Israeli Law
- The question of the liability of a third party involved in a breach of fiduciary duty has not been discussed in depth in the case law of the courts in Israel, both in the general context and in the context of officers of the corporation. In the meantime, this possibility was mentioned in a side note in the judgment of this Court inA. 3506/13 Habi v. State of Israel, paragraph 220 [Nevo] (January 12, 2016)) and in C.C. (Central District of Lod) 10538-02-13 The Success of the Consumer Movement for the Promotion of a Fair Economic Company v. El Al Israel Airlines Ltd. [Nevo] (February 3, 2016), where Justice Grosskopf noted that "There may be situations in which third parties bear liability due to their involvement in a breach of a duty of confidentiality or a duty of trust [...] but in order to impose such a liability, an appropriate evidentiary basis is required, which indicates knowledge and involvement" (ibid., at paragraph 17) (emphasis added – 8:20). Moreover, based on the doctrines that exist in common law, Justice R. Ronen granted a motion to certify a derivative action, which was filed, inter alia, against a controlling shareholder who was involved in a breach of the duties of officers – as will be detailed in more detail below. And even recently, my colleague Justice Y. Kasher addressed the question of the liability of a third party who was aware of a breach of the fiduciary duty of the opposing party's lawyers, in light of section 14 of the Trust Law. Without deciding on this question, my colleague ruled that he shares the position expressed in the literature that there is room to expand the application of the section to any case in which a third party knows, or should have known, of a breach of this duty of trust (Civil Appeal 3640/22 Cohen and Ashlagi v. Buchman, at paragraph 62 ([Nevo] 01.09.2024)).
- In any event, the responsibility of the foreigner who intervenes in contractual and fiduciary relations is based, in essence, on a number of provisions of the law. First, Section 14 of the Trust Law, 5739-1979 (hereinafter: the Trust Law), states that:
"Cancellation of actions
- An action that was taken in breach of the fiduciary duty and the third party knew or should have known about the breach, or was done without compensation, the court may cancel it, and the third party will be liable and liable for the failure of a fiduciary; knowledge of the existence of the fiduciary duty does not merely constitute knowledge of the breach of fiduciary duty" (emphases added – H. 20).
Similarly, Section 9 of the Mission Law, 5725-1965 (hereinafter: the Shlichut Law), states that: