Interpretation

In the Supreme Court	CA 7996/11
Sitting as a Court of Civil Appeals

 

 

Before:	Justice E. Rubinstein Justice Y. Danziger Justice Z. Zylbertal
The Appellants:	1. Safecom Ltd 2. David Zilberberg
v.
The Respondent:	Ofer Raviv
	Appeal against the Haifa District Court's judgment of August 28, 2011 in CF 542-04-09, given by His Honor Judge Dr. A. Zarnakin
Date of session:	Cheshvan 6, 5774 (October 10, 2013)
On behalf of the Appellants:	Adv. Nahum Gabrieli
On behalf of the Respondent:	Adv. Tamir Afori

JUDGMENT

 

Justice Y. Danziger

 

This is an appeal of the judgment of the Haifa District Court (His Honor Judge Dr. A. Zarnakin) of August 28, 2011 in CF 542-09-09, dismissing the Appellants' claim against the Respondent for the infringement of copyright in their technical drawings.

 

Factual Background

 

1.         Appellant 1, Safecom Ltd (hereinafter: "Safecom"), develops and markets products for the electrical backup of cable TV broadcasting systems, and the Appellant 2, David Zilberberg (hereinafter: "Zilberberg") is its manager and one of its shareholders. Zilberberg became acquainted with the Respondent when the latter sought to market Safecom's products to a company for which he worked, and he also connected Zilberberg to an American company, Innovative Solutions 21, Inc. (hereinafter: "the American company"), which led to the marketing of Safecom products in the USA. On June 18, 2002, an agreement was made between Safecom and the American company according to which the American company would be the exclusive distributor of Safecom products (hereinafter: "the Agreement"). The Agreement provided that ownership of all copyright, patents and other intellectual property rights connected with the products, including graphics, sketches and models, that were developed by Safecom would be retained by it. The Respondent had no formal status in the American company, but he was involved in the technical matters associated with marketing Safecom's products in the USA, and, in that context, he also took part in the preparation of technical drawings of Safecom products. In May 2005, the Agreement was terminated by Safecom, and in 2008, it learned of the filing of a patent application in the USA by the Respondent together with the American company's president, which concerned a voltage backup system for cable systems. In view of Safecom's complaint that the drawings underlying the patent application infringed its copyright in the drawings of its products, it filed suit in the District Court. By consent of the Respondent, the court awarded a provisional injunction. An objection filed against the registration of the American patent registration was dismissed.

 

2.         Safecom asserted that the Respondent had copied 14 original drawings that Zilberberg had prepared as part of a presentation for the Safecom products, which was furnished to the Respondent in 2003, when the agreement was still in force. According to it, the drawings that Zilberberg prepared were protected by copyright and owned by it, while the Respondent's drawings were absolutely identical and had been copied "one to one" and, as such, constituted an infringement of its right of reproduction. In order to emphasize the copying, Safecom pleaded that its drawings contained a mistake in the presentation of the switch box, and that mistake had been copied by the Respondent.

 

3.         The Respondent, for his part, asserted that the claim was governed by American law because the alleged infringement had been committed in the USA, and since that law had not been proven, the claim should be dismissed. According to him, under American law the claim would be dismissed because of the applicable American rules of fair use. In regards the very infringement, the Respondent pleaded that since the act was governed by the Copyright Act, 1911 (hereinafter: "the Old Law") it was first necessary to prove that the alleged infringement also constituted an infringement under the Copyright Law, 5768-2007 (hereinafter:  "the New Law"). According to him, under section 21 of the New Law, the copying of a work that is deposited for public inspection constitutes permitted use and no infringement is therefore involved. As regards the alleged copying, the Respondent pleaded that there was no relevant similarity between the Safecom drawings and his drawings, either visual or substantial. According to him, there are approximately 32 elements in the patent application drawings, while in the presentation there are only 19. This is because of the difference between the technology used in order to manufacture Safecom's products and that presented in the patent application. The Respondent further pleaded that the similarity between the drawings lay in their common functionality in a manner that does not afford protection. The Respondent also pleaded that he was party to making the drawings and therefore had a right of ownership in the Safecom drawings, and that the Agreement did not apply to him because he was not an employee of the American company. The Respondent also filed a counterclaim, but since no appeal has been brought in respect of it, we need not refer to it here.

 

The District Court's Judgment

 

4.         The District Court first dismissed the Respondent's claim that the matter is governed by American law. The court held that the Respondent had received the presentation in Israel.  It was therefore reasonable to assume that the act of copying had also been performed in Israel, and it had not been proven otherwise. In any event, the court held that the Respondent did not dispute the court's jurisdiction to try the matter in accordance with domestic law when the provisional injunction application had been considered, and he was therefore estopped from pleading the same. As regards Israeli law, the court held that the Safecom drawings do indeed amount to a protected work, according to both the Old Law and the New Law. The court dismissed the Respondent's claim that the use he had made was permitted use under section 21 of the New Law since the section treats of  the use of works that have already been deposited for public inspection and not use which itself constitutes deposit for public inspection.

 

5.         As regards the alleged copying, the District Court first held that the Respondent was not a joint owner of the rights in Safecom's drawings, because, even if he was not one of the American company's formal officers, he did substantially function as such and the agreement should therefore be applied to him. The court nevertheless dismissed Safecom's claim that the Respondent had admitted copying the drawings. The court emphasized that the Respondent's claim with respect to the difference in the number of elements between Safecom's drawings and the drawings in the patent application had not been rebutted, and a visual similarity had therefore not been established. The court dismissed Safecom's claim with respect to copying the mistake in its drawings because, according to it, no mistake was in fact involved. Finally, the court held that because of the great functionality of the Safecom drawings, some similarity was obliged between drawings that sought to present a similar product, and Safecom's drawings, or a substantial part of them, had therefore not been copied.

 

            Hence, the appeal.

 

The Grounds of Appeal in Brief

 

6.         The Appellants – through their attorney, Adv. Nahum Gabrieli – argue that the District Court erred            when it held that there had been no copying in the instant case. According to them, they did not have to adduce direct evidence of copying the drawings because the law makes it possible to suffice with circumstantial evidence to prove copying. The Appellants assert that the access that the Respondent had to the drawings, which is not in dispute, together with the substantial similarity between their drawings and his, leads to the sole conclusion that there was copying. The Appellants emphasize the identical elements between their drawings and those of the Respondent that do not derive from the functional presentation of the products, like the same twists and turns in the lines that are shown on them. According to them, the Respondent himself admitted that there are many ways to draw the products concerned, and he even showed example drawings of similar systems that were different from the drawings in the instant case. Moreover, in principle it cannot be held that when functional technical drawings are involved, copying cannot necessarily be inferred. The Appellants add that the finding that the similarity between the drawings was not the result of copying is inconsistent with the relationship between the parties, as described above. Finally, the Appellants aver that the court was mistaken when it reviewed the substantial similarity on the basis of the number of elements appearing in each of the drawings, rather than a general impression of the substance of the part copied, which according to them, obliged the conclusion that there had been prohibited copying.

 

The Respondent's Reply in Brief

 

7.         The Respondent – through his attorney, Adv. Tamir Afori – argues that the District Court rightly distinguished between proving a visual similarity and establishing a substantial similarity. According to him, in the instant case there has not been copying, as a matter of fact, because even if it were established that he had access to Safecom's drawings, the court found, as a matter of fact, that there was no visual similarity between the works. According to him, in order to establish such a similarity, the Appellants should have produced an expert opinion insofar as the matter concerns a technical drawing. In any event, the Respondent asserts that there had been no copying of a substantial part that was original to the Appellants, and that the copying of parts of the work that are not original in any event does not amount to copying and to an infringement of any right of the work's owner. According to him, in the instant case works are involved, only parts of which are original, and it is necessary to carefully analyze whether the original parts that were copied constitute a substantial part of the Plaintiff's work. Since, in the instant case, functional works are involved, the respondent argues that only the identical copying of original parts should be regarded as an infringement of copyright. The Respondent emphasizes that after filtering out all the non-original parts of Safecom's drawings, what remains is at most a "copy" of curved lines that do not constitute a substantial part of the work.

 

8.         The Respondent adds that it was inappropriate to deny his rights in Safecom's drawings since he was a joint author of them because of the Agreement between Safecom and the American company to which he was not party, and it should therefore be held that he is a joint owner and joint author of the Safecom drawings. Furthermore, the Respondent asserts that it was inappropriate to hold that the law governing the infringement is Israeli law since the Appellants had not established that the infringement asserted by them was committed in Israel, and that burden rested with them. According to him, his agreeing to the award of a provisional injunction does not attest to his agreeing to conduct the principal case in accordance with Israeli law. Finally, the Respondent argues that even if he is not the owner of the Safecom drawings, he is still their joint author, and the use that he made of them is therefore a permitted use under section 27 of the New Law, which permits the author of an artistic work to make works that constitute a partial copying or derivative of it, even if he is not the owner of the right. Moreover, according to him, the use that he made of the drawings is also protected by virtue of section 20 of the New Law because it was done in legal administrative proceedings or, in the alternative, it was fair use under section 19 of the New Law.

 

9.         In the hearing before us an attempt was made to bring the parties to an overall understanding that would make the need for our ruling unnecessary, but that attempt was unsuccessful.

 

Discussion and Ruling

 

10.       This appeal raises questions at the very heart of copyright law, and that, essentially, address the foundations upon which the protection of works is based, and in particular, the matter of the author's originality; the distinction between idea and expression; and infringement of the right to copy the work. These questions are highlighted with regard to the protection of functional works, and they require elucidation and clarification. Having read the parties' summations and listened to their oral arguments in the hearing before us, I have reached the overall conclusion that the appeal should be allowed and the case should be remanded to the District Court in regard to the matter of relief. I shall also recommend that my colleagues do the same.

 

The Basis of the Protection of Works – Originality

 

11.       The requirement of originality has been recognized by this Court as a threshold for the existence of copyright in a work [for more on the originality requirement, see: Michael Birnhack, “The Requirement of Originality in Copyright Law and Cultural Control,” 2 Alei Mishpat 347, 352-355 (2002) (Hebrew) (hereinafter: "Birnhack")]. The development of the requirement in Israeli case law has been based on the provisions of the Old Law, despite the fact that the Hebrew version did not mention "originality", whereas the binding English version provides, in section 1, that copyright will be granted in respect of:

 

            "every original literary, dramatic, musical and artistic work…" [emphasis added  – YD].

 

            The requirement of originality was anchored in the New Law in section 4(a), which provides:

 

            "Copyright shall subsist in the following works:

            (1) original works that are literary works, artistic works, dramatic works or musical works, fixed in any form"  [emphasis added – YD].

 

12.       This Court reviewed the case law relating to the elements underlying the requirement of originality at length in CA 8485/08 FA Premier League Ltd v.  Israel Sports Betting Regulation Council (March 14, 2010) (hereinafter:  the Premier League case) [http://versa.cardozo.yu.edu/opinions/fa-premier-league-v-israel-sports-b.... It was held that the requirement of originality is analyzed on the basis of two main criteria – investment and creativity.

 

            In the scope of the investment criterion, the author must have invested certain labor in the work in order to gain the right to its rewards, similar to the theoretical basis for recognizing the right to "corporeal" property [see: the Premier League case, para. 26; CA 513/89 Interlego A/S v. Exin-Lines Bros SA, IsrSC 48(4) 133, 164 (1994) (hereinafter referred to as the Interlego case)]. This criterion is based on the labor approach and the theory of natural rights based on the teachings of the philosopher John Locke as theoretical justification for the grant of property rights generally and copyright in particular [for a broader discussion, see: Birnhack, pp. 373-375; Guy Pesach, “The Theoretical Basis for the Recognition of Copyright,” 31 Mishpatim 359, 386-391 (2001) (Hebrew) (hereinafter: "Pesach"); Justin Hughes, “The Philosophy of Intellectual Property,” 77 GEORGETOWN L.J. 287, 297-98, 302-10 (1988); Wendy J. Gordon, “A Property Right in Self-Expression: Equality and Individualism in the Natural Law of Intellectual Property,” 102 YALE L.J. 1533 (1992)].

 

            In the context of the creativity criterion, which is based on the rationale according to which the purpose of copyright law is to enrich the creative world and the range of expressions available to the public, the nature of the investment, independently of its quantity, must be considered in order to show that it contributes to that purpose [see: Premier League, para. 27; Interlego, pp. 164-165]. This approach is based on a more social concept of copyright but, nevertheless, also on a utilitarian-economic approach, according to which a balance should be made between the cost – the incentive to be given to the author in the form of the monopoly granted to him in respect of the use and control of his work -- and the benefit of safeguarding the public domain for future work [see: Pesach, pp. 361-374; William M. Landes & Richard A. Posner, “An Economic Analysis of Copyright Law,” 18 J. LEGAL STUD. 325 (1989)].

 

            I would add that, in my opinion, in the scope of the originality requirement three subordinate elements should be identified, and in addition to the investment criterion and the creativity criterion, the origin criterion should be analyzed. By this I mean a requirement that the work should originate in the author and that it should not be based on another work – or in the words of my colleague Justice E. Rubinstein "original, meaning independent" [see: CA 3422/03 Krone AG v. Inbar Reinforced Plastic, IsrSC59(4) 365, 378 (2005); CA 360/83 Strosky Ltd. v. Whitman Ice Cream Ltd., IsrSC 40(3) 340, 346 (1985) (hereinafter: the Strosky case). For further on originality as origin, see Birnhack, p. 355-372].

 

13.       This Court has also considered the question of the nature and quantity of the originality requirement's elements that suffice to realize it. In respect of the investment criterion, it has been held that all that needs to be proven is a minimal investment of some human resource [see: Interlego, p. 173; Premier League, para. 34]. On the other hand, a quantitative definition of the requisite creativity is somewhat more complex and it appears that this Court has not yet fashioned a single formula for its realization.  Nevertheless, the definition of the requisite creativity for the protection of a work has been delineated in case law by a process of elimination. Thus, it has been held that the creativity criterion does not impose a particularly high threshold for the author, and that slight and even worthless creativity might sometimes suffice [see: Interlego, p. 173; CA 23/81 Hirschco v. Orbach, IsrSC 42(3) 749, 759 (1988) (hereinafter: the Hirschco case); CA 2687/92 Geva v. Walt Disney Co., IsrSC 48(1) 251, 257 (1993) (hereinafter: the Geva case)]. It has also been held that the work need not be novel in comparison with existing works in the same sphere [see Strosky, p. 257; Geva, p. 257].

 

14.       Because of the lack of any cohesive definition of the creativity requirement, and because of the absence of any controversy with regard to the definition of the investment necessary for the protection of a work, the possibility has been raised that a substantial investment in a work can compensate for a lack of creativity in such a way as will meet the requirement of originality and establish protection for the work. However, that approach was rejected by this Court long ago in Interlego, in which the approach of American law was adopted, as expressed in the American Supreme Court's judgement in Feist Publications, Inc. v. Rural Telephone Service Company, Inc., 499 US 340 (1991) (hereinafter: the Feist case), according to which mere investment is not sufficient for the copyright protection of a work [see: Interlego, p. 165, 169; Premier League, paras. 36-38].

 

15.       To sum up the foregoing, the case law laid down by this Court is that for the grant of copyright protection in respect of a work, it must be established that an original work is involved, three subsidiary elements being analyzed – the origin criterion, the investment criterion and the creativity criterion – the existence of only one element being insufficient for the purpose of establishing originality.

 

The Protected Part of the Work – The Idea/Expression Dichotomy

 

16.       Before I move on to discuss the originality required for the protection of functional works, I wish to consider another basic rule concerning the copyright protection of works – the distinction between idea and expression. A basic principle of copyright law is that the idea that underlies a work will not be protected by the right, and that the protection is afforded only to the way in which it is expressed. This rule is embodied in section 7B of the Copyright Ordinance, which governs the instant case, and was subsequently anchored in section 5 of the New Law, which provides:

 

            "Copyright in a work as provided in section 4 shall not extend to any of the following, but copyright shall apply to the way in which they are expressed:

 

            (1)       an idea …"

 

17.       This Court has consistently emphasized the said distinction in its case law [see, for example: CA 10242/08 Mutzafi v. Kabali, (October 10, 2012), para. 24 (hereinafter:  the Mutzafi case); CA 2173/94 Tele Event Ltd. v. Golden Channels & Co., IsrSC 55(5) 529, 544 (2001) (hereinafter: as the Tele Event case); Strosky, p. 346; CA 139/89 Harpaz v. Achituv IsrSC 44(4) 16, 19 (1990)]. This distinction is based on the concept that the grant of protection to mere ideas would frustrate one of the major purposes of copyright law – the encouragement of creation and leaving sufficient "raw material" in the public domain [see: Tony Greenman, Copyright, vol. I, 75 (second ed., 2008) (hereinafter:  "Greenman")]. The distinction between idea and expression, in the context of textbooks for example, has sometimes led to the conclusion that the author's right has been infringed because of the fact that the expression of the method of study created by him (which constitutes a mere idea) has been copied [see, for example: Hirschco], but also sometimes to the opposite conclusion that all that has been "copied" is the actual idea that underlies the work [see, for example: Mutzafi].

 

18.       The rule that an idea is not protected and only the way in which it is expressed is protected overlaps the rule that facts per se are not protected. This rule finds expression when compilation works are involved, and it has been held that such works will only be protected insofar as the choice and arrangement of the raw materials – which constitute unprotected facts – meet the requirement of originality (see: Interlego; CA 2790/93 Eisenman v. Kimron, IsrSC 54(3) 817 (2000); Tele Event]. This requirement is  expressed in section 4(b) of the New Law, which provides:

 

            "… originality of a compilation means the originality of the selection and arrangement of the works or of the data embodied therein".       

 

            However, in view of the rising status of the creativity requirement and the determination that investment does not suffice to prove originality, it has been held that, in certain cases, a "compilation work" will not be sufficiently original and will therefore not gain protection [see: Premier League, paras. 51-54]

 

19.       We can see that the distinction between idea and expression is of major importance in copyright law, and that, in certain senses, it also overlaps the requirement of originality that underlies the copyright protection of works. The overlap between these two basic principles of copyright law is particularly relevant when functional works are involved, as will be explained below.

 

The Merger Doctrine and Functional Works

 

20.       Having regard to the distinction between idea and expression, the concept has developed whereby, insofar as a particular idea can be expressed in only a single way, then protection will not be given to a work that constitutes that expression. This concept has been called the "merger doctrine". The merger doctrine has received little reference in the case law of this Court [see: Geva, p. 262; CA 2682/11 Petach Tikva Municipality v. Zissu (May 20, 2013), para. 49]. The doctrine originates in American law, and its application in modern case law is based on the judgement in Baker v. Selden, 101 US 99 (1880) (hereinafter: the Baker case). In the Baker case, consideration was given to whether a book that presents a new method of bookkeeping and also includes blank forms that make it possible to implement the method, grants its author an exclusive right to use the actual method. The American Supreme Court laid down a rule in that case for use in analyzing works, the only or main use of which is utilitarian. The Court in that case held that:

 

            "… where the art it teaches cannot be used without employing the methods and diagrams used to illustrate the book, or such as are similar to them, such methods and diagrams are to be considered as necessary incidents to the art and given therewith to the public" [ibid., p. 103].

 

            The federal courts in the USA have relied on this statement in order to develop the merger doctrine. The best-known judgment, which most broadens that doctrine, is Morrisey v. Procter & Gamble Co., 379 F.2d 675 (1st Cir. Mass. 1967) (hereinafter: the Morrisey case). In that case, it was held that when a single idea has a very narrow range of possible expressions, a work that constitutes one of the expressions is not to be granted copyright protection (ibid., pp. 678-679)]. Numerous federal courts have supported the rule in Morrisey, but dissenting opinions have also been aired [see: Melville B. Nimmer & David Nimmer, Nimmer on Copyright § 2.18[C] (2002) (hereinafter: Nimmer)].

 

21.       Baker and its development in case law have been strongly criticized [see: Nimmer, § 2.18[C]. Firstly, it has been argued that in Baker itself, the American Supreme Court restricted the rule cited above solely to the right to use the method or idea given expression in the work, and that the use of the expression in order to present the method will constitute an infringement of the copyright, or in the words of the American Supreme Court:

 

            " The use by another of the same methods of statement, whether in works or illustrations, in a book published for teaching the art, would undoubtedly be an infringement of copyright" [ibid., p. 103].

 

            Secondly, it has been argued that the distinction between copying the expression for the purpose of using the method (or idea), compared with copying the expression for the purpose of showing the method (or idea) is artificial. It has therefore been proposed to determine that copying for the purpose of using the idea will also constitute copyright infringement, and that all that should be permitted is the use of the method or idea for functional needs [see: Nimmer, § 2.18[C]-[D]]. This proposal is based on the understanding that copyright does not preclude reliance upon a work that constitutes a certain expression of an idea and presents a particular method in order to turn the method into a product. Such protection is only granted by patent law. For the purpose of demonstration, let us assume that a company manufactures a particular electrical product that is not per se protected by copyright. For the purpose of manufacture, the company produces drawings that constitute a protected work (as detailed at length below). In view of the proposition presented above, a competing company will not be able to copy the drawings, but assuming that the product itself is not protected by a patent or design, the competing company will be able to manufacture the product on the basis of the drawings without infringing copyright. I would immediately say that I accept this latter distinction, and in my opinion, it should be adopted.

 

22.       Despite the criticism that has been presented, it does appear that when there is a complete merger between the idea and its expression, and when there is only one way to express the idea, a consensus does exist that the work that gives expression to that idea will not gain copyright protection [see: Greenman, p. 83; Nimmer § 2.18[C][2]; Paul Goldstein, Copyright § 2.3.2 1 (1989)]. However, opinions are divided on the question when there are just a few possibilities of expressing the idea. According to one approach, as held in Morrisey, in such a case, copyright protection should also not be granted, but according to another approach, the work will be granted copyright, but it will only be infringed when there is absolute or almost absolute similarity between the works [see: Greenman, p. 83; Geva, p. 262]. This controversy is relevant, because, in the instant case, it is asserted by the Respondent that Safecom should have proven exact copying because its drawings constitute an idea that can only be expressed in limited ways (para. 12 of the Respondent's summations). In order to decide this controversy, in my opinion, reference may be made to the fundamental rule of copyright law presented above – the requirement of originality.

 

23.       Issues concerning the merger doctrine arise in many cases in respect of certain types of work. Thus, in the modern era, the question arises in respect of computer programs [see: Greenman, p. 81]. In addition, it has been asserted that the courts in the USA are expanding the application of the doctrine to visual works [for more on this, see: Michael D. Murray, “Copyright, Originality and the End of the Scenes a  Faire and Merger Doctrines for Visual Works,” 58 BAYLOR L. REV. 779 (2006)]. Another area in which the work, by its nature, raises issues concerning the merger doctrine is that of functional works. The instant case involves a functional work that is also a visual work. In fact, the merger doctrine can be well understood not only on the basis of the distinction between idea and expression, or to be more accurate, the merger between them, but also on the basis of the originality requirement, in particular insofar as it concerns functional works.

 

24.       In Interlego, President M. Shamgar considered at length the difficulties that the requirement of originality raises as regards functional works. One of President Shamgar's most important findings in this respect was that, in principle, a work is not to be denied copyright protection merely because it is functional [ibid., p. 160]. Nevertheless, President Shamgar held that in respect of these works the Old Law applies a filter in addition to the requirement of originality, which he called "the artistry criterion" [ibid., p. 173]. I would immediately explain that President Shamgar based the reference to that criterion on section 35(1) of the Old Law, which defines artistic work as works of painting, drawing, sculpture and artistic craftsmanship, and architectural works of art, and engravings and photographs [emphasis added – YD]. In the instant case, Safecom's drawings meet the exact definition of a "drawing" as an artistic work in accordance with section 35(1) of the Old Law, and on the face of it, the artistry criterion therefore does not apply to them directly. However, in my opinion, inspiration may be drawn from that criterion in order to interpret the application of the merger doctrine to Safecom's drawings, and to analyze their originality as a functional work.

 

25.       In Interlego, the difficulty that functional works pose for the requirement of originality was described in a way that very much brings to mind the principles of the merger doctrine. In President Shamgar's words:

 

            "When the form is dictated by the function, namely when the function limits the possible forms in which the product can be designed, then there is no justification for granting copyright to the form that is a product of functional-artistic judgement, since the protection that is given protects the function, not the author's original choice of the specific form. This is a circumstance in which the product's form is determined because of its functional task" (ibid., p. 177) (emphasis original – YD).

 

In fact, the words "function" and "form" can be substituted for the words "idea" and "expression". In order to resolve this problem, President Shamgar proposed six possible criteria for identifying the "artistry" of a work: the choice criterion; the author's intention criterion; the public acceptance criterion; the public's willingness to pay criterion; the minimal aesthetic standard criterion; and the art for art's sake criterion (ibid., p. 179). After a detailed discussion, President Shamgar proposed the "choice criterion" as the test appropriate to the examination of whether or not a work's expression derives solely from its functionality. He defined the criterion as follows:

 

            "The choice criterion: one of the characteristics of art is that it reflects the ability to express an idea in a variety of ways. As far as we are concerned here, this is a very broad criterion since it will be fulfilled whenever the creator of the functional product has the ability to choose between several options (ibid., p. 179).

 

            And following:

 

                        "It appears that in view of the purposes of copyright as indicated, and in light of the principles for the solution as formulated, the choice criterion should be regarded as a proper one in the context of examining the final product. That is to say, as long as the form obtained is one of several alternatives. The alternatives should be effective. An effective alternative is one that not only performs the functional task of the product but also meets the limited options of form existing in respect of future works deriving from the connection between function and form. There should be alternatives which, in addition to the functional task, meet the restriction of form that derives from the product's functional task or in other words, there should be several alternatives that all meet the restrictions of form that derive from the functional task" (ibid., p. 181).

 

26.       Applying the choice criterion can be of help in determining the proper protection of work regarding which it is asserted that its great functionality limits the ways for expressing the idea it represents. According to the choice criterion, the function or purpose for which the work is intended should be sought and an examination made as to whether the form of presenting that purpose – the expression – is accompanied by the author's choice from among several options that could achieve the same purpose. The application of this criterion might certainly lead to different conclusions with regard to different elements of the work. One can think of a functional work, some of the elements of which constitute essential expression of the purpose for which it has been created and therefore do not require the author to choose from alternatives when creating them, while at the same time, other elements are not dictated by its purpose, and it is clear that the author had a large range of possible choices with respect to the mode of expression. In view of this, one can again enquire into the controversy existing with regard to the relevance of the merger doctrine. As aforesaid, in my opinion when there is a solitary option for the expression of a particular idea, it is inappropriate to grant protection to that solitary mode of expression. However, when there are several possible expressions of a particular idea, even if they are very few, then in my opinion, having regard to the choice criterion, the author does have a choice among those possible expressions, and it is therefore inappropriate to deny copyright protection to the expression chosen. Nevertheless, I am willing to accept the approach that in such cases, when the number of options is very limited, then in order to prove copyright infringement, it will be necessary to apply the copying criteria strictly, and require that the work that is alleged to be an "infringing work" be almost absolutely the same as the protected work [see: Geva, p. 262; Strosky, p. 357; Greenman,  p. 83].

 

Copying a Functional Work

 

27.       The question of the criteria for copying in copyright law is an elusive one. Nevertheless, in the early 1970s, this Court laid down standards for the test in CA 559/69 Almagor v. Godik, IsrSC 24(1) 825 (1970) (hereinafter:  the Almagor case). The standards that were laid down in Almagor are still in use and were recently summed up by Justice Y. Amit in Mutzafi as follows:

 

            "(–)     It has to be proven that the defendant copied real and substantial parts of the plaintiff's work, the quality rather than the quantity being decisive.

            (–)       Copying can be inferred when the defendant had access to the plaintiff's work and the similarity between the works is of such an extent that it is unreasonable to suppose that it is the hand of chance.

            (–)       The accumulation of points of similarity is of importance. The more there are, the greater the concern that copying is involved.

            (–)       The question whether the similarity between the two works is sufficient to determine that copying of a real and substantial part is involved is one of fact and degree. The answer to the question should be given not on the basis of a mechanical comparison of a number of words or lines that are similar in the particular works, but in accordance with the judge's impression of the works as a whole" (ibid., para. 26).

 

28. Do these standards change when the protected work is a functional one? In my opinion, that question should be answered in the negative. As I have described above, functional works raise various difficulties at the stage of analyzing the requisite originality for the purpose of recognizing them as copyrighted works. However, once a functional work has passed the originality requirement stage and the choice criterion, it is a protected work in all respects, and substantial parts of it may not be copied. In this respect, even if only some of the elements that make up the functional work have passed the "choice filter", that does not affect their being work protected against copying.

          The only consequence of a work being functional concerns the standard for the analysis of copying when the protected elements constitute an idea that can only be expressed in a limited number of ways.. In such a case, a higher threshold will be necessary to establish copying, and almost absolute similarity between the protected elements and the allegedly copied elements will be required in order to establish that substantial similarity.

 

 

Were Safecom's Drawings Copied?

 

29.       Having considered the elements necessary to establish the protection of a work and prove its protection when the emphasis is on functional works, I shall now analyze whether, in the instant circumstances, Safecom's drawings amount to protected works, and whether the use that the Respondent made of them amounted to copying in infringement of the copyright.

 

30.       Firstly, it should be noted that drawings do generally meet the definition of an artistic work under section 35(1) of the Old Law, and, in any event, the Respondent does not assert that Safecom's drawings do not fall within the scope of the works to which protection is granted. Consequently, an analysis has to be made of whether the drawings meet the requirement of originality and, in such event, because they are functional works, whether they also meet the choice criterion. It is not without reason that it is said that a picture is worth a thousand words, and I shall therefore first present one of the parties' drawings as they appear in the comparative table that the Appellants filed (Exhibit 1 of their exhibits).

 

*  On the left – the Safecom drawing; on the right – the respondent's drawing

 

            The Safecom drawings portray an electrical product whose purpose is to provide electrical backup when there is a malfunction. The drawings show an illustration/photograph of the product with boxes at its sides in which there is text that expresses some electrical function, each of the drawings showing – on the product and between it and the boxes – lines and arrows that describe the electrical function that the drawing seeks to describe by visual expression. I would first state that I accept the Respondent's argument that the boxes, per se, like the text within them, do not amount to protected works. I also accept his argument that his drawings show a photograph of a product that is different from Safecom's, and that it is therefore not a copy. Nevertheless, that does not suffice as regards the question of the drawings' originality and the question of copying.

 

31.       It should first be noted that even if each of the elements of the Safecom drawings does not, per se, amount to an original work, that does not negate the possibility that the combination of the elements into a single visual work does amount to a compilation that affords protection to the way in which the elements are arranged, as opposed to the protection of each element individually [see: Greenman, pp. 119-124]. Nevertheless, even without finding that the Safecom drawings amount to an original compilation, in my opinion it can be found that they do constitute a sufficiently original artistic work.

 

32.       From looking at Safecom's drawings there appears to be no doubt that their purpose is to demonstrate the electrical process and the functions performed by the product that it manufactures. For the purpose of that demonstration, there is no doubt that it is necessary to use predefined expressions, such as the text that describes common electrical functions and such as showing the actual product to which the text relates. Together with that, Safecom's drawings also include lines and arrows that demonstrate the flow process described in the drawing. From looking at the drawings, it appears that this demonstration, which has a functional task, can be expressed in a large number of ways that can achieve the purpose, while Safecom chose a particular means of expression according to which the lines and arrows would be of a certain length and certain thickness, taking a winding course appropriate to the way in which it chose to position the product and the text boxes on the drawing. It is my opinion that Safecom's said choice affords it copyright protection in respect to the particular visual element that seeks to "correspond" with those elements that do not amount to a protected work.

 

33.       Having found that some of the elements of Safecom's drawings do amount to copyrightable artistic work, it remains to determine whether the Respondent's drawings constitute a reproduction of its drawings. I stated above that when a functional work is involved, insofar as there is a limited number of ways in which to express the underlying idea, it will be necessary to show that the work that is allegedly an infringement is almost completely the same as the protected elements in the functional work. I am prepared to assume, for the purpose of the discussion, that whether Safecom's drawings in whole constitute a protected compilation, or whether some of the elements are protected separately as an artistic work, the number of ways to give expression to a demonstration of the product's electrical process is limited. Nevertheless, even working on that assumption, from a comparison between Safecom's drawings and the respondent's drawings it appears that as regards the drawings marked Fig. 2 to Fig. 13, and Fig. 15 and Fig. 16 (Exhibit 1 of the Appellants' exhibits), the Respondent did make an identical (or at least almost identical) copy of the protected elements of the Safecom drawings in the form of the lines that describe the flow process.

