overall behavior is that it did not act in pure good faith. I find this to be the case even though I am aware that the appellant – for its own reasons – did not appeal the English judgment, and it has become final.

D.    I therefore believe that the discretion that the Convention has conferred upon the court should have led it to reject the petition for recognition – and for this reason I concur in the result reached by my colleagues. Since both of them also responded in detail to the arguments regarding the interpretation of the Statute, I will deal with the matter only briefly – but I will first note that my main impression is that the existing legal situation is unsatisfactory and unclear, and that the time has come to re-organize the issue. I write this thirty years after the then student (and now Judge) Shaul Mannheim wrote his critical article “Direct Recognition of Foreign Judgments,” supra.  It appears that in the years since then, not only has there not been any legislative response to the difficulties that he noted, but these difficulties have in fact only increased, in light of this Court’s ruling in CA 970/93 Attorney General v. Agam [3].

From the general to the particular

E.    I have examined the question of the significance of the existence of a pending proceeding in Israel from the perspective of art. 3(5) of the Convention (cited above), and not from the perspective of s. 6(a)(5) of the Statute. This reflects an approach regarding the interpretation of s. 11(a) of the Statute, one which is somewhat different from that of my colleagues, and I will now discuss it briefly. Section 11 of the Statute provides as follows:   

11. (a)  An Israeli court or tribunal will recognize a foreign judgment regarding which the following conditions have been met:

(1)  A treaty with a foreign country applies to it;

(2)  Israel has undertaken, in that treaty, to recognize foreign judgments of its type;

(3)  The undertaking only applies to foreign judgments that are enforceable pursuant to Israeli law;

(4)  The judgment satisfies all the conditions in the treaty.

 (b) By way of a deliberation concerning a matter within its jurisdiction and for the purpose of the main matter, a court or tribunal in Israel may recognize a foreign judgment, even if sub-section (a) does not apply to it, if the court or tribunal has found that it is right and just to do so.

(c)  The provisions of s. 6(b) and (c) will apply in proceedings involving the recognition of a foreign judgment pursuant to this section.

As to the dispute between my colleagues – concerning the question or whether the conditions of s. 11(a)(3) are to be applied to the judgment for which recognition is being sought or to the treaty by virtue of which the recognition is being sought – I share the view of my colleague the Vice President. I also believe that the condition that the “undertaking only applies to foreign judgments that are enforceable pursuant to Israeli law” requires that a determination be made as to whether the treaty (“the undertaking”) does indeed apply only to foreign judgments that are enforceable in Israel; and does not require a determination as to whether the judgment for which recognition is sought meets these conditions (see the Vice President’s reasoning in para. 4 of his opinion; Mannheim, “Direct Recognition of Foreign Judgments,” supra, at p. 707). Under these specific circumstances, and for the purpose of the case before us, I also find that the Convention which is the basis of this proceeding complies with these conditions.

F.     For these reasons, in my view, it is not necessary to determine whether the appellant has a good defense pursuant to s. 6(a)(5) of the Statute. The court is obliged (pursuant to s. 11(a)(4) of the Statute) to examine whether “it [the judgment for which recognition is sought – E.R.] satisfies all the conditions in the treaty”. The reference is to the conditions in the treaty – not the conditions in the Statute. “The conditions for recognition will be established in each case in accordance with the treaty between Israel and the country in which the judgment was issued” (Wasserstein Fassberg, Foreign Judgments in Israeli Law, supra, at p. 52). It appears that the treaty is to be examined according to the tests established in the Statute, and the judgment is to be examined according to the tests established in the treaty.

G.    Thus, in cases in which the treaty confers discretion upon the Court of Application, and in which – according to the language of the treaty and in accordance with its objective – there are a number of possible legitimate results, it is appropriate, as my colleague the Vice President wrote, to “strive to achieve conformity between the Statute’s requirements regarding the enforcement of foreign judgments and its requirements for recognition” (para. 9 of the Vice President’s opinion). A common sense view and the judicial aspiration for the most harmonious possible interpretation would require this. However, as a rule, when the subject is a document signed by two countries whose internal laws differ on this matter, I believe that the signatory countries’ main commitment is to an interpretation of the treaty which is in accordance with that document’s own language – and only secondarily to its conformity with their own internal legal systems. “So far as interpretation of the treaty is concerned, it would appear that significant weight should be attached to international uniformity and a desire for harmony with outcomes that are reached in foreign countries” (CA 7833/06 Pamesa Ceramica v. Yisrael Mendelson Engineering Technical Supply Ltd., [10] ). There is good reason, I believe, and certainly within the framework of an international business system, to maintain harmony between different countries in terms of the interpretation to be given to the same treaty – both with respect to legal certainty and out of a duty of fairness to the various “players” who should not be compelled to discover that when they move from country to country, they will be faced with a differing interpretation of the same language. This is certainly the case in terms of a multilateral treaty, but it is also true with respect to a bilateral treaty, as is the case here.

H.    As in Israel, there is not much English case law dealing with the Convention that is the subject of this proceeding (although see, for example, Tuvyahu v. Swigi 1997] EWCA Civ. 965 [20]). However, in the spirit of the above discussion, as there are differences between Israel’s Enforcement of Foreign Judgments Law and its principles, on the one hand, and the parallel English statute (the Foreign Judgments (Reciprocal Enforcement) Act 1993), on the other hand, an interpretation that is directed only at conformity with the provisions of the internal law will naturally lead to two different interpretations in the two countries; this is an utterly undesirable result with respect to an international treaty. An example of one of the differences between the two statutes would be in relation to the ability to enforce a non-final judgment. Section 3(2) of Israel’s Statute provides as follows:

‘An Israeli court may declare that a foreign judgment is enforceable if it finds that the following conditions have been met with regard to it . . . (2) the judgment is not subject to appeal.’

Section 3 of the English statute provides the following:

‘For the purposes of this section, a judgment shall be deemed to be final and conclusive notwithstanding that an appeal may be pending against it, or that it may still be subject to appeal, in the country of the original court.’

(Regarding the differences between the English law and the Israeli law concerning this matter, see also Ben Dayan v. IDS International [6], at p. 105; Shapira 1, supra, at pp. 527-528.) In a context which is very similar to ours (the differences in language between s. 6(a)(4) of the Statute and the provisions of 5(1)(6) of the treaty with the Federal Republic of Germany), Justice M. Cheshin wrote the following:

‘The rule of interpretation is indeed that a statute and a treaty should be conformed with each other; that the two should work together and should not conflict with each other (see A. Barak, Legal Interpretation, supra, at p. 575), but a peace-building bridge can only be built between two sides that are close to each other – not between two elements between which there is a great divide’ (CA 1137/93 Ashkar v. Hymes [11], at p. 659).

Foreign judgments that are enforceable pursuant to Israeli law

I.     As stated above, I agree with my colleague the Vice President that the statutory language indicates that the requirement contained in s. 11(a)(3) – “the undertaking applies only to foreign judgments that are enforceable pursuant to Israeli law” – refers to the treaty (“the undertaking”) and not to the specific judgment for which recognition is sought. However, I am not certain that the only possible interpretation of the term foreign judgments that are enforceable pursuant to Israeli lawis the intermediate interpretation that my two colleagues have proposed.

J.     I myself would propose that the phrase (in s. 11(a)(3)) “foreign judgments that are enforceable pursuant to Israeli law” (emphasis added – E.R.) should be read as an internal reference to s. 3 of the Statute, which is captioned “Conditions for Enforcement”; the reference should possibly even be only to the specific condition contained in s. 3(3) that “the obligation in the judgment is enforceable pursuant to the laws for the enforcement of judgments in Israel”. This would be in the spirit of the interpretation given for that condition in the explanatory note to the Draft Enforcement of Foreign Judgments (Amendment) Law 5734-1974:

[i]f the Israeli law does not have the tools that make it possible to enforce the foreign judgment or to enforce it in some other manner, such as through specific performance of a contract for personal service (Draft Laws, 1974 – at p. 172).

In any event, I believe that this is not a reference to s. 6 of the Statute, which (according to its caption) deals with “Defenses Against Enforcement”. In my view, the conditions are to be understood as constituting one matter, and the defenses are deemed to be a different matter. (Regarding the differences between conditions and defenses – primarily in terms of burdens of proof – see CA 1268/07 Greenberg v. Bamira [12], at para. 13; CA 10854/07 Pickholtz v. Sohachesky [13].)

K.    In terms of interpretation, a strong indication that the expression “enforceable pursuant to the law of Israel” in s. 11(a)(3) does not refer to the defenses listed in s. 6 of the Statute can be found, in my view, in s. 11(c):

  (c)   The provisions of s. 6(b) and (c) will apply in proceedings involving the recognition of a foreign judgment pursuant to this section.

In my view, this section, which also applies to direct recognition pursuant to s. 11(a) (see M. Shava, Direct Conversion of a Foreign Judgment, supra, at p. 40, n. 20), indicates two things: (1) if not for its express provision, none of the conditions of s. 6 would apply to proceedings pursuant to s. 11 (nor would they apply through s. 11(a)(3)); and (2) that only the “provisions of s. 6(b) and (c)” apply to proceedings pursuant to s. 11. Furthermore, I believe that it cannot be said that the legislature – which, according to my colleague the Vice President sought to limit the power of the executive branch to enter into certain agreements – would have reserved for that branch the discretion to determine the “threshold conditions or set of red lines” (per Justice Arbel, in para. 30 of her opinion), or to decide among the various interpretations that my colleagues have discussed.

L.    A review of the legislative history of the Foreign Judgments Law also indicates that the legislature’s tendency had been to enable the government to enter into treaties for the recognition of foreign judgments with greater ease – and not to increase the difficulties involved by adopting threshold requirements from Israel’s internal law (see the explanatory notes to the Draft Enforcement of Foreign Judgments (Amendment) Law 5734-1974, Draft Laws, supra at p. 172; the explanatory notes to the Draft Enforcement of Foreign Judgments (Amendment No. 2) Law 5737-1977, Draft Laws 246; C. Goldwater, “Amendments to the Foreign Judgments Enforcement Law”, 10 Isr. L. Rev. 247 (1975), at p. 248). The question may be asked as to why a respondent should not, in the context of a petition for the recognition of a foreign judgment, benefit from the same defenses that a respondent can rely upon in a petition for enforcement. The answer is that a respondent does in fact benefit from those particular defenses (or from similar defenses) that the State saw fit to include in the framework of the treaties that it has signed. In order to make matters clear, I note that some variation of the “pending proceeding” defense is included in all four treaties that Israel has signed (see, in addition to the article which is the subject of this case: art. 5(3) of the treaty with Austria, (Israel Treaties 21, at p. 149); s. 5(1)(5) of the Schedule to the Enforcement of Foreign Judgments Regulations (Treaty with The Federal Republic of Germany), 5741-1981; art. 4(e)(1) of the treaty with Spain (Israel Treaties 30, at p. 714)).

Pending proceedings and public policy

M.   I would like to comment further on the matter of public policy. The current proceeding focuses on the nature of the exception dealing with “pending proceedings” (lis alibi pendens) – an argument which, in appropriate circumstances, will enable a stay of proceedings even in a situation in which the two proceedings are being conducted within the same internal legal system. (For a survey, see U. Goren, Issues in Civil Procedure (10th ed., 2009), at pp. 116-117.) The Convention recognizes another exception dealing with cases that conflict with public policy – although there it is combined with the exception dealing with cases that have an adverse impact on “the sovereignty or security of the State” (art. 3(2)(d)); and in the Statute, it is combined with language referring to the requirement that “the obligation in the judgment is enforceable pursuant to the laws for the enforcement of judgments in Israel” (s. 3(3); the exception relating to cases having an adverse impact on sovereignty or security has been given a separate section, s. 7). The fact that the exception dealing with public policy can be situated in different contexts – together with matters affecting the security of the State (as in the Convention), or together with the condition involving conformity with the internal law (as in the Statute) – may indicate that there is a certain similarity in principle between the concept of public policy and the other exceptions to enforcement and recognition – including, in my view, the exception dealing with “a pending proceeding”.

