ISRAEL Law and Practice Contributed by: Yitzhak Yaari, Chen, Yaari, Vaki & Co.
1. Fraud Claims 1.1 General Characteristics of Fraud Claims There are many judgments in Israeli case law relat - ing to acts of fraud, including serious fraud, bribery, forgery and theft, and less extreme cases such as misrepresentations or breaches of fiduciary duties (of corporate officers, custodians, trustees, etc). Some - one who is injured by an act of fraud is entitled to relief under Israeli law, according to the general approach of Israeli law that “where there is a right, there is also a remedy” (ubi ius ibi remedium). The specific cause of action can be found in various statutes, whether general ones such as the Torts Ordinance, the Con - tracts Law or the Unjust Enrichment Law, or specific legislative frameworks such as the Companies Law, the Securities Law, the Agency Law, the Trust Law, the Mutual Trust Law, etc. These lawsuits, in which the plaintiff alleges fraud, misrepresentation, malice or undue influence, require a particularly high standard of proof that exceeds the one required in an ordinary civil claim (although not the standard of proof of beyond all reasonable doubt, which is required in criminal proceedings). Therefore, these claims are often filed after the defendant has already been convicted in a criminal proceeding: under Section 42A of the Evidence Ordinance, the findings and conclusions of a final criminal judgment convicting a defendant will be admissible in a civil trial as prima facie evidence of the matters determined. This eliminates the need to re-establish the defend - ant’s liability. As a rule, and wherever possible, it is recommended that clients who have fallen victim to fraud file civil proceedings before criminal proceed - ings are commenced in order to secure access to the fraudster’s assets and recover from them before they are seized by law enforcement authorities. 1.2 Causes of Action After Receipt of a Bribe The crime of bribery is regarded as one of the most serious economic crimes and has been described by the Supreme Court as “the worst crime that corrupts the integrity of the civil service.” There are many civil causes of action that are available to a company when one of its officers accepts a bribe: the torts stated in the Torts Ordinance, namely fraud, theft and neg - ligence; breaches of fiduciary duties and statutory
duties, and unjust enrichment. According to the case law of the Supreme Court, “It is self-evident that the court will not be sympathetic to someone who takes a bribe, not for personal reasons but for reasons in the public interest and public ethics… It is therefore natural that the courts will also treat someone who gave a bribe severely in a civil proceeding filed against him and make it as easy as possible for the plaintiff to prove his damage” (CA 711/72 Naftali Meyer v Jewish Agency for Israel [1974] IsrSC 28 (1) 393, 402). Moreover, someone who has been injured by a bribe is entitled to sue the person who received a bribe for the amount that they received, even without proving that the plaintiff suffered damage, based on the prin - ciple that “no wrongdoer should be allowed to profit from his own wrongdoing.” Thus, for example, in one case, the State filed a civil lawsuit against a person who was convicted of taking bribes in return for infor - mation that came into his possession in the course of carrying out his duties (advance information about the making of surprise inspections). In that case, the Supreme Court held that the defendant enriched him - self at the State’s expense and therefore could be held liable under unjust enrichment law. However, it was also held that even if the defendant had not enriched himself at the State’s expense, he could be held liable under the principle that no wrongdoer should profit from their own wrongdoing. Another basis for holding someone who took a bribe liable is the law of fiduciary duties. The law recog - nises that in certain cases a person has a fiduciary duty towards others. This is the case in the relation - ship between an agent and their principal, between a manager and the corporation, between a trustee and a beneficiary, and other situations in which the inter - ests of one person have been entrusted to another. When someone breaches a fiduciary duty, they may be deprived of the profit they made by breaching the duty, and the profit may be transferred to the person to whom they owed a fiduciary duty. 1.3 Claims Against Parties Who Assist or Facilitate Fraudulent Acts Since there are causes of action in tort against the fraudster, there is nothing to prevent suing anyone who aided them in the act of fraud. The liability of
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