 

34.       The Respondent asserts in this regard that filtering out the photograph of the product that was not copied and the elements that are not protected in the form of the boxes and the text on them, "at most what are left are… certain curved lines that describe the connections between the parts of the system. Curved lines in a drawing are not a 'substantial part' of the work. Real de minimus is involved" (para. 14 of the Respondent's summations). I cannot accept that argument. The fact that certain elements of the work are not copyrighted, whether because they are unprotected works, mere ideas or a complete merger between idea and expression, leaves those elements in the public domain and thereby permits their free use by anyone so desirous. However, when other elements of the work are copyrighted, it cannot be said that the fact that other elements of the work are not protected makes copying them insubstantial. Such a finding would negate the very protection of those elements, and that cannot be accepted. In my opinion, specifically when substantial elements of the work do not gain copyright protection and remain in the public domain, then copying all those protected elements will attest to the copying of a substantial part of the work, a fortiori when there is absolute, or almost absolute, similarity [on the substantiveness of the reproduction having regard to the amount of the copying, see Mutzafi, para. 91). This is especially so since there is no dispute that the Respondent did have full access to Safecom's drawings. It should be borne in mind that the Respondent could have made use of those unprotected elements of Safecom's drawings and added different visual descriptions to them that demonstrate the functionality of the drawings, and he could also have arranged the elements of the drawing differently, which would have achieved the functional purpose as well. Since the Respondent made exact use of Safecom's protected visual resources, he infringed its copyright in those elements.  Justice's Netanyahu's statement in Strosky is apt in this regard:

 

            "A general inverse relationship equation may be appropriate inasmuch as the less originality and intellectual effort in the work, the more exact the copying that is needed for its copyright infringement. According to this equation, it can be said that the originality and effort in the sign are modest, while the copy is almost exact. That suffices for infringement" (ibid., p. 357).

 

Permitted Uses

 

35.       Having found that the Respondent did infringe Safecom's copyright in its drawings, it remains to discuss the Respondent's arguments that his actions and the drawings that he made constitute permitted use according to the New Law and therefore do not amount to infringement. The Respondent bases his arguments on section 78(c) of the New Law, according to which an act that does not constitute an infringement of copyright in accordance with that Law will not constitute an infringement of copyright under the Old Law, despite its application in the circumstances. In view of that argument, it should first be determined whether the use of the work, in accordance with the uses that are defined in chapter four of the New Law as "permitted uses", constitutes copyright infringement. In my opinion, the answer to that is in the negative. In CA 5097/11 Telran Communications (1986) Ltd v. Charlton Ltd. (September 2, 2013) (hereinafter referred to as "Telran"), my colleague Justice Z. Zylbertal expressed the opinion that use in accordance with the uses defined in chapter four of the New Law cannot amount to a contravention of that law (ibid., paras. 28-30). That opinion is based both on the wording of the Law and on the perception that there are certain uses that, according to the purposes underlying copyright, amount to a right of the user and not merely a defense against contravention of the Law [for further, see Niva Elkin-Koren, “Users' Rights,” in Michael Birnhack & Guy Pesach, eds., Copyright (2009) 327 (Hebrew)]. I accept this position both as regards the finding that permitted use, as defined in chapter four of the New Law, does not constitute a contravention of the law, and as regards the finding that permitted use in fact constitutes a right that is granted to the user to make certain types of use of a work. I am conscious of the fact that this position is contrary to the holding of Deputy President E. Rivlin in CA 9183/09 Football Association Premier League Ltd. v. Anonymous (May 13, 2012) (hereinafter: the Anonymous case), para. 18 of his opinion, and in view of the existing disagreement, the time may have come for an extended bench to address this issue.

 

36.       Having found that permitted use does not amount to a contravention of the New Law, consideration should be given to the types of permitted use that are asserted by the Respondent in the instant case.

 

            Firstly, the argument Respondent raises avers that his use of Safecom's drawings is permitted use under section 20 of the New Law, which permits the use of a work in legal administrative proceedings to the extent justified having regard to the purpose of the use. I cannot accept that argument. I am prepared to assume for the purpose of the discussion that using the work for the purpose of presenting it to the registrar of patents in a particular country does constitute use in legal administrative proceedings, despite the fact that such a finding is not free of difficulties. However, the main element of this permitted use is the extent of the use, having regard to its purpose. In the instant case, the purpose of using Safecom's drawings and presenting them to the American Registrar of Patents in the patent registration application was the registration of a patent in respect of a product that competes with the one that Safecom markets. My opinion is that such use by a direct competitor, using the copyrighted work for the purpose of direct competition with the owner of the work, cannot amount to permitted use under section 20 of the New Law.

 

37.       Secondly, the respondent raises an argument that the use that he made of Safecom's drawings amounts to fair use, as defined in section 19 of the New Law. Section 19(a) of the New Law comprises an open list of types of use of protected works that will be permitted and fair. Section 19 (b) of the New Law enumerates four non-exclusive factors that are to be considered in order to determine whether a particular use amounts to fair use, including:

 

            "(1) the purpose and nature of the use;

            (2) the nature of the work of which use is made;

            (3) the extent of the use, qualitatively and quantitatively, in relation to the work as a whole;

            (4) the effect of the use on the value of the work and its potential market".

 

            This Court has held that "these are not essential or cumulative factors but a non-exhaustive list of parameters that might indicate the fairness of a particular use that is made of a protected work" [Anonymous, para. 19 of the opinion of Deputy President Rivlin].

 

            The four subordinate criteria listed in section 19(b) of the New Law are based on the subordinate criteria that have been laid down in the American Copyright Act [see: 17 USC § 107]. Empirical research that has been conducted attests that although the fourth subordinate criterion – the effect on the potential market – is most often mentioned as the decisive factor regarding the fairness of use, the first subordinate criterion – the purpose and nature of the use – does in fact have the most marked effect on the decision, the most influential factors being the commerciality and transformativeness of the use [see: Barton Beebe, “An Empirical Study of US Copyright Fair Use Opinions,” 1978-2005, 156 U. PENN L. REV., 549 (2008); Neil Weinstock Netanel, “Making Sense of Fair Use,” 15 LEWIS & CLARK L. REV. 715 (2011)]. It appears that these factors were also the most influential in this Court's ruling in Anonymous [ibid., para. 20].

 

            In the instant case, it appears that the use that the Respondent made of Safecom's drawings did not meet the standard of fair use. Thus, in the scope of the first subordinate criterion, it is clear that the Respondent's use was commercial because its whole purpose was to bring about the registration of a patent in respect of his product that competes with Safecom's product. Moreover, on analyzing the question of transformative use, it does not appear that the Respondent's use of the Safecom drawings led to the creation of a new expression, different from the original expression embodied in them. As regards the third subordinate criterion – the extent of the use – I have already found above that the Respondent made an exact, or almost exact, copy of Safecom's drawings, and the extent of the use is therefore full. Finally, having regard to the fourth subordinate criterion, it is clear that since the product marketed by the respondent directly competes with Safecom's product, there is no doubt that the use affects the potential market for Safecom's drawings.

 

            Incidentally, I would mention that I cannot accept the Respondent's argument that the American Patent Office has expressed its opinion that the use of a protected work for the purpose of a patent application amounts to fair use. From studying the opinion (which was annexed as Appendix J to the Respondent's volume of supporting documents), it appears that the American Patent Office means that the use of protected works that the Office itself makes in its relationship with those filing patent applications amounts to fair use [see: United States Patent and Trademark Office, USPTO Position on Fair Use of Copies of NPL Made in Patient Examination (January 19, 2012)].

 

38.       Thirdly, the Respondent contends that the use that he made of Safecom's drawings is permitted in accordance with section 27 of the New Law. Section 27 of the New Law provides:

 

            "Making a new artistic work which comprises a partial copying of an earlier work, or a derivative work from an earlier work, as well as any use of the said new work, are permitted to the author of the said earlier artistic work even where said author is not the owner of the copyright in the earlier artistic work, provided the new work does not repeat  the  essence  of  the  earlier  work  or  constitute  an  imitation thereof".

 

            In order to fall within the scope of the section, the Respondent must show that he was at least a joint author of the Safecom drawings. The District Court found that the Respondent had waived his rights in the drawings in favor of Safecom in the scope of the Agreement. The Respondent argues in this connection that even if he had waived his rights in the drawings, as regards the New Law he is still the first joint author of them. In my opinion, there is no need to rule on this issue because even if the respondent is a joint author of Safecom's drawings, section 27 of the New Law does not work in his favor in this case because the use that he made of Safecom's drawings amounts to an absolute, or almost absolute, copy of them. It cannot, therefore, be said that "partial copying" of Safecom's drawings, or a work deriving from them, is involved, and it can easily be found that the Respondent's drawings "repeat  the  essence  of  the  earlier  work  or  constitute  an  imitation thereof".

 

39.       Before concluding, I shall briefly consider the Respondent's argument concerning the law governing this case. According to the Respondent, copyright law is naturally territorial, as is the application of the Old Law. Since Safecom's drawings were copied in the USA, the Respondent asserts that the law governing the case is American law, which was not proven by the Appellants, and the appeal should therefore be dismissed. The District Court considered the Respondent's said argument and held that the drawings were not only copied in the context of filing the patent, but that the Respondent had received the presentation containing Safecom's drawings in Israel and copied them on the computer at his home in Israel. Consequently, the District Court held that Israeli law could be applied to the case. Those findings of the District Court are findings of fact, in which I have not found it appropriate to intervene at the stage of appeal. I would merely state that even were it appropriate to find that this case is governed by American law, that would not necessarily lead to the dismissal of the appeal in the absence of proof of the foreign law. This is particularly so when a sphere is involved that is regulated by numerous international conventions, which lead to relatively great conformity among the different state laws [see, for example: CA 169/94 Werner v. Amorim, IsrSC 50(3) 119, 124 (1996); CA 1227/97 Red Rock Quarry and Stone Works Ltd. v. Ibrahim IsrSC 53(3) 247, 259 (1999); CA 7687/04 Sasson v. Sasson (February 16, 2005), para. 10].

 

40.       In conclusion, I would recommend to my colleagues that we find that certain elements of Safecom's drawings amount to protected work, that 13 of the Respondent's drawings amount to an absolute, or almost absolute, copy of Safecom's drawings, and that the use that the Respondent made of the drawings does not amount to permitted use. I would also recommend to my colleagues that we remand the case to the District Court for ruling on the appropriate relief in respect of those infringements, and that the Respondent pay the Appellants' costs in the amount of NIS 40,000.

 

 

 

Justice Z. Zylbertal

 

            I concur.

 

 

 

Justice E. Rubinstein

 

A.        I concur in the illuminating opinion of my colleague, Justice Danziger.

 

B.        My colleague gave thorough consideration to a broad picture of copyright law, with regard to originality as a condition for the protection of a work, the protection of the way in which an idea is expressed, as opposed to the idea itself, and the criteria concerning works of a functional character, which is a complex matter in itself.

 

C.        I would like to add another criterion to all these – the common sense criterion, which might sound too broad because it can be said that common sense should guide us in every case, and on the other hand it is not necessarily the same for everyone in individual matters. However, by saying "common sense" in the instant case, I mean the accumulation of all the overall facts before the court.  When a work is involved, appearance or the sight of the eyes ("better is the sight of the eyes than the wandering of the desire", Ecclesiastes 6:9) is also acknowledged to be a significant parameter in intellectual property law (and see: CA 3422/03 Krone v. Inbar, IsrSC 59(4) 365, in respect of drawings as well. See also, inter alia, CA 7125/98 Mipromal v. Kalil, IsrSC 57(3) 702, 710 et seq.). Incidentally, the expression "the criterion of common sense" (in a slightly different sense) can be found in case law. See the statement by then Justice Grunis in ALA 5454/02 Taam Teva v. Ambrosia, IsrSC 57(2) 438, 453 (2005) citing this criterion per the learned commentator Seligson (Trademarks and Similar Law, (5733), 80-81 (Hebrew)) as regards the comparison of a conceptual message. And in the instant case, in preparing the file, when we – the bench – inspected the drawings involved, in our eyes there was a great similarity that was immediately conspicuous. Consequently, as I see it, the result that we have reached was required not only by common sense but also by the sight of our own eyes.

 

D.        Intellectual property law does, indeed, in many cases involve subtle nuances in respect of which it is frequently difficult to separate the wheat from the chaff, and much has been written about the difficulties of litigation in this sphere (see: D. Freiman, Patents (second printing, 2008) 7); but in my opinion, the case before us is not one of the difficult ones and anyone looking at the drawings that my colleague presented in his opinion (para. 30) needs no arcane language and can take them at face value, almost like the well-known definition by US Supreme Court Justice Potter Stewart concerning pornography, who said that it is perhaps difficult to define but "I know it when I see it".

 

E.         As aforesaid, I concur with my colleague's review, together with his cataloguing and arrangement of the matter.

 

F.         Before concluding, I would mention that Jewish law, especially in its modern embodiment, but even long ago, has considered the matter of intellectual property rights; see my opinion in CA 9191/03 V&S Spirt Aktiebolag v. Absolute Shoes, IsrSC 58(6) 869, 888-892, which also discusses (at p. 890, para. 18(3)) the Jewish law foundations of enforcement in intellectual property matters, and I would here emphasize the approaches of Jewish law that concern a another’s craftsmanship, trespass and theft, and more; in Krone, supra (at p. 379), I also considered the matter of a graphic pattern (or drawings) as a cause of action in Jewish law, and also see my opinion in ALA 7774/09 Weinberg v. Weisshof (2012) paras. 9 to 12 and the authorities cited there.

 

 

 

            Decided as stated in the opinion of Justice Y. Danziger.

 

Given this 15th day of Kislev 5774 (November 18, 2013)

 

 

 

Justice

Justice

Justice

 

 

 

 

 

            

 

 

 

 

 

Appeal allowed by majority opinion (Vice-President A. Barak, Justice D. Levin), Justice E. Mazza dissenting.

6 Nissan 5755.

6 April 1995.

 

C.A. 337/62

           

 

GUNTER-GIDEON RIEZENFELD

v.

ROSA JACOBSON AND OTHERS

 

 

In the Supreme Court sitting as a Court of Civil Appeal

[May 15, 1963]

Before Olshan P., Silberg J., Berinson J., Witkon J and Cohn J.

 

 

Contract - Conditional promise of marriage - Breach of promise - Agreement immoral and contrary to public policy

 

   The appellant, a married man, and the respondent formed a liaison with the intention that they would marry on the appellant obtaining a divorce from his wife. Soon after he acquired an apartment out of his own money and had it registered in the respondent's name. It was understood, however, that the apartment did not belong to the respondent, its registration in her name being a token of their mutual affection, and that if they did not marry, the apartment would be transferred back into the name of the appellant. Subsequently they fell out and the respondent barred him access to the apartment. The appellant sued for a declaration that the apartment was his and an order for possession. The respondent defended by pleading that his claim was based on agreement which was immoral and contrary to public policy. Her defence succeeded in the District Court: hence this appeal.

Held (Olshan P. and Silberg J. dissenting),

(1) Whilst the law in England regarding breach of promise by an already married person is based on the sacramental nature of marriage - although modified in recent times - in the Jewish law of marriage and divorce the position is different, marriage being not a status but a contractual tie, even of a most solemn kind, which may always be dissolved by agreement. Consequently (per Cohn J.) an agreement with another woman, during the subsistence of an existing marriage, does not offend against public order or morality. Alternatively (per Witkon J.) where the existing marriage has virtually collapsed, a promise to marry another will not have the dire effects which are implied by an appeal to public policy and morality.

 

(2) The agreement as to future marriage must be distinguished from the agreement over the apartment. Whatever may be said about the first. there is in respect of the latter - which in many respects was in the given circumstances extraneous to the promise of marriage - the conflicting but equally important principle of the sanctity of contracts. In any event, no justand desirable result can be reached unless that agreement is given the benefit of the doubt.

 

Per Silberg J.

                In the moral conception of Jews everywhere extra-marital sexual relations are improper and vile because they undermine the purity of family life. The agreement over the apartment was here inseparably bound up with the promise of marriage and was therefore immoral.

           

            Israel cases referred co:

           

1.         C.A. 136/56 - Slavko Fouks v Elon & Erzioni Ltd. (1957) 11 P. 358.

2.     C.A. 127/62 - "Yahad" Workers and Meat Transporters Cooperative of Haifa. Ltd. v Zvi Shimansky (1962) 16 P.D. 2341.

3.         C.A. 110/53 - Harry Jacobs v Yaakov Karroz (1955) 9 P.D. 1401.

4.     C.A. 191/51 - Leib Skornik v. Miriam Skornik (1954) 8 P.D. Selected Judgments, Vol. II, 327.

           

English cases referred co:

 

5.         Spiers v Hunt (1908) 1 K.B. 720.

6.         Wilson v Carnley (1908) 1 K.B. 729.

7.         Skipp v Kelly (1926) 42 T.L.R. 258.

8.         Fender v. Mildmay (1937) 3 All.E.R. 402: (1938) A.C. 1.

9.         Jones v Randall (1774) 98 E.R. 954.

10.       Pearce v Brooks (1886) 14 L.T. 288.

11        Upfill v. Wright (1911) 1 K.B. 506.

12.       Shaw v D.P.P. (1961) 2 All E.R. 446.

13.       Holman v Johnson (1775) 98 E.R. 1120.

 

American cases referred co:

 

14.       Smythe v Evans 70 N.E. 906.

15.       McManus v. Fulton 67 ALR 690 (1929).

 

Dr. S. Wolf for the appellant.

M. Ben-Dror for the respondents.

 

COHN J.                     This appeal is well-founded. The first respondent is the registered proprietor of a one room apartment on the fourth floor of a house at 4 Yodfat Street, Tel Aviv (Plot 41, Block 6954) and the holder of 410 ordinary shares in Havazelet Yodfat Limited in the name of which company the house is registered. The appellant asks for a declaration that the apartment and shares are his, an order that the apartment and shares be registered in his name, an order that the respondent yield up possession of the apartment and an order that certain chattels which the respondent received from him be returned or payment therefor made. The District Court dismissed the appellant's action. Hence this appeal.

 

            The necessary facts are very simple indeed and actually not in dispute between the parties. The apartment was acquired out of the appellant's funds and was intended to be the residence of both the appellant and respondent. From the time of its registration in June 1958 in the respondent's name until August 1958 the parties lived there as man and wife, although the appellant was then married to another woman and resided in his former home. In August 1958. (as the learned judge says in his judgment) the respondent changed "the lock of the apartment and locked its doors to the appellant." On the evidence before him, in particular that of the parties themselves, the learned judge found that they intended to get married after the appellant had succeeded in divorcing his wife; and further that the respondent "did not think of the apartment as her separately acquired property but regarded its registration in her name as an expression of the appellant's trust and affection, and even said that she would retransfer it if the marriage did not take place. She said that both before the registration, when it did not occur to her that her bond with the appellant might be broken, and afterwards, when it was already more or less clear to the parties that they were not going to marry."

           

            In these circumstances the respondent pleads - and this is the only plea which the learned judge found proper to consider - that the appellant's action must fail, since it is based on an agreement which offends against public morality and public policy, as stated in section 64(1)of the Ottoman Civil Procedure Law. The offence against public morality and public policy consists, it seems, of joining by immediate intercourse and future marriage with another woman whilst marriage with one's lawful wife is still valid and in effect. This plea found favour with the learned judge but he was vague about it and did not explain in his judgment the considerations which led him to his conclusion (apart from a lengthy quotation from a book by one Lloyd regarding the considerations to be taken into account in such a case as the present). Since he found the parties' agreement to be illegal, he refused "to entertain a claim arising out of its breach".

           

            At first I asked myself whether the appellant's action arose only out of a breach of the respondent's agreement to marry him or also out of a breach of an agreement under which she consented to live with him as man and wife even before marriage. Assuming for the moment that such two     agreements are illegal and not enforceable by the courts either specifically or by way of damages, is the appellant actually claiming performance or damages for their breach? Not in the least. I suspect that not a little of the confusion which has occurred in this case is due to the way of the respondent's Defence was framed - repeatedly it refers to "the agreement referred to in paragraph 2 of the Statement of Claim"- and from the negligent manner in which the Statement of Claim is formulated. Paragraph 2 of the latter states that the appellant acquired the apartment in question "in the expectation of marriage" with the respondent and on "the express condition, in agreement with the (respondent), that if for any reason the marriage between the parties should not take place, the registration would be cancelled". In so far as there is any plea of an agreement here, it is not an agreement to marry or to live together without marriage but only one for the return of the apartment in the particular event of the marriage between the parties not taking place. And if the parties' agreement that they should enter into marriage after the appellant divorced his wife is illegal and unenforceable, then law and morality have been fully satisfied by the respondent not performing the agreement. But in her rightly omitting to do so, the condition stipulating the return of the apartment to the appellant has been met. Why should the court then not compel her to do that?

 

            Be that as it may, even assuming that what is involved is a claim arising out of "an agreement between a man and a woman to live together unmarried and a mutual promise to get married whilst one of them is married (to another) and the court has not decreed any divorce", in the words of the learned judge, in my view, such an agreement does not in Israeli law offend against public morality or public policy and it bears no taint of illegality.

           

            Before, however, dealing with Israeli law, I must pause to consider English law on which the parties in this case relied. The English courts have held that a claim in damages for breach of promise to marry after the promissor's wife has died will not be heard (Spiers v. Hunt (5) and Wilson v Carnley (6)). They have also refused to award a woman damages for breach of promise, when given whilst she was married to another man (Skipp v Kelly (7)). In so far as public policy obliges observance of the principle that spouses should abide by their obligations to one another, as English marriage law lays down, all are agreed that such a policy is not consonant with the implementation of any agreement that may  undermine marriage. But in as far as public policy is invoked to avoid an agreement because of extraneous fears lying outside marriage law itself, the prevailing rule today in England as well is that no public policy requires nullification of the agreement. This is what Lord Atkin said in Fender v Mildmay (8) (at pp. 409-10) in speaking of the reasons why the courts refuse to award compensation to women who are promised marriage after the death of a living lawful wife

 

"The judges appear to have thought that a promise made in such circumstances tended to cause immoral relations. They may be right. Speaking for myself, I really do not know whether that result would follow as a rule. I can only say that, if the lady yields to a promise with such an indefinite date, she is probably of a yielding disposition, and it would appear difficult to predicate that immorality is either facilitated or accelerated by the promise. As to the suggestion that such a promise is bad, because it tends to induce the husband to murder his wife, I reject this ground altogether. Alderson B. ... classes such objections as ridiculous. They appear to afford another instance of the horrid suspicions to which high-minded men are sometimes prone."

 

            In that case the House of Lords was dealing with a promise of marriage after the defendant-husband had already obtained a decree nisi of divorce from his first wife. The majority held that in these circumstances the promise of marriage was of effect and awarded damages for its breach. The reason was that at that point in the marital relationship prevailing English marriage law no longer required the married couple to live together, and since the test for applying the rule of public policy was maintaining observance of that law, there was no occasion to apply it when the spouses themselves were under no duty in that respect. As Lord Atkin put it (ibid. at pp. 410-11):

           

"In these circumstances, what possible effect can a promise to marry a third person have by way of interference with matrimonial obligations? There is no single duty which is being observed by either to the other, and it appears to me merely fanciful to suggest that the public interests are in any respect being impaired. If a respectable man, whose wife has fled with the lodger, leaving the children in his charge, engages himself to another respectable person, to marry her as soon as he is free, no public interests suffer. In my opinion, they benefit. Similarly in the converse case of a wife whose husband is living with another woman, of whose child he is the father. Does either of these persons still owe any kind of duty to love or cherish the other spouse ... or any duty which ... will be impaired by a promise to marry a third person when free? From the point of view of law, it ought to be remembered ... that, by legislation, it has been established that it is not contrary to public policy that married persons should obtain a divorce, and not contrary to public policy that, immediately after final divorce, either of them should marry ... I must confess it appears lamentable that the law should set its ban upon promises made to do a lawful act by persons who, in the interval between the promise and the fulfilment, do nothing, and are not induced by the promise to do anything, contrary to public policy. I dismiss with indignation the idea that public policy is to be involved, on the ground that such promises tend to immorality."

 

            The minority view was that for centuries a promise of marriage made during the subsistence of a previous marriage has been deemed to be contrary to morality as well as to all the hallowed ideas of religion in England and there was no occasion even today to depart from this important rule. As long as a marriage subsists, in theory as in practice, a promise to marry another woman will not be enforced by the courts. Lord Russell of Killowen said in the above case (at p. 417)

           

            "(W)hen England was a Catholic country, matrimony was a sacrament, conferred upon themselves by the spouses. This sacramental nature of marriage, the holy state of matrimony, was the basis of the civil law of Europe with regard to it. When, in the reign of Elizabeth, England abandoned the old faith and became a Protestant country, matrimony ceased ... to be ranked among the sacraments ... The status of marriage became the product or result of a contract between the parties. But the obligations resulting from the status, the importance to a civilized community of its maintenance, remained almost unimpaired. Until the first Divorce Act, in 1857, the marriage tie was indissoluble except by legislation... The question now arises whether, as a result of that Act, and subsequent divorce legislation, there has come about such an alteration in the public view of the status of marriage, its obligations, and the importance of its maintenance, that, without any offence to public policy or public opinion, a spouse may validly contract to marry another ..."

 

And (at p. 422)

 

"As I see in this case, there is here no question of inventing a new rule of public policy. It is only an illustration of an old rule applied to new facts ... The institution of marriage has long been on a slippery slope. What was once a holy state, enduring for the joint lives of the spouses, is steadily assuming the characteristics of a contract of a tenancy at will. For myself, I am glad that the opinion which I have formed of the law which is applicable to this case is consistent with the view that the obligations of married people do not cease, in the eyes of the law, until, in the eyes of the same law, they cease to be married...."

 

            I have quoted at length in order to show, not only how far leading English lawyers (like Lord Atkin) also labour over the understanding and reality of a public policy of age-old tradition, but principally that this public policy derives from features peculiar to English marriage law and that the odour of Catholic sacrament pervades it. For ourselves, it has already been decided that, in respect of public morality public order mentioned in section 64 aforesaid resort to the English criteria of public policy not required ("Yahad" v Shimansky (2)). If that is generally so, even in matters in which there are no basic differences of approach between us and the English, it is all the more so in matters concerning the marriage of Jews contracted under Jewish religious law, the nature and features of which are to be found in the confines of Jewish tradition.

           

            Indeed, it seems to me that we do not have to look beyond the applicable substantive law for the public morality in matters of the marriage of Jews. If from the viewpoint of such substantive law no defect or flaw mars an agreement or promise of marriage after an existing marriage is dissolved, then the inevitable conclusion is that such agreement or promise also does not impair public morality and public order.

           

            The Mishnah (Kiddushin III, 5) expressly states

           

"If (a man) says to a woman 'Behold, be thou betrothed to me after I become a proselyte' or 'after thou becomest a proselyte'...or 'after thy husband dies' or 'after thy sister (i.e. his existing wife) dies'...she is not betrothed. Similarly, if (a man) says to his neighbour' If thy wife bears a female, let her be betrothed to me', she is not betrothed. If (however) his neighbour's wife was pregnant. the child being discernible. his words are valid. and if she bears a female. she is betrothed."

 

            The reason why in the instances given the betrothal is not valid is, in the words of Rashi (Kidd. 62a). because "things which have not yet come into existence are involved and it does not lie in his power to betroth the woman." The Gemora gives a further reason, that of public policy. not to create "evil feeling" in the mind of the husband or sister. as the case may be (Ibid 63a). But nowhere is it mentioned or suggested that betrothal of woman when her husband dies or divorces her is morally bad either in law or in religion. Some of the Tannaim have held that in all the instances set out in the Mishnah, whilst the man cannot effectively betroth the woman at that instance, she is so betrothed the moment the given condition is satisfied (see the views of R. Meir and R. Judah Ha-Nasi, Ibid. 63a). It is in fact a leading rule of law that a conditional betrothal will come into effect upon the condition being fulfilled, whether it was the man or the woman who stipulated the condition (Manimonides, Hilkhot Ishut IV, 1). It is not our concern to elaborate on the law relating to conditions. It is enough to observe that substantively every condition is effective. Even the stipulation of what is physically impossible or contrary to biblical prescription, although initially void, will not disqualify the betrothal. A stipulation that betrothal should not take effect until a certain event occurs - that the father consents or another woman agrees, for instance - is lawful and valid and the betrothal will become effective on fulfilment of the conditions (ibid, VII,1) since the condition is not contrary to any prescript of the Torah nor impossible to perform (cf. ibid, VI, 12).

           

            It follows that

"So long as it is not a matter of religious prohibition but depending on another's mind, since the latter may be persuaded by being offered money, the condition is effective." (Bet Yosef to Tur Even Ha-Ezer, 38].

 

            Moreover, in contemplation of Jewish law the divorce is not affected, witness the many divorces arising from doubt. In addition also a temporary betrothal may ab initio be entered into even if only for a matter of days (Yevamot 37b: Even Ha Ezer 2 : 10) although the rabbis did not welcome marriage with an intention to divorce, not made known to the woman. Originally, divorce lay entirely within the husband's power (Gittin 90a) but since the ban of Rabbenu Gershon the woman's consent is essential. Far from such consent being not forbidden or invalid, it is altogether desirable.

 

            Unlike English Common Law, Jewish law does not confer on spouses the "status" of marriage which, once entry thereinto has been decided upon and solemnized, cannot be abandoned except by legislation or divine decree. Marriage in Jewish law is a contractual tie, although of a most solemn kind, between a man and a woman which, if they so wish, they can enter into and, if they so wish. may dissolve and terminate. Where a consenting couple so desire, the only task of the courts is to supervise and carry into effect the entry into marriage or its dissolution. In this very difference of Jewish law from Christian marriage law lies its greatness and, if you will, its modernity, not the rigidity of status but freedom of contract, not the incontestable determination of status but the right of spouses to choose in their discretion between marriage and divorce.

           

            Consequently an agreement to marry cannot be injurious to public morality or public order merely because its implementation is made conditional upon obtaining the consent of the spouse of one of the parties to be divorced. Again in the words of Lord Atkin (at p. 413),

           

"I do not myself understand a doctrine of public policy which is founded merely on a statement that one contract is inconsistent with, or incompatible with, another. I venture to say that the doctrine is meaningless, unless the impugned contract leads, or is likely to lead, to injurious action, and I have pointed out that this cannot be predicated of these contracts, in the circumstances in which they are made. The whole notion of any danger to public interests seems to me fanciful and unreal. For these reasons, I think that public policy demands that these contracts should be enforced..."

 

I fully agree.

Accordingly the learned judge erred in refusing to hear the appellant's action.

            The learned judge said, and not incidentally, that he had no power to order the respondent to yield up possession of the apartment. It is not so: since the action was in respect of ownership and not of use or possession alone, it does not come under section 28(3) of the Courts Law, 1957.*

           

            Regarding the claim for the chattels, the learned judge notes that many of these have in the meantime been returned to the appellant but he comes to no decision about the remaining goods which have not yet been returned (except for the watch, the claim for which was dismissed).

           

            There is no appeal before us against the dismissal of the action for return of the sums paid to the respondent for keeping house.

            I would grant the appeal.

           

SILBERG J.               With great respect, I disagree with the judgment of my learned colleague, Cohn J. In my opinion, the appeal should be dismissed, although without costs, because of the large part also played by the first respondent in this immoral agreement.

 

2. What happened is that the appellant, husband and father, became tired of his lawful wife and wished to divorce her. Over a long time the wife, rightly or not, refused her consent to a divorce, and he cast his eyes on another woman, a divorcee with a child, the first respondent.

 

            Relations between the appellant and respondent grew stronger and closer, they began to have sexual relations, and ultimately at the end of summer 1957 the appellant bought an apartment in Tel Aviv to live undisturbed with his mistress until the "redeeming" divorce eventuated and they could marry lawfully. Sexual relations were had during the day and not at night, since to have, so to speak, the best of both worlds, the appellant continued to reside in the apartment jointly owned by himself and his lawful wife in Holon. Every evening he slept there without being intimate with his wife in case that would harm the divorce suit he had presented to the Tel Aviv Rabbinical Court in August 1957. For the same reason, as we shall see, he also kept from his wife the fact that he had bought an apartment in Tel Aviv.

           

            The parties differ as to precisely when they began to have sexual relations but both admit that they had such relations: the respondent even became pregnant by the appellant and had an abortion paid for by him.

           

3. In August 1958, about two months after the appellant had registered the apartment in the name of the respondent, the latter began to become estranged from the appellant, after having decided that she could no longer expect her lover's divorce. She proceeded to act with great effect by simply changing the lock of the apartment and barring him access to it. I will not go into the details of the cooling of their relationship but merely note a curious fact which the learned judge found to be the last straw that broke the camel's back:

 

"He put in" she said in evidence, "a very large table which almost fills the room. The table was for a miniature railway. That's his hobby. We had first agreed that after the wedding he would put such a table on to the balcony but not in my room. It hurt that he did not ask me" and so on. The witness Klinger said "I remember that the incident which led to the break in the parties' relationship was in connectionwith the plaintiff's hobby, a miniature railway."