N.    Indeed, Israel’s internal law provides a variety of reasons for a stay of a proceeding based on “a pending proceeding”. Some of these are clearly utilitarian – such as the concept of avoiding additional burdens for litigants and for the legal system (see U.  Goren, Issues in Civil Procedure, supra, at p. 116; LCA 346/06 Hazan v. Club Inn Eilat Holdings Ltd. [14], at para. 4); some of them are closer in their nature to the public policy concept – such as the idea of mutual respect among different courts (LCA 1674/09 Lechter v. Derek Boateng [15], at para. 22; CA 1327/01 Ephrayim v. Elan [16], at pp. 781-782), and the prevention of conflicting rulings (LCA 2733/07 Amiron S. T. L. Finance and Investment Ltd. v. Wallach [17]). Without blurring the practical differences between the various exceptions, it appears that from a preliminary and distant perspective, there could be a certain amount of interfacing between the concepts. Furthermore, with regard to the same issue within the internal legal system, when a court needs to rule on a “pending proceeding” argument, it should weigh “good faith utilization of a right” considerations (S. Levin Law of Civil Procedure – Introduction and Basic Principles (2nd ed., 2008), at p. 124). The ideational proximity to the super-principle of public policy (regarding this matter, see also Teva v. Pronauron [8]), and the importance attributed to good faith should be a court’s guiding light when it exercises the discretion conferred upon it by the Convention. For this reason I believe that the discretion granted by the Convention should have led to the result reached by my two colleagues. As a side point, I note that in Jewish law, the principle of public policy is referred to by a global, perhaps universal and elegant term – ‘tikkun olam’ [repairing the world] – as in, for example “Hillel the elder enacted the pruzbul [a deed deposited with the rabbinical court to which the monetary sabbatical year does not apply– E.R] due to a concern for tikkun olam” (Mishna Gittin, Chapter 4, Mishna 3).

Conclusion

O.    As stated above, I believe that s. 11(a)(3) presents minimalist threshold requirements, the purpose of which is to restrict the State in terms of its ability to enter into international treaties, and it does not obligate the courts to examine whether the respondent in the petition for a specific recognition has a good defense pursuant to s. 6 of the Statute (while, of course, defense claims based on treaty provisions are examined pursuant to s. 11(a)(4)). I do not wish to put a final finish on this matter, since it is not necessary to decide it in order to decide the issue presented by the current case.  Furthermore, the approach that I am proposing is likely to give rise to various difficulties, since even if it is possible to determine that those who drafted the Convention had made an effort to conform it to the threshold requirements of Israeli law, I am not certain that this objective was achieved in full (with regard to s. 3(3) of the Statute, in particular). It may be that from this perspective, my colleague Justice Arbel’s proposal is a desirable one, but in my view it is difficult to reconcile it with the statutory language – and this may be the foundation for a new arrangement. I therefore agree with the result reached by my two colleagues – i.e., that the appeal should be allowed. Going beyond what is needed, as stated, I also agree with the Vice President’s position that the requirement presented in 11(a)(3) refers to the relevant treaty and not to the judgment for which recognition is sought, but I would give this section a narrower interpretation than is given to it by my colleague.

P.     And after all this has been stated, there is a much greater practical difficulty, which relates to the fact that the four existing treaties – even if they do meet the requirements stipulated in the Statute – provide only a partial solution to the practical need for the recognition of foreign judgments from all over the world. At present, only four treaties have been signed, and the last of them was signed twenty years ago (although it should be noted that the Convention which is the subject of this case was updated in the early part of the last decade); this is despite the fact that s. 11 was enacted in 1977 and the fact that since that time, many additional states have established diplomatic relations with Israel. Not only do these four treaties provide solutions for only four countries, they do so only partially – because they do not apply to all types of judgments. It is clear that in light of the real need (which may be presumed to exist, at least, in light of the phenomenon of globalization) for a mechanism that allows for the recognition of foreign judgments (especially for the recognition of judgments in rem), and in light of the restrictive rule established in Attorney General v. Agam [3], there is a need to re-think the regulation of this area, since the 1977 amendment does not appear to have succeeded. I agree with the views of my colleagues regarding this matter as well.

 

Appeal allowed.

8 Tevet 5771

15 December 2010

 

 

 

Hamadah v. Israel Auto Insurance Fund

Case/docket number: 
CA 6860/01
Date Decided: 
Wednesday, March 26, 2003
Decision Type: 
Appellate
Abstract: 

[This abstract is not part of the Court's opinion and is provided for the reader's convenience. It has been translated from a Hebrew version prepared by Nevo Press Ltd. and is used with its kind permission.] 

 

The Appellant was injured in a traffic accident in Gaza in a car insured by an Israeli insurance company. The Appellant filed his claim seven years later in an Israeli court. The court found that the accident was subject to an order by the military commander, which established a two year limitations period for claims deriving from traffic accidents in Gaza, and thereby held that the period of limitations had elapsed. This appeal challenges that decision.

 

The Supreme Court held:

 

A.         1.         Since the enactment of the Compensation for Persons Injured in Traffic Accidents Act 1975 (hereinafter: The Compensation Act), the military commander issued the Order for Compensation for Persons Injured in Traffic Accidents (Gaza Area) (n. 544) 1976 (hereinafter: the Compensation Order). The Compensation Order includes an arrangement that is essentially identical to the arrangement in the Compensation Act and includes reference, in certain matters, to the Civil Torts Ordinance 1944, including a limitations provision that sets the period of limitations at two years.

 

            2.         The statutory source for the authority of the military commander in the West Bank and in the Gaza Strip (hereinafter: the area) is twofold: it is both a result of customary international law and of Israeli law, as the commander is the long arm of the Israeli government. Each of these sources leads to the conclusion that indeed the claim has passed the statute of limitations and that the appeal must be rejected.

 

B.         1.         One alternative assumes that the orders of the commander are foreign law. Under this assumption, the matter of conflict of laws in terms of the limitations issue must be resolved according to the rules of private international law.

 

            2.         When a local court must decide a matter that involves foreign law, the rules of international law mandate that procedural provisions be decided according to the laws of the forum, and substantive provisions be adjudicated according to the foreign law. In Israel, periods of limitations are procedural provisions and thus, seemingly, it limitations must be determined under the laws of the forum. However, this is not the case when the foreign law – which creates an encompassing arrangement that includes provisions of substantive law and incidental provisions that regulate the implementation of the substantive rights – is concerned. In a case where a statute grants substantive rights and attaches to them provisions that limit their exercise, including procedural provisions, the arrangement must be applied cohesively rather than in parts. When the foreign law establishes a cause of action to assert substantive rights and attaches to it a specific period of limitations on its realization, the parties may not claim entitlement to enjoy the period of limitations that exists in the adjudicating forum.

 

            3.         When the case is heard in Israel, and the substantive law that applies is foreign law that established a specific period of limitations for a right granted in substantive law, the limitations must be considered a substantive provision, or – sadly – a provision that is an integral part of the foreign law that must be applied cohesively in the adjudicating suit. In the case at hand, it is sufficient to find that to the extent that the Compensation Order is foreign law, the Appellant’s claim has passed the statute of limitations.

 

C.         1.         Should considering the military commander as an Israeli authority lead to a conclusion that the order is that of an Israeli governmental authority, and thus the Compensation Order constitutes Israeli law, we must refer to the Limitations Act 1958. Section 58 of the Limitations Act stipulates that the Act does not offend a period of limitations in terms of a certain issue that is set in a different source of law. Therefore, should it be possible to consider the Compensation Order a “different source of law”, the period of limitations that it sets will be the applicable period, rather than the ordinary period of limitations that is set in the Limitations Act. In terms of the relevant limitations, the Compensation Act refers to the Civil Torts Ordinance, which sets a period of limitations of two years.

 

            2.         The Limitations Act does not define the term “different source of law.” The status of the Compensation Order is not definite because of the duality in the status of the military commander. We must examine the substance of the military commander’s orders, their relation to the Israeli legal system and the particular nature of the Compensation Order. As noted above, the statutory source of the military commander’s orders is Israeli. The Compensation Order is identical in its primary section to the Israeli Compensation Act, and it is considered by the court to be an order that is closely and clearly related to Israel law. The conclusion that results from the combination of the commander’s statutory status and the Compensation Order’s connection with Israeli law is that they can be considered to be Israeli law when adjudicated by an Israeli court. Though from an international perspective the commander’s authorities are sourced in customary international law, when the commander’s legislative activity is heard by an Israeli court it can be seen, for such relevant purposes, as Israeli law.

 

            3.         The status of the commander as an organ of Israeli government coupled with the clear link between the Compensation Order and the Israeli Act lead to the conclusion that the Compensation Order can be seen as included in the definition of the term “law” as it appears in the Interpretation Ordinance or in the term “different source of law” as it appears in the Limitations Act. Therefore, We must turn to the Compensation Order for purposes of setting the applicable period of limitations, and this period is of two years according to the Ordinance to which the Order refers.

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

Justice T. Strasberg-Cohen

Facts

1.  On October 31, 1990, appellant was shot and injured while driving through the streets of Gaza City in a car insured by respondent no. 1, an Israeli insurance company. Appellant was taken to Shifa Hospital in Gaza.  He was then moved to Soroka Hospital in Be’er Sheva, where he remained hospitalized for close to two months. Approximately seven years later, on October 12, 1997, appellant submitted a personal injury claim to the Tel Aviv/Jaffa District Court under the Road Accident Victims (Compensation) (Gaza Strip) (Number 544) Order-1976 [hereinafter Compensation Order].  The court summarily dismissed the claim as being barred by the statute of limitations.

Judgment of the District Court

2.  The district court ruled that, since the accident occurred in Gaza, the Compensation Order applied.  The Compensation Order regulates road accidents claims in a manner similar to the Road Accident Victims (Compensation) Law-1975 [hereinafter the Compensation Law]. However, at the same time, the Compensation Order applies several sections from the Civil Wrongs Ordinance-1944 [hereinafter the Mandatory Ordinance], including the two year statute of limitations provided for in section 68(a) of the latter.  The Court ruled that this two year prescriptive period should be applied, since section 27 of the Prescription Law-1958 provides that the latter would not affect any period of prescription fixed in any “other law.” The Court saw the Compensation Order as an “other law” which provides for a particular prescriptive period. Thus, the court held that the Compensation Law does not apply despite the fact that the claim was submitted in Israel.  As such, the court dismissed the claim.  

Arguments

3.    Appellant claims that the Compensation Order is not a “law,” as defined by the Interpretation Ordinance (New Version) or the Interpretation Law-1981, and is not an “other law” as defined by section 27 of the Prescription Law.  As such, section 27 should not apply, and the Mandatory Ordinance should not determine the prescription period.  Appellant further asserts that the prescriptive period should be determined in accordance with Israeli law, which provides for a seven-year statute of limitations.  Appellant also claims that under the Oslo Accords, and also due to the practice of the respondents, compensation claims under the Compensation Order may only be submitted in Israeli courts. As such, appellant claims, Israeli law should be applied. In Israel, the Mandatory Ordinance has been replaced by the Civil Wrongs Ordinance (New Version), and the prescription period in section 68(a) of the Mandatory Ordinance has been modified by section 89 of the Civil Wrongs Ordinance. As such, courts in Israel determine the prescription period according to section 89 of the Civil Wrongs Ordinance. 

In the alternative, appellant asserts that his injuries constitute “continuing damages.”  Under section 68(b) of the Mandatory Ordinance, where there are “continuing damages,” the prescription period begins running only after the damages cease.

