Fraud is the false presentation of a fact, knowing that it is false or without belief in its truth or out of frivolity, when the presenter does not care whether it is true or false, and with the intention that the misrepresentation will act on it; However, a claim for such representation may not be filed, unless it was intended to mislead the plaintiff, even misled him, and the plaintiff acted in accordance with it and thereby suffered pecuniary damage."
- On the basis of this provision, the case law held that the existence of fraud is contingent on the existence of five cumulative elements as follows (Civil Appeal 4181/22 Anonymous v. Anonymous, paragraph 13 of the opinion of Judge Grosskopf [Nevo] (May 19, 2024) (hereinafter: LA 4181/22); Civil Appeal 1206/16 Samuel Diamond Company – Rosenbaum (1992) Ltd. v. State of Israel – Ministry of Industry, Trade and Labor, para. 27 [Nevo] (October 9, 2018); Civil Appeal 3823/13 SF Wing Overseas Real Estate Investments Ltd. v. Yaniv, para. 25 [Nevo] (01.03.2016) (hereinafter: SF Wing case); The Dark Matter, in paragraph 35):
(a) False representation;
(b) Lack of faith in the truthfulness of the representation;
(c) the intention that the representative will be misled and act in reliance on the representation;
(d) The act of the representative on the basis of the representation;
(e) Pecuniary damage caused to the representative as a result of the representation.
- With regard to the first element, which deals with the very existence of a false representation, it has been held in the past that "even partial non-disclosure, or partial disclosure, which is in fact intended to conceal material parts of the truth" – may fulfill this element (Dark Matter, at para. 38; Ada Bar-