 

            To complete the picture, let me add that the appellant divorced his wife at the end of 1960 and married another woman in 1961. The respondent herself married the second respondent in 1959 and took him into the apartment bought by the appellant. She divorced the second respondent after the action was commenced and for that reason the latter has no longer any standing or interest in the subject matter of the appeal before us.

           

4. A few weeks after the relationship between them was broken off, the appellant commenced an action against the respondent in the Tel Aviv-Yaffo District Court. His main claim was for a declaration that ownership of the apartment was his. He argued that the registration of the apartment was made on the express condition that if for any reason she did not marry him, she would vacate the apartment and transfer it back to him. The respondent's defence was inter alia that the agreement on which the appellant relied was unlawful and could not serve as a cause of civil action. The learned judge regarded this as the only plea he needed to consider and he accepted it and dismissed the claim. The appellant is appealing against the judgment.

 

5. Two questions present themselves to us in this appeal, (a) was the parties' agreement, when the apartment was registered in the respondent's name, lawful or unlawful: (b) if it was unlawful how does that unlawfulness affect the appellant's claim.

 

            I shall begin by saying - what is known to all - that the terms "illegal" or "immoral" are identical twins, which have been used simultaneously and dealt with together in English case law for close on 200 years. Every immoral contract is illegal in every sense and aspect of that notion - Jones v Randall (9). Pearce v Brooks (10). Upfill v Wright (11). Shaw v D.P.P. (12). We can therefore abandon the term "illegal" altogether and examine the case before us from the standpoint of its morality or lack of morality.

 

6. In my opinion the agreement between the appellant and respondent over the registration of the apartment was absolutely immoral. And it was so, whether the consideration for the apartment was the sexual relations between parties for months before registration or the intended lawful marriage upon the appellant divorcing his first wife, and all the more so if both served as the consideration.

 

7. As to the first alternative, there is not one iota of doubt in my mind that in the moral conception of Jews in Israel and abroad extra-marital sexual relations are improper and vile, whether with a prostitute or with a concubine even of the highest rank. Purity of family life has always occupied a prominent place among Jews, and relations with a prostitute or a concubine do not safeguard the family. Observe how Jews normally behave. Does concubinage figure in the life of the Jewish people in the cities of Israel or elsewhere? How many such pairings can we find? It is true that family morals have somewhat declined in modern times and pairings of this kind are not frowned upon quite as they were in past generations but no one can say that the stigma attaching to extra-marital relations has been completely removed. Even those who indulge in such relations cannot rid themselves of the uncomfortable pangs of conscience and the feelings of aversion which frequently visit them.

 

            I do not believe that the progress of mankind lies along the route of freedom from the restraints of the marital bond. Only when children grow on trees will such salvation take place. As long as the child needs its mother's breast and the mother a companion to help her in the difficult task of rearing offspring, the family will not cease and pass from the world. Human society cannot exist without vigil once over its primary cell, the family. Concubinage and "free love" - free to cease - cannot take the place of lawful marriage for they are evanescent, they are overtaken by "a miniature railway" and replaced by a change of locks, as we have well seen in the present case.

           

 8. The fact that the Israeli legislature recognizes the existence of "the reputed spouse" does not attest to the moral rehabilitation of concubinage. The safeguards which a number of laws provide for such a spouse are financial and nothing more, compensation for the material sacrifice made to the other during the subsistence of their relationship. I venture to assert, although I have no evidence, that the legislature mainly had in mind the female "reputed spouse", who is usually the victim of the male instigator. "It is the way of a man to go in search of a woman but it is not the way of a woman to go in search of a man "(Kidd. 2B). Only for fear of being suspected of sexual discrimination did the legislature extend the safeguard to the male "reputed spouse"; to this day we have not heard of a claim made in court by such a male.

 

9. As for the second alternative, a promise of future marriage was in fact the consideration here for the registration of the apartment. I think that an agreement of this kind, when one party is still married to another spouse, is also immoral. I am close to saying that in certain respects it undermines the foundations of family life even more. A little "arithmetic" helps to demonstrate the point. If Reuven the husband of Leah is permitted to engage himself to marry Rachel after divorcing Leah, then by the same token, logically and equitably, he may, whilst still married to Leah, engage to marry Bilhah after divorcing Rachel and to marry Zilpah after he divorces Bilhah. In other words, he may arrange for a kind of "alternate harem" of a number of women as absolute "re-insurance" against some breakdown in his sexual life. And precisely the same thing may be done also by a married woman, for why should she be worse off? Such agreements, even if restricted to one alternative spouse, clearly take from marriage its monogamous character and return it to the age of polygamy which has been forbidden to Jews for over nine centuries or to the age of polyandry which is regarded immoral by all peoples other than primitive tribes in Tibet, the Himalayas or Sumatra.

 

            Conditional engagement with another woman cannot but widen the yawning rift between a man and his lawful wife, as the present case demonstrates. The appellant ceased to have relations with his wife in January 1975. He made the acquaintance of the respondent in May-June of that year and soon afterwards in August, took divorce proceedings. His dual residence in Tel Aviv and Holon, his concealment of his mistress's apartment, was that not done to forestall the financial claims of his wife?  Can such conduct be termed "moral"? I can hardly imagine how such a triangular marriage is other than tainted.

 

            Whilst under Israeli law marriage is not a sacrament. it nevertheless has no place for libertine and licentious behaviour or for "marital" liaisons behind the back or against the wishes of an existing spouse. That is what I suggested above when I said that a married man's conditional engagement with another woman is from one aspect far less moral than the cohabitation of unmarried people.

           

            I have therefore reached the conclusion that the agreement between the appellant and the respondent is immoral in every respect and therefore unlawful.

           

10. I now approach the second question, the effect which the immoral agreement has upon the claim for retransfer of the apartment.

 

            The basic rule a propos unlawful contracts is ex turpi causa non oritur actio and the complementary in pari delicto melior est conditio defendentis. The result is that when both parties are equally "at fault", the plaintiff cannot rely either on an illegal contract in order to enforce it or on its illegality in order to avoid it. Ipso facto the defendant must succeed, even though, as Lord Mansfield said in Holman v Johnson (13) (at p. 120):

           

"The objection that a contract is immoral or illegal...sounds at all times very ill in the mouth of the defendant. It is not for his sake, however, that the objection is ever allowed; but it is founded in general principles of policy, which the defendant has the advantage of, contrary to the real justice, as between him and the plaintiff by accident, if I may so say. The principle of public policy is thus: ex dolo malo non oritur actio. No court will lend its aid to a man who founds his cause of action upon an immoral or an illegal act. If, from the plaintiff's own stating or otherwise, the cause of action appears to arise ex turpi causa, of the transgression of a positive law of this country, there the Court says he has no right to be assisted. It is upon that ground the Court goes; not for the sake of the defendant, but because they will not lend their aid to such a plaintiff. So if the plaintiff and defendant were to change sides, and the defendant was to bring his action against the plaintiff, the latter would then have the advantage of it; for where both are equally in fault, fortior est conditio defendentis."

 

            Similar observations have been voiced by American judges. Where a person seeks the enforcement of a contract which is contrary to the public benefit or one prohibited by public law, the court will refuse its assistance to either party but leave things as they are; in refusing assistance The court does not act in favour of one of the parties or in order to preserve the rights claimed by him but out of its respect and regard for public welfare and the laws of the country: Smythe v Evans (14) cited in McManus v Fulton (15) at p. 698 and Salimond Williams, The Law of Contracts (2nd ed.) pp. 345-46, illustrates the rule as follows:

           

"If, for example, in an illegal contract for the sale of goods the seller were to deliver the goods and sue for the price, the buyer would be entitled to plead that the contract was illegal and void. So if the buyer had paid the price in advance and the seller refused to deliver the goods, the seller would be similarly entitled to the same plea. But if the seller, not being able to get the price, were to sue the buyer for return of the goods, the buyer could plead that they were delivered to him under a contract of sale; and the only reply of the plaintiff would be that the contract could not be relied on by the buyer because it was illegal and therefore void. But this reply is excluded by the rule in question. The plaintiff will not be permitted to establish his claim by any such replication, for it amounts to a reliance on the illegality of a transaction to which he is a party."

 

11. The conclusion that emerges from the foregoing is that in the present instance the plaintiff cannot succeed in his claim, since in order to do so he must necessarily rely on the conditions he stipulated on making the agreement and that agreement was in every possible respect invalid, as I have explained. I also feel that "it sounds ill", as Lord Mansfield pointed out, that one party at fault (the male plaintiff) should suffer loss, whilst the other party at fault (the female defendant) should reap gain. I am aware of the criticism levelled against the above rule by scholars, among them J.K. Grodecki, "In pari delicto" (1958) 71 L.Q.R. 265 ff., but what is to be done? English case law has not changed its position on illegal contracts. Elsewhere (in Jacobs v Kartoz (3)) I referred to the opposite position taken by Jewish law on "sinful" contracts and I pointed out the interesting distinctions which Jewish law draws. In my opinion, it would be right for the Israeli legislature to adopt in this area the recognized principles of Jewish law. So long, however, as it does not, and we continue along the path hewn by English Common Law, we have no choice - notwithstanding its bitter aftertaste and its ill-sounding effect

- but to follow English case law as set out above.

 

12. Accordingly, in my opinion, the appeal should be dismissed. I would not impose costs on the appellant because of the respondent's complicity in the immoral agreement.

 

WITKON J.                I have had the opportunity of reading the judgments of my honourable brethren, Silberg J. and Cohn J., and I join in the conclusions of Cohn J., although I am not at one with him in all his reasons.

 

            The learned judge who heard the case in the District Court, saw two grounds for holding that the parties' agreement was immoral and void. First, it was, in his opinion, an agreement to have extra-marital sexual relations. Secondly, the agreement involved a promise of marriage whilst one of the parties was married to another. Silberg J. relied on these two reasons for the invalidity of the agreement.

           

            In my respectful opinion, the first ground is irrelevant. It is true that the apartment in question served the parties for having intercourse; they lived there as husband and wife for several months. But the apartment - or more precisely the shares representing its ownership - were not registered in the respondent's name for that purpose. Registration was effected out of the parties' wish to make for themselves a common home on their lawful marriage after dissolution of the appellant's existing marriage. There is no reason to assume that the appellant agreed to register the apartment in the name of his lover for the purpose of intercourse alone. For that purpose he might have allowed her to live there as a licensee at will instead of as owner. It follows that in order to succeed in his claim to ownership of the apartment, the appellant has no need to rely on any agreement to have extra-marital relations. This detail- like many other "piquant" details concerning the couple's life in the apartment - is immaterial to the claim itself, and we may or, as it appears to me must, ignore it.

 

            There remains the second and important ground for invalidating the agreement. It raises a serious social problem which has exercised many people in other countries as well. But before I deal with it, I wish to dissociate myself from the view of Cohn J. that even if the agreement is found to be immoral and contrary to public policy, that is not enough to defeat the appellant's claim. In Cohn J.'s opinion, this claim does not depend on the fulfilment of the immoral promise of marriage but on its revocation; when the respondent refused to marry the appellant the sting was removed from any agreement between them and the latter had to retransfer the property she groundlessly occupied. It seems to me, with all respect, that the parties' agreement to enter into marriage is the basis for the cause of action, without which it does not arise. Just as the court would not entertain the woman's claim for damages for breach of promise (if invalid as such), so the man will not be heard to plead that the woman's breach of the agreement to marry has removed all foundation for the registration of the apartment in her name.

           

            Accordingly, the question is whether the agreement on which registration of the property in the respondent's name was based is an immoral agreement and contrary to public policy because at the time it was made one of the parties was married to another. This question Silberg J. answered affirmatively and Cohn J. negatively, and both in their abundant learning brought support from Jewish law. I take no part in this debate on the Halakhah, not only because I hesitate to intervene between such outstanding scholars but because I cannot believe that public opinion is reflected in the law and rules relating to conditional betrothal, Halitzah and conversion. The vast majority of our people does not find in such rules any inspiration regarding the problem confronting us here. If the ordinary reasonable person were asked or the views of the progressive public consulted as to the "morality" of the given agreement, we would receive, not surprisingly, a number of differing and contradictory answers, as various as those that would be forthcoming on this delicate subject among other people and in other countries. These answers and opinions would reflect the outlook of the person questioned, his education, his temperament and character, his entire spiritual and intellectual make-up. The notion of betrothal and conditional betrothal is unlike the notion of a promise of marriage that occupies us here. A man who promises to marry a woman, in the modern understanding, does not betroth her, and the effect of the promise or of its breach is unlike that of betrothal. Hence, whatever the source inspiring a modern Israeli in his view on the instant question, the rule cited by Cohn J. will not, in my opinion, provide the answer.

 

            Furthermore, when the question - which is in truth more sociological than legal - is put to us, we as judges are enjoined to give expression and effect not to our private views but to what appears to us to reflect public opinion, and that means the opinion of the progressive and enlightened section of the public of our time and place. That public may possibly have its own outlook, not identical with that of other peoples, and it need not be said that in such event we would only be guided by the viewpoint of our public. But it seems to me that our public wishes to regard itself as part of the family of enlightened nations and share with them those values which mould the thinking of the entire civilized world. I think therefore that only rarely will any gap be revealed between our people's outlook on such values and the outlook common in other communities in the world. I have already said about the institution of marriage (in Skornik v Skornik (4) at p. 180) that it is of a universal character and that betrothal under Jewish law is not exceptional. I would hesitate to find among the ideas common among us something specific which does not accord with those universal notions.

           

            That is shown by the differences between my learned brethren. Both treat of the significance of the marriage institution as it appears to them in the light of the rules of Jewish law and both arrive at contrary conclusions. My learned brother, Cohn J., finds in the lenient approach of Jewish law an indication that marriage is not to be regarded as a sacrament but as a contract like any other which can be revoked at the wish of the parties without particular difficulty. It seems to me, with all respect, that this is not the entire picture and that one must not overlook (among other things) all the stringencies of Jewish law regarding dissolution of the marriage tie when one side - mainly the man - does not consent to the delivery of a bill of divorce. Moreover, although it is true that Jewish law does not make it difficult for spouses to part, when the marriage has broken down and they agree to be divorced, I would not infer from this that Jewish law manifests an approach to the marriage institution different from that common in other countries. On the one hand, in most countries, including those where the population is largely of the Catholic religion which denies divorce, civil divorce is recognized and the courts do not obstruct but assist in loosening the ties of marriage when the spouses are united in their desire to separate, and a solution is found to the problem presented by children. On the other hand, even among those people who do not lay stress on the "sanctity" of marriage the institution is not treated lightly; and it is also regarded among them as a condition of high significance, created by formal ceremony with attending moral (if not religious) rights and obligations that penetrate every corner of life. If that is to be called "a contract" - and even the English employ this term innumerable times in connection with the marriage covenant - it is a contract sui generis. Nonetheless I do not think that a comparison of our marriage laws with those current in England (or in other countries where monogamy prevails and divorce is available) will bring us closer to a solution of our problem. The same basic premise obtains, that in moral and social contemplation marriage is an institution with roots deeply implanted in man's consciousness, the lynch pin of human society.

 

            But the trouble is that this positive approach to the marriage institution, which we share without difference of principle with other civilized people, does not suffice to give an unambiguous answer to our question, as is clear from the varying views that have emerged among us, a situation in which English judges have also found themselves when considering the perplexities of the matter, to which I shall soon turn. The question, it will be recalled, is whether it is immoral for a married person to make an agreement with another, with the intention of marriage to that person, after dissolution of his existing marriage. The question of "morality" is not a question of "pure" law. The judge who must decide finds himself in a difficult position. As I have already said, the task of the judge is to represent progressive public opinion but he does not possess the tools to ascertain it for certain. In truth it must be said that there may indeed be differences of opinion on the question, and it is not impossible that one or the other approach is necessarily more or less "moral". It seems to me that the source of the bewilderment lies in two matters. The first is that it is difficult to affirm or disaffirm an agreement of this kind in abstracto; not in every instance and in all circumstances can it be found morally defective. Secondly, whoever disallows an agreement for its immorality must do so at the expense of another worthy principle, pacta sunt servanda. The party who relies on a defect in his promise in order to rid himself of it does not do so out of pure motives. In most cases the "guilty" party is found to benefit. The rule that the court must avoid enforcing defective agreements operates generally in favour of such a party and enables him to add wrongdoing to his "guilt". Hence the doubt about the fairness of the rule as a whole and the tendency of the courts today to limit its application.

 

            When the question arose in 1936-37 in England in Fender v Mildmay (8) - a claim for damages for breach of promise given whilst the defendant was still married to another woman - counsel for the plaintiff did not deny the existence of the rule, that such a promise is contrary to public policy, but he argued, successfully, that the rule is inapplicable where the promissor has already obtained a decree nisi in a suit for divorce. The rule that a woman who has been promised marriage by a married man cannot sue for breach of promise (unless she was unaware that he was married) appears in all the textbooks on English Contract law (see, e.g. Cheshire & Fifoot, the Law of Contract (1960) 310). It has also been received in the United States (see Williston on Contracts, vol. 6, para. 1743). In fact, however, the rule is not very old. An agreement of this kind is not found among those agreements that impair marriage, listed in Stephens Commentaries (ed. E. Jenks. 1908) vol. 2, p. 92, or in Anson's Law of Contract (1906) p. 223. In 1908, however, two cases came before the courts, in which a person was sued for breach of promise to marry after the death of his wife and in both the action was dismissed: Spiers v Hunt (5) and Wilson v Carnley (6). The judges gave different reasons. Some thought that such a promise would encourage sexual relations between a man and his fiancee or even arouse in him a desire to kill his wife. Others thought that such a promise was incompatible with the duty of faithfulness existing between spouses.

           

            When Fender v Mildmay (8) came before the House of Lords in 1937, some of the judges regarded it as being without precedent (so Lord Wright at p. 423); the difference between this case and those mentioned above was that here the promise was to marry not after the death of the wife but after divorce and the promise was made when a decree nisi had already been granted. Opinion was divided among all the judges who heard the case. Hawke J. and the majority in the Court of Appeal did not find it proper to depart from the rule laid down in Wilson v Carnley (6), whilst to most of the Lords the fact that the promise was made after the decree nisi so distinguished the cases. As I have indicated, that fact was enough for the majority to treat the promise lawful and valid; everything else they said was obiter. But if we examine the reasons given by the majority, principally Lord Atkin, it is clear that they were not satisfied with the rule itself. Unhesitatingly they rejected the reason for invalidating a promise of this type, that it tended to encourage sexual relations or might move the man to kill his wife. On the other hand, they did not doubt the fact that as long as consortium between married couples existed, betrothal to another must necessarily impair the marriage tie, the moral ideal inherent in it and the legal duty of mutual love and faithfulness. However, in the view of the majority, after the grant of a decree nisi, the cohabitation of the spouses was no longer a reality.

 

            This limitation - that the spouses' relations after a decree nisi are changed - does not rest on any ground other than a realistic approach to the problem of broken marriages, when all hope of restoring marital harmony has gone. The defect, if at all, of a promise of marriage to another at this point was considered by Lord Atkin vis-a-vis the danger of offending against the principle that a person must observe his obligations, and he found that the latter is to be preferred. He thought that after a decree nisi there is no longer, in the vast majority of cases, anything that might be saved. Again, the clear implication of his observations is that it is not the decree nisi which is the decisive turning point in the spouses' life but the deterioration of their relationship which led them to seek divorce. Nothing remains of the marriage, so Lord Atkin infers, except its outward trappings and he denies altogether a rule of public policy which impugns an agreement for the reason alone that it is inconsistent with another agreement. It is apposite to stress here the view of the minority judges, mainly Lord Russell. He analyses the then current English divorce law and shows most persuasively that in fact no difference exists in situation before and after a decree nisi. Apart from the duty of consortium, the mutual obligations of the spouses do not change; an act of adultery occurring between decree nisi and decree absolute remains an act of adultery with all its legal consequences. Lord Russell emphasizes indeed the fact that the majority arrived at the view they took not because of any special importance attaching to the decree nisi but for more general reasons, the source of which was their willingness to recognize a new ground for defeating agreements for "public policy" reasons and to come to the assistance of a person who has broken his promise when it is clear that at the time he made it nothing remained of the marriage bond except its external form. Lord Wright in-fact admits (at p. 433) that many of his arguments would apply even where the spouses have only separated, the more so after a divorce petition has been presented, but he did not think that any certainty of result flowed from these preliminary stages and that the situation only really crystallized upon the grant of a decree nisi.

 

            In this country divorce is not decreed by two stages, nisi and absolute. The learned District Court judge expressed the interesting view that the position in England after decree nisi and before decree absolute is similar to that in Israel after Decree of divorce and before delivery of the bill of divorce. In my opinion, this comparison cannot be drawn. In the present case it was found as a fact that marital harmony between the spouses had not existed for many years. Although when the appellant promised to marry the respondent, he had not even petitioned for divorce, such a petition had already been pending for a year when in 1958 the apartment was registered in the respondent's name. At this point alone, it seems to me, is it important for us to decide our attitude on the validity or invalidity of the parties' agreement. If we follow the realistic approach taken by Lord Atkin, as I understand his judgment, I would say that at this point the relations between the appellant and his wife had been shaken to their foundations and there no longer remained between them that bond of mutual love and faithfulness that could still be affected by his engagement with the respondent.

           

            I have indeed been exercised by the question but have finally reached the conclusion that on an ultimate balancing of the pros and cons there is insufficient reason to invalidate the agreement. The English rule, as I have tried to show, does not rest on firm foundations and foremost judges have levelled objections at it. I favour their approach for its honesty and its adherence to reality. In bitter reality not every marriage fares well and when it reaches a crisis, it is difficult to speak seriously of the bonds of love and faithfulness between the spouses, which do not tolerate engagement with another after they have been severed. With this, I do not intend to justify the promise of a married person to marry another after obtaining a divorce. In most, if not all, cases there is reason for "faulting" the agreement. Good sense would demand that the existing marriage be brought to an end before the new engagement is entered into. But in so saying I am still very far from voiding the promise as something immoral and therefore illegal. So to do is only possible by sacrificing the doctrine of the sanctity of contract. It appears to me that this would be too high a price for the purpose, the value of which is not free of doubt. As is well known, a desirable and just result is for the most part not attained by avoiding the agreement. In such a situation, the rule that "the agreement should benefit from the doubt" is operative. Accordingly I am also of the opinion that the appeal should be allowed.

 

 

OLSHAN P.               I am of same mind as Witkon J. that our concern here is not with an agreement for extra-marital relations. That was not the purpose for which the apartment was registered in the respondent's name. Likewise I concur with the reservations of Witkon J. about the view of Cohn J. that even if the agreement is found to be immoral and contrary to public policy, that would not defeat the appellant's claim. The apartment was registered in the respondent's name with the appellant's consent in accordance with the agreement between them. The appellant sought to cancel that registration because the respondent had broken the agreement, in other words, in reliance on an implied term of the agreement that upon a breach by the respondent she would have to retransfer the property. If the agreement were illegal, the appellant's claim would be defeated.

 

   I have wrestled with the question whether the agreement should be regarded as being illegal. I could not close my eyes to the weighty reasons for granting the appeal but in the end the balance came down on the side of the conclusion reached by Silberg J.

           

            I will mention one of many reasons.

           

            Not infrequently in marital relations it may occur when the wind of change affects, one of the spouses and disrupts domestic harmony and divorce proceedings are even commenced, that reconciliation may take place - either under the influence of the rabbinical judges or of members of the family and the like. An agreement, however, of the present kind may prevent such a possibility, since it creates a situation where the husband who made the agreement can no longer resile. In other words, the husband had engaged with another to destroy his marriage bond with his wife. In this regard, the agreement widens the breach between the spouses and may undermine their family life - an institution recognized by society as one of the foundations of social existence. I do not think that such an agreement is in accord with existing public morality.

 

BERINSON J. I join in the opinion of my learned friend. Witkon J., and for the reasons he has given this appeal should be granted.

 

Appeal granted (Olshan P. and Silberg J. dissenting)

Judgment given on May 15, 1963.

H.C.J 316/63

           

           

GAZIT & SHEHEM BLDG. LTD.

v.

PORTS AUTHORITY and others

 

 

In the Supreme Court sitting as the High Court of  Justice

[January 23, 1964]

Before Sussman J.,. Landau J. and Manny J.

 

Public tenders - fair competition and equal terms - undisclosed matters - desire to save public funds.

 

Whilst the second respondent was building a wharf in Kishon harbour, the first respondent issued a tender for the erection of a warehouse in the same place. The second respondent competed in the tender but its bid was not the lowest. Because, however, of the desire to have the job finished for the coming citrus marketing season and because of the difficulties apprehended if two different contractors worked on the site at the same time, the work was awarded to the second respondent after negotiations for a reduction of the price. Only the second respondent of all those competing knew of the urgency for carrying out the work. The petitioner whose bid was the lowest challenged the award.

 

Held (1) The purpose of a public tender is on the one hand to obtain as many bids as possible from among which the most appropriate one can be chosen and on the other hand to give an opportunity for fair competition on equal terms to all participants.

 

(2) A contract is not to be awarded on grounds not obvious from the nature of things and undisclosed in the tender. Matters which are withheld create from the outset a situation of inequality.

 

(3) It is not proper to issue a tender with the intention of afterwards negotiating a reduction in price with one or other bidder. A bid is to be accepted or rejected as it stands. The desire to save public funds may well be bona fide but that is not the only element in conducting public tenders.

 

Israel cases referred to:

 

(1)   H.C. 292/61 - Bet-Ariza Rehovot Ltd. and others v. Minister of Agriculture and others (1962) 16 P.D. 20.

(2)   H.C. 273/60 - B. Givstein and another v. Mayor, Council and Inhabitants of Rishon-le-Zion and another (1961) 15 P.D. 916.

(3)   H.C. 25/63 - Uniko Roitman Ltd. v. Local Council of Kiryat Ono and another (1963) 17 P.D. 1208.

(4)   H.C. 117/63 - A. Zalof v. Mayor, Council and Inhabitants of Kfar Saba and another (1963) 17 P.D. 1278.

(5)   H.C. 210/52 - Rehitei LaKol and another v. Minister of Commerce and Industry and another (1952) 6 P.D. 795.

 

I. Nahshatan for the petitioner

Z. Terlo, Deputy State Attorney, for the first respondent.

R. Nabat for the second respondent.

 

SUSSMAN J. A wharf is in the course of being built in the Kishon area which is under the control of the first respondent. The work was given by the first respondent to the Ports and Foreign Work Co., which is a part of Solel Boneh Ltd. This company is closely linked with the second respondent. Although separate legal entities, the activities of the two companies in Israel are in practice combined and the work in question is being mainly carried out by the personnel and with the equipment of the second respondent.

 

            By notice in the newspaper "Ha-Aretz" of 18 August 1963 the first respondent informed contractors of its intention to publish "a tender for the building of a warehouse of 5,000 square metres adjoining a new wharf (on the north side) which is now being built in the Kishon area of Haifa port" and invited contractors interested in being included in the list of participants in the tender to apply and receive approval of their inclusion. The petitioning company, a building contracting company, which was at its request included in the list, received from the first respondent the information it required to prepare its bid, including technical specifications, and duly put in its bid. The second respondent also submitted a bid and in addition three other bids were received by the first respondent.

           

2. Under clause 7(e) of the Practice regarding Tenders, laid down by the first respondent, it may "enter into a contract without tender if the contract is connected with any one of the following activities: ... (e) in every case ... where the Director of the Authority decides that the circumstances require that execution of the work should be negotiated and not put out on tender." Hence to give out the work on tender is not compulsory. The Director, however, decided not to allot the work to any given contractor by negotiation and accordingly a tender was issued. In accordance with clauses 9 and 20(c) of the said Practice, the tender was to be in the form of "open competition", that is, by publication in two daily newspapers and by personal notice to at least three contractors.

 

3. On 25 October 1963, the offers received were opened by the Central Tenders Committee of the first respondent. It emerged that the lowest bid came to IL 720,790.20 and the highest to IL 1,287,983.40. The identity of the bidders was not then disclosed to the Committee. The Committee decided to pass the offers over to the engineering division and resolved that at its next meeting it would decide who had won the contract and when the work was to begin. In view of this, a technical committee met, which made the following recommendation to the Tenders Committee:

 

"The cheapest bid is that of Competitor No. 3, then comes the bid of Competitor No. 5 and thirdly in the amount of the bid Competitor No. 1.

 

The difference between the three offers is within 4% approximately. On the other hand it is very important to commence putting up the warehouse at the same time as the wharf is built. It appears to us that a decision should be made only after the names of the competitors are ascertained and in the event that the work is given to Competitor No. 3 it should be required to sign an express undertaking not to make any demands over excavation, locksmith and electrical work."

 

The technical committee also did not know who were the participants in the tender.

 

            On 14 November 1963, the Tenders Committee met again, with the recommendation of the technical committee before it. The Committee ascertained at this meeting that the cheapest bid had been submitted by the petitioner, whereas the price proposed by the second respondent was IL 739,339.05. Another bid was for IL 753,909.75. The Committee resolved "to accept the offer of Solel Boneh (that is, the second respondent) provided the company agreed to a reduction of 2.5%". The resolution went on to give the following reason.

 

"Reason: Solel Boneh Ltd. is at present engaged in building wharfs in Kishon harbour. The entry of a second contractor into an area where another is already active necessitates coordination and adjustment of work. In this case that would cause a four months' delay in commencement and since the building work will take 10 months, the warehouse will not be ready by April 1964/65."

 

4. Subsequently, Mr. Laskov (the Director of the Ports Authority) got into touch with the second respondent which agreed to a reduction of 2%. As a consequence, the Central Tenders Committee resolved on 24 November 1963 to give the work to the second respondent. The next day, 25 November 1963, an order was sent to the second respondent to commence work and work in fact commenced on 3 December 1963.

Later, on 10 December 1963, a contract was signed between the two respondents.

 

5. On 12 December 1963 the petitioner applied to this Court for an order nisi and the following day an order issued from the Court, calling upon the respondents to show cause why the said contract should not be set aside and the work not be awarded to the petitioner which had made the lowest bid. Along with the order the Court directed that in the meantime the work should cease until after trial.

 

6. In his affidavit on behalf of the second respondent in answer to the order nisi, Mr. Yaakov Porat, one of its directors, states in clause 7(3):

 

"After learning that the intention was that the work should begin at once in coordination with the main work (the wharf of Kishon harbour) and we could thus save money, we agreed to reduce our bid but only by 2%, and we informed Mr. Laskov accordingly so that he could pass on our amended offer to the Committee."

 

The affidavit also states in clause 6(b)(2)

 

"The said work - erection of the warehouse - must be done in the same area as the main work is being done. A contractor doing the two at the same time can do both and each with greater efficiency, speed and coordination than two contractors, however capable they might be."

 

As we know the Committee approved the bid at its meeting of 24 November 1963.

 

            By virtue of rule 16(a) of the Rules of Procedure in the High Court of Justice we found fit to allow cross-examination on the affidavits in order to do justice in the matter, but Mr. Porat was injured in a traffic accident and could not appear in court. In his place another director of the second respondent, Mr. Tzutzka, was examined by counsel for the petitioner and he confirmed that when the second respondent sent in its bid, it knew that if successful it could commence the work of building the warehouse immediately. It should be added here that the contract fixed a period of "10 calendar months from the day it was decided to commence work". Thus, the date of commencing and of completing the work was left to the bidder; it was, however, clear to the second respondent that if it obtained the work the first respondent would order it to be commenced at once. Petitioner's counsel showed that Mr. Porat's assertion in clause 7(3) of his affidavit cited above contradicted the evidence of Mr. Tzutzka, the former saying that the second respondent only learned of the intention to commence work at once during the conversation with Mr. Laskov after the tender was opened. The question whether or not this is a contradiction no longer needs to be resolved. It is reasonable to assume that the advantage mentioned in clause 6(b)(2) of Mr. Porat's affidavit, that as a contractor already working at the site the second respondent could carry out the two jobs, "both and each of them with greater efficiency, speed and coordination than two contractors", was known in advance by the second respondent. The commencement of the work, however, was not made conditional only upon the readiness of the contractor but mainly on the instructions given by the tenderer, and in this respect Mr. Natan Kaplan testified in his affidavit on behalf of the first respondent that there was no possibility of allowing two contractors to work simultaneously on the site. Therefore, he said, "no company could commence before the wharf was built", meaning obviously no company other than the second respondent which was already engaged in building the wharf, "and this we knew when the tender was published". The wharf was to be finished by 15 March 1964, which meant that no other contractor could commence before 15 March 1964, and, as I have said, Mr. Tzutzka, a director of the second respondent, also knew that his company would receive instructions to commence work at once and would not need to wait until the wharf was finished, provided only it won the contract.

 

            It is reasonable to assume that in negotiating with the second respondent Mr. Laskov emphasised this fact and used it as a reason for reducing the price, and that Mt. Porat's statement in his affidavit is so to be understood.

           

            In spite, however, of the advantage of carrying the two sets of work at the same time, which enabled the second respondent to save on expenses, its offer was not the lowest.