4.  Respondents, for their part, agree with the judgment of the district court. They assert that it should not be possible, by shifting the venue of the claim, to revive a claim which has become time-barred in the locations where the accident occurred. They assert that the Compensation Order creates the appellant’s right to compensation, and the Order also limits that right.  The Order provides for a two-year statute of limitations. Moreover, as the claim was submitted in Israel, the Prescription Law cannot be applied.  The Compensation Law is territorial and applies only to accidents which occurred within the State of Israel.  Local law applies to an accident which occurred in Gaza, and that local law is the Compensation Ordinance.  Respondents assert that this is a correct interpretation of the law, including the language of the Motor Vehicle Insurance Ordinance (New Version)-1970 and the relevant caselaw.  Respondents claim that the fact that the Israeli courts have applied “local law” does not mean that the Israeli prescription period should be applied. This is because the Prescription Law is a general law which is overridden by the specific law of the Compensation Order. It is also the case under section 27 of the Prescription Law, since the Compensation Order is a “law,” as defined by the Interpretation Ordinance, and should be seen as an “other law” which section 27 of the Prescription Law refers to. 

Respondents also claim that if the Compensation Order is not “Israeli law”—but rather “foreign law”—its statute of limitations should be construed as a substantive—not procedural—law which, under private international law, apply in an Israeli forum.  This is a basic legal approach in common law countries. Appellants also complain of the growing phenomenon where compensation claims concerning accidents which occurred in Judea, Samaria or Gaza [hereinafter the Area], and which involved residents of the Area, are submitted to the courts in Israel in an attempt to use the Israeli statute of limitations. Due to the security situation in the Area, this prevents the proper investigation of the relevant facts. Thus, respondents assert, as a matter of appropriate policy, the prescription period set in Israeli law should not be applied. 

The appeal here focuses on the prescription of a personal injury claim submitted in Israel by a party injured in a road accident which occurred in the Area, where the car was insured by an Israeli company.

The Statute of Limitations

5.   In 1976, approximately one year following legislation of the Compensation Law, the military commander issued orders regarding compensation for victims of road accidents—Order no. 544 in Gaza and Order no. 677 in Judea and Samaria.  Like the Israeli Compensation Law, these orders established no-fault causes of action for victims of road accidents.  They also established a statutory fund for the compensation of the victims of road accidents. The Compensation Order includes comprehensive regulations, which are essentially identical to the regulations of the Compensation Law and, in certain matters, refers to the Mandatory Ordinance.  In one case, the orders refer to section 68 of the Ordinance, which deals with the statute of limitations:

  1. No action shall be brought for any civil wrong unless such action be commenced –
    1. within two years next after the act, neglect or default of which complaint is made, or
    2. where the civil wrong causes fresh damage continuing from day to day, within two years next after the ceasing thereof…

The period of prescription in claims regarding personal injury caused by a road accident is, under section 68 of the Mandatory Ordinance, two years.  The period of prescription in Israel, in contrast, under section 5 of the Prescription law, is seven years.  Which law applies to the case at hand: the two-year prescription period of the Mandatory Ordinance or the seven-year prescription period of the Israeli Prescription Law?  Before examining this question, I will devote some space to the normative status of the Compensation Order and to the source of the authority of the military governor who issued the order. 

Status of the Military Governor in the Area

6.     The status and authority of the Israeli military governor of an area under military control are derived, first and foremost, from customary international law.  See G. von Glahn, The Occupation of Enemy Territory 27 (1957); 2 L. Oppenheim, International Law 432-34 (7th ed.). Article 43 of the Hague Convention Regarding the Laws and Customs of War on Land-1907 [hereinafter Hague Convention] grants authority to the military governor and even obligates him to act to “restore” and “ensure,” as far as possible, “public order and the safety” of the residents of the area.  See HCJ 302/72 Hilu v. Israeli Government IsrSC 27(2) 169; HCJ 606/78 Saliman Tofif Oyev v. Minister of Defence IsrSC 33(2) 112; HCJ 390/79 Doykat v. Israeli Governement IsrSC 34(1) 1; HCJ 69/81 Abu Atya v. Commander of the Region of Judea and Samaria IsrSC 37(2) 197, 309; HCJ 393/82  Jamit Askhan Almaalmon Altaonya Almahduda Almaolya v.  IDF Commander in the Region of Judea and Samaria IsrSC 37(4) 785; HCJ Tha v. Minister of Defence IsrSC 45(2) 45.  On the authority of this obligation the governor acts to regulate the lifestyle and welfare of the residents of the area.  See von Glaht at 436-37; Oppenheim, at 33-34. 

There is an additional normative source of authority, which stems from the fact that the military governor of the Area is an Israeli government authority.  This stems from the Proclamation in the Matter of Law and Government (Judea and Samaria) (Number 2), promulgated on June 7, 1967, which grants legislative and administrative authority regarding the Area to the IDF commander in the Area.  It provides that such authority shall be exercised by the commander, or by whoever acts on his behalf. See section 3(a) of the Proclamation. An examination of the legislative activities of the governor demonstrates that they accord with government policy and are often influenced by Israeli statutes, at times even identical to them. Professor A. Rubenstien states:

The regional commanders are military officers who answer to the Chief of Staff and the Minister of Defense. The person responsible for legislation is the Coordinator of the Activities, who is subject to the Minister of Defense.  Legislative actions or orders must be approved by the civil government system, and often the initiative itself comes from the Coordinator of Activities or the Minister of Defense.  Occasionally, the initiative, or the approval, is given by the government itself. In effect, the regional commanders are the executive arm of governmental policy.  Furthermore, the various “headquarter officers” stationed at regional headquarters, and who represent the various government ministries, are the official extensions of the government ministries. 

See A. Rubenstien, The Shifting Status of the Administered Territories, 11 Iyunei Mishpat, 439, 451-52. In another context, Justice I. Zamir stated:

The Foreign Minister, responsible for foreign policy, speaks in the name of the state… The IDF commander in the region of Judea and Samaria, who also acts on behalf of the government, speaks in the name of the state in all matters regarding the territory in that area.  Both voices are voices of the state.