           

7. In clause 11 of the petition, the petitioner sets out its criticisms of the tender. It submits inter alia that the first respondent preferred on the face of it the second respondent "without any justification and not in accordance with the standards of law and equity but out of extraneous considerations, invalid and arbitrary, and out of unfair preference and discrimination" and that "it had made up its mind to hand over the building of the warehouse to the second respondent even before it had published the tender and only published that in order to do its ostensible duty."

 

            We agree with the submission of the Deputy State Attorney that these matters were not proved. These is not an iota of evidence that the tender was a sham. We also agree with the submission of counsel for the second respondent that this conduct was not exceptional. We believe what the declarant on its behalf, Mr. Porat, said, that it knew nothing about the existence of the petitioner and that its existence first came to its knowledge when it read in a newspaper that an order nisi had issued from this Court. Notwithstanding all this, we are of the opinion that the tender does not comply with principles laid down by this Court regarding public authority tenders and must be treated as invalid.

           

8. As I have said, the second respondent had the initial advantage that if it won the contract it could carry out the job, or more correctly the two jobs, "with greater efficiency, speed and coordination than two contractors" and with a saving of costs. Thus far all seems to be fine. since the difference in performance capacity between two competing contractors is not a flaw.

 

            But the first respondent had the intention, not disclosed in the tender, of instructing the second respondent to commence work immediately, which it would not do with any other contractor until March 1964 and make it impossible to finish the work until 15 January 1965, that is ten months after the wharf was finished. Here we come to the matter which was undisclosed to the participants in the tender: the first respondent vitally needed the wharf to be finished, even if incompletely without gates and doors, by October 1964, since otherwise it would be unable to use the structure to market the season's citrus fruit. A building delay would involve the first respondent in losses, estimated by Mr. Kaplan at IL 1,833 a day. Hence the first respondent decided that even if the job done by the second respondent cost more, the loss arising out of delay in erecting the warehouse would be avoided, and as long as the cost outbalanced the loss, the second respondent was preferable to any other contractor.

           

9. The consideration that there was already a contractor on the site with equipment and workers, who could finish the job at an earlier date than any other contractor is certainly a material consideration and there is nothing wrong with it. All the more so when the presence of two contractors working at the same time, each with their own equipment and workers, was likely to create disputes and problems, as Mr. Kaplan explained in evidence before us. For this reason we should not criticize the first respondent had it seen fit therefore to forgo a tender and contract with the second respondent without tender on the basis of clause 7(e) of the Practice. But had it done so, it would presumably have been unable to fix a competitive price and would perhaps have had to pay more to the second respondent. In parenthesis, it is to be observed that before publishing the tender the first respondent estimated the building costs at IL 823,316.50 and as a result of competitive pressure it also obtained a reduction of 2% on the bid made by the second respondent, which was already more than IL 80,000 less than the estimate. The first respondent thus saved public funds, and there is no foundation for the argument that it did not act in good faith. Its intentions were desirable and fair. We also believe the first respondent, that had the difference between the bid of the second respondent and the lowest bid been greater than it was, it would not have been given the job but the lowest bid would have been accepted in view of the fact that the loss entailed by delay in erecting the warehouse till after the commencement of the season of October 1964, would be balanced by the saving in the costs of the building.

 

10. We are prepared to agree with the submission of the Deputy State Attorney that the petitioner as well knew, or should have known, that the second respondent had the said initial advantage, that by already being on the site it was in a better position to carry out the work. The participants in the tender visited the place and the representatives of the petitioner also saw that the wharf was in the course of building. As experts they could not but understand and know what others knew, that a contractor doing other work near to the site would be at an advantage. The petitioner indeed competed in these circumstances with open eyes. But the ability of a competitor to do the work is one thing, and the considerations of the tenderer in choosing a contractor is another. As regards the first, it is natural that one's capacity should differ from another's and nothing rests on that. But all who join in a tender are entitled that the choice between those competing should not fall to be decided by matters not in the nature of things and undisclosed in the terms of the tender. Secret conditions create at once lack of equality between competitors, whilst a contractor submitting his offer and joining in a tender expends money in preparation and expects that he is par inter pares.

 

            The petitioner was not par inter pares. Although the contractor building the wharf would save on expenses by also erecting the warehouse, the petitioner still made a lower bid. The first respondent was interested in having the warehouse ready by 15 October 1974 and for it that was determinative. But nothing was said about that in the tender nor was the petitioner aware of it. The petitioner was prepared to carry out the work during such time as another contractor continued building the wharf. The first respondent was afraid of disturbances in the latter and since these fears were not imaginary its wishes are to be honoured, since if the contract were not awarded to the second respondent work could not commence until that was finished. For this reason the second respondent was instructed to begin at once and the decision went in its favour, but no other bidder was entitled to that, although he was not restrained from carrying out the work because of the presence of another contractor on the site. It follows that every other bidder was disqualified from the start unless his bid was so much smaller as to compensate for the prospective loss resulting from putting off the warehouse from October 1964 until January 1965.

 

11. The purpose of a tender, as this Court ruled in Bet-Ariza Rehovot Ltd. v. Minister of Agriculture (1), is twofold: from the standpoint of the person issuing the tender it is to obtain as many bids as possible from amongst which to choose the most convenient and most appropriate; from the standpoint of the contractors it is that "the tender gives them the opportunity to get the proposed job in fair competition and under conditions of equality."

 

            The first respondent's tender failed in respect of the second purpose. Its interest in having the work completed by October 1964 was of decisive importance and not only was that not disclosed in the tender but a period of ten months was laid down from a date it would decide upon and the fact that the second respondent would be instructed to commence at once whilst any other contractor would only do so after the warehouse was finished was not mentioned. By suppressing this important fact from those participating in the tender - apart from the second respondent which knew, as I have said, that it would be allowed to begin at once - the first respondent was in breach of the principles of equality on which every fair tender is founded. Had the other contractors known of the first respondent's hidden intention, they could have competed more effectively with the second respondent; they could have made bids which because of the difference of cost between them and the second respondent might have gained them the contract even though they did not begin building at once. And it is not impossible that because of this absence of equality, the other contractors might have chosen not to compete in the tender.

           

12. In Givstein v. Rishon-le-Zion (2) this Court nullified a tender drawn up by a public authority because, whilst under the tender it had to chose the most convenient bid within the terms of the tender, it had decided to have regard also to an offer which it had already received outside the tender. Such an act, the Court held, offended the rule of equality in tenders. Although in the present case the first respondent did not deal with any offer outside the tender, it drew up the tender in the knowledge that, when it came to examine the bids put in, it would decide according to a consideration which gave one bidder an advantage. That bidder knew about this but the rest did not. Even if this consideration was valid - and we have already expressed the opinion that the first respondent cannot be said to have acted maliciously and in bad faith - the result was invalid because in fact it led to discrimination and preference. Any one making a bid in response to the tender was entitled to expect that in general the lowest bid would be accepted. Here, on the other hand, the lowest bid would not have been successful unless the difference between it and that of the second respondent would render delay in the commencement of the work worthwhile. In the words of this Court in Uniko Roitman Ltd. v. Kiryat Ono (3) the effect was that "competition among the bidders was not conducted within bounds known to all of them, which they had to keep in mind". And nothing turns on the fact that in that case, the tender suffered from many defects whereas here there is only one ground for disqualifying it.

 

13. We have asked ourselves whether the first respondent could have drafted the terms of the tender it published in such a manner that on the one side disclosed the decisive facts on which it intended to accept a bid and on the other would not deter contractors from participating in the tender and competing with the second respondent when they read that the first respondent wished the warehouse to be finished by October 1964 and that they would not be allowed to commence the work until the wharf was completed. One thing certainly could have been published, that completion of the building by October 1964 was vital for the purposes of the first respondent. As for the date of commencement - as against the necessity to finish by the date mentioned - the first respondent might possibly have maintained equality had it asked for alternative bids based, for instance, on a six or seven or ten month period for the job, provided the warehouse was finished by the date mentioned. We have said "possibly" because we cannot determine what minimum period was required for carrying out the work but, be that as it may, the lack of possibility to issue a fair tender cannot justify an unfair one; it can only justify for objective reasons giving the work to a contractor, capable of doing it, not by way of tender.

 

14. The petitioner voiced another objection to the tender proceedings. It complained that as a result of the decision of the Tenders Committee of 14 November 1963, the Director of the first respondent got into touch with the second respondent, as mentioned in paragraphs 3 and 4 above, and negotiated with it behind the backs of the others. To justify this the first respondent relies on rule 47 of the Practice which prescribes that

 

"Where the Tenders Committee decides to give the work not to the lowest bidder, the chairman of the Committee shall conduct negotiations with the bidder to whom the work has been given for reducing the price bid and adjusting it to the lowest bid."

 

We are afraid that rule 47 creates a difficulty which the Deputy State Attorney did not succeed for all his ability to dispel. If the Committee decided "to give the work not to the lowest bidder", it is difficult to understand what use there is in conducting negotiations "with the bidder to whom the work has been given". Why should this bidder, to whom the work has already been given, agree to lower his price? It is superfluous to say that it is unprecedented to issue a tender in order afterwards to bargain about it with one or another bidder.

 

            In fact the Committee at that meeting only came to a "conditional decision". The condition was actually not fulfilled since the second respondent agreed to a reduction of 2% and not 2.5% asked of it. We assume that had the Director of the first respondent not obtained this reduction in the negotiations he conducted, the Committee at its next meeting would have given the work to the petitioner because its bid was the lowest. There was no final decision not to give it the work. Although the hands of the first respondent were tied since it was interested in the second respondent's bid because it could begin at once, the first respondent had got itself into this difficulty by not disclosing the matter at once in the tender. For this reason the proceedings were invalid, as it was in Zalof v. Kfar Saba (4). There, as here, "(the respondent) did not expressly say 'yea' or 'nay' " but "chose (the second respondent) as the only bidder with whom to negotiate, clearly by intending to obtain a reduction in price. Thus it offended against the principle of equality of opportunity and assurance of fair competition among the various bidders which are the foundation of public tenders" (at 1278). In Rehitei Hakol v. Minister of Commerce and Industry (5) this Court had already held (at 799) that negotiations with one bidder on a matter unbeknown to the others would disqualify a tender.

 

15. With regard also to the negotiations with the second respondent we have no doubt that the first respondent intended saving public funds and that attests to its good faith, but good faith alone, as we know, is not the sole basis on which to conduct a tender. Here the original sin was that because of the factor concealed by the tenderer, the true conditions of competition were unknown to all the competitors. When the bids were received and the second respondent did not make the lowest bid, the first respondent hesitated from paying it - because the work could be carried out more efficiently and perhaps more cheaply - more than that asked by any other bidder and felt itself bound to enter into negotiations. The first respondent's motive was proper and found justification in rule 47 of the Practice. But we are doubtful how rule 47 can be reconciled with the principle of tendering, that a bid is accepted or rejected as it is and no negotiations are conducted.

 

            The cumulative effect of these two defects in the tendering process is that the first respondent used the bids as a means of reducing the demand of one bidder without revealing to the others that because of two considerations - the need to finish the building by October 1964 and the unwillingness to have two contractors on the site - the matter would not be dealt with on the basis of equality among the bids made.

           

16. Having found the tendering process imperfect, the question arises whether to direct the first respondent to give the work of building the warehouse to the petitioner in accordance with its bid.

 

            Counsel for the second respondent stressed that the second respondent had already begun working and expended money in connection therewith. He also submits that no faulty behaviour attaches to his client. We agree to this submission but not for this reason alone can the contract made with it remain in effect. Prima facie invalidation of the tender compels the conclusion that the contract is to be cancelled and that it be given to one entitled to get the job in accordance with the tender, since otherwise there would be no point in this Court intervening in the matter.

           

            Another reason moving this Court to refrain from passing on the contract may be that the contractor who was wrongfully successful has already carried out part of the work. Indeed in Zalof (4), unlike here, a very considerable part of the work had already been done. The value of what has already been done by the second respondent until stopped by the interlocutory order does not, according to Mr. Kaplan's estimate, amount to more than IL 4,000 - "not including organisation". As against the value of the whole tender which is over IL 700.000. this is a paltry sum and the second respondent can be compensated by the first respondent if it so claims. The very day when instructions were given to the second respondent to commence work, the petitioner turned to the first respondent asking why the contract had not been awarded to it. On the petitioner's part there was no delay.

 

            The only doubt in our minds does not concern the rights of the second respondent but the public interest. Since we do not presume to compel the first respondent to allow the work to begin before 15 March 1964 when the second respondent leaves the port, is not the public prejudiced by the fact that the warehouse will not be ready for marketing citrus at the beginning of the season? This Court, needless to say, is enjoined to safeguard vital public interests before which private rights must sometimes yield.

           

            Having reached this conclusion, we invited counsel to find out whether the petitioner is ready to complete the building work by 15 October 1964. Petitioner's counsel informed us today, after consulting with his client, that the petitioner is prepared to do so provided that the first respondent instructs it to commence immediately on 15 March 1964 and that the site will be vacant and made available by that date. The idea is that the petitioner can already now, forthwith upon receiving the order for the job, make the necessary preparations for carrying it out but will not go onto site at the port until 15 March 1964, and will finish on 15 October 1964.

           

            Accordingly we make the order nisi absolute and direct the first respondent to give the work to the petitioner in accordance with the conditions of the tender, subject to the dates for beginning and finishing the work is amended as above.

           

            Order nisi made absolute.

            Judgment given on January 23, 1964.

HCJ 721/94

El-Al Israel Airlines Ltd

v.

1. Jonathan Danielowitz

2. National Labour Court

 

The Supreme Court sitting as the High Court of Justice

[30 November 1994]

Before Vice-President A. Barak and Justices Y. Kedmi, D. Dorner

 

Petition to the Supreme Court sitting as the High Court of Justice.

 

Facts: The first respondent, who is employed by El-Al as a flight attendant, has a stable relationship with another man. Under a collective agreement, El-Al gives every permanent employee a free aeroplane ticket, every year, for that employee and his/her spouse (husband or wife). Under a collective arrangement, a free ticket is also given to a companion recognized publicly as the employee’s husband/wife. The first respondent asked El-Al to give him a free ticket for his companion, but his request was denied.

 

Held: (Majority opinion — Vice-President A. Barak, Justice D. Dorner) Not giving the respondent a free ticket for his same-sex companion amounted to discrimination, since a distinction on the basis of the difference between a heterosexual and a homosexual relationship is unjustified in the context of employee benefits.

(Minority opinion — Justice Y. Kedmi) Linguistically, only a heterosexual couple can be called a ‘couple’; the concept of the ‘couple’ linguistically only applies to an union of male and female that can, conceptually, have children. Therefore a distinction between a same-sex companion and an opposite-sex companion is a distinction between persons who are fundamentally unequal, and this does not amount to discrimination.

 

Petition denied, by majority opinion (Vice-President M. Shamgar and Justice D. Dorner), Justice Y. Kedmi dissenting.

 

Legislation cited:

Basic Law: Human Dignity and Liberty, 5752-1992, ss. 7, 8.

Contracts (General Part) Law, 5733-1973, ss. 14, 31.

Criminal Law Ordinance, 1936, s. 152(2).

Employment Service Law, 5719-1959, s. 42.

Equal Employment Opportunities Law, 5748-1988, ss. 2, 2(a) 2(c).

Equal Employment Opportunities Law (Amendment), 5752-1992.

Equal Remuneration for Female and Male Employees Law, 5724-1964.

Equal Retirement Age for Female and Male Employees Law, 5747-1987.

Government Corporations Law, 5735-1975, s. 18A.

National Insurance Law [Consolidated Version], 5728-1968, s. 8.

Penal Law, 5737-1977, s. 351(3).

Penal Law (Amendment no. 22), 5748-1988.

Women’s Equal Rights Law, 5711-1951, s. 1.

 

Israeli Supreme Court cases cited:

[1]      FH 13/84 Levy v. Chairman of Knesset Finance Committee [1987] IsrSC 41(4) 291.

[2]      HCJ 98/69 Bergman v. Minister of Finance [1969] IsrSC 23(1) 693; IsrSJ 8 13.

[3]      EA 2/88 Ben-Shalom v. Central Elections Committee for Twelfth Knesset [1989] IsrSC 43(4) 221.

[4]      HCJ 114/78 Burkan v. Minister of Finance [1978] IsrSC 32(2) 800.

[5]      HCJ 453/94 Israel Women’s Network v. Government of Israel [1994] IsrSC 48(5) 501; [1992-4] IsrLR 150.

[6]      HCJ 953/87 Poraz v. Mayor of Tel-Aviv-Jaffa [1988] IsrSC 42(2) 309.

[7]      HCJ 104/87 Nevo v. National Labour Court [1990] IsrSC 44(4) 749; IsrSJ 10 136.

[8]      HCJ 507/81 Abu Hatzira MK v. Attorney-General [1981] IsrSC 35(4) 561.

[9]      HCJ 301/63 Streit v. Chief Rabbi [1964] IsrSC 18(1) 598.

[10]    HCJ 693/91 Efrat v. Director of Population Registry at Ministry of Interior [1993] IsrSC 47(1) 749.

[11]    HCJ 1000/92 Bavli v. Great Rabbinical Court [1994] IsrSC 48(2) 221.

[12]    HCJ 5394/92 Hoppert v. ‘Yad VaShem’ Holocaust Martyrs and Heroes Memorial Authority [1994] IsrSC 48(3) 353.

[13]    HCJ 246/81 Derech Eretz Association v. Broadcasting Authority [1981] IsrSC 35(4) 1; IsrSJ 8 21.

[14]    HCJ 141/82 Rubinstein v. Knesset Speaker [1983] IsrSC 37(3) 141; IsrSJ 8 60.

[15]    HCJ 5688/92 Wechselbaum v. Minister of Defence [1993] IsrSC 47(2) 812.

[16]    FH 10/69 Boronovski v. Chief Rabbis [1971] IsrSC 25(1) 7.

[17]    HCJ 30/55 Committee for Protection of Expropriated Nazareth Land v. Minister of Finance [1955] IsrSC 9 1261.

[18]    CrimA 112/50 Yosipof v. Attorney-General [1951] IsrSC 5 481; IsrSJ 1 174.

[19]    HCJ 153/87 Shakdiel v. Minister of Religious Affairs [1988] IsrSC 42(2) 221; IsrSJ 8 186.

[20]    CrimA 224/63 Ben-Ami v. Attorney-General [1964] IsrSC 18(3) 225.

[21]    HCJ 720/82 Elitzur Religious Sports Association, Nahariyah Branch v. Nahariyah Municipality [1983] IsrSC 37(3) 17.

[22]    HCJ 4169/93 — unreported.

[23]    HCJ 410/76 Herut v. National Labour Court [1977] IsrSC 31(3) 124.

 

Israel National Labour Court cases cited:

[24]    NLC 33/25-3 Flight Attendants Association v. Hazin [1973] 4 IsrNLC 365.

[25]    NLC 44/85-0 – unreported.

 

American cases cited:

[26]    Welsh v. United States 398 U.S. 333 (1970).

[27]    Califano v. Westcott 443 U.S. 76 (1979).

[28]    Boutilier v. Immigration Service 387 U.S. 118 (1967).

[29]    Nemetz v. Immigration & Naturalization Service 647 F. 2d 432 (1981).

[30]    Braschi v. Stahl Associates Co. 544 N.Y. Supp. 2d 784 (1989).

[31]    Yorkshire Towers Co. v. Harpster 510 N.Y. Supp. 2d 976 (1986).

[32]    Two Associates v. Brown 502 N.Y. S. 2d 604 (1986).

[33]    E. 10th St. Assoc. v. Estate of Goldstein 552 N.Y. Supp. 2d 257 (1990).

 

English cases cited:

[34]    Dyson Holdings Ltd v. Fox [1975] 3 All E.R. 1030 (CA).

 

European Court of Human Rights cases cited:

[35]    Norris Case 142 Eur. Ct. H. R. (Ser. A) (1988).

[36]    Modinos v. Cyprus Case 259 Eur. Ct. H. R. (Ser. A) (1993).

 

Canadian cases cited:

[37]    Schachter v. Canada (1992) 93 D.L.R. (4th) 1.

[38]    R. v. Turpin [1989] 1 S.C.R. 1296.

[39]    Vriend v. Alberta (1994) 6 W.W.R. 414.

[40]    Egan v. Canada (1993) 103 D.L.R. (4th) 336.

[41]    Haig v. Canada (1992) 94 D.L.R. (4th) 1.

[42]    Layland v. Ontario (Consumer Protection & Commercial Relations) (1993) 104 D.L.R. (4th) 214.

[43]    Canada (A.G.) v. Mossop [1993] 1 S.C.R. 554.

 

Jewish Law sources cited:

[44]       Genesis 1, 27; 1, 28; 2 24; 5 2; 6 19.

 

For the petitioner — Y. Winder, A. Ben-Israel

For the first respondent — S. Donevitz, O. Kalmaro

 

 

JUDGMENT

 

 

Vice-President A. Barak

A collective agreement and a collective arrangement confer a benefit on a ‘spouse’ (husband or wife) or a ‘companion recognized as a husband/wife’ of an employee. Is this benefit conferred also on an employee’s same-sex companion? That is the question before the court in this petition.

The facts and the litigation before the Labour Court

1.    The first respondent (the respondent) works as a flight attendant for the petitioner (the El-Al company). Under the collective agreement, every (permanent) employee is entitled to receive free (or discounted) aeroplane tickets for himself and his ‘spouse (husband/wife)’ once a year. Under a collective arrangement (entitled ‘professional guidelines’), aeroplane tickets (as of 1 January 1986) are given to ‘a companion recognized as the husband/wife of an employee of the company if the couple live together in a joint household as husband and wife in every respect, but they are unable to marry lawfully.’

2.    The respondent applied (on 21 January 1988) to the petitioner with a request to recognize his male companion as his ‘companion’ for the purpose of receiving an annual free or discounted aeroplane ticket. In his request, the respondent explains that he has a stable and long-term relationship (since 1979) with another man. The relationship involves, inter alia, running a joint household and cohabiting in a private apartment purchased jointly. The respondent’s request was refused.

3.    The respondent applied to the Regional Labour Court. He asked the court to declare him entitled to receive free or discounted aeroplane tickets for his male companion, just as El-Al gives these to its employees’ spouses. According to a procedural agreement, it was agreed that the court would first consider the underlying question whether an El-Al employee is entitled to a free or discounted ticket for a same-sex ‘companion’. On this question, the Regional Labour Court (Justice Lubotsky and public representatives Ozeri and Pinchas) held that the provision of the collective agreement (which confers the right to the benefit on a ‘spouse’) does not confer a right on a companion of an employee, and this does not involve improper discrimination. However, the provision of the collective arrangement conferring a benefit on persons recognized as a couple (despite their being unable to marry lawfully) but not conferring the same benefit on a same-sex couple (who are also unable to marry lawfully) is a discriminatory provision. This discrimination is prohibited by the provisions of the Equal Employment Opportunities Law, 1988. Under the provisions of this law (in s. 2) — as amended in the Equal Employment Opportunities (Amendment) Law, 1992 — an employer may not discriminate against any of his employees in their conditions of employment ‘on the basis of sex, sexual orientation, personal status or their being parents.’ Because of this prohibited discrimination, the discriminatory provision in the collective arrangement was disqualified. By virtue of the procedural agreement, the Regional Labour Court went on to consider whether the respondent in fact cohabits with his companion.

4.    El-Al appealed to the National Labour Court. The National Labour Court (President M. Goldberg, Vice-President S. Adler, Justice Y. Eliasof and public representatives R. Ben-Yisrael, Abrahamovitz, Friedman and Galin) dismissed the appeal.[*] It was held that the respondent does not fall into the category of those entitled to a discount under the collective agreement, since the expression ‘spouse (husband/wife)’ does not include a same-sex companion. It also held that the respondent does not fall into the category of ‘persons recognized as the husband/wife of an employee’ in the collective arrangement, since a recognized companion, in the context of the collective arrangement, does not include same-sex companions. Notwithstanding, the court held that this position constitutes improper discrimination on the basis of sexual orientation, contrary to the principle of equality set out in the Equal Employment Opportunities Law, as amended in 1992. This improper discrimination, contrary to provisions of the law, gives the respondent (as of 2 January 1992) a right to demand for himself the benefit that was not conferred on him for discriminatory reasons.

5.    The petition before us is directed against the decision of the National Labour Court. El-Al (the petitioner) asks for a ruling that its refusal to give the respondent an aeroplane ticket for his companion does not constitute improper discrimination under the Equal Employment Opportunities Law as amended in 1992. El-Al’s contention is that this law — in the 1992 amendment — added an additional type of prohibited discrimination (‘sexual orientation’) but it did not confer rights to receive benefits that an employee was not previously entitled to receive. The respondent argued before us that there is no reason why we should intervene in the National Labour Court’s judgment, which ruled that a cause of action based on discrimination was created by the Equal Employment Opportunities Law, justifying giving aeroplane tickets for the respondent’s companion as of the date when the law was amended (on 2 January 1992).

The interpretive construction

6.    The respondent (the flight attendant, the employee) may base his argument to receive the benefit (a free or discounted ticket) for his companion on two legal constructions. According to the first construction, his right is founded on the collective agreement that gives benefits to ‘a spouse (husband/wife)’ and on the collective arrangement that gives a benefit to ‘a person recognized as the husband/wife of an employee.’ According to this construction, the term ‘spouse’ (in the collective agreement) and the term ‘recognized companion’ (in the collective arrangement) should be interpreted according to their purpose to include also a spouse of the same sex and a recognized companion of the same sex. The respondent’s right to receive the benefit is contractual, and it is founded on the text of the collective agreement and the collective arrangement, just like the respondent’s right to receive the benefit for himself. This legal model is interpretive in nature. It is intrinsic to the actual text. In this the respondent’s right to receive benefits — for his companion and for himself — derives from the legal meaning of the contractual text that is chosen from among its various linguistic meanings. Naturally this right accrues to the employee when the conditions entitling him to it are fulfilled.

7.    The interpretive construction was rejected by the Labour Courts. They held that the (legal) meaning of the term ‘spouse (husband/wife)’ in the collective agreement does not include same-sex companions. The National Labour Court pointed out that —

‘In the case before us, the parties to the collective agreement expressly showed that they did not mean a same-sex companion. The collective agreement says “spouse (husband and wife)”. The words “husband and wife” attached to the term spouse show that the parties used the term spouse in its narrow sense. It follows that this expression in the collective agreement does not include recognized companions and same-sex companions who are indisputably not “husband and wife”.’*

With regard to the term ‘person recognized as a husband/wife’ in the collective arrangement, the National Labour Court held that this does not include persons of the same sex who cohabit. The National Labour Court pointed out that the ‘term “recognized companion” does not appear by itself, but it is accompanied by the words “as husband/wife”.’* This use of language shows ‘that the intention of the drafter was not to include persons of the same sex.’*

The statutory construction

8.    A second legal construction is also available to the respondent. This construction starts with the premise that the contractual right to receive a benefit is conferred only on a companion who is not the same sex as the employee. According to this construction, the contractual arrangement (the product of the interpretive construction) is a discriminatory arrangement that is contrary to the Equal Employment Opportunities Law (as amended in 1992). The remedy given to the respondent as a result of this discrimination is not to nullify the contractual arrangement — a remedy that he did not request at all — but to make a (judicial) order based on the provisions of the law to correct the discrimination. The respondent will therefore be entitled to the benefit for his companion by combining the discriminatory contractual provision with the corrective statutory provision. This construction is not interpretative. It is extrinsic to the actual text. Its existence derives from the combination of (A’s) contractual right and the statutory mandate to prevent discrimination (against B). The resulting right of the employee arises on the day that the statutory prohibition against discrimination on grounds of sexual orientation came into force (i.e., on 2 January 1992). It may be called a statutory (or extrinsic) construction. The National Labour Court accepted this construction, and this is what El-Al is attacking before us. Analyzing this legal model must be done in two stages: first, whether the contractual arrangement (the product of the interpretive construction) is (improperly) discriminatory because of sexual orientation; second, what remedy should be given to an employee who has been the victim of (improper) discrimination on the basis of sexual orientation?

9.    The respondent did not reargue the interpretive construction before us. Indeed, this construction — which, as stated, was rejected by the National Labour Court — is complex (cf., with regard to the term ‘spouse’, FH 13/84 Levy v. Chairman of the Knesset Finance Committee [1]; see also C. A. Bowman, B. Cornish, ‘A More Perfect Union: A Legal and Social Analysis of Domestic Partnership Ordinances,’ 92 Colum. L. Rev. (1992) 1164; R. Elbin, ‘Domestic Partnership Recognition in the Workplace: Equitable Employee Benefits for Gay Couples (and Others),’ 51 Ohio St. L. J. (1990) 1067). We would have been compelled to decide this, had the respondent insisted on his (contractual) right to receive a benefit from the date when these (contractual) rights were created. As we have seen, the respondent accepts the decision of the National Labour Court that his right is based on the argument of discrimination on the basis of sexual orientation, relying on the amendment (of 2 January 1992) to the Equal Employment Opportunities Law. As a result, we do not need to consider the interpretive construction. I therefore presume — without deciding the issue — that the respondent does not have a (contractual) right under the collective agreement and the collective arrangement to receive the benefit for his companion. On this basis, I will now examine the statutory construction, with its two questions (is discrimination present; what is the proper remedy). I shall begin with the first question.

The right to equality and its violation

10. Equality is a fundamental value in Israeli law. ‘It is the heart and soul of our whole constitutional regime’ (Justice Landau in HCJ 98/69 Bergman v. Finance Minister [2], at p. 698 {18}) and ‘it is part of the essence and character of the State of Israel’ (Vice-President Justice Elon in EA 2/88 Ben-Shalom v. Central Election Committee for the Twelfth Knesset [3], at p. 272). ‘…The rule that one may not discriminate against persons on the basis of race, sex, nationality, ethnicity, country of origin, religion, beliefs or social status is a fundamental constitutional principle which is counted among our fundamental jurisprudential perspectives and constitutes an integral part of these’ (Justice Shamgar in HCJ 114/78, Motion 451, 510/78 Burkan v. Minister of Finance [4], at p. 806). Considerations of justice and fairness underlie the principle of equality. ‘The principle of equality… has long been recognized in our law as one of the principles of justice and fairness…’ (Justice Mazza in HCJ 453/94 Israel Women’s Network v. Government of Israel [5], at p. 521 {150}). Equality is a central element of the social contract upon which society is based (see HCJ 953/87 Poraz v. Mayor of Tel-Aviv-Jaffa; Labour Party in Tel-Aviv-Jaffa Municipality v. Tel-Aviv-Jaffa Municipal Council [6], at p. 332). Indeed —

‘Discrimination is a plague that fosters a feeling of unfairness and frustration. It harms the sense of belonging and constructive motivation to participate in, and contribute to, social life. A society that practices discrimination is not a healthy society, nor can a state in which discrimination is practised be called a civilized state’ (Justice Bach in HCJ 104/87 Nevo v. National Labour Court [7], at p. 760 {150}).

11. The principle of equality is entrenched in Israel in a number of normative structures. First, it is a principle of case-law — the product of  ‘Israeli common law’ — that has been recognized and developed by the courts in Israel. This principle reflects on the (objective) intention of every piece of legislation and acts as a criterion for its interpretation. ‘The fundamental principle, which constitutes a legislative goal for all the acts of the legislature, is the principle that everyone is equal before the law… legislation should therefore be presumed and interpreted as intending to achieve this purpose, not to undermine it.’ (HCJ 507/81 Abu Hatzira MK v. Attorney-General [8], at p. 585. See also HCJ 301/63 Streit v. Chief Rabbi [9], at p. 612). The case-law principle of equality reflects on the law’s ‘fundamental concepts’ (such as reasonableness, justice, equality and public policy) and constitutes a normative element in establishing the scope of their application (see HCJ 693/91 Efrat v. Director of Population Register at Interior Ministry [10]). A discriminatory collective agreement may therefore be contrary to public policy and be disqualified as a result (see Nevo v. National Labour Court [7] and L.C.J. 3-25/33 Flight Attendants’ Committee v. Hazin [24]). The case-law principle of equality is a normative basis for recognizing the right of equality as a human right in Israel. It leads to the formulation of case-law rules based on it — such as the rule of spouses’ joint property ownership (see HCJ 1000/92 Bavli v. Great Rabbinical Court [11]).

12. Second, the principle of equality is incorporated in Israeli legislation. This began with Israel’s Declaration of Independence, which provides that the State of Israel shall treat its citizens equally ‘irrespective of religion, race or sex’. It continued in legislation that creates equality in specific relationships. Thus, for instance, the Women’s Equal Rights Law, 1951, provides that ‘women and men shall be subject to the same law for every legal act...’ (s. 1). The Employment Service Law, 1959, prohibits discrimination by the Employment Service when referring a person for employment (s. 42). The Equal Remuneration for Female and Male Employees Law, 5724-1964, aims to ensure equality in employees’ salaries. Special legislation is intended to allow corrective preferential treatment for women (see section 18A of the Government Corporations Law, 1975). Another law — which is the relevant one in this case and which we will discuss separately — is the Equal Employment Opportunities Law. This development culminated in the enactment of the Basic Law: Human Dignity and Liberty, which entrenched equality as a super-legislative constitutional right, within the framework of human dignity:

‘Today the principle of equality can be entrenched in the Basic Law: Human Dignity and Liberty. Such entrenchment implies the elevation of the principle of equality to a constitutional, super-legislative normative status’ (per Justice Or in HCJ 5394/92 Hoppert v. ‘Yad VaShem’ Holocaust Martyrs and Heroes Memorial Authority [12], at p. 362).

13. Needless to say, equality does not confer an absolute right. The human right of equality — like every other human right — is a relative right. The principle of ‘equality is not an absolute but a relative principle’ (per Justice Or in Hoppert v. ‘Yad VaShem’ Holocaust Martyrs and Heroes Memorial Authority [12], at p. 361); the limits of extending the principle of equality are determined by an (internal) balance between the whole spectrum of human rights and by the public interest (see A. Rubinstein, The Constitutional Law of the State of Israel, Shoken, 4th edition, 1991, at pp. 199, 299). The right to equality may be restricted by virtue of other appropriate values (see HCJ 246/81 Derech Eretz Association v. Broadcasting Authority [13], at p. 13 {32}, and cf. s. 8 of the Basic Law: Human Dignity and Liberty). Indeed, sometimes equality is not completely protected. Equality may be lawfully restricted if this is consistent with the values of the State of Israel, is for a proper purpose and if equality is not restricted more than necessary.

14. The factual premise is that people are different from one another. ‘...No person is completely identical to another’ (Justice S. Levin in HCJ 141/82 Rubinstein v. Knesset Speaker [14], at p. 148 {67}). Every person is a world in himself. Society is based on people who are different from one another. Only the worst dictatorships try to eradicate these differences. Moreover, the presumption behind the Basic Law: Human Dignity and Liberty is that every person is free to develop physically and spiritually as he sees fit (see HCJ 5688/92 Wechselbaum v. Minister of Defence [15]). This underlying freedom is the basis for the principle of equality. It means equality before the law and the law being impartial to the differences between people. It means equality in applying freedom. It means equality in opportunities. This equality presumes a normative arrangement that is applied uniformly to all individuals, irrespective of the factual difference between them. However, the principle of equality does not presume only one rule for everyone. Indeed, the principle of equality does not rule out different rules for different people. The principle of equality demands that the existence of a rule that treats people differently is justified by the nature and substance of the issue. The principle of equality therefore presumes the existence of objective reasons that justify a difference (a distinction, dissimilarity). Discrimination — which is the opposite of equality — exists therefore in those situations where a different law for people who are (de facto) different from one another is based on reasons that are insufficient to justify a distinction between them in a free and democratic society. In Justice Or’s words, discrimination is ‘different treatment without an objective justification’ (Hoppert v. ‘Yad VaShem’ Holocaust Martyrs and Heroes Memorial Authority [12], at p. 360). President Agranat discussed this and pointed out:

‘The principle of equality, which is merely the opposite of discrimination and which, for reasons of justice and fairness, the law of every democratic country aspires to achieve, means that people must be treated equally for a particular purpose, when no real differences that are relevant to this purpose exist between them. If they are not treated equally, we have a case of discrimination. However, if the difference or differences between different people are relevant for the purpose under discussion, it is a permitted distinction to treat them differently for that purpose, provided that those differences justify this. In this context, the concept of “equality” therefore means  “relevant equality”, and it requires, with regard to the purpose under discussion, “equality of treatment” for those persons in this state. By contrast, it will be a permitted distinction if the different treatment of different persons derives from their being, for the purpose of the treatment, in a state of relevant inequality, just as it will be discrimination if it derives from their being in a state of inequality that is not relevant to the purpose of the treatment’ (FH 10/69 Boronovski v. Chief Rabbis [16], at p. 35).

Therefore a particular law will create discrimination when two individuals, who are different from one another (factual inequality), are treated differently by the law, even though the factual difference between them does not justify different treatment in the circumstances. Discrimination is therefore based on the factors of arbitrariness, injustice and unreasonableness. Justice Witkon discussed this and pointed out:

‘What is discrimination? Not every distinction between different groups of people is called “discrimination”; the concept of discrimination includes the idea of unfairness in treating equals unequally’ (HCJ 30/55 Committee for Protection of Expropriated Nazareth Lands v. Minister of Finance [17], at p. 1265).

Discrimination — which, as stated, is the opposite of equality — means unfair, unjust and arbitrary treatment (see CrimA 112/50 Yosipof v. Attorney-General [18], at p. 490 {183}).

15. As we have seen, the contractual regime at El-Al gives a male or female employee a right to receive a benefit (a free or discounted aeroplane ticket) for a wife or husband or recognized companion (male or female), provided that they are of the other sex. Does this constitute discrimination against a companion of the same sex? As we have seen, the test for equal and discriminatory treatment is the question whether the difference in sex is relevant to the issue. This relevance is examined on the criteria of arbitrariness, fairness and justice. The basis for giving a benefit to an employee for a spouse or a recognized companion lies in the attitude that there are reasons for giving a benefit — such as an aeroplane ticket — to an employee for the person with whom he lives and shares a common household, from whom he is separated when he leaves on his flights and to whom he returns when he finishes his work. This is the criterion that both a spouse and a recognized companion have in common. The purpose of the benefit is not to strengthen the institution of marriage. Indeed, El-Al gives the benefit to an employee living with a recognized companion, even when that recognized companion is lawfully married to someone else. The idea underlying the giving of the benefits is therefore cohabitation for a certain period (specified in the collective arrangement), which is evidence of a firm social unit based on a life of sharing. In this context, it seems clear to me that denying a same-sex companion this benefit amounts to discrimination and a violation of equality. Indeed, the only reason for denying the benefit to a same-sex companion is sexual orientation. There is no other reason. This difference is not at all relevant to the issue before us (supporting a firm social unit, based on a life of sharing). In the case before us, we are dealing with a distinction that is arbitrary and unfair: is parting from a same-sex companion easier than parting from a companion of the opposite sex? Is living together for persons of the same sex different, with regard to the relationship of sharing and harmony and running the social unit, from this life of sharing for heterosexual couples?

16. One might argue that a life of sharing and harmony between persons of opposite sexes (whether as husband and wife or as recognized companions) is so different in its character from a life of sharing and harmony between persons of the same sex that any legal regime giving a benefit to the former relationship does not discriminate against the latter relationship. Although this argument seems to me problematic, I am prepared to reserve judgment, since the question that we must ask is not whether one relationship (a life of sharing and harmony between persons of opposite sexes) is different on any criteria from the other relationship (a life of sharing and harmony between persons of the same sex). As stated, I am prepared to assume that in various social contexts this difference does indeed exist. The question that we must ask is whether the difference in the relationship is relevant to the issue before us. The ‘issue before us’ is the social unit, the life of sharing and harmony that justify, in El-Al’s opinion, giving a benefit to a (permanent) employee in the form of an aeroplane ticket which will enable him to take with him the person with whom he cohabits. In this respect, the difference between a life of sharing between persons of different sexes and a life of sharing between persons of the same sex is clear and blatant discrimination.

Discrimination on the basis of sexual orientation

17. We have seen, therefore, that giving a benefit to a (permanent) employee for a spouse or recognized companion of the opposite sex and not giving the same benefit for a same-sex companion amounts to a violation of equality. What is the nature of this discrimination? Indeed, all discrimination is prohibited, but among the different kinds of discrimination there are varying degrees. The severity of the discrimination is determined by the severity of the violation of the principle of equality. Thus, for example, we consider discrimination on the basis of race, religion, nationality, language, ethnic group and age to be particularly serious. In this framework, the Israeli legal system attaches great importance to the need to guarantee equality between the sexes and to prevent discrimination on the basis of sex (see HCJ 153/87 Shakdiel v. Minister of Religious Affairs [19]; Poraz v. Mayor of Tel-Aviv-Jaffa [6]). It may be said that the discrimination in the appeal before us is based on improper considerations of sex. Conversely, it may be argued that discrimination on the basis of sex does not exist, since the same benefit is conferred on (permanent) male and female employees. This argument, in itself, does not strike me as convincing. However I do not need to decide the issue, since there can, I think, be no doubt that the discrimination in this case is based on the ‘sexual orientation’ of the (permanent) employee. This discrimination — against homosexuals and lesbians — is improper. It is contrary to equality. This emerges clearly from the provisions of the Equal Employment Opportunities Law. This law, as amended in the Equal Employment Opportunities Law (Amendment), states (in s. 2):

‘(a) An employer shall not discriminate between his employees, or between candidates for employment on the basis of their sex, sexual orientation, personal status or their being parents with respect to any of the following:

(1)  giving employment;

(2)  conditions of employment;

(3)  promotion in employment;

(4)  training or professional studies;

(5)  dismissal or severance pay.

(b) For the purposes of subsection (a), making irrelevant conditions shall also be regarded as discrimination.

(c) Discrimination shall not exist under this section when it is required by the character or nature of the job or position.’

In explaining the provision about the prohibition of discrimination on the basis of sexual orientation, the chairwoman of the Labour and Welfare Committee, Mrs O. Namir, pointed out:

‘I hope that adopting the proposed law will contribute towards treating men and women equally, regardless of their sexual orientation, allowing them to live according to their sexual orientation as equal citizens in every respect, and affording them the legal protection enjoyed by every other group.’

This provision does not deny the differences between human beings. These differences are natural. This provision states that the different sexual orientation of persons shall not be relevant in employment, unless this is required by the nature of the job. Indeed, with regard to conditions of employment, the employer must be impartial to his employees’ sexual orientations. He must determine the conditions of employment only in view of the criteria required by the nature of the job. Therefore if a benefit is conferred on an employee having a long-term and permanent relationship with a woman, that benefit should be conferred on an employee who has a long-term and permanent relationship with another man. Thereby the employer implements the principle of equality. Thereby he is prevented from invading the privacy of the employee (cf. s. 7 of the Basic Law: Human Dignity and Liberty). Conferring a benefit on a permanent employee for his recognized companion and not conferring it on a permanent employee for a same-sex companion (who complies with all the requirements of a recognized companion apart from the requirement of sex) amounts to discrimination in conditions of employment because of sexual orientation. This discrimination is prohibited. Consider A, a permanent employee of El-Al, who shares his life for several years with a woman B. They cohabit and run a common household (as required by El-Al for complying with the conditions of a recognized companion). A is entitled to an aeroplane ticket for B. Now consider A who lives in the same way with a man C. They too cohabit and run a common household. A is not entitled to an aeroplane ticket for C. How can this difference be explained? Does the one carry out his job as an employee differently from the other? The only explanation lies in A’s sexual orientation. This amounts to discrimination in conditions of employment because of sexual orientation. No explanation has been given that might justify this discriminatory treatment. There is nothing characterizing the nature of the job or the position that justifies this unequal treatment (see s. 2(c) of the Equal Employment Opportunities Law). To be sure, it is possible that El-Al thinks that a (permanent) employee who lives with a (same-sex) companion behaves ‘improperly’. It is possible that someone at El-Al thinks that this joint lifestyle should not be encouraged. We need not examine this argument on an ethical level. Whether or not we agree with it, it does not amount to a justification that negates the existence of the discrimination. Indeed, the discrimination is not determined merely by the will and intention of the person creating the discriminatory norm. It is determined by the effect that it has in practice (see Nevo v. National Labour Court [7], at p. 759; Bavli v. Great Rabbinical Court [11]). Occasionally we can justify a violation of equality — which, as we have seen, is not an absolute but a relative right — on the basis of a proper purpose. Such grounds must be very substantial and relevant. A very great weight rests on someone who tries to discharge this burden. In the case before us, the burden has not been discharged. No attempt has even been made to discharge it. All that we have heard is that same-sex companions who cohabit are not like companions of different sexes who cohabit. Thereby they indicated to us the difference that exists between the different situations. In doing so they did not negate the discrimination, and they certainly did not point to a proper purpose that might justify it (see M. N. Cameli, ‘Extending Family Benefits to Gay Men and Lesbian Women,’ 68 Chi-Kent L. Rev. (1992-93) 447.

The remedy for a violation of the right to equality

18. I have therefore reached the conclusion that the legal regime created by the collective agreement and the collective arrangement, with regard to the benefit conferred on an employee to receive a (free or discounted) aeroplane ticker for a spouse or recognized companion (of the opposite sex), discriminates against an employee living with a same-sex companion. Now we must turn to the second question requiring a decision, namely the remedy to which an employee who has suffered discrimination is entitled. Case-law has established that a discriminatory contractual regime may support a claim that the provision in the contract is contrary to public policy and is therefore invalid (see Flight Attendants Association v. Hazin [24]). This invalidity may cause the whole contract to be invalid. In most cases, there is no reason to invalidate the whole contract, and it is sufficient to invalidate the illegal part by severing it from the lawful part (see ss. 14 and 31 of the Contracts (General Part) Law, 1973). Thus, for instance, in Nevo v. National Labour Court [7] the contractual regime provided that the ‘retirement age for a pension is 65 for men and 60 for women’ (ibid. at p. 753). The Supreme Court held that this amounts to discrimination against women. It was held that the proper remedy — which the petitioner sought in that case — is striking out the invalid part. The result is that the part of the employment agreement providing that ‘the retirement age for a pension is 65’ remained valid. The Court thereby used a technique of severance. This technique is not possible in the case before us. Indeed, had the collective agreement and collective arrangement provided that a permanent employee is entitled to a benefit for whoever is his companion, except a companion of the same sex, it would have been possible to strike down the limiting provision, and so re-establish equality. But the contractual text in our case is different. It does not allow operating on the body of the text and severing the healthy part from the unhealthy part. What, then, is the remedy to which the petitioner is entitled?

19. As we have seen, a possible remedy is voidance of the contractual arrangement regarding the benefit. The result, from the respondent’s perspective, will be a case of ‘Let me die with the Philistines’ (Judges 16, 30): the respondent will not receive a benefit, but neither will recognized companions of the opposite sex. This outcome is not reasonable in the circumstances. Why should recognized companions of opposite sexes suffer a material loss? What wrong have they done? The National Labour Court rightly pointed out that the petitioner himself did not seek this remedy.

20. The appropriate remedy in this situation is to confer the benefit also on same-sex cohabitees. This remedy is recognized in the comparative literature. It was developed mainly in the case of laws that are contrary to the principle of equality laid down in a constitution. In American constitutional literature it is called the  ‘extension’ of the existing text. In Canadian constitutional literature it is called ‘reading into an arrangement’ or ‘reconstruction’ of the text. These terms are not accurate ones. The judge does not change the existing text, nor does he reconstruct it nor add to it. The judge does not do anything to the existing text. What the court does is different. It determines that as long as the existing text remains as it is — and as stated the judge does not do anything to it — similar benefits must be given to an additional group that is not mentioned in the text. Conferring this benefit derives directly from the principle of equality, which is a normative principle to which the text is subservient and to which it must conform. It can be seen then that the court does not implant an additional organ into the body of the text infected by improper discrimination. The court determines, however, that by virtue of the principle of equality — as long as the discriminatory contractual arrangement remains unchanged — a relief of conferring a benefit also on the victims of discrimination is required in order to remove the discrimination.

21. As we have seen, this relief is recognized by American constitutional law. In the case of Welsh v. United States (1970) [26] a statute exempted a person from military service because he was opposed to war for reasons of religion or faith. The petitioner asked for an exemption for reasons of conscience. A number of judges held that the exemption for reasons of religion or faith extends also to an exemption for reasons of conscience. Justice Harlan, however, disagreed. In his view, an exemption for reasons of conscience was not included in the statute. In this the statute violated the provisions of the Constitution. The proper remedy, in the judge’s opinion, was not nullifying the exemption for reasons of religion or faith but granting an exemption, based on the Constitution itself, for reasons of conscience. Justice Harlan writes, on page 361:

‘Where a statute is defective because of underinclusion there exist two remedial alternatives; a court may either declare it a nullity and order that its benefits not extend to the class that the legislature intended to benefit, or it may extend the coverage of the statute to include those who are aggrieved by exclusion…’

He continues at p. 364:

‘While the necessary remedial operation, extension, is more analogous to a graft than amputation, I think the boundaries of permissible choice may properly be considered by the legislative pronouncement on severability.’

Since that case, American courts tend to grant this remedy (see R. Bader-Ginsburg, ‘Some Thoughts on Judicial Authority to Repair Unconstitutional Legislation’ 28 Clev. St. L. Rev. (1979) 301; B. K. Miller, ‘Constitutional Remedies for Underinclusive Statutes: A Critical Appraisal of Heckler v. Mathens,’ 20 Harv. C.R.-C.L.L. Rev. (1985) 79. This remedy appears to the court natural and appropriate and preferable to nullification. One of the cases involved a statute that gave assistance to needy families. The statute provided, inter alia, that the support would be given to a family where the mother did not work and the father had worked previously but was now unemployed. A family where the father did not work and the mother had worked previously but was now unemployed was not included among the recipients of the support. The court held that the statute unlawfully discriminated against families where the father did not work whereas the mother had worked but was now unemployed. Against this background arose the problem of the remedy: whether to nullify the support for the family that was entitled (because of the discrimination inherent in the arrangement) or to extend the application of the statute to a family that was not included in it. It was held that the family which was the victim of discrimination should be added (Califano v. Westcott (1979) [27]).

22. The Supreme Court of Canada has a similar approach. It often tends to ‘read in’ to the statute provisions that will negate the unconstitutional nature of the statute. Justice Lamer wrote in Schachter v. Canada (1992) [37], at p. 12:

‘…extension by way of reading in is closely akin to the practice of severance. The difference is the manner in which the extent of the inconsistency is defined. In the usual case of severance, the inconsistency is defined as something improperly included in the statute which can be severed and struck down. In the case of reading in, the inconsistency is defined as what the statute wrongly excludes rather than what it wrongly includes. Where the inconsistency is defined as what the statute excludes, the logical result of declaring inoperative that inconsistency may be to include the excluded group within the statutory scheme. This has the effect of extending the reach of the statute by way of reading in rather than reading down.’

23. These remedies are appropriate in the constitutional sphere. They promote the purpose underlying the constitutional arrangement. They make it unnecessary to nullify legislation. The use of this remedy is not mechanical. We must consider in each case whether extension is possible. We must examine whether it is simple to implement, and whether it does not involve excessive intervention in the legislative fabric. We must consider the budgetary ramifications. Indeed, a benefit conferred by law to a marginal group does not justify granting a constitutional remedy by extending the remedy to a large and significant group. Neither should we adopt this technique to impose obligations on sectors of the population in whose favour the law has discriminated by not imposing these obligations on them.

24. These remedies — which were developed in the constitutional sphere — can be applied in the field of collective agreements and collective arrangements. They create a contractual regime that is subject to a supreme normative principle of equality. This principle derives its supremacy (with respect to collective agreements and arrangements) from the Equal Employment Opportunities Law. This principle of equality applies — by virtue of the express provisions of the Equal Employment Opportunities Law — also in private law. It is not merely a principle of public law. It obliges every employer not to discriminate against any of his employees in the fields of private law. Indeed, with regard to the prohibition of discrimination because of sexual orientation — just as with regard to other kinds of discrimination — the law establishes a mandate that obliges the employer. By virtue of this normative mandate — which is of supreme status with regard to collective agreements and arrangements — the employer is forbidden to discriminate against any of his employees with regard to conditions of employment. When a contractual arrangement drawn up by him involves prohibited discrimination, the contract is tainted with illegality. It may be voided by virtue of the provisions relating to invalid contracts. To prevent it being voided, we may demand — as an alternative remedy — that the employer refrains from the prohibited discrimination. This is achieved by compelling the employer to confer the benefit on the employee who is the victim of the discrimination. This does not change the agreement between the parties. We do not thereby read into the contract what is not there. We thereby merely remove the discrimination and comply with the normative mandate not to discriminate. Indeed, the basic fact is the discriminatory contractual arrangement. The contents of this are determined by the parties to the contract, and they control it and can change it. As long as the discriminatory contractual arrangement remains unchanged, the supreme normative mandate — which derives from cogent law — exists alongside it and compels the employer to act with equality. Indeed, just as by virtue of the normative supremacy of the constitution (or the entrenched Basic Law) the scope of applicability of a provision of a law may be extended, so too can the normative power of the law extend the scope of applicability of provisions in a collective agreement or a collective arrangement. By virtue of this normative supremacy, the contractual regime must modify itself to comply with the principle of equality (in our case, the prohibition against discrimination in conditions of employment because of sexual orientation). This modification does not require cancelling the existing contractual arrangement. This modification is achieved by conferring a benefit — which originates not in the contractual arrangement but in the principle of equality that extends the contractual arrangement to equivalent situations — on the class that is the victim of discrimination. This extension is suitable for the contractual model. It adds a small group of beneficiaries and does not therefore impose a significant budgetary burden. Justice is done, and justice is seen to be done.

The petition is denied. The case is remanded to the District Labour Court, as stated in the judgment of the National Labour Court. The petitioner shall pay the costs of the first respondent in a total amount of 10,000 NIS.

 

 

Justice Y. Kedmi

The question we must decide in this case is: does the concept ‘spouse’ used in the employment agreements include same-sex companions or not? My esteemed colleague, the Vice-President, answered this in the affirmative. Unfortunately, I cannot agree with that conclusion. The following are my main reasons:

1.    ‘Spouse’: the conceptual significance in the social sphere

(a) The linguistic concept of spouses, who together form a ‘family’, expresses, in the social sphere, an union of two individuals of opposite sexes to form a ‘couple’; a ‘couple’, in this context, has since the origin of man until the present represented a joining of two individuals of opposite sexes. This is the case here and throughout the world, and the Book of Books gives decisive proof of this: ‘And God created man in His image, in the image of God He created him; male and female He created them’ (Genesis 1, 27 [44]).

This is the case with man and it is the case with the animals, and the story of Noah’s ark leaves no doubt about this: ‘You shall bring two of each into the ark to preserve with you; they shall be male and female’ (Genesis 6, 19 [44]).

There is of course nothing to prevent the term ‘couple’ expressing a ‘quantity’ of two individuals; but we are not dealing here with the quantitative meaning of the concept but with its substantive meaning in the social sphere.

To give the concept ‘couple’, in the context discussed here, a different meaning from the linguistic meaning that it has always had is impossible. ‘A different meaning’ of this concept would deprive it of its essence; once again we are not speaking of a ‘couple’ that builds a family, incorporating a ‘husband’ and a ‘wife’, but a ‘couple’ that expresses a ‘quantity’ of two individuals who have come together, whatever their sex is.

In Hebrew the concepts of ‘husband’ and ‘wife’ are inseparably associated with the concept of ‘family’; you cannot have a ‘family’ unless two companions of different sexes are its basis (‘a heterosexual couple’).

(b) The relationship that turns two individuals — of opposite sexes — into a ‘couple’, in its linguistic-social meaning, is characterized by the decision of the two to have a joint lifestyle; ‘joint’, in this context, inter alia and especially, expresses family life whose primary purpose — and from a conceptual viewpoint it is impossible otherwise — is to bring children into the world: ‘And God blessed them, and God said to them: be fruitful and multiply and fill the earth…’ (Genesis 1, 28 [44]).

Thus it is no coincidence that the concept ‘couple’ is, in Hebrew, derived from the root meaning ‘intercourse’; the ‘couple’ and ‘intercourse’ are one, and only where these exist can we speak of a ‘family’.

Admittedly not every couple is ‘capable’ — or wishes — to bring children into the world, and not every ‘couple’ becomes such in order to bring children into the world. But these ‘exceptions’ in this context cannot undermine the fundamental conceptual meaning of the concept ‘couple’; therefore a precondition for two people being a ‘couple’ is that they are of different sexes.

(c) The heterosexual ‘couple’ is what creates the basic family unit; and, as stated, there is no ‘family’ in the social meaning of the word, unless a heterosexual couple forms the basis of it.

It is indeed possible to change the meaning of basic concepts such as ‘couple’ and ‘family’. However the change must primarily be a conceptual change of basic epistemological meanings; the language that has existed from ancient times does not recognize a ‘couple’ and a ‘family’ that are not heterosexual, except as an exceptional phenomenon that requires a descriptive supplement alongside the use of these concepts, which lose their original meaning where we do not refer to a joining of the two sexes.

(d) It is indeed possible for ‘two persons’ of the same sex to adopt for themselves external characteristics that describe a ‘couple’ and a ‘family’ as stated, and to imitate — in so far as they can — the behaviour pattern of ‘spouses’ and even to establish in practice a ‘family’. But they do not become a ‘couple’ and a ‘family’ in the fundamental meaning of these terms in our language; and language is, in the end, the mirror that reflects our society.

In order for two people to become a ‘couple’ that establishes a ‘family’, in the conceptual-epistemological meaning of our language — and it is a common language that forms the basis of our existence as a society — it is an essential and necessary condition that the two individuals who comprise a ‘couple’ come from opposite sexes.

In this regard, it is irrelevant that two individuals of the same sex, who join into a ‘couple’, do so because their natural sexual orientation does not allow them to be ‘spouses’ in the conceptual sense accepted in our language, namely that of persons of the opposite sex. It is not the ‘capacity’ to be a spouse, in the said basic epistemological meaning, that matters, but the sex of the partner. The criterion for two persons to be a ‘couple’ — according to the epistemological meaning of the concept — does not lie in the lifestyle led by the two persons but, primarily, in their being of different sexes.

(e) The aforesaid should not be regarded as a position deriving from a conservative religious outlook: religion did not dictate the meaning of the concept ‘couple’ in the epistemological sphere, but life itself dictated it; and the reality that reflects life is what lies at the basis of the expression ‘couple’ and this is what gave it the aforesaid meaning in the social sphere.

(f) It should be emphasized:

(1) The concept ‘couple’ — whose components are a ‘husband’ and ‘wife’ — is not necessarily connected with the institution of marriage. Use can be made of the concept ‘couple’ both with regard to a ‘married couple’ and an ‘unmarried couple’, so long as the joining of the spouses makes them a ‘couple’ within the meaning set out above.

(2) There is nothing to prevent adjectives being added to the concept ‘couple’ in its basic social meaning, such as married and unmarried; the adjective ‘married’ does not affect the basic meaning of the concept ‘spouse’ which expresses, in the context under discussion, two individuals of opposite sexes forming a social unit, based on sexual collaboration, whose nature is determined by its original purpose.

(3) In consequence — and more will be said about this below — there is no reason why ‘recognized companions’ should not be regarded as ‘spouses’, since they comply with the basic condition of an union of two persons of different sexes into a family unit, within the basic meaning of this expression as aforesaid. Recognized companions are not a ‘married’ couple but they do constitute a ‘couple’ and a ‘family’; as such, there is no fundamental conceptual difficulty in applying to them legal arrangements prescribed for a ‘married’ couple, and treating them, socially and linguistically, as a ‘couple’ in every respect.

(4) In these circumstances, in the language of human beings — all human beings — the word ‘couple’, in a social context, expresses an union of two individuals of opposite sexes, for a ‘joint life’ in the primary meaning of the word as aforesaid; and if we wish to change the meaning of the concept, we must do so, first and foremost, in the sphere of the basic linguistic concepts of our language and determining this change, expressly, in legislation relating to this issue. Without an express determination, the law gives expression to the linguistic meaning of the concepts to which it refers, unless it states the contrary.

The law speaks in human language, since it is intended for human beings; wherever we wish to deviate from human language and speak in the ‘language of the law’ — this should be done in accordance with an express, clear and unambiguous provision of the legislator. In the present context, this must be a provision that deliberately changes the linguistic significance of the term ‘couple’ in the social context and gives this concept, for the purpose under discussion, another meaning, materially different from its meaning in current usage.

2.    Marriage and the institution of recognized spouses

(a) As a rule, wherever we speak of a ‘couple’ — in the social sphere — the initial impression created in the conscience of the listener or the reader is one of a ‘married’ couple; for ‘marriage’ is what grants legal — and social — recognition to the joint life of the ‘spouses’ as a family unit, in the aforesaid primary meaning.

(b) However, as stated, it is not the external, formal framework of marriage that gives a ‘couple’ its traditional, literal meaning as aforesaid: a ‘couple’ in the sense discussed here, may be ‘married’ or ‘unmarried’, but it must always be a ‘couple’; and you do not have a ‘couple’ in the meaning discussed here unless the two individuals who form it are of opposite sexes. Linguistically, there is no ‘other’ couple in the social sphere; and language is what underlies human communication, and it is the means whereby people express their thoughts.

So marriage, as a legal institution, does not give the linguistic term ‘couple’ its content and conceptual meaning; it merely adds to it social recognition as a family unit in the community, and grants the two individuals forming it — the man and the woman — rights and duties in the legal sphere.

(c) For this reason — and this too has already been said — wherever a ‘couple’ complies with the basic definition of the concept — namely, wherever we are speaking about an union of two individuals of different sexes for a joint lifestyle as a family unit within the meaning set out above — there is no logical difficulty in regarding them as a ‘married couple’ for the purpose of duties and rights that the law prescribes for a ‘married’ couple; regarding the two as a ‘couple’ forms the basis whereby the law confers rights and imposes duties on a married couple.

By contrast, wherever we are speaking of two persons who have joined together for a joint lifestyle as a ‘pair’ that is not a ‘couple’ within the aforesaid basic linguistic sense, logic does not allow us to regard them from a legal viewpoint as if they were a ‘couple’, because they constitute something ‘else’. The ‘married’ couple and ‘recognized companions’ are a ‘couple’, whereas two persons who have joined for a joint lifestyle and are of the same sex are not a ‘couple’ but a ‘pair of friends’.

3.    The collective agreement and the collective arrangement

(a) Now let us turn from the general to the particular. The collective agreement, whose provision we are interpreting, speaks of a ‘spouse (husband/wife)’ (emphasis added); the term ‘spouse’ should be given the traditional linguistic meaning, whereby it refers to individuals of different sexes forming a ‘couple’ as set out above.

The addition ‘husband/wife’ is not intended to tell us that we are referring to spouses of different sexes, since for this we do not need any addition, and use of the term ‘spouse’ is sufficient. The addition is intended to clarify that this agreement refers to spouses who are married to one another, for they alone are called ‘husband’ and ‘wife’; the supplementary addition in the collective arrangement referring to a ‘companion recognized as a husband/wife’ proves that this is indeed the case. Had it not been for this supplement, the words ‘husband/wife’ in the collective agreement could have been interpreted as restricting ‘spouse’ to a ‘married’ couple only, and it would have been necessary to clarify that they are referring also to a ‘couple’ that is not married but which is merely recognized publicly as such.

(b) The addition of ‘recognized companion’ in the collective arrangement does not break away from the framework provided in the collective agreement: both refer to a ‘couple’ and ‘spouses’ in the basic social meaning of the concept ‘couple’, as aforesaid; distinguishing between ‘couples’ on the basis of marriage has more than a hint of discrimination. A married couple and an unmarried couple are fundamentally ‘equal’, in so far as the meaning of the concept ‘couple’ is concerned; distinguishing between them on the basis of ‘marriage’, which merely constitutes a formal, external mark of the framework of their joint lifestyle as a ‘couple’, amounts to improper ‘discrimination’ and not a permitted ‘distinction’. This is sufficient to justify the supplement in the collective arrangement, which intends to prevent improper and forbidden discrimination between ‘couples’.

(c) By contrast, introducing a pair made up of two individuals of the same sex (‘a same-sex couple’) into the said provisions of the agreement and the arrangement amounts to planting a foreign type of plant — something that is not a ‘couple’ — in a field that contains only couples, whether married or unmarried.

A same-sex ‘couple’ is not a ‘couple’ within its basic linguistic meaning, and it should, in my opinion, be referred to, linguistically, as a ‘pair’; the argument that it is a victim of discrimination in comparison with other ‘couples’ is unfounded: the married and unmarried couples are couples, and distinguishing between them constitutes discrimination, whereas the ‘pair’ is not a ‘couple’, and distinguishing between it and a ‘couple’ (married or merely publicly recognized) is not discrimination. So long as the linguistic and social meaning of the concept ‘couple’ is unchanged, a ‘pair’ will not become a ‘couple’: the latter ‘combine into one’ (‘Wherefore a man shall leave his father and mother, and shall cleave to his wife, and they shall become one flesh,’ Genesis 2, 24 [44]), whereas the former will always remain two.

4.    The interpretive aspect

(a) The means of communication between human beings is language, and a precondition for understanding between persons having a discussion is that the words, expressions and concepts that form the language have a stable linguistic meaning.

(b) As stated, the law speaks to human beings in human language: and the word is, first and foremost, the basis for interpretation of its provisions. The concepts ‘couple’ and ‘spouses’ and the linguistic relationship between them and ‘family’ are primarily linguistic concepts, whose meaning — in so far as the social sphere is concerned — is, as stated above, an union of two individuals of opposite sexes to share their lives in a family unit, when this sharing is characterized, inter alia, by intimacy designed, conceptually, to ensure the continuation of life.