HCJ 2717/96 Wapah Ali v. Minister of Defence IsrSC 50(1) 848, 855. 

7.     Thus, the normative source of the authority of the military governor in the Area is twofold—it stems from customary international law as well as from Israeli law, in that the governor acts as the arm of the Israeli government.  In this regard, Professor I. Dinstien writes:

The authority of the legislative Jordanian authority has been suspended, and the Israeli military commander acts as a substitute for it, subject to the limits placed upon him by international law. He possesses legislative authority for the West Bank.  However, from the perspective of Israeli constitutional law, the military commander continues to be a part of the executive branch, and his actions are subject to the judicial review of the Supreme Court sitting as the High Court of Justice, just like the actions of the Chief of Staff and the Minister of Defense, who are appointed over him…. In my opinion, the legal status of the legislative acts of the military commander, from the point of view of the Supreme Court of Israel, does not differ from the legal status of any administrative regulations promulgated by the executive branch. In both situations, the High Court of Justice may embellish upon it… It can be appreciated that the twofold nature of the military commander as both supreme legislator, from the perspective of the territories, and as an executive authority subject to rules and regulations, from an Israeli perspective, raises difficulties of both practical and theoretical natures.

I. Dinstien, Judicial Review Over the Activities of the Military Government in the Administered Territories, 3 Iyunei Mishpat 330, 331-32 (1973). It seems that the above paragraph, which concerned judicial review of the actions of the military commander, also applies to questions of private law.

This Court, in a number of decisions, has addressed the duality which characterizes the status of the military governor. We have held that this duality requires the governor’s orders to conform to the requirements of both international and Israeli law.  See HCJ 302/72 Id.; HCJ 606/78 Id.; HCJ 390/79 Id.; HCJ 60/81 Id., at 230-232; HCJ 393/82 Id..

8.   How does the normative duality of the governor affect the status of the orders he issues?  The cases I have cited, in which the Court implemented a dual test for the examination of the governor’s orders, concerned administrative petitions which examined the actions and activities of the governor. This is not the case here, where we are being asked to determine the normative status of the governor’s orders in a civil proceeding before an Israeli court.  In such a situation, should we consider the governor’s orders as “foreign law” or “Israeli law”?  The answer to this question will affect the prescriptive period which applies to a right created by the Compensation Order, the Mandatory Ordinance or the Israeli Prescription Law.  If we conceive of the governor’s order as “foreign law,” the question will be examined in light of the principles of private international law which apply to the implementation of foreign law in a local forum.  On the other hand, if we conceive of the governor’s orders as Israeli law, we must refer to section 27 of the Prescription Law which states that it will not apply where the matter is specifically regulated by another law.  I will discuss each of these possibilities.

The Order as Foreign Law—Private International Law

 9.    The relationship between Israel and the Area is not a relationship between two independent sovereigns.  There is the sovereign country of Israel, on the one hand, and administered territory, on the other.   This Court, in dealing with the orders of the military governor has presumed them to be “foreign law.”  See CrimA 831/80 Tzoba v. State of Israel IsrSC 31(2) 169; CA 300/84 Abu Atya v. Arbatisi IsrSC 39(1) 365; C.App. 4716/93 Nablus Arab Insurance Co. v. Abed Zrikat IsrSC 48(3) 265; Crim.A. 8019/96 Amir v. State of Israel IsrSC 53(4) 459, 477.  For the sake of argument, under the assumption that the governor’s orders are foreign law, choice of law in the matter of prescription is determined in accordance with the rules of private international law, to which I now turn.

    When a matter which involves foreign law comes before a local forum, the rules of international law provide that procedural rules shall be in accordance with the law of the forum, while substantive rules shall be in accordance with foreign law. In Israel, questions of prescription are procedural issues.  As such, it would seem that the laws of the forum should be used.  Such is not the case, however, where foreign law creates a comprehensive system of regulation which includes provisions that regulate the realization of those substantive rights.  Where the legislation grants substantive rights and includes provisions which limit their realization—even procedural provisions—the system of regulation should be applied in its entirety. In such circumstances, the procedural provisions should be construed as inseparable from the substantive provisions, such that the procedural provisions become an integral part of the foreign substantive law.  Even if one finds that the provisions remain procedural despite their being part of the general substantive system of regulation, a plaintiff who desires to rest his claim upon foreign law should not be allowed to select part of those regulations while ignoring others.  He cannot choose those provisions which are beneficial to him, while ignoring those which are to his detriment.  Such a result is dictated by both common sense and proper legal policy.  This is the case here: where foreign law creates a cause of action for the realization of substantive rights and simultaneously sets out a specific limitations period for their realization, the local forum’s procedural rules of prescription will not apply.

10.  The proposal for the Choice of Law Act-1987, written by Professor A. Levontin, is a clear expression of this approach.  This proposal was not legislated.  However, there is no reason not to adopt its approach and apply it in the appropriate contexts, through judicial interpretation.  Section 50 of the proposal, the section relevant to the matter at hand, provides:

(7) In examining a right granted by foreign law, and in realizing such a right in Israel, the prescription provisions of the law that set out the right should be taken into account.  Where foreign law provides for a specific prescription period for the enforcement of a particular right, it is presumed that the foreign law intended that this specific period should apply even when the proceedings regarding that right occur outside the country of that law, including Israel.

Where foreign law provides a general procedural period of prescription, it is presumed that the foreign law only intended that period to be binding in proceedings occurring within that country. 

The explanatory notes of the proposed provision state:

Where foreign procedural prescription has been attached to a particular right, and only to that right, it should be assumed that something inherent in the nature of that right led the foreign legislator to specifying a period of prescription for it.  In such a case “it is presumed that the foreign law intended that it should apply even when the proceedings regarding that right are taking place outside of the country of that law, and in Israel.

Explanatory Notes to the Choice of Law Act, Ministry of Justice Publishing-1987, p.91.

The approach I set out above is apparent in the proposed law and the explanatory notes.  According to this approach, a prescription period which is attached to a particular right shall be applied in every state in which the realization of the substantive right is requested, even where the prescription provision is, at the outset, procedural.  This approach is not unique to Israel.  It has been adopted in the common law countries, whether through legislation or through caselaw.