(c) The same is true of interpretation of the law, and likewise with regard to interpretation of a legal document: a ‘couple’ requires the union of two individuals of opposite sexes; this is true even when the two are incapable in practice or unwilling — for whatever reason — to be intimate for the purpose of ensuring the continuation of life.

(d) Indeed, one of the fundamental rules of statutory interpretation is that the law is interpreted in order to achieve the purpose for which it was legislated; mutatis mutandis, a legal document is interpreted so as to achieve the intention of the parties to it.

Where the language is clear, we would fail in our duty if we were to deviate from the agreed linguistic meaning by which people plan their lives, and give the concepts used by the law or the agreement a different meaning from the one that they have in the world of language.

5.    The Equal Employment Opportunities Law – discrimination

(a) I wholeheartedly agree with the illuminating remarks of my esteemed colleague — the Vice-President — with regard to the significance of the principle of equality and the duty to realize and apply it.

However, as my esteemed colleague noted — when citing Boronovski v. Chief Rabbis [16] and Committee for Protection of Expropriated Nazareth Lands v. Minister of Finance [17] — you cannot violate the principle of equality unless you have ‘equals’; where you have persons who are not equal, treating them differently compared with others who are different from them should not be regarded as improper discrimination, but merely as a permissible distinction.

(b) My esteemed colleague found that same-sex couples are ‘equal’ to heterosexual couples; from here, it was naturally easy to reach a conclusion of ‘discrimination’ between the two types of ‘couples’, where one is entitled to a benefit and the other is not.

I do not accept this position. In my opinion — following what I have said until now — we are dealing with two ‘couples’ that are completely different in nature; the one — the heterosexual (whether married or unmarried) — is a ‘couple’, whereas the other — the homosexual — is merely a ‘pair’; therefore conferring a benefit on the one does not constitute discrimination when not conferring the benefit on the other.

(c) The common denominator that makes the two ‘couples’ — the homosexual and the heterosexual — ‘equals’ for the purpose of the principle of equality, lies, according to my esteemed colleague, in the fact that the characteristic marks of the joint lifestyle of the two are equal; both run a common household, both form a family unit, and both live within a social framework based on a life of sharing and harmony; prima facie, they only differ from one another in one external-formal factor, which is merely that the homosexual couple cannot marry.

My esteemed colleague adds: ‘the inability to marry’ is a factor that also distinguishes married spouses from ‘publicly recognized’ companions; and this distinguishing factor did not prevent a total comparison between the latter and the married spouses.

(d) According to my thinking, a sharing and harmonious relationship — as pointed out by my esteemed colleague — is insufficient to make a homosexual couple a ‘couple’ within the meaning that this concept has in our language in the context discussed here, because it lacks an element essential to ‘being a couple’, namely that the spouses must be of opposite sexes. The formal ‘inability’ to marry — by a formal marriage — does not put the homosexual couple in the same category as the heterosexual ‘publicly recognized’ unmarried couple; the latter is a ‘couple’ within the linguistic meaning of this concept, whereas the former is not.

The distinction between the heterosexual couple — including ‘publicly recognized companions’ — and the homosexual couple is based on the fundamental nature of the concept ‘couple’; the first is a ‘couple’ because it is comprised, as stated, of two individuals of opposite sexes, whereas the second is otherwise; the fact that the homosexual spouses maintain a social framework ‘similar’ in its external characteristics to that of the heterosexual couple — the natural family unit — does not make them a heterosexual couple.

As stated, an essential factor — which is an indispensable condition in this context — for converting two individuals enjoying a life of sharing and harmony into a ‘couple’, within the meaning of the term in the Hebrew language, lies in them being ‘of one flesh’ and their being able — conceptually — to fulfil the precept of ‘being fruitful and multiplying’. The ‘married’ couple and the ‘publicly recognized’ couple meet this basic requirement, and they are therefore ‘equal’ for the purpose of examining an allegation of discrimination; whereas the homosexual couple, which does not meet the said basic requirement, is different from them in the said respect.

(e) My esteemed colleague is aware of a substantive difference that distinguishes, conceptually, between the two ‘couples’ as stated, but according to his approach this difference has no implication for the case before us; this is because in his opinion El-Al decided to confer a benefit on its employees ‘in the form of an aeroplane ticket enabling the employee to take with him the person with whom he shares his life’ (emphasis added), and for this purpose there is no difference between the two couples.

Even this narrow and restrictive approach to the problem before us does not, unfortunately, enable me to agree with my colleague. Admittedly we are concerned with the interpretation of El-Al’s decision. However, this decision does not speak of granting an aeroplane ticket to a person who ‘lives together with the employee’ (emphasis added) but to ‘the employee’s spouse’ (emphasis added); the linguistic difference between the two speaks for itself. As I have already stated, in my opinion the concept ‘couple’ in our language — in the social sphere considered here — expresses the union of two individuals who share their lives, which makes them physically into ‘one flesh’ in the primary sense of the expression; ‘He created them male and female… and He called their name man…’ (Genesis 5, 2 [44]); whereas the union of two individuals that ab initio cannot, physically, become ‘one flesh’ as stated, and who conceptually cannot achieve the said purpose, creates a couple quantitatively (since there are two), but not qualitatively (since the two cannot become one, within the framework of the commandment of being fruitful and multiplying).

(f) In my opinion, all we have before us is the language of the collective agreement — and in the supplement found in the collective arrangement — namely: ‘spouse (husband/wife)’ in the agreement, and ‘the person publicly recognized as husband/wife of the company’s employee’ in the arrangement; I do not think that we may read instead of these: ‘whoever lives together with the employee’ and even not ‘whoever forms a family unit with the employee’.

We are not dealing with a ‘life of sharing’ or a ‘family unit’, but with spouses within the basic conceptual meaning that this concept has in our language; these are always heterosexual, as long as language does not change its meaning.

5.    With regard to the allegation of discrimination between a ‘homosexual couple’ and a ‘heterosexual’ couple, there is no place in my opinion for considerations of social justice; the distinction between these two does not lie in the employees’ sexual orientation, but in the distinction between a ‘couple’ and a ‘family’ and those who do not constitute either a ‘couple’ or a ‘family’, within the meaning given to these terms in our language. Even single employees — whether ‘heterosexual’ or ‘homosexual’ — have close friends with whom they would like to spend their vacation abroad; yet no-one claims that they are discriminated against in that they are refused the benefit merely because they do not commit themselves to a formal framework of ‘a joint lifestyle’ with those friends.

El-Al saw fit to confer a benefit on ‘spouses’ that constitute a ‘family’ within the meaning thereof in the language which we use to communicate with one another; this does not constitute discrimination on the basis of ‘sexual orientation’, since we do not regard the homosexual spouses as included in the linguistic concepts ‘couple’ and ‘family’. We have here a distinction between a ‘spouse’ and someone ‘who is not a spouse’, and it may be argued that from a sociological and social viewpoint there is discrimination between ‘couples’ and those who are not ‘couples’; however, discrimination on a basis of ‘sexual orientation’ is not present here.

6.    More regarding the distinction between ‘couples’

(a) Heterosexual couples share a complete mutual commitment to sharing and stability, each to the other and both to the framework of the couple, in all spheres of life. The law gives validity to this commitment, since society, as such, has a profound interest in preserving the framework of the couple — which forms the basis of the organizational structure of human society — and ensuring its stability.

Society has adopted in this respect the approach that regards spouses becoming ‘one flesh’ — that is capable, conceptually, of achieving the mission of ‘being fruitful and multiplying’ — as a condition for making two people who unite for a life of sharing into a ‘couple’; language expresses this with the meaning it attaches to ‘couple’ and ‘family’. At the same time, society created rules to give a seal of social recognition to the framework of the ‘couple’, and it protects it and intervenes when a couple wishes to dissolve the framework, and it even seeks to prevent the dissolution whenever possible.

The said protection and intervention are achieved with legal tools; and the law — following language, which reflects social consensus — attaches the said meaning to ‘couple’ and ‘family’, but not to the homosexual couple.

(b) The recognition of the heterosexual couple that is ‘publicly recognized’ as a ‘couple’, even though it does not have all the legal guarantees of mutual commitment and stability, derives from the existence of the basic social requirements for the existence of a ‘couple’ — namely, an union of two individuals of opposite sexes as ‘one flesh’, who are able, conceptually, to ensure reproduction — and when these exist, there is no social justification for ignoring the de facto existence of the family unit and the spouses comprising it; on the contrary, it must ensure that the mutual commitment and stability of the unit are protected, even without the formal status of marriage.

The rules granting ‘mutual benefits’ to publicly-recognized heterosexual couples just like to married couples — in the circumstances provided by law — are based on a desire to give expression to the mutual commitment and ensure the stability of the family unit created by the publicly recognized ‘couple’, not necessarily by formally entering into the institution of marriage.

(c) This case of the homosexual couple is different: on the one hand, the substantive condition of different sexes is not met, and without this, one cannot speak physically of ‘one flesh’ and conceptually of reproduction and continuation of life, and therefore it does not constitute the same fundamental unit that lies at the basis of the organizational structure of human society; on the other, the partners do not have the same mutual commitment to the stability and continuity of the partnership that might induce society to recognize them as a ‘special’ couple and fit them in alongside the ‘typical’ couple at the basis of the social structure.

When society reaches the conclusion that a homosexual unit should also serve as a basic ‘unit’ of the social structure alongside the heterosexual couple, and when it determines rules for its creation, formal recognition of its existence and the guarantee of the mutual commitment between its constituents to partnership and stability, then the linguistic-conceptual meaning of the term ‘couple’ and ‘family’ in this context will change, and the homosexual couple will be included in the new linguistic framework alongside the heterosexual couple.

But as long as there is no such social consensus, the homosexual couple is not included within the framework of a ‘couple’ in our language, and it is not recognized as one of our society’s nuclear units; consequently its formation, the mutual commitment of its constituents to the partnership and its stability, and the rights and duties of those involved in it are naturally not regulated by our law.

(d) The change required here is therefore a basic conceptual change in our social outlook regarding the substance of the basic social unit, counted among the elements of our society’s organizational basis. The expression of what appears to be ‘tolerance’ towards exceptional cases and an attempt to prevent apparent social discrimination against those exceptional cases on the basis of what is exceptional about them cannot replace the fundamental conceptual change necessary for equating the homosexual couple with the heterosexual couple.

7.    Different conceptual attitudes in different cases

(a) According to my approach, there is no reason to attach an ‘independent’ and different meaning to the concepts ‘couple’ and ‘spouse’ in different contexts of sharing lives in society. I do not accept the approach that says that these concepts should be examined separately in the field of labour relations, in the field of social legislation, in the field of residency and citizenship, in the field of property law and obligations, in the field of taxation, etc..

In my opinion, as stated, in current circumstances, from the linguistic-social viewpoint, the words ‘couple’ and ‘spouse’ have only one conceptual meaning, namely two individuals of opposite sexes who have united into a framework of a joint life, which is based on the physical ability to become ‘one flesh’ and the conceptual ability to fulfil the commandment of being fruitful and multiplying; the removal of this two-fold characteristic from the framework of the definition of the concept ‘couple’ amounts to a nullification of the meaning that this concept has in the language of consensus that we use as an organized society.

(b) Destroying the linguistic-conceptual meaning in one sphere naturally leads to departing from it in other spheres, and the social framework built on an existing agreed meaning is undermined. The term ‘couple’, in this context, will lose its conceptual meaning in our language, and the focus of this meaning, which today derives from the heterosexuality of the spouses, will become a personal decision to have a life of quasi-family sharing at a particular time, where the sex of the spouses will be left to one side. There is nothing to prevent this result being reached, if it is deemed correct to go in this direction. However, this must be done by giving a ‘different’ meaning to the linguistic concept ‘couple’; this is not for us to do, but for whoever is authorized to change the Hebrew language, even if only in the legal sphere.

(c) Let me not be misunderstood: my approach does not seek to challenge the increasingly prevalent social recognition of the sexual orientation of individuals who wish to build their lives with persons of the same sex, nor do I wish to place obstacles in the path of those individuals to prevent their self-fulfilment in accordance with their orientations. All that I want is to refrain from the destruction of a conceptual ‘barrier’, linguistic chaos and communication that suffers from ‘misunderstandings’, by deviating so sharply from the meaning of basic concepts, which are the foundation of society and facilitate its operation in the way that we currently live.

For generations the concept ‘couple’ has been used in the social context to express a heterosexual couple. It was used in this way both orally and in writing, and it was used in this way in determining social arrangements and legal norms. If we try to introduce a change in this matter, this ought to be done in a straightforward way and not in a roundabout fashion; for we are dealing with human language, and we are obliged to respect it and protect the stability of its contents.

8.    Summary

(a) A ‘heterosexual’ couple — whether married or unmarried — is a ‘couple’ within the conceptual meaning of the word, whereas a ‘homosexual’ couple is not.

(b) For this reason, we are not dealing conceptually with ‘equal’ couples, and therefore the distinction made between the heterosexual couple and the homosexual couple is merely a ‘distinction’, and not ‘discrimination’.

(c) There is no basis for partial and limited recognition of the institution of the ‘homosexual’ couple; yes — with regard to labour agreements; no — in other areas, such as taxation, personal status, citizenship, giving testimony, etc..

A change in the meaning of the concept of ‘spouse’ must be general and all-encompassing, and it ought to be done in a way that everyone is aware of the new meaning given to it and its ramifications.

(d) An employer may offer a ‘benefit’ only to heterosexual couples without being guilty of discrimination, because the homosexual couple is not a ‘couple’, and the distinction between employees who are ‘spouses’, in the said basic linguistic sense, and employees who are not, is a ‘distinction’ and not ‘discrimination’.

(e) The discrimination that the respondent alleges in this case, is merely an ‘appearance of discrimination’, and it derives from what clearly appears to be ‘social injustice’. However, every distinction in distributing benefits to employees involves ‘social injustice’; the principle of equality as a defence against discrimination was not intended to address this.

Were my opinion accepted, the petition would be granted and the judgment of the National Labour Court’s decision would be reversed.

 

 

Justice D. Dorner

1.    The French philosopher, Michel Foucault, discussed the influence of social norms — reflecting what is accepted, ‘normal’, and what changes from time to time and from society to society — on the application of transcendental and formal laws (legal norms).

‘…le pouvoir de la Norme… est venu s’ajouter à d’autres pouvoirs en les obligeant à de nouvelles délimitations; celui de la Loi… et du Texte…

…le pouvoir de la norme fonctionne facilement a l’intérieur d’un système de l’égalité formelle, puisque a l’intérieur… la règle, il introduit… des différences individuelles’ (M. Foucault, Surveiller et Punir (1975) 186).

In translation:

‘… the power of social norms joins with other forces — the law and the text — and imposes on them new limitations…

… the power of social norms acts well within a system of formal equality, since it introduces… individual differences into… the rules.’

It seems to me that we cannot decide the petition before us without referring to the changes that have taken place with regard to social norms in Israel respecting homosexuality.

2. The respondent demanded that the petitioner recognize the man with whom he shares his life as a ‘spouse’ for whom he is entitled to receive an aeroplane ticket as of 1989, by virtue of the collective agreement. The Labour Court accepted the claim on the basis of the Equal Employment Opportunities Law (Amendment). The law, which came into effect on 2 January 1992, added to s. 2(a) of the Equal Employment Opportunities Law (hereafter — ‘the Equal Opportunities Law’) a prohibition against discrimination against employees because of their sexual orientation. The Labour Court held that the law changed the existing law and gave the respondent a right that he did not have before it was enacted, and that therefore he is entitled to receive the aeroplane tickets from the date that the amendment came into effect.

My colleague, Vice-President Barak, presumed — in the absence of any contrary argument by the respondent — that the respondent’s right does not derive from the collective arrangement itself. In Justice Barak’s opinion, the respondent’s right derives from the amendment, which reflects the principle of equality and the prohibition of discrimination against employees on the grounds of their sexual orientation.

My colleague, Justice Kedmi, is of the opinion that the expression ‘spouse’ cannot be given a different meaning in different laws. In his view, this expression has only one meaning: a man and a woman who unite for a joint life. This definition is accepted both from a linguistic viewpoint and a social viewpoint. It follows that without an express provision in the law that a same-sex life-partner is a ‘spouse’, a life-partner of the same-sex should not be given the benefits to which a ‘spouses’ is entitled on the basis of a provision prohibiting discrimination against the employee himself because of his sexual orientation.

3.    I agree with the result reached by the Vice-President. However, in my opinion, the respondent’s right does not derive only from the Equal Opportunities Law, but also derives from the general principle of equality that has, for some time, been a part of our labour law.

In my view, the original version of the Equal Opportunities Law reflected the principle of equality but did not establish it. Thus, for instance, in Nevo v. National Labour Court [7], a provision that provided a different retirement age for men and women was disqualified on the basis of the principle of equality. This disqualification was based on the legal position prior to the Equal Retirement Age for Female and Male Employees Law, 5747-1987, which made the retirement age the same for women and men, while preserving the right of women employees to early retirement. Cf. also the remarks of Justice Mazza in Israel Women’s Network v. Government of Israel [5], at pp. 521-522 {150}.

Similarly, the amendment also did not change the existing law about equal rights for homosexuals, but merely gave expression to them. Consequently, had the respondent insisted on his original claim to receive the benefits for his spouse since May 1989, which was before the enactment of the amendment, I would have granted his request. Conversely, if not for the development of social norms in Israel which no longer totally oppose homosexual relations, it is possible that the Equal Opportunities Law would have been interpreted narrowly, similarly to the interpretation of my colleague, Justice Kedmi, which would not give the respondent the benefits that he claimed.

4.    The principle of equality does not operate in a social vacuum. The question whether a certain case involves discrimination between equals, or whether it merely involves different treatment of different people, is decided on the basis of the accepted social outlooks. Justice Wilson discussed this in the Canadian case of R. v. Turpin (1989) [38], at p. 1331:

‘In determining whether there is discrimination on grounds relating to personal characteristics of the individual or group, it is important to look… to the larger social, political, and legal context…

Accordingly, it is only by examining the larger context that a court can determine whether differential treatment results in inequality.’

See also the remarks of Lord Denning in Dyson Holdings Ltd v. Fox (1975) [34], at p. 1033.

5.    In the past, intimate relations between members of the same sex — relations that are considered a sin by all the monotheistic religions — constituted a criminal offence. Legitimacy was also given outside the criminal law to a distinction based on sexual orientation. Homosexuals (including lesbians) were fired from their jobs, were not accepted for positions requiring a security clearance, and were forbidden to raise their children. In the United States they were classified as psychopaths and were not allowed to immigrate into that country (The Editors of the Harvard Law Review, Sexual Orientation and the Law, 1990, at pp. 44, 65, 119, 132, 139, 150, 153).

This treatment has changed gradually. Legal literature criticized the definition of homosexual relations as a criminal offence, as well as discrimination against homosexuals in all areas of life, including areas of employment (R.A. Posner, Sex and Reason, Cambridge, 1992, at p. 308). Movements advocating the equality of rights for homosexuals were established. The trend today — which began in the seventies — is a liberal treatment of the sexual orientation of an individual, which is considered to be his private matter.

These changes in social outlook were given expression in law in the Western world, and homosexual couples have achieved equality, in accordance with the social norms in each country.

6.    In European countries, there is no longer a criminal prohibition of homosexual relations. Legislation in the field of public law and labour relations in France, Denmark, Sweden and Norway prohibits discrimination because of sexual orientation. Laws in Sweden, Holland and Norway equate the rights and duties of homosexual couples with the rights and duties of heterosexual couples, including tax benefits and property division arrangements upon separation. The law in Sweden also recognizes the right of inheritance of a homosexual spouse (see L.R. Helfer, ‘Lesbian and Gay Rights as Human Rights: Strategies for a United Europe’ 32 Va. J. of Int’l L., 1991-92, 157, 168). Homosexuals have achieved the most recognition in Denmark. The law in that country allows ‘marriage’ between two persons of the same sex by registering their life-partnership relationship. This registration entitles homosexual spouses to social rights granted to married couples (M.H. Pedersen, ‘Denmark: Homosexual Marriages and New Rules Regarding Separation and Divorce’ 30 Jour. of Family L., 1991-92, 289).

Article 8 of the European Convention for the Protection of Human Rights also provides protection for homosexual relationships as part of the protection given to the right to privacy (see decisions of the European Court of Human Rights in the Norris Case (1988) [35]; and Modinos v. Cyprus (1993) [36]). Recently, a proposal was made to amend the Convention to expressly prohibits discrimination of any kind because of sexual orientation (Draft Protocol to the Convention for the Protection of Human Rights and Fundamental Freedoms).

7.    Article 15(1) of the Canadian Charter of Rights and Freedoms, which is a part of the Constitution Act, provides protection for the right of every person to equality. In case-law this section has been interpreted as prohibiting discrimination on the basis of sexual orientation (Vriend v. Alberta (1994) [39]; Egan v. Canada (1993) [40]; Haig v. Canada (1992) [41]). By contrast, claims of homosexual couples for rights conferred on married couples were rejected. It was held that, since the purpose of marriage is raising children, the different treatment of the homosexual couple is not a breach of the charter (Haig [41], at p. 340; Layland v. Ontario (Consumer & Commercial Relations) (1993) [42], at p. 231).

8.    In the United States the change has been more moderate. In some States there is still a criminal prohibition — which is not enforced — against having homosexual relations. As recently as 1967, the United States Supreme Court held that, since the homosexual has a psychopathic personality, as defined in the Immigration and Naturalization Act, his immigration into the United States was prohibited, and he was liable to immediate deportation (Boutilier v. Immigration Service (1967) [28]). Six years later, however, in 1973, the American Psychiatric Association rejected the definition of homosexuality as a psychiatric disorder, and, in 1981, the rule in Boutilier [28] was reversed. It was held that because homosexuality is not a psychiatric disorder, it does not indicate bad character, and therefore it does not constitute grounds for rejecting a naturalization request (Nemetz v. Immigration & Naturalization Service (1981) [29]).

During the 1980s, 139 judicial districts (States and local authorities) enacted laws prohibiting discrimination on the basis of sexual orientation in employment, housing and education (Note: ‘Constitutional Limits on Anti-Gay Rights Initiatives’ 106 Harv. L. Rev. (1992-93) 1905, 1923-25). The municipal laws of 12 municipalities allowed homosexual couples to register at the municipality as domestic partners, for the purpose of receiving social rights given to families (Bowman and Cornish, supra, at p. 1168).

At the same time, the courts in several States have recognized the rights of a same-sex spouse on the basis of the ‘functional test’. According to this standard, recognition of the homosexual couple depends on the purpose of the law conferring rights on a ‘family’ or ‘spouse’. The homosexual spouse will enjoy the rights conferred by law, if this is consistent with the law’s purpose.

Thus, for instance, the New York State Court of Appeals recognized the life-companion of a deceased tenant as a protected tenant by virtue of his being the spouse of the deceased. It was held that, in view of the purpose of the tenant protection law, the difference between a heterosexual couple and a homosexual couple is irrelevant. If the life-companion were not recognized as the spouse, the purpose of the law would be frustrated, in that a remote relation would be entitled to the accommodation, whereas the person who shared his life with the deceased would be expelled from the apartment where he had lived for years (Braschi v. Stahl Associates Co. (1989) [30], at pp. 788-789; see also Yorkshire Towers Co. v. Harpster (1986) [31]; Two Associates v. Brown (1986) [32]; E. 10th St. Assoc. v. Estate of Goldstein (1990) [33]).

The accepted outlook in the United States was summarized in the article of Bowman and Cornish, supra, at pp. 1175-77, as follows:

‘… there is a general tendency to look at the characteristics of the particular relationship to determine whether it qualifies as a family for the purposes of the particular statutory scheme, especially when a statute uses a term such as “family”, “spouse”, or “parent” without defining it.

…

… Courts have identified certain elements as indicia of a “family-like” relationship, including financial commitment, exclusivity of the relationship, the reliance members place on each other, the length of the relationship, and the presentation of the relationship to the outside.’

9.    The law in Israel regarding homosexuals reflects the social changes that have occurred over the years.

Male homosexual relations were, in the past, included in the offence of deviations from nature, an offence punishable by 10 years’ imprisonment (section 351(3) of the Penal Law, 5737-1977, which was a new version of section 152(2) of the Criminal Law Ordinance, 1936, enacted by the Mandate). This prohibition was never enforced. As early as the year 1963, in CrimA 224/63 Ben-Ami v. Attorney-General [20], at p. 238, the court held that this offence has no basis in our present reality. Speaking for the court, Justice H. Cohn said:

‘Unnatural sexual relations, and homosexual relations, when done in private between consenting adults, are not acts involving moral turpitude, nor do they indicate that the persons who do them are criminals deserving of punishment. These are offences that we inherited from ancient systems and past generations and they have no place in the criminal law of a modern state… ‘Nature’, as such, no longer needs the protection of the criminal law. What needs, and is therefore entitled to, their protection are the human body and human dignity and liberty… one of the basic rights of the citizen is that the State will not interfere in the private life and his behaviour behind closed doors…’

Nonetheless, for many years the offence remained the law and was not repealed. Even in 1980, when the draft Penal Law (Amendment no. 14), 5740-1980 — which, according to its explanatory notes, was intended to replace the provisions of the Mandatory law with legislation suitable to the reality of our times — was tabled in the Knesset, it was suggested that the prohibition against homosexuality remain. Notwithstanding, it was proposed that the punishment for this offence be reduced to one year’s imprisonment. The explanatory notes said: ‘The question whether in our time there is a justification for the interference of the criminal law in sexual acts done between consenting adults in private is a controversial one’ (ibid., at p. 392).

This proposal did not reach the Knesset, and the criminal prohibition was repealed eight years later in the Penal Law (Amendment no. 22), 5748-1988.

This formal repeal reflects the current position of Israeli society that the law (as opposed to religion) should be indifferent to the sexual orientation of a person, so long as he does not harm anyone. There is widespread consensus that homosexuals should not be restricted or subject to discrimination (Rubinstein, The Constitutional Law of the State of Israel, supra, at p. 334). The amendment to the Equal Opportunities Law reflects this approach. M. Virshowski MK referred to this during the debate proposing the law at first reading:

‘… with this we are in fact establishing the rules accepted today in the enlightened world and allowing people to live in accordance with their sexual orientations, and not to suffer for them or be oppressed because of them’ (Knesset Proceedings 119, 1991, at p. 1034).

10. In our case, it is clear that there is a difference between a homosexual couple and a heterosexual couple. However, a ‘difference’ justifying different treatment must be relevant (Boronovski v. Chief Rabbis [16], at p. 35; HCJ 720/82 Elitzur Religious Sports Association, Nahariyah Branch v. Nahariyah Municipality [21], at p. 21; HCJ 4169/93 [22]).

The proper test is therefore to consider the relevance of the sexual orientation to the benefit conferred on the spouse. The functional test meets this requirement. According to this test, no distinction should be made between homosexual couples and heterosexual couples, if the spousal relationship between the spouses of the same sex meets the criteria that realize the purpose for which the right or benefit is conferred. By contrast, when the sexual orientation is relevant to realizing the purpose of the benefit, for instance if the purpose is to encourage having children, withholding the benefit from a same-sex spouse will not constitute discrimination. Justice L’Heureux-Dubé discussed this distinction in the judgment of the Canadian Supreme Court in Canada (A.G.) v. Mossop (1993) [43], at p. 560:

‘… “family status” may have varied meanings depending on the context or purpose for which the definition is desired… the Tribunal concluded that the potential scope of the term “family status” is broad enough that it does not prima facie exclude same-sex couples. In making this finding, the Tribunal used the proper interpretational approach, considered the purpose of the Act and the values at the base of the protection of families.’

Cf. also NLC 54/85-0 [25]. In that case it was held that a recognized partner is exempt from paying insurance premiums under s. 8 of the National Insurance Law [Consolidated Version], 5728-1968, exempting ‘a married woman whose husband is insured’ from making insurance premiums. Justice Goldberg, who wrote the judgment, explained that in view of the purpose of the law to place a recognized partner on an equal footing with the ‘lawful wife’, and in view of the definition in the law of the expression ‘his wife’ including a ‘recognized partner’, the recognized partner must also be regarded as a ‘married woman’.

11. Public authorities are first and foremost subject to the principle of equality, but this principle also applies in the field of labour relations in general (see, for instance, S. Almog, ‘A Guide to Labour Law’ The Employee’s Guide, 1994, 35-36). The employer’s contractual freedom retreats when faced with the employee’s right to equality (Flight Attendants Association v. Hazin [24]; HCJ 410/76 Herut v. National Labour Court in Jerusalem [23]; Nevo v. National Labour Court [7], ibid.). The legislation prohibiting discrimination in labour relations reflects this principle, but did not create it. See also F. Raday, ‘The “Privatization of Human Rights” and the Misuse of Power’ 23 Mishpatim, 1994, at pp. 21, 41.

12. In our case, the aeroplane ticket was not meant for a spouse who is married to the employee, and in any event the purpose of the benefit was not to encourage a lifestyle within a traditional family framework. The benefit is given to the employee for the spouse with whom he shares his life de facto. Indeed, although the petitioner did not intend the arrangement to apply to same-sex spouses, the sex of the spouse is not relevant to the purpose of giving the benefit.

Benefits for a spouse are a significant part of employees’ salaries. Professor Elbin’s calculations found that in the United States 27% of employees’ salary is made up of benefits (in his article, supra, at pp. 1068-1069).

In Israel, benefits (including ‘related conditions’) may lead even to the doubling of the salary (see the monthly periodical Calculation, M. Katzin, ed., October 1994, 50). A significant part of these benefits — such as pension plans and life insurance — are given for the spouse, including the recognized partner, and to deny benefits to a spouse with whom a homosexual lives is tantamount to reducing his salary. Consequently, denying these benefits is discrimination against the employee himself. Professor Elbin said of this:

‘Unable to marry, gay couples are generally excluded from the benefits afforded married couples in our society, including benefits commonly accorded spouses in employee and public benefit programs. For gay employees, the result is total compensation lower than that of other married co-workers performing the same job.

Domestic partner provisions lessen the economic discrimination that results from the ban on same-sex marriage.

…

… An employer who does not offer domestic partner benefits is, in fact, paying less in total compensation than he should be because employees with domestic partners are not being compensated equitably’ (supra, at 1068-69, 1082).

In the case before us, denying the benefit to the respondent would lead to a reduction of his salary in the amount of the price of the ticket, and there is no justification for this.

For these reasons, I agree that the petition should be denied.

 

 

Petition denied, by majority opinion (Vice-President A. Barak and Justice D. Dorner), Justice Y. Kedmi dissenting.

30 November 1994.

 

 

 

[*]                 NLC 3-160/53 El-Al Airlines v. Danielowitz IsrLC 26 339.

*                 Ibid., p. 349.

C.A. 84/64

           

BETH HANANYA, WORKERS' COOPERATIVE SETTLEMENT LTD.

v.

MOSHE FREIDMAN et al.

 

 

In the Supreme Court sitting as a Court of Civil Appeal

[30 July 1964]

Agranat D.P., Berinson J. and Manny J.

 

 

 

Cooperative societies - membership - admission of wives - effect of long unchallenged usage - Cooperative Societies Ordinance, sec. 1.

 

 

At a general meeting of the appellant society a resolution was adopted amending a certain provision of its constitution. The respondents, members of the society, sought a declaration that the resolution was void because wives of members had voted thereon although not formally members themselves. The appellant pleaded that the wives had been duly admitted to membership, that it was customary, as throughout the settlement movement, for wives to become members and that the respondents were estopped from denying such membership. The District Court granted the declaration claimed.

 

Held, granting the appeal, that whilst normally a person did not become a member unless duly admitted under the relevant law or according to a society's rules, the question was whether or not in formally accepting a husband as a member the intention was to exclude his wife. Such intention could only be established by examining the circumstances. In the instant case, the only conclusion that could be drawn was that admission of a husband included his wife, especially as wives had always been treated as members for all purposes. The mode of admission to membership was left by law to a society's constitution and the statutory definition of "member" was broad enough not to exclude those who became members in some manner other than that specified in such constitution.

 

            A society's constitution was in the nature of a contract between it and its members or among the members inter se. In certain circumstances the contract might be varied by mutual consent evidenced manifestly in long continuous practice. Such variation received the force of a binding usage. That was so in the instant case, wives having been accorded rights and obligations equal to those of their husbands. The court could not equitably disregard this situation and set it at naught.

           

            To hold that the wives were not members would shake the society and others like it to their very foundations since it would render everything done by them void of all legal effect.

           

Israeli cases referred to:

 

(1)       C.A. 25/50 - S. Wolfson v Spinis Co. Ltd. (1951) 5 P.D. 265: 4 P.M. 26.

           

            Palestinian case referred to:

 

(2)   C.A. 5/40 - S. Cohen and Company and an. v. Abraham Capun (1940) 7.P.L.R. 80; (1940) 1 S.C.J. 63.

 

English cases referred to:

 

(3)       Lyle-Meller v. A. Lewis and Co. (Westminster), Ltd. (1956), 1 All E.R. 247.

(4)   Lewis H. Evans, Official Manager of the Agriculturalists' Cattle Assurance Company v. Aaron Smallcombe and an. (1868) L.R. 3 H.L. 249.

 

American case referred to:

 

(5) Francis v. Perry (1913) 144 N.Y.S. 167.

 

R. Navat for the appellant.

A. Fichman for the respondents.

 

BERINSON J.:                       The appellant is a workers' settlement constituted as a cooperative agricultural society (hereinafter referred to as "the society" or "the settlement"), and the respondents are members of the society.

 

            On 2 June, 1963, the general meeting of the society resolved to change the clause in the society's articles of association which deals with the settlement of disputes. At that meeting, as at all meetings of the society, members' wives participated and voted. The respondents claim that the wives are not members. Because they participated, the respondents applied to the District Court for a declaration that the above resolution was null and void and that the clause in its version prior to the resolution, remained in force.

           

            The society raised the following points in its defence:

           

1. The women were duly accepted as members.

 

2. In the settlement, as in all other workers' settlements of the Settlement Movement in Israel, there is a binding custom according to which wives are full members.

 

3. The respondents are estopped from denying the wives' membership.

 

            These contentions were not accepted by the District Court and judgment was given in favour of the respondents. In the present appeal, the same three points are raised and I shall deal with each of them.

           

1. With respect to the procedure for accepting members into the society. Mr. Tobel. the secretary of the society. testified as follows:

 

            "Application for membership is always made by both spouses together and both sign the application which is in the form specified in the society's articles of association... The committee considers the application after making enquiries about the personalities and the health of both spouses. They are both sent for medical examinations.  Should the committee find that one of the couple is unsuitable, neither is accepted. If the committee finds the couple suitable, it resolves to accept them and passes the matter on to the general meeting for approval. Only the name of the head of the family is designated in such approval. In my opinion, under this procedure the whole family is accepted as member."

           

            Mr. Tobel's opinion did not meet the approval of the learned Judge who held that "acceptance of members into the cooperative society may not be implied - it must be explicit". He deduced this from the definition of the term "member" in the Cooperative Societies Ordinance, and from the society's articles of association (hereinafter referred to as "the articles") which specify that the decision of the administrative committee to accept a member must be approved by the general meeting.

           

            It is true that usually a person does not become a member unless he has been duly accepted in accordance with the provisions of the law and the articles as they stand. Nevertheless, it seems to me that the learned Judge was in error here. First, we are not dealing with the question of implied acceptance of members. There is no dispute that the women, together with their husbands, signed the written applications for joining the society or that the committee would decide whether to accept or reject both husband and wife. The committee's decision would be passed to the general meeting for approval and the general meeting would approve the application in the name only of the husband. The sole question that might arise is what was the intention of the general meeting in giving its approval? Was it to approve the husband alone and to reject the wife or to approve them both even though formal expression of such approval was made in the name of the husband alone. In the Corpus Juris Secundum. vol. 7. p. 56, sec. 23(b), we find:

 

"One may become a member of an association by formally signing its articles, or in any other way that shows a mutual agreement between himself and the existing members that he is a member. But membership is a question of intent and cannot be established by any facts which fail to show the existence of a mutual intent that one shall be a member of the association... It is sufficient if the existing members agree to accept him as a member, and he agrees to become such, with the mutual understanding that he shall be entitled to all the rights and privileges incidental to membership, and shall assume all the duties and obligations attaching thereto, the question of membership depending on the intent and understanding of the parties."

 

The task therefore is to discover the true intention of the parties, having regard to all the circumstances of the case. First and foremost, obviously,  the conduct of the parties at the time of the application and their understanding of the outcome must be considered. Mr. Tobel's testimony regarding the acceptance of new members was absolutely clear. He found no express approval by the general meeting of the acceptance of the wives as members of the society but he testified that the approval of the general meeting in the name only of the husband, is viewed as approval of both husband and wife: "When it is decided to accept a new member, a whole family, and not just the one member, is accepted". This also emerges from the fact that the settlement does not accept bachelors. Bachelors who joined the settlement when it was first founded were required to marry within two years and those who did not do so were forced to leave. "At present" said Mr. Tobel, "there are no bachelors on the settlement".

 

            It is a fact that throughout the existence of the settlement, new members have been accepted in the above manner and when a new family is accepted,  everyone considers the wife to be a member with equal rights and obligations in every respect. Wives participate in the activities of the settlement together with their husbands; they participate in the general  meetings and enjoy the right to vote, they are elected to the institutions of the settlement and act in its name, just like their husbands. Accounts in the settlement are kept in the name of both spouses on the clear assumption that both are members of the society.

 

            In the light of these facts, the only possible conclusion is that the association in its general meetings would accept both spouses as members, even though only the name of the husband appeared in the minutes.

           

            This conclusion certainly does not contradict the articles of association, for, as we have said, the intention of the general meeting in approving the decision of the committee in the husband's name only is to accept both husband and wife as members. The best evidence of this is that subsequent to the approval, the wife is treated by all as a member of the settlement in every way. Nor is this conclusion contrary to the law, as the learned Judge thought, relying on the definition of "member" in section 2 of the Cooperative Societies Ordinance. According to this definition:

           

            " 'Member' includes a person joining in the application for the registration of a society and a person admitted to membership after registration in accordance with the rules (of the society) and this Ordinance and the regulations made thereunder."

           

            I have already said that the admission of the women was in fact consistent with the articles of association, for the action of the general meeting can only be interpreted as approval of the membership of both husband and wife. The Cooperative Societies Ordinance and the regulations made thereunder do not prescribe conditions for the admission of members. The regulations stipulate only that every association must in its articles of association specify the conditions for the acceptance of members, and the method of choosing them. When the choice is made in accordance with the articles, all the requirements of the law relating to this matter are satisfied. Similarly, the definition of "member" in terms of "includes" is not exhaustive, i.e., it does not preclude the possibility of a person becoming a member of the settlement in a manner different from those specified in the definition. Consequently, even if the admission of the women did not conform to all the specific provisions of the articles of association, nevertheless, since they were in fact recognized as members for many years, enjoying the benefits and bearing the responsibilities of membership, such de facto recognition gives rise to the assumption that their membership is in order de jure as well.

 

            I could in fact have ended my judgment here but because both sides argued at length on two other questions of great public importance, in that they relate not only to the present litigants but to all the workers' settlements belonging to the Settlement Movement, I will also deal with these questions as briefly as possible.

           

2. The second submission of the appellant is, as I have said, that the practice with respect to the acceptance of members has become so firmly rooted that it has become a binding custom which the respondents may not deny. The practice has been the same since the settlement was founded in 1951. Moreover, all other settlements belonging to the Workers' Settlement Movement have followed the same practice for as long as the Movement has existed. Mr. Arazi, a member of the secretariat of the Movement and the coordinator of its membership committee, pointed out: "I am familiar with the procedure for accepting members in all the settlements in Israel. In all settlements, it is customary for the acceptance of members to include the acceptance of female workers". There is no doubt that all those concerned knew of the practice and conformed to it. The learned Judge, however, thought that the practice cannot be binding because it is contrary to the law. The contradiction, he thought, lay in the fact that by giving the right to vote to both a member and his wife, a member would have two votes, whereas section 16(1) of the Cooperative Societies Ordinance allows each individual member one vote only. It would seem that conceptually, this view is based on the ancient rule of the Common law, taken from the Pentateuch, that a man and his wife are "of one flesh" (Gen. 2:24) and therefore the wife's act is that of the husband. This view is fundamentally wrong from both a legal and a factual point of view. The wife's right to her own opinion is given to her by virtue of her separate personality and membership. When the wife expresses her opinion on matters concerning the settlement, she is exercising this right of hers and in no manner can her vote be equated with the vote of her husband. Consequently, the husband is not given two votes but only one by virtue of his membership and the wife too has a vote by virtue of her membership. There was therefore no violation of the provisions of section 16(1) of the Ordinance.

 

            In support of his view denying the binding force of the above practice relating to the mode of accepting new members. the learned Judge quoted the following passage from Wurtzburg. The Law relating to Building Societies. (9th ed.) p. 21:

           

"As between the society and its members, a course of dealing at variance with the rules, for whatever length of time it may be pursued and acquiesced in, is of no validity whatsoever."

 

            The author himself adds a warning note to the effect that the authorities upon which this statement is based are not particularly strong and that his words must be read with caution. I have looked at those of the sources which I could obtain and can find in them nothing clear and explicit in support of Wurtzburg's view. And it is no wonder, for the principle emerging therefrom does not, in my opinion, conform to the accepted position of the law on this matter. The very same author says elsewhere (at p. 41):

           

"Sometimes a person is estopped, by virtue of an agreement and acceptance, from denying the legality or validity of a new regulation."

 

            That is correct. The articles of association are only an agreement between the society and its members, or amongst the members themselves, under which they proceed by mutual consent. In certain circumstances, a deviation from the articles of association will have effect because of such consent. When the deviation persists continuously for a sufficient period of time and is known to all those concerned and decisive in their mutual relations, it acquires the force of binding custom which the law recognizes, just as it recognizes every other custom or commercial usage which those concerned cannot deny.

           

            For this reason, there is no doubt that the usage with respect to the acceptance of members in the appellant settlement, in terms of duration, persistence and continuity and in view of its familiarity (Wolfson v Spinis (1) and Cohen v. Capun (2)], has become a binding custom not to be challenged.

           

3. The last argument is that in view of the circumstances, the respondents are estopped from denying the membership of the wives.

 

            After all that has happened. it is difficult to understand how the respondents summoned up courage to argue against the membership of the wives. One only has to see how in the past the respondents served in various capacities in the society and were elected at meetings in which women participated and voted. Together with their wives, they initiated various claims against the appellant in which they admitted that they and their wives were members of the society. All members of the settlement, including the respondents, looked upon the women as members of the settlement with rights and duties equal to those of the men, and not a murmur has been heard against membership of women since the settlement was founded. Now, after all this. the respondents wish to exclude the women, saying: "What happened in the past happened, but it was worth nothing, as if it had never happened." A person attempting to make such a claim must be clearly told: "What happened in the past is still valid, and will continue to be so in the future." A court of equity will not consider an argument which disregards the facts of life and attempts to dismiss them with a wave of the hand. The court will act upon the principle that a person must stand by his deeds and his words when another has acted upon them and, as a result, prejudiced his situation.

           

            Counsel for the respondents claims that the respondents' belief that the women were members was founded on a mistaken legal outlook and took no account of the real position. This contention is incorrect for a number of reasons. The question whether a particular person is a member of a society is a question of fact, see Francis v Perry (5) at p. 281, which quotes the Legal Encyclopaedia of America and England vol. 25, (2nd ed.) p. 1134, and no one will dispute that misrepresentation of fact is grounds for estoppel. We have already seen that the question of the membership of the wives hinges on determining the intention of the general meeting and that, too, is a question of fact. At most, it might be said that this is a factual conclusion arising from that which was proved, or that it is a mixed question of fact and of the law concerning the legal relationship between the parties. Even were it so, we have found a judgment of Denning J., in Kyle-Melle rv. Lewis & Co. Ltd. (3) (at p. 250), according to which misrepresentation, or deception,give rise to estoppel. In his words:

           

"I do not think that it is necessary to go into these refinements about law and fact. I am clearly of the opinion that this assurance was binding no matter whether it is regarded as a representation of the law or of fact or a mixture of both, and no matter whether it concerns the present or the future. It may not be such as to give rise to an estoppel at common law which was restricted to representations of existing fact; but we have got far beyond the old common law estoppel now. We have arrived at a new estoppel which affects legal relationships."

 

            The absence of any action which the actual situation demanded, when the position was known, is liable to be interpreted as a silent admission or as acceptance of the law, preventing the relevant party from later arguing the opposite. Such estoppel, arising as a result of silence when the position was known, has found expression in the decision of the House of Lords in Evans v. Smallcombe (4), where the Court ruled that shareholders in a company, who knew how a situation was developing and remained silent, are estopped from challenging the outcome if they did not protest at the time the event occurred...

           

            The District Court also held that one of the conditions for the application of estoppel was not fulfilled since no proof existed that the settlement had, by reason of the conduct of the respondents, changed its position to its detriment. "If the respondent settlement wishes to make the required changes in its articles of association, it can easily hold another general meeting and see to it that only the male members participate." This is a very narrow view of the issue and it misses the main point. The estoppel that was claimed against the respondents does not concern the said resolution of the general meeting but rather the question of the wives' membership: the fate of the decision hinges on this latter question. A determination to the effect that the women are not members of the settlement would be of tremendous importance and could shake the settlement to its very foundations. A workers' settlement is a way of life based on the principles of equality, mutual aid and responsibility, and the existence of communal living and services for the benefit of all the members, including women whose status and rights are equal to those of the men. From an analytical point of view, a decision that the wives are not members of the settlement and consequently are denied the right of lawful participation in the social and economic activities of the settlement would be a hard blow to the structure of the settlement and to the principles it advocates and would mar its character. From a practical point of view, such a decision would mean that everything that has been done in the settlement since its inception is without force and void ab initio because everything that took place at the meetings and in its institutions occurred with the participation of the women as subjects of equal rights to those of the men. Furthermore. in the light of Mr. Arazi's testimony, that the same situation applies in all the settlements belonging to the Cooperative Settlements Movement of Israel. it may be said chat everything that has been done in all the settlements and in the Settlement Movement itself from the very start is, and always has been, devoid of legal force. Obviously, such a result is most grave and could cause total confusion to the appellant and to all the ocher workers' settlements in Israel. This Court must do everything within its power to prevent the creation of such a terrible situation, to the extent that the law allows such action. Fortunately, the law does make such action possible, as explained above, for a number of reasons.

 

            In view of what we have said, the appeal is allowed, the decision of the District Court is hereby over-ruled, and the respondents' action dismissed, and the costs from both this Court and the District Court, in the sum of I.L. 1200, will be borne by the respondents.

           

            Appeal allowed

            Judgment given on 30 July 1964.

 

C.A. 776/80

 

ISRAEL BRITISH BANK (LONDON) LTD. (in Liquidation)

v.

ESTATE OF THE LATE WALTER NATHAN WILLIAMS

 

 

In the Supreme Court sitting as a Court of Civil Appeals

[September 24, 1984]

Before: Ben-Porat V.P., S. Levin J. and Netanyahu J.

 

 

Bank-customer relationship - Limitation of actions on a debit balance - Construction of contracts and the parties' intentions.

 

 

            The appeal turns on the question as to when the cause of action arises, for the purposes of limitation of actions, in a suit brought by a bank against its customer and founded on a debit balance in a current account: on the date the debit balance came into existence or on the date of the demand for payment.

 

Held by the Supreme Court:

 

A.      (1)     All of the terms, upon which a particular indebtedness is conditional, must be complied with in order to vest in the other party to a contract the right to claim its discharge. That is a fundamental rule in the law of contracts and, in the absence of any flaw nullifying a particular condition (for example, where it offends against some compelling rule of law), it should be preserved by dint of the principle of freedom of contract and the will of the parties.

          (2)     Where a party to a contract undertakes to perform a certain obligation "on demand" or "within a specified period of time after demand," the reasonable construction is, that an actual demand on the part of the creditor constitutes an essential condition of the formation of the right to have that obligation fulfilled. Only with the demand (besides other conditions, if any) as agreed upon, is the creditor's cause of action established and, accordingly, only then does the limitation of that right begin to run.

 

B.      (1)     The rule, whereby a contract is to be construed in accordance with the parties' intention, was accepted early in Israel also and took root here.

          (2)     The parties' intention is to be deduced from the contract itself and, if not apparent therefrom, then from the circumstances.

          (3)     The intention of the parties to a particular contract is the determining factor.

          (4)     The ancient exception laid down in English law, whereby the cause of action for a loan debt repayable on demand arises without a demand immediately upon the granting of the loan, contradicts the foregoing test of construction of contracts and the accepted policy in Israel. It is, therefore, regarded as incompatible with local conditions, within the meaning of that phrase in Article 46 of the palestine Order-in-Council, 1922.

          (5)     The object of a loan agreement is the use of the loan monies by the borrower in return for the profit that the lender derives, within the framework of his business, from such use for as long as it continues. The condition, the repayment shall be "on demand" (namely, on the demand of the lender), only enables him to bring the transaction to a close whenever he so desires but, as long as the thing is, in his opinion, worthwhile, he may elect to prolong the transaction even for many years, going beyond the period of limitation. That is totally inconsistent with the notion, that the borrower is under an obligation to repay the loan immediately upon its being granted.

          (6)     The demand on the part of the bank is an essential element in the formation of a cause of action against the customer.

 

C.      (1)     Minority opinion of S. Levin, J.:

                    In the absence of agreement to the contrary, the cause of action on a debt, repayable on demand, arises immediately on the receipt of the loan by the borrower. The fact that the indebtedness under the loan includes interest does not alter the date on which the cause of action was created. Accordingly, limitation, in the case of a loan repayable on demand, begins to run on the day the loan is granted.

          (2)     The same applies to a promissory note payable on demand in which, for that purpose, the period of limitation commences with the issue of the note.

          (3)     The lender and borrower are at liberty to determine between themselves, expressly or impliedly, that the need for a demand is part of the cause of action.

          (4)     There are instances where the court is prepared to deduce from the circumstances surrounding a particular relationship, that a demand is a necessary part of the cause of action. For example, it is assumed that a collateral undertaking, such as a guarantee or security for a debt, may not be enforced unless preceded by a demand as part of the cause of action. Even then, however, the rule applicable to such cases is subject to the interpretation of the express or implied intention of the parties to the transaction.

          (5)     With respect to banks, too, the cause of action on a debt payable on demand arises with the creation of the debt.

          (6)     The English rule of law, whereby limitation of action, in relation to the customer's credit balance begins to run from the date of the demand, and not from the date the credit comes into existence, has become so deeply embedded in our country's jurisprudence, that it ought not to be altered other than by legislation.

 

 

Judgments of the Supreme Court referred to:

 

[1]        C.A. 51/62- MV "New Rotterdam" v. Ennisfield, 16 P.D. 72.

[2]        C.A. 345/78 - Bank Hapoalim Ltd. v. Sardes, 33 P.D. (Part I), 683.

[3]        C.A. 323/80 - Iltith Ltd. v. Bank Leumi LeIsrael Ltd., 37 P.D. (Part II), 673.

[4]        C.A. 279, 280/53 - Levi v. Klinger et al. and counter-appeal, 10 P.D. 802; 23 P.E. 298.

[5]        C.A. 395/57 - Ila Hotels Co. Ltd. v. State of Israel, 22 P.D. (Part I), 20.

[6]        Cr.A. 515/75 - Katz v. State of Israel, 30 P.D. (part III), 673.

[7]   C.A. 679/76 - Sali, by her parents v. Estate of Karl Schaeffer et al. 32 P.D. (Part II), 785.

[8]        Cr.A. 595/83 - unpublished.

[9]        C.A. 160/62 - Levi et al. v. Municipality of Tel Aviv-Yaffo, 17 P.D. 1773.

[10]      C.A. 96/50 - Tsinki et al. v. V.A. Chayat et al. 5 P.D. 474; 4 P.E. 103.

 

Palestine judgment referred to:

 

[11]      C.A. 209/40 Friedman et al. v. Ali et al. 7 P.L.R. 569; (1940) S.C.J. 555.

 

English judgment referred to:

 

[12]      Norton V. Ellam (1837) 150 E.R. 839 (Ex).

[13]      Jackson v. Ogg (1859) 70 E.R. 476 (Ch.).

[14]      Re J. Brown's Estate Brown v. Brown (1893) 69 L. T. 12 (Ch.).

[15]      Bradford Old Bank v. Suttcliffe (1918) 2 K.B. 833 (C.A.).

[16]      Joachimson v. Swiss Bank Corporation (1912) 3 K.B. 110; (1921) All E.R.92 (C.A.).

[17]      Foley v. Hill (1848) 9 E.R. 1002 (H.L.).

[18]      Douglas v. Lloyd's Bank Ltd. [1929] 34 Com. Cas. 263.

[19]      Hartland v. Jukes (1863) L.J. Ex. 1052.

[20]      Parr's Banking Company v. Yates (1898) 2. Q.B. 460 (C.A.).

[21]      Lloyd's Bank Ltd. v. Margolis [1954] 1 All E.R. 734 (Ch.).

[22]      Carter v. Ring (1813) 170 E.R. 1445.

[23]      Winter Garden Theatre v. Millennium (1947) 2 All E.R. 331 (H.L.).

 

American judgment referred to:

[24]      Union Bank v. Knapp 15 Am. Dec. 181 (1825).

 

Scottish judgment referred to:

[25]      Macdonald v. North of Scotland Bank (1942) S.C. 369.

 

            Appeal from the judgment of the District Court of Tel Aviv -Yaffo (Judge D. Levin), dated October 8, 1980, in C.F.201/79. Appeal allowed (S. Levin, J., dissenting). The file was returned to the District Court for continuation of the hearing.

            A. Shavit for the Appellant.

            Y. Meron for the Respondent.

 

 

 

JUDGMENT

 

S. LEVIN, J.

 

1. On January 25, 1979, the Appellant, a company registered in England and a subsidiary of the Israel British Bank Ltd. , brought an action by way of summary procedure in the District Court of Tel Aviv -Yaffo against the estate of the late Walter Nathan Williams, represented by the interim administrators of the estate (the Respondent in this appeal). From the Statement of Claim we learn, that until his death on October 31, 1971, the deceased served as chairman of the board of directors of the Appellant company, and he held five accounts with the bank; on August 8, 1974, the Appellant company went into liquidation and the present action was brought by the liquidators.

            On August 8, 1974 (thus alleges paragraph 3(b) of the Statement of Claim), the state of the deceased's accounts with the Appellant company was as follows:

"(1) The deceased's no. 1 account showed a debit balance of B218,969;

"(2) The deceased's special shares account showed a debit balance of B176,031;

"(3) The deceased's no. 3 account showed a credit balance of B730.79;

"(4) The deceased's no. 4 account showed a credit balance of B151.85;

"(5) The deceased's policies account showed a credit balance of B1,975.75."

 

            Appended to the Statement of Claim were photostatic copies of the last two pages of account no. 1 and the last page of each of the other accounts.

            The Appellant company avers, in paragraph 3(d) of the Statement of Claim, that it set off the credit balances in accounts no. (3), (4) and (5) against the deceased's debit balance in accounts no. (1) and (2) and claimed from the Respondent the balance of B393,149.69, together with interest thereon.

            After rejecting another argument of the Respondent, that the Court lacked local jurisdiction, the District Court dismissed the action in limine on the ground that it was statute-barred; hence the present appeal.

 

2. The learned Relieving President (as he then was), decided that the cause of action was founded on overdrafts by the deceased before his death, together with the accumulated interest on the overdrawn sums, as from the date the accounts had become overdrawn and until the date of the bringing of the action. More than seven years had elapsed from the date of his demise (31.10.71) until action was brought (25.1.79), so that the allegation of limitation of action was well-founded. The Relieving President went on to state:

 

"There is no dispute - indeed, it is apparent from the bank documents appended to the Statement of Claim - that no withdrawals from the deceased's account took place after his death. It follows, therefore, that the last withdrawal from the deceased's accounts could have been made on the day he died, namely, October 31, 1971. That raises the question: when does the cause of action arise, where the subject-matter is an overdraft in a bank account? Counsel for the bank contends, that the cause of action arises on the date the bank demanded payment of the overdrawn amount, in this instance, on January 2, 1979. Counsel for the estate, on the other hand, rejects this view and submits, that the determining date is the day on which the overdraft appeared - and he is right.''

 

After reviewing the authorities cited to it, the District Court formed the opinion that, in the absence of any other specific agreement between the bank and the customer, the bank's right to sue for its money arose on the day the debit balance was created and, as from that time, "the period of limitation starts to run with respect to the debit balance created by the withdrawal." Accordingly, the action ought to be dismissed, in so far as it related to the capital amounts drawn by the deceased, and to the interest payments with which he had been debited, where the dates on which they had become due were more than seven years before the action was brought. The right to claim the interest, with which the accounts had been debited afterwards, had, indeed not become statute-barred, but the sums were so tiny, that the Relieving President assumed there was no point, from the Appellant company's point of view, in continuing to conduct the action "within the limits of the paltry sums of interest that had not yet become statute-barred." He, therefore, dismissed that part of the action summarily, too, but without prejudice to Appellant company's right to bring a separate action therefore.

 

3. In our Court, counsel for the Respondent rightly abandoned the contention that the court lacked local jurisdiction. So there remained but one question to be considered, namely, when is the bank's cause of action created, for the purposes of limitation, in so far as it relates to a debit balance in its customer's account: on the date of the demand for payment (in which case it is not statute-barred) or the date on which the debit balance is created (in which case the claim is statute-barred)? But before I turn to a discussion of the issue on its merits, I must first dispose of certain arguments submitted to us by the Appellant company, and to deal with one argument raised by the Respondent.

 

            (a) In paragraph 3(c) of the Statement of Claim, the Appellant company alleged, that "the deceased expressly and/or impliedly undertook to pay the Plaintiff company the balance of his debt in each of the accounts above stated, on demand." If it turned out, that there had been such an express agreement, the action would most certainly not be statute-barred and the Appellant company should be allowed to prove its factual allegation regarding the existence of an agreement; but in the course of his argument before us, counsel for the Appellant company waived his submission on that score, whereas his submission as to the existence of an implied agreement did not hinge on any particular facts, but rather on the relationship generally existing between a bank and its customer. It was not contended before us, that there was any legal significance in the fact, that the deceased served as chairman of the board of directors of the Appellant company; so the aforesaid issue regarding the date on which the cause of action arose, for the purpose of limitation of actions, remains to be decided by us in its general form.

 

            (b) In the course of the hearing before us, counsel for the Appellant raised the argument, that there had been a waiver on the part of the Respondent of the submission regarding limitation. That matter is not referred to in the learned Judge's judgment, but after judgment had been delivered, the Appellant company applied to have the court record amended (in Motion 7888/80) by the addition of a statement by counsel for the Respondent in the following terms:

 

"For the sake of good order I beg to note, that we are not alleging limitation of action, in so far as the claim could have become statute-barred on October 30, 1978, because we have an agreement to the effect that, with regard to every right of action available against the estate which might have become statute-barred, if at all, on October 30, 1978, the beginning of the period of limitation is postponed to February 1, 1979."

 

            The Court, with the consent of counsel for the Respondent, allowed the Application. On the strength of that it was argued, that the agreement revived the claim that had become statute-barred on October 30, 1978.

           

            Counsel for the Respondent explained to us that, at a certain stage of the proceedings, the possibility (which the Respondent denies) had been mooted of calculating the period of limitation from the date of the deceased's death. Counsel for the Respondent agreed, that if that proposition were indeed correct, the action had not become statute-barred, notwithstanding its having been filed some seven years and three months after the demise, and for that reason the above declaration had been made. After the aforementioned judgment had been given, the Appellant company thought that the Court had actually adopted that proposition and, in order to put the Appellant company's mind at rest, there had been no reason for counsel for the Respondent to refrain from consenting to the amendment, which reflected the actual situation. In point of fact - so counsel for the Respondent argued - the learned Relieving President had not regarded the date of death as the determining date, so the above-mentioned declaration and the agreement referred to therein are of no consequence in our deliberations. In my opinion, the Respondent is right. A perusal of paragraph 9 of the Notice of Appeal makes it quite clear, that the Appellant company, too, attached no importance to the aforementioned declaration, save in so far as it was referring to the Appellant company's interpretation of the District Court's view, namely, that it regarded the date of the deceased's demise as the appropriate date for determining when the period of limitation began to run; whereas when you read the judgment, it becomes quite clear, that the date of the demise was noted there only as the ultimate limit of the last possible withdrawal from the account and that, in the Court's opinion, the limitation started running on the day the debit balance came into existence. The Appellant company did not, in the District Court, dispute the argument that, if its cause of action arose with the creation of the debit balance, rather than with the demand for payment, then the action was statute-barred. In those circumstances the aforementioned allegation of waiver is without substance.

           

            (c) The appeal before us was at first pleaded orally. Counsel for the Appellant company addressed us orally and we then ordered that argument be completed in writing; the Respondent would reply to the Appellant company's submissions, and the latter would be entitled to respond with its own arguments. Only in the course of the Appellant company's rejoinder did a new submission appear, the substance of which is this: examination of the photostat copy of the second page of the no. (1) account shows that, on November 5, 1971 (that is to say, after the deceased's death), there appears a credit balance in the sum of [011]36.95. Details of that credit balance were noted thus; "CHO CL." Appellant company contends, that a credit balance puts a stop to the course of limitation. That argument must be rejected, for two reasons: first, it was not raised in the District Court or in the written propositions or in counsel's oral argument in this Court. It was an assumption accepted by both parties up to the latest presentation of the Appellant company's submissions, that any items in the account, registered therein after the demise, were irrelevant to the issue of limitation. The Respondent rightly applied to have this submission struck out of the Appellant company's argument, since counsel for the Respondent had had no opportunity of referring to that submission and replying to it; secondly, after we had determined, that the agreement referred to in the preceding paragraph was valueless in the present circumstances, as it only related to a certain assumption, that has proved to be without foundation, it is evident that the claim was brought after more than seven years had elapsed from the date when the above-mentioned credit balance had been registered so that, assuming the District Court was right in its general view of the law, the action had become statute-barred.

 

4. Counsel for the Respondent, for his part, argued before us, that the accepted case-law regarding the merging of the various items in a current account into the balance (C.A.251/62 [1]) does not apply to an account that is permanently overdrawn. In the case of such an account (so it was argued before us), the period of limitation should be calculated from the date on which each one of the withdrawals was made. For this submission, he relied on statements made in C.A.345/78 [2]. I find no support for that argument in that judgment. The issue of limitation of actions never arose there at all; all that judgment says is, that the act of debiting an account that is overdrawn does not constitute payment, unless the bank and the customer have otherwise agreed. There is even contradictory authority to the Appellant company's contention: see C.A.323/80 [3]. However, as will appear anon, this submission of the Respondent calls for no decision, since in the circumstances of the present case, the relevant debit balance came into existence more than seven years before the action was instituted.

 

            So we return to the original issue: when, for the purpose of limitation of actions, does the bank's cause of action against its customer arise, where it is based on a debit balance in a current account: from the date it comes into being or from the date of the demand for payment? In order to answer that question, I shall refer to three points, dealing with each in turn:

            (1) the relationship between lender and borrower generally, where the debt is payable on demand; (2) the relationship between a bank and its customer, when the account shows a credit balance; (3) the relationship between a bank and its customer, where the account is overdrawn.

 

5. The Relationship between Lender and Borrower generally, where the Debt is payable on Demand.

            (a) From time immemorial it has been the accepted principle of English law that, in the absence of agreement to the contrary, the cause of action on a debt payable on demand arises immediately on receipt of the loan by the borrower. In the case of Norton v. Ellam (1837) [12], Parke J. states (at page 840), that:

 

"The cause of action arises instantly on the loan."

 

            This was repeated by the court in the case of Jackson v. Ogg (1859) [13], at page 378. In both cases it was held, that the fact that the indebtedness under the loan included interest did not alter the date on which the cause of action was created. According to the principles laid down in both those judgments, the limitation of an action on a loan repayable on demand begins to run on the day the loan is granted. That rule applies equally to a note payable on demand in which, for that purpose, the period of limitation commences with the issue of the note (Y. Zussman, Law of Bills (Duff-Chen, 6th Edition, 5743-1983), p. 381; and cf Re J. Brown's Estate; Brown v. Brown (1983) [14].

            (b) As already noted, the lender and the borrower are at liberty to determine between them, expressly or impliedly, that the requirement of a demand is part of the cause of action. There are instances where the court is prepared to deduce from the circumstances surrounding a certain relationship, that the requirement of a demand is part of the cause of action. For example, it is assumed that a collateral undertaking, such as a guarantee or security for a debt, may not be enforced, unless preceded by a demand as part of the cause of action: Bradford OId Bank v. Sutcliffe (1918) [15]. However, even in that case, the rule applicable in those instances is subject to the interpretation of the express or implied intention of the parties to the transaction; see also, Re J. Brown's Estate aforesaid [14].

            (c) It follows from the foregoing, that when we speak of a debt on a loan repayable on demand, we may be referring to two distinct kinds of case: in the one case, the debt is due to be paid, as it were, "immediately"; in the other, the debt is due to be paid only after a demand has been addressed to the debtor. In the first case, the cause of action arises "immediately" on the granting of the loan; in the other case, the cause of action arises only after the presentation of the demand. In the first case, the claim becomes statute-barred seven years from the date the loan was granted, whilst in the other case, it becomes statute-barred seven years from the date of the demand.