Comparative Law

11.  The federal structure of the United States, which is comprised of autonomous states, has provided rich ground for the discussion of choice of law questions. Over the years, both legislative rules and caselaw have developed to deal with conflicts between the laws of the states, especially with regard to the issue of prescription.  The problem was a result of the traditional approach, which perceived statutes of limitations as procedural.  This encouraged “forum shopping.”  In order to prevent this phenomenon, two main rules were formulated.  The first, a product of case-law, relates to statutes of limitations of a sister-state as foreign substantive law. This rule provides that when a statute creates any sort of obligation and limits that obligation by a particular period of prescription, the court will perceive the prescription period as accompanying that obligation in any court in which the obligation is claimed, even where prescription is procedural.  In this regard Justice Holmes stated in Davis v. Mills, 194 U.S. 451, 454 (1904):

[C]ourts have been willing to treat limitation of time as standing like other limitations and cutting down the defendant’s liability whenever he is sued.  The common case is where a statue creates a new liability and in the same section or in a same act limits the time within which it can be enforced, whether using words of condition or not…. It is merely a ground for saying that the limitation goes to the right created and accompanies the obligation everywhere.

The second rule is statutory, and involves the adoption of “borrowing statues.” The foreign law is borrowed and drawn into local law.  In this way, the prescription period of the state of the substantive law is applied by the forum handling the claim.  E. F. Scholes and P. Hay explain:

As noted, the traditional (procedural) characterization of the Statue of Limitation may encourage forum-shopping.  Two exceptions are designed to alleviate this problem.  The first exception is a judicial creation: when the foreign limitation is intended to extinguish the right and not only to bar the remedy, it will be considered to be “substantive”…  The courts invariability limit the substantive characterization to limitations of rights created by statute.  The limitation is considered to be “built-in”… The second exception to the traditional rule… It takes the form of “borrowing statutes enacted by most jurisdictions”.  The typical “borrowing statute” provides that the cause of action will be barred in the forum if it is barred where it arose, accrued or originated.

E. F. Scholes & P. Hay, Conflict of Laws 60-62 (2nd 1992). (For additional judgments dealing with the case-law rule see Scholes & Hay, 60, nn. 2-4. For additional judgments regarding the system of “borrowing statutes” see Heavner v. Uniroyal, 305 A.2d 412 (N.J. YEAR?); Henry v. Richardson-Merrell., 508 F.2d 28, 32 (3d Cir. 1973); Allen v. Volkswagen of America, 555 F. 2d 361 (FORUM 1977).

12.  Thus, in American Law, the traditional common law approach, which provided that the law of the forum would apply with regard to statutes of limitation, was abandoned.  Instead, it was determined that foreign statute of limitations would apply.  A similar approach may be found in Scottish and Australian caselaw.  See Dicey & Morris, The Conflict of Laws 185 (12th ed. 1992).  England has also abandoned the traditional common law approach.  After years of criticism of the traditional rule, a committee was established to examine the application of foreign law in English courts.  In 1984 the Foreign Limitations Periods Act was legislated. This law regulated the application of prescription in a conflict of laws situation.  It provided that, in dealing with a claim under foreign substantive law, the foreign period of prescription would be applied.  The English prescription period would only apply in cases where English substantive law applied:

The Act was based on the recommendations of the Law Commission.  It adopts the general principle, subject to an exception based on public policy, that the limitation rules of the Lex Causa are to be applied in England. English limitations rules are not to be applied unless English law is the Lex Causa or one of two Leges Causae governing the matter.

Dicey & Morris, 186-87. See also J. D. McClean, Morris: The Conflict of Laws 386-87 (4th ed. 1993); Cheshire  North,  Private International Law 79-81 (12th ed. 1992).

To conclude this section, I find the approach articulated above to be acceptable. I am of the opinion that, where Israeli courts are dealing with a matter involving foreign law, and the applicable foreign substantive law provides for a specific period of prescription, the prescription period should be construed as a substantive provision. Alternatively, the prescriptive period should be construed as an integral part of the foreign law. This suffices to determine that, in so much as the Compensation Order is foreign law, the appellant’s claim has become time-barred, and should be dismissed.

The Order as “Law” or “Other Law”

 13.   I shall now turn to examine the other approach before us, which perceives the military governor as an Israeli authority. According to this perspective, the order has been promulgated by an Israeli authority. As such, the issue of prescription, as well as the Compensation Order itself, should be examined as Israeli law, and the issue would be governed by the Prescription Law.  Section 27 of the Prescription Law provides that it does not affect a prescription period that is provided for in another law:

 27. This law shall not, unless otherwise expressly therein provided, affect any period of prescription fixed for a particular matter in any other law…

If the Compensation Order is an “other law,” which provides a distinct prescription period, that period will apply. On the other hand, if the Compensation Order is not an “other law,” the prescription period provided in section 5 of the Prescription Law will apply.  More specifically, the “other law” would be the Mandatory Ordinance which the Compensation Order refers to.

 14.              The Prescription Law does not define the term “other law” in section 27, and there is no caselaw on the matter.  In the cases regarding section 27 which have come before Court, all of the relevant legislation has been Israeli legislation. See, e.g., CA 419/71 Menorah Re-Insurance v. Nomikus IsrSC 26(2) 527; CA 33/72 Fromin & Sons  v. Director of Customs and Excise Taxes IsrSC 28(2) 459; AD 36/84 R. Tychner v.Air France French Airways IsrSC 41(1) 589. This is not the case here, where the position of the possible “other law” is characterized by the dual status of the issuer of the order. 

In interpreting the term “other law,” we turn to the Interpretation Ordinance. This is because the Interpretation Law does not affect the definitions contained section 1 of the Interpretations Ordinance regarding statutes and administrative orders which were enacted before the Interpretation Law came into effect.  For such matters, the Interpretation Ordinance governs. The Compensation Order and the Prescription Law were enacted prior to the Interpretation Law.  Therefore, the relevant statute is the Interpretation Ordinance, which contains the following definition of a “law”:

“law”—any law or regulation, whether passed before the commencement of this Ordinance, or after it;

“regulation”—any regulation, rule, bylaw, proclamation, order, direction, notification, notice or other document, issued by any authority in the State of Israel or in Israel.

Can the Compensation Order, which was issued in the Area, be considered an “order” issued by “any authority” in “Israel”, which is included in the definition of a “regulation” that is “law”?  The answer to this question is not simple.  We must examine the essence of the order, as well as its connection to Israeli law.  As stated, the normative source of the governor’s orders, including the Compensation Order, is Israeli. This is a result of the military governor’s position as an organ of the Israeli government. Regarding the status of the governor as part of the executive branch, and the derivative status of his legislation as secondary legislation of the executive branch, see supra para. 7.

7.    With regard to the status of the legislator in the Area as an extension of the executive branch of the government, Professor Rubenstein writes:

Anyone who deals with law in the Area immediately notices the vast disparity between the reality and the legal fictions which disguise it.  One obvious legal fiction is that the military commander is the legislator for the Area….. In fact, the regional commanders are actually the executive arm of government policy….For all practical purposes, they are actually an extension of the government.

Rubenstien, at 452. In the same spirit, Justice Kedmi is of the opinion that, with regard to judicial notice, defense legislation in the Area has the same status as domestic Israeli law:

With regard to judicial notice, defense legislation in the Area is subject to the same rules as Israeli legislation.  The “legislator” in the Area is the long arm of the Israeli executive branch…. Considering the dual status of the legislator in the Area—Israeli, on the one hand, and local, on the other—our courts may regard defense legislation as if it were internal secondary legislation which applies only in the Area.

Crim.A. 8019/96 Amir, Id.

15.  The core of the Compensation Order is identical to the Compensation Law.  This Court construes the Compensation Order with an eye to its clear and strong connection to Israeli law.  The Deputy President, Justice S. Levin, has stated that the normative source of the Compensation Order is Israeli, and that the order draws its principles from the Israeli Compensation Law.  He states:

The issue of liability in a road accident, including the question of a definition of a “road accident,” is regulated in the Area by the orders of the military governor, in accordance with the principles of absolute liability and appropriation of cause, while the normative source of the legislation is Israeli, through the military governor.

C.App. 3003/96 The Arab Insurance Company Inc. v. Amro 55 Dinim Elyon 926. See also C.App. 4716/93 Shechem Arab Insurance Co. v.Zrikaat IsrSC 48(3) 265, 272-73 (Levin, D.P.)

The combined effect of the normative status of the governor and the strong connection of the Compensation Order to Israeli law, is that when this Court deals with such orders, it may conceive of them as Israeli law.  It seems to me that this order may be seen as an “order” included in the definition of a “regulation” which is “law,” as such is defined by the Interpretation Ordinance. Therefore, although from the international point of view the governor’s authorities are rooted in the principles of customary international law, when the governor’s orders come before an Israeli court, they may be seen as Israeli.

16. Even if the Compensation Order should not be construed as a “law,” as defined by the Interpretation Ordinance, it may perhaps be seen as an “other law,” as that term is used in section 27 of the Prescription Law.  The term “other law” is not defined by the law.  It is unclear whether the term “other law” only covers that which is “law,” as defined by the Interpretation Ordinance, or whether the term “other law” may be interpreted more broadly.  No one claims that the governor’s order is not law.  The dispute is with regard to the question of the normative nature of the order—whether it is foreign law or Israeli law.  The combined effect of the status of the governor as an Israeli government organ together with the clear connection between the Compensation Order and Israeli law, leads to the conclusion that the Compensation Order may be seen as included within the Interpretation Ordinance’s definition of the term “law” or the term “other law” as it is used in the Prescription Law. Consequently, the Compensation Order should be used in order to determine the applicable prescription period.  The prescription period should thus be set at two years, in accordance with the Mandatory Ordinance, to which the Compensation Order refers.

Continuing Damage

17. The appellant raised an alternative argument, which should be addressed briefly. Appellant argues that section 68(b) of the Mandatory Ordinance should be applied to his appeal. This section provides that where the civil wrong causes “continuing damage,” the prescription period shall not begin until the cessation of the damage.  Appellant claims that his damage has not ceased, that his wounds continue, that his medical condition is not final, and that “only the opinion of doctors appointed by the court” can assess “his medical condition.” This claim, however, which was argued only weakly before this Court and the district court, has not been grounded in a factual basis made in the statement of claim which would establish that we are dealing with “continuing damage.” The fact that the appellant was physically injured and that he has not yet healed does not toll the prescription period.  The claim that he has not yet healed, even if it is true, does not suffice to create “continuing damage.”  We have ruled several times that the prescription period commences with the occurrence of the injury and the initial damage, provided that it is not negligible. The prescriptive period does not begin to run from the time of the stabilization of the victim’s medical condition or with the submission of a doctor’s statement of opinion. We are aware that the claim is being summarily dismissed before the parties have had the opportunity to present evidence. However, the statement of claim submitted by the appellant does not offer a factual basis for his argument. 

18. In conclusion, I have found that the claim is barred by the applicable statute of limitations, and that the appeal should be dismissed.  This conclusion is the result of an analysis of both the alternatives presented for the question at hand, whether the order is seen as “foreign law,” or as “law” as defined by the Interpretation Ordinance, or as “other law” as defined by the Prescription Law.

Therefore, the appeal should be dismissed, since two years time has passed since the occurrence of the road accident in which the appellant was injured. Under the circumstances there is no order for costs.  

Justice E. Rivlin
I agree.

Justice A. Grunis
I agree.

Appeal dismissed, as per the opinion of Justice T. Strasberg-Cohen.

March 26 2003

Translated by: Leora Dahan

Edited by: Eli Greenbaum

Comments, questions and suggestions are all welcomed, and may be directed towards elig@supreme.court.gov.il

 

Subscribe to RSS - Insurance