            (d) An examination of the first kind of case mentioned raises a problem: if the loan is indeed due to be repaid "immediately," the borrower must return the loan to his creditor immediately upon receiving it. Since by law, a debtor must seek out his creditor, it would follow that he is not in fact entitled to receive the loan at all, being under an obligation to return it to his creditor on the spot. If he nevertheless receives the loan and does not return it "immediately," he is bound to compensate his creditor, under section 11(b) of the Contracts (Remedies for the Breach of Contract) Law, 5730-1970 (hereinafter called "the Remedies Law"). Such a result is obviously unacceptable and the parties' intention is that the borrower is not supposed to return the loan unless called upon to do so; and so long as the borrower is not called upon to return it, he is not expected to do so and there is, of course, no ground for charging him with compensatory interest. How can all that be reconciled with the proposition, that the cause of action arises with the receipt of the loan?

            Mr. Meron, for the Respondent, tried to compare the requirement of a demand, in the kind of case in question, to a notarial caution, such as was required before the Remedies Law, by the Ottoman Civil Procedure Law, and with respect to which it has been held that, although such caution had to be served as a preliminary step to a claim for damages for breach of contract, its service does not constitute a part of the cause of action for the purpose of limitation of actions: C.A.279,280/53 [4]. But that does not help us here, for while the notarial caution may not have constituted a part of the cause of action, it did serve as a prior condition to an action, within the meaning of that term in Rule 94 of the Civil Procedure Rules. 5723-1963; thus if the Defendant alleged in his Defence, that the notarial notice had not been served before action was brought, the claim would be dismissed, whereas in the kind of case we are dealing with here, the non-delivery of a demand does not cause the action to fail and the Statement of Claim may itself be regarded as the demand for this purpose.

            (e) The solution to this mystery, it would seem, is to be found in the recesses of ancient English law. In days of yore, monetary indebtedness was regarded as having been created by the receipt of the consideration, a quid pro quo, rather than by the promise to pay the debt. The cause of action arose, accordingly, immediately upon the granting of the loan; but it was generally agreed that in practice, the debtor would return the loan only on demand. So long as no demand was forthcoming, he was not expected to repay his debt, nor was he obliged to pay damages. The cause of action, for the purposes of limitation, commenced on the date of the receipt of the loan, but on the other hand, the demand did not constitute a prior condition to the institution of an action and even less a part of the cause of action (A. L. Corbin, On Contracts, (St. Paul, vol. 3A, 1960) p. 75. Thus in the Scottish judgment, delivered in the case of MacDonald v. North of Scotland Bank (1941) [25] (which departed from the English decision in the case of Joachimson v. Swiss Bank Corporation (1921) [16], which held that the presentation of a demand by the customer to the bank was a necessary ingredient of the cause of action for the refund of the monies standing to his credit in his account), it was hinted by Lord Cooper, that the forementioned rule of law was based on the ancient writ of indebitatus, in which a demand was required as part of the cause of action.

            (f) It is difficult to base the above rule, applying to the first kind of case, along with its component parts, on grounds of legal logic, just as it is difficult to regard it as being particularly consistent. As with many rules of common law, it was probably created in order to provide a solution to practical needs and, in the course of time, became a part of the case-law as a rule that no one bothered to question. Indeed, if the notarial caution has been described as a purely incidental part of the cause of action, the demand referred to could be called the incidental to the incidental part thereof. Whenever the legislature wanted to depart from the rule in order to provide that the cause of action on a debt payable on demand was created with the demand, it specifically said so: see, the Prescription and Limitation (Scotland) Act, 1973, and in England, sections 5 and 6 of the Limitation Act, 1960.

            Since the rule has been accepted in the world of commerce, that the period of limitation of a debt payable on demand is to be calculated from the date of the granting of the loan (whatever its sources may be), and in the absence of any legislative provision to the contrary, I see no reason to depart from it, even where we are referring in our country to a debt payable simply upon demand. In point of fact, we have not been asked by the parties in this appeal to do so.

           

6. The Relationship between a Bank and its Customer, when the Account shows a Credit Balance.

            The relationship between a bank and its customer has never lent itself to a precise definition within one of the recognized legal categories. When a customer deposits a sum of money with his banker, is there created between them a relationship of bailment or deposit? Is the bank considered to be the customer's trustee? Is the customer looked upon as one who has lent money to the bank? Halfway through the last century it was held, that the relationship between a bank and its customer, who deposits monies with it, is that of lender and borrower: Foley v. Hill (1848) [17]. We would seem, however, to be dealing with a more complex relationship: the bank is not obliged to seek out its creditor, the customer, and its obligation to return the loan does not extend beyond the branch in which the account is managed at the usual working hours. The bank may not refrain from honouring the customer's withdrawals without reasonable advance notice. The bank does not pay out except against the customer's written demand, while the customer, for his part, undertakes to behave with a reasonable degree of caution in giving written instructions, so that the bank is not misled and in order to avoid, as far as possible, the opportunity of forgery by others. The demand is an integral part of the customer's cause of action against the banker, so that the limitation starts running from the date of the demand and not from the date the credit balance comes into existence. It was so held in the above-mentioned Joachimson case [16] in 1921, a decision that has always been regarded in England as the locus classicus of banking law.

            Counsel for the Respondent, Mr. Meron, opened a frontal assault on that decision which, in his submission, is unsuited to modern developments in commercial life. That rule has not been adopted in Scotland (see, the Macdonald case [25]), and it is doubtful whether it applies in South Africa: D. V. Cowen, On the Law of Negotiable Instruments in South Africa (4th ed. by D. V. Cowen and L. Goring, 1966), p. 661. On the other hand, it applies to the United States: see A. H. Michie (ed.), on Banks and Banking (Charlotteville, vol. 5B, 1973), p. 126. I myself do not share that criticism, but whatever the position may be, that rule has been adopted and become so well-established in our country's case-law, that it seems to me that there is no way of altering it other than by legislation. Cf. C.A.251/62 [1], C.A.395/67 [5], Cr.A.515/75 [6], at p. 688, and C.A. 323/80 [3], at p. 679. One of Mr. Meron's arguments turns on those cases, where the account in question has been dormant for many years, and if the rule in Joachimson’s case [16] were applied, the bank would be obliged to preserve documents and records relating to the account for dozens of years, in fact, without any limitation of time. English case-law has found a way of overcoming such situations, by creating a presumption of fact, in the circumstances of a specific case, that after dozens of years of inactivity in an account, the bank's debt must be presumed to have been cleared off: Douglas v. Lloyds Bank (1929) [18].

            Mr. Meron relies on that judgment as proof of the unsatisfactory consequences of the Joachimson case [16], so much so, that the only way to overcome them was by creating a presumption of fact, as described above. But the Israeli legislator has intervened in this matter, perhaps unconsciously, and has restricted the effect of the decision in Joachimson [16] in relation to inactive accounts. Section 13B(a) of the Banking Ordinance, 1941, as amended in the Banking Ordinance Amendment (No. 15) Law, 5741-1981,provided as follows:

           

"A banking corporation shall endeavour to communicate with the owner of an inactive deposit soon after the due date for refunding the deposit; as regards a deposit to be refunded on demand, the due date for its refund shall be deemed to be the date on which the deposit became inactive."

            An inactive deposit was defined in section 2 of the Ordinance, as: "A deposit, whether in Israel or foreign currency, in respect of which ten months have elapsed since the instruction was received from the owner of the deposit."

           

            I have said, that the intervention of the legislature was perhaps unconscious, because a perusal of the Banking Ordinance Amendment (No. 14) Bill, 5741-1981, would seem to indicate, that the object of the amendment was to prevent the loss in value of inactive deposits rather than to restrict the application of the Joachimson rule: but the wording adopted had more far-reaching consequences. As stated above, I see no reason to depart from that rule and, in my opinion, the Respondent's arguments on this matter should be rejected.

           

7. The Relationship between a Bank and its Customer, where the Account is overdrawn.

            The Appellant company has argued before us in favour of a legal symmetry between the situation where the customer's account at the bank was in credit and that where it was overdrawn. The Appellant company further contended, that there was no support, both in the authorities and in professional literature, for the view that no distinction could be drawn between those two situations. Let us review the authorities and literature on this matter:

            (a) In the case of Hartland v. Jukes (1863) [19], the question arose as to when limitation begins to run with respect to a claim brought on a general guarantee, given by the guarantor of a debit balance in a debtor's account with a bank. Pollock J., delivering the judgment of the Court, held that the cause of action against the guarantor had not arisen at the time the debtor's debt had been created, but after the guarantor had been served with a demand. The action against the guarantor had not, therefore, become statute-barred. No one in that case disputed the view, that the principal debtor's debt had been created by the withdrawal.

            (b) In the case of Parr's Banking Company v. Yates (1898) [20], the Court departed from that rule, as far as the cause of action against the guarantor was concerned. Vaughan Williams J. held, that the right of action had been created with the appearance of each item of debit balance, and so both the principal debtor and the guarantor were entitled to benefit from the defence of limitation as from such date.

            (c) Similarly, in the Bradford Old Bank matter [15], already referred to, the defence of limitation, raised against a claim brought on a guarantee given to secure the debit balance on a current account, was considered. The Court held, that the demand does not usually constitute a part of the cause of action for the refund of the debt, but this does not apply in the case of a guarantee. In that case, the answer to the question, whether or not the demand constitutes part of the cause of action, depends on the construction of the document in question, although prima facie, a demand is required. As regards the guarantee under consideration there, the Court preferred the approach adopted by the Court in the Hartland Case [19] to the opinion expressed in the Parr's Banking Company Case [20] .

            In all three of those judgments it was not disputed, that the demand was not part of the bank's cause of action against its customer, where the claim was based on debit balances in the latter's account, so there is no substance in the Appellant company's submissions in this respect.

            (d) The Appellant company also placed reliance on a judgment given at first instance in England, namely, the matter of Lloyd's Bank Ltd. v. Margolis (1954) [21]. The facts in that case were these: a bank received from its customer a deed of mortgage on certain land to secure his overdraft in current account. The bank sought to foreclose on the mortgage and demanded payment of the debt, but it was met with the defence of limitation; if the determining date was the date of the overdrafts, the claim had become statute-barred, whereas if the date of the demand was the decisive factor, the defence ought to be rejected. The Court noted that the issue, whether the demand was part of the cause of action, was one of construction of the instrument in question and, in its opinion, the proper interpretation called for the service of a demand before action was brought. Upjohn J. also added the following remarks, at p. 738:

 

"In my judgment, where there is a relationship of banker and customer and the banker permits his customer to overdraw on the terms of entering into a legal charge which provides that the money which is then due or is thereafter to become due is to be paid "on demand", that means what it says. As between the customer and the banker, who are dealing on a running account, it seems to me impossible to assume that the bank were to be entitled to sue on the deed on the very day after it was executed without making a demand and giving the customer a reasonable time to pay. It is indeed, a nearby correlative case of that decided in Yoachimson v. Swiss Bank Corporation...

            In this case the agreement has provided quite clearly what is to be done before the bank can sue. They must demand the money."

 

            It is quite evident, that that statement relates to the construction of the document under discussion and that the court was disposed to insist upon a demand as part of the cause of action, because the document in question was by way of a security. The Court does not refer to the case where the issue is when does the cause of action generally arise in the relations between a bank and its customer, the latter's account being overdrawn and there is no document defining the relationship between them.

           

8. A review of the legal literature reveals, that the majority of scholars support the view negativing the application of the rule in Joachimson [16] to an overdrawn current account; see, for example, J. R. Paget, Law of Banking (London, 9th ed., by M. Megrah and F. R. Ryder, 1982), p. 79; T. G. Reeday, The Law Relating to Banking (London, 4th ed., 1980), pp. 47-48; H. P. Sheldon, The Practice and Law of Banking (London, 10th ed., 1972), p. 199; C. H. S. Preston and G. H. Newson, On Limitation of Action (London, 3rd. ed., 1953), p. 29, and also Cowen, supra, who notes that that is also the attitude in South Africa. Michie, too, in his monumental essay mentioned above, notes that in the United States, as well, the period of limitation with respect to a debt arising from a debit balance in a bank, is calculated from the date on which the debit balance is registered in the account. The sole authority on which the learned author relies to support his conclusion is to be found in a judgment, given in 1825 in the Commonwealth of Massachusetts, namely, Union Bank v. Knapp, (1825) [24], p. 181. I have had a look at that judgment and it seems, that the question of the meaning of the term "a debt payable on demand" was not in issue. Nevertheless, the Court took it for granted, that the overdrafts created an immediate indebtedness, so that the discussion turned primarily on the question of whether the indebtedness came into existence with each withdrawal or only with the latest debit balance in the account. The fact that no particular or additional judgments on this point have been delivered in the United States during the 150 years that have elapsed since the judgment would seem to indicate that that rule has been accepted without question in that State, which is one that boasts a highly developed banking system.

            The only author, to whom our attention has been drawn as holding the opposite view, namely, that favouring the Appellant company, is J. M. Holden, who in his book The Law and Practice of Banking (3rd. ed. , 1982), comments, at p. 41, that there exists an understanding between the bank and the customer, that the bank shall call in its debt by notice. The author comments, however, that the question is of little significance, as it is difficult to imagine a bank leaving an overdrawn account dormant for a long time without calling in its debt. Mr. Meron rightly drew our attention to the fact that, in his book, Law of Banking (London, 5th ed.), Lord R. S. T. Chorley calls Holden in aid, but nevertheless takes the view, that limitation starts running on the day the loan is granted (ibid., at p. 22). At the same time, the author notes there, (in footnote 4), that while there exist differences of opinion among scholars on this point, he prefers that of Grant, On Banking (7th ed.), p. 182, who favours the existence of a single rule with respect to a credit balance and debit balances in a customer's account with the bank.

 

9. If one adopts the assumption that, in the absence of an agreement to the contrary, the cause of action on a debt payable on demand arises with the creation of the debt, it is difficult to appreciate why it is necessary to distinguish between an ordinary creditor and one who happens to be a bank and to bestow on the latter privileges denied the ordinary creditor, the fact that, as a result of the decision in Joachimson [16], assymmetry has been created in the formation of the cause of action in various situations of credit and debit balances, need not deter us. Symmetry is an aesthetic concept rather than a legal one. In the Joachimson Case [16], the special reasons that led the Court to require the customer to serve a demand on the bank as a prior condition to the forming of a cause of action were explained. Those reasons do not exist where the customer's account is overdrawn, so there is nothing to prevent us reaching the opposite conclusion. In practice, I see no reason for preferring a bank, which is a creditor for a sum of money owed it by its customer on account of a debit balance in a current account, to any other creditor of a debt payable on demand.

            Even were I to consider the lex ferenda to be that contended for by the Appellant company, I would still not allow the appeal. The existing rule has been formulated and accepted by nearly everybody. As the learned author Holden, supra, has remarked, the number of instances where the question in issue before us is likely to arise is very small. If the existing rule is, indeed, so undesirable, let the legislature come and say so.

           

10. I have read my distinguished colleagues' opinions and I find myself unable to agree with their conclusions. Incidentally to a consideration of a comparatively limited issue of the relationship of a bank to its customer, whose account happens to be overdrawn, my distinguished colleagues feel justified in overturning a general rule of law concerning the relations between lender and borrower, which has become deeply rooted in the whole of the Anglo-Saxon world as well as in Israel - a rule. whereby the period of limitation, in the case of a debt payable on demand, commences on the day on which the debt is created, and not on the date of the demand. In the arguments presented to us that question was not raised as an issue in dispute, and from this Court there will go forth, ex curia as it were, a far-reaching rule of law, revolutionizing time-honoured arrangements, well-established in the world of commerce!

            Admittedly, the theoretical foundation for the present rule is somewhat shaky; but the greatness of the common law lay in its ability to formulate practical rules that have stood the test of time, even where the theoretical source was somewhat doubtful. The fact that the theoretical source of a legal norm is doubtful does not render the norm undesirable. Observe what may be the result of adopting the majority opinion: a lender, who has not demanded of the debtor payment of his debt for very many years, can start the period of limitation by presenting a demand, thereby obliging the lender to preserve the documents pertaining to his account almost indefinitely. Is that really what a normal lender and borrower had in mind with respect to a debt repayable on demand?

            In my judgment, this appeal should be dismissed.

           

M. BEN-PORAT, V-P: All the conditions, on which the creation of a certain obligation is made dependent, must, as we all know, be complied with before the other party to the contract becomes entitled to demand its performance. That is a fundamental rule of contract law which, in the absence of a flaw nullifying some term or other (such as one that contradicts a compelling rule of law), must be maintained by virtue of the principle, that freedom of contract and the will of the parties should be respected. Moreover, I accept the rule, that found its expression in Corbin's book (supra), whereby, when a party to a contract promises to perform a certain obligation (whatever it may be) "on demand" or "within a specified period of time after demand" it is reasonable to construe that as meaning, that an actual demand on the part of the creditor becomes an essential condition in the formation of the right to have that obligation performed. Only on delivery of the demand (besides the other conditions, if any), as agreed upon, does the creditor's cause of action crystallize, so that in any event, only then does the period of limitation of that right begin to run: section 6 of the Limitation Law, 5718-1958.

            However, as fully explained in the opinion of my distinguished colleague, S. Levin, J., for reasons that have their origin "in the recesses of ancient English law," a departure from the above rule has taken root in English law, with regard to a monetary obligation to be satisfied "on the demand of the creditor." In days of yore, a monetary obligation was considered to be the consequence of the receipt of consideration (a quid pro quo), rather than the outcome of a promise to perform the obligation. Following that line of thought, notwithstanding the condition that payment will, as stated, be made "on the demand of the creditor," it was held there, that the creditor's cause of action comes into being with the giving of "the consideration." In other words, the cause of action for payment of a monetary debt is formed even without a demand, so that in any case, the period of limitation of that right also commences at the same moment. Pursuing that same line of thought, the drawer of a promissory note or the acceptor of a bill of exchange, payable "upon demand," can be called upon to honour that note immediately, so that the cause of action comes into being with the issuing of the note and the period of limitation starts to run at the same time, the reason therefore being, that the holder of the note can in any case demand its payment immediately: Zussman, in his aforementioned book (and if the note has been deposited with a trustee - on the day the latter is bound to deliver it to the creditor, even if he has not done so: C.A.209/40 [11]).

            Within the framework of the exception, rightly described in legal literature as peculiar or extraordinary, there is an exception to the exception (which fits the rule) as regards the relationship between a bank and its customer, whose account shows a credit balance. In the leading judgment of Joachimson [16] it was held, that the bank (the borrower) need pay the customer (the lender) his money only after the latter's demand, and this approach has been adopted in Israel:

C.A.251/62 [1], at p. 77, C.A. 679/76 [7], at p. 786, and C.A.323/80 [3], at p. 679. On the other hand, the relationship between the bank and its customer, whose account is overdrawn, has remained within the scope of the extraordinary exception, although it is undisputed that that relationship, conversely, is also that of lender and borrower: C.A.395/67 [5], at p. 22, C.A.323/80 [3] aforesaid, at p. 679, and Cr.A.595/83 [8].

            A similar approach (though, it would seem, not a truly identical one) may, at first sight, be discerned from the summarization of the rule in the Restatement, Contracts, 262, cited in Corbin's book at p. 77, note 53. I quote the passage as it stands:

           

"Generally there can be no right of action on a contractual promise in terms conditional until all the facts stated as conditions have happened or been performed. But a peculiar rule prevails in regard to promises to pay money debts on demand. Such a promise to pay one's money debt is regarded as unconditional unless the parties by some more express language indicate a contrary intention, or unless usage as in the case of bank deposits prescribes a different rule. In other promises in terms conditional on demand, no duty of immediate performance arises without a demand, and even in such promises to pay one's own debt, interest is allowed as damages only from the making of a demand."

 

            We perceive, therefore, that the exception is described there as "peculiar." From the language of that passage, one cannot conclude what "money debts" are being referred to. It follows from the text (ibid. at pp. 76-77), that the exception applied mainly to negotiable instruments payable "upon demand," since with regards to those, the assumption is (as in the passage above quoted), that the words "on demand," standing on their own, do not reveal a genuine intention to make the maturing of the debt (as distinct from charging interest) conditional on an actual demand. Accordingly, an action may be brought on such an instrument without a prior demand, and there are some who regard the action as constituting the demand. A certain degree of astonishment on the part of the author is rightly felt when he says:

           

"The peculiarity of the case is that the action is not thought to be premature."

           

            With respect, I share that astonishment, even though, as regards the principal debtor on a note (the maker of the promissory note and the acceptor of a bill of exchange), that approach has been absorbed into our law (as shown in the authorities I have cited above). But I must straight away confess, that the logic of that rule has never been apparent to me. Let us assume that the same person signs a promissory note "on demand" in favour of one creditor (for instance, because there are no cheques left in his cheque-book) and a cheque to the order of another creditor, drawn on the bank where he holds a current account. As far as the cheque is concerned, at least, if the proper date of issue has been inscribed on it, there can be no doubt, that it is tantamount to a payment in cash, that is to say, that the intention is to pay the amount due immediately on its being presented to the bank. The same applies, in the example given above, to the promissory note, (unless some other condition, in addition to the "on demand," was introduced into the agreement between the parties). However, while the holder may sue on the note without previous demand, he may obviously sue on the cheque only if he has first of all presented it to the bank and it has been dishonoured. It is the dishonouring of the cheque that gives rise to the right to sue on it, so that it is presented to the bank a few weeks later, the cause of action will arise on the later date (if it is dishonoured), and the period of limitation also begins to run as from that date (see section 96(a) of the Bills of Exchange Ordinance [Revised Version]). One may wonder why the situation is different, where the debtor has (in the above example) given a promissory note payable "on demand," and the payee has taken it without demanding its payment on the spot; and where such demand is made only a few weeks later (as in the case of the holder of the cheque) and encounters a refusal, why that is not regarded as constituting the cause of action and the beginning of the period of limitation.

            But the negotiable instrument is not the central feature of our present deliberations, and we may leave the case-law to be pondered on some other time; it may well be that the present rule has taken such deep root, that the intervention of the legislature is needed to alter it.

            An identical exception was recognised in the United States with respect to an antecedent debt, that the debtor had promised to clear off "on demand": Corbin, supra at p. 77.

            But for our purposes, it is important to stress - if I have fully grasped the situation - that the exception extends, particularly in the United States, to an existing debt, by way of a quid pro quo, or an antecedent debt, accompanied by a condition, that it is to be paid "on demand," and without any embellishment designed to reveal the parties' intention beyond that expression. Such is the situation, for example, where the debtor has received from the creditor the goods he ordered and in return, has given the latter a promise to pay "on demand": see the illustration quoted in the Restatement, supra, in which the creditor "sells and delivers" to the purchaser the vehicle he has ordered and receives in return the debtor's promise to pay the purchase price "on demand."

            That, however, is not the case in point here, and I have found no contradictory case-law in Israel. In the matter in hand, the commercial transaction between the bank and its customer is one of the giving of a loan (by way of overdraft ) which - so it must be assumed - is in the interests of both parties. The retention of the money in the hands of the borrower, therefore, constitutes the subject-matter of the agreement, and if you deprive it of that character, you have emptied the contract of its contents and ignored its purpose. Indeed, in 51 Am. Jur. 2d. (Rochester and San Francisco) 697, we found that -

           

"...in many cases involving contracts for the payment of money on demand (most of them loan transactions) the view has been taken that actual demand was required and that the Statute could run merely from the time of demand."

 

(My emphasis - M.B.-P; and see the authorities cited in footnote 9, ibid.)

           

            Furthermore, it is noted in Corbin, supra at p. 77, note 55, and in the text immediately following, that in actions on the promise (that is to say, as distinct from the existing or antecedent debt as the cause of action), it has been held in several judgments, that the demand is an essential component, that must be pleaded and proved. Among the authorities, I have also found English cases: see, for example, Carter v. Ring (1813) [22] (where it was held, on the strength of the parties' intention, as indicated by the document, that what they had in mind was an actual demand).

 

            I want to stress, that the ancient exception I have been discussing hitherto is itself founded, as it were, on the intention attributed to the parties, whereby, the debt being presently existing or antecedent, the parties are not presumed to propose actually turning the demand, on which the undertaking to pay has, technically, been made dependent, into an integral part of the cause of action (as distinct from the basis for awarding interest). At the same time (and to my mind, this is a contradiction in terms), they admit in England, that the whole concept results from an approach long out of date. There is no doubt that the rule, under which a contract is construed in accordance with the presumed intention of the parties, was long ago adopted and has become deeply rooted in Israel, too (see, now, section 25(a) of the Contracts Law (General Part)). The intention is to be deduced from the contents of the contract and if it cannot be implied from it, then it is to be inferred from the circumstances. But as a test for determining intention nowadays, it is difficult to accept an ancient view that has become discredited. In the current reality of Israel, such an approach is a kind of alien concept, opposed to well-established principles, inter alia, the principle that the presumed intention of the parties to a contract is the determining factor. It is both lex lata and ferenda, whilst the ancient exception, described even in its native land as odd and puzzling, contradicts that test and the accepted policy in Israel, as I shall demonstrate anon. Accordingly, in my judgment, the aforementioned exception should be regarded as incompatible with the conditions in Israel, within the meaning of the proviso to Article 46 of the Palestine Order-in-Council, 1922. My view derives also from the fact, that the overriding principle of presumed intention has been absorbed, and rightly so, into our law, whereas the said exception (which is incompatible with that principle) ought to be rejected. The exception has not so far been adopted in our case-law, so that this is not a case that calls for the intervention of the legislature.

            I have already hinted, that we are dealing with a commercial loan transaction, and that it is the use of the loan monies in the hands of the lender against profits that the borrower enjoys, within the course of his business, from that use, as long as it lasts, that constitutes the subject-matter of the loan contract. The condition, whereby the repayment shall be "upon demand" (namely, the lender's demand), only enables him to bring the transaction to an end whenever he wishes. But as long as it is worthwhile, in his opinion, he may elect to let the transaction go on even for years on end, beyond the period of limitation (unless the borrower has returned the loan money on his own initiative). All that stands, in my view, in complete contradiction to an implied intention, is that there is an obligation to repay the loan immediately on its receipt. I see no point in distorting the intention ascribed to the parties, by relying on an old and outdated view, especially since even in the Anglo-Saxon world, the exception was not intended to apply to a commercial loan agreement between John Doe and Richard Roe, even though it is to be repaid "upon demand," as distinct from a present or antecedent monetary debt (see above).

            Furthermore, I am inclined to think (without deciding the matter), that the demand must be accompanied by the allotment of a reasonable time to perform the obligation, the length of time to be determined according to the circumstances of each given case. This does not mean, that the passage of time necessarily postpones the course of limitation or necessarily prevents the creation of the cause of action, but this follows, looking at it in the light of fair behaviour, that Israeli law requires of the parties to a contract (especially since the Contracts Law (General Part)). As the case in question preceded the Contracts Law (General Part), I propose to rely, for my opinion, on the case-law relating to an entirely different subject, which nevertheless has a bearing on the accepted general approach.

            It has long been held, that a person, who has given permission (or a "licence") to another to use his property (such as to enter upon his land for some purpose), even a permission customarily described as "bare," and who now wishes to revoke it, must give the licensee, as a sine qua non, notice of revocation with a reasonable period of time elapsing between that notification and the filing of the action. Otherwise (as has been decided - perhaps as an extraordinary step), the ground for eviction is incomplete: C.A. 160/62 [9], at p. 1779, and the authorities cited there. Moreover, if the permission was not "bare" only, but for a consideration, the notice had to state a reasonable extension of time (it was not enough that, in actual fact, the licensor allowed a reasonable time to elapse): see with respect to the distinction C.A. 96/50 [1], at p. 477, 479. Support for my line of thought, that receipt of consideration for the user (whether monetary or in land) is a matter that should be taken into account when construing intention, may be found in the English judgment concerning a licensee in Winter Garden Theatre v. Millenium (1947) [23], at p. 335 (in the judgment of Lord Simon).

            In my judgment, it is inconceivable that a borrower in a commercial transaction (and perhaps even in a loan granted as a favour) should not benefit from the same degree of consideration under Israeli law as a licence under a "bare" permission, as described.

            I should not be understood to imply, that the status of licensee still exists after the coming into force of the Leasing and Lending Law, 5731-1971 (hereinafter called "The Lending Law," a problem that we need not resolve in this appeal.

            Further support for my line of thought may be found in the provision contained in section 29(b) of the Lending Law whereby, if "the period of lending has not been agreed on or the parties have continued to maintain it after the expiration of the period agreed upon without fixing a new term, each party may bring the lending to an end by giving the other party notice a reasonable time in advance" (my emphasis - M. B-P). That is to say that, despite the fact that the licence to possess and use the property was granted without consideration (definition of "lending" in sec. 2b of the Lending Law), the legislator ensured that the borrower would not be evicted on the spot and that conduct towards him should be fair. I am aware that that Law is later than the period relevant to our case, but it is a continuation, or a kind of continuation, of the concept of the bare licence under the law that preceded it."

            In the same spirit, section 41 of the Contracts Law (General Part) provides, where there is no agreement on the date for the performance of a contractual obligation, that it is to be performed "a reasonable time after the contract has been concluded, on a date notified by the creditor to the debtor reasonably in advance" (my emphasis - M. B-P). (The proviso does not appear in section 9(a) of the Law of Sale, 5728-1968, as regards the date for the delivery of the commodity, not delivered immediately on the completion of the contract).

            But for our purposes, there suffices a demand on the part of the bank as an essential component for the creation of the cause of action against the customer.

            My opinion is, therefore, that the bank's action was not statute-barred and in this sense, the appeal ought to be allowed. The case should be returned to the District Court for trial on the merits. I would award costs against the Respondent in both Courts in the sum of IS. 500,000.-, linked from today and until actual payment.

 

S. NETANYAHU, J.: As my distinguished colleagues have explained, it is a long-established rule in common law that, for the purposes of limitation, the cause of action on a loan debt repayable on demand arises without a demand, immediately on the granting of the loan. Such is also the situation in the relationship between a bank and its customer, it being regarded as a relationship between lender and borrower, except that in this case, there is an exception to that rule, namely, the exception laid down in the Joachimson Case [16], to the effect that whenever the customer has a credit balance and the bank is the debtor, the period of limitation commences against the bank only with the date of the demand.

            The rule in the Joachimson Case [16] has been adopted in our case-law, too, as stated in my colleagues' opinions. As my colleague S. Levin, J. demonstrated, there exists an additional exception in the common law, in an action against guarantors, that there, too, the period of limitation starts to run only after the demand. In that respect, in our country, section 8 of the Guarantee Law, 5727-1967, applies, and this provides, that the creditor is in no way entitled to demand of the guarantor fulfilment of the guarantee, without first requiring the debtor to perform his obligation, save in the case of one of the three exceptions set out in that law.

            The parties before us do not dispute that rule. The dispute between them turns only on the issue, whether the exception to that rule, laid down in the Joachimson Case [16], ought also to apply to the action of a bank against its customer, whose account is overdrawn. Were the dispute limited to this alone, I should be inclined to adopt the view held by my colleague, S. Levin, J., that the ratio decidendi of that judgment necessitates distinguishing it from the circumstances arising in cases, where the bank is suing a customer, whose account is overdrawn.

            However I, too, am unhappy about that ancient rule and I, too, like my two colleagues, am dissatisfied with the degree of logic in making a loan debt repayable on demand, repayable immediately without the need for a demand for the purpose of the course of limitation. Had our case-law already absorbed such a rule, constituting an exception to the principle that no cause of action arises unless and until all the conditions for its creation have become crystallised, or were I convinced that it had become an accepted and established custom of bankers in our country, then I would accept it without demur. But as I have already remarked, in our law, it is precisely the exceptions to the rule (the rule in Joachimson's Case [16], as regards case-law, and as regards actions against guarantors, in the Guarantee Law), that are compatible with the proper principle, that have in fact been accepted. The rule itself has not been adopted in the case-law and it has no application here, save in the case of a principle debtor under a promissory note (as was explained by my colleague, the Vice-President). Nor have we heard from counsel for the Respondents any submission, that a departure therefrom would bring about a change in banking practice that would harm the banking business system.

            In view thereof and since that rule has not taken root in our country, even during the period when we were referred to the common law by virtue of Article 46 of the Palestine Order-in-Council, why should it have become acceptable without question and part of our law today, after we have ceased to be subject to the common law?

            Although the parties have not argued against it, there is no justification for our abetting in the absorption of this alien and outlandish concept into our legal system.

            I share the opinion of the Vice-President, that the appeal ought to be allowed and the case returned to the District Court for trial.

 

 

            Resolved by the majority, with S. Levin, J., dissenting, to allow the appeal, to reverse the judgment of the District Court and to return the file to the District Court to be tried on the merits. The Respondent will pay the costs of the appeal in both instances in the sum of IS. 500,000.-, linked to the date of the giving of this judgment.

 

Given this day, 27 Ellul 5744 (24.9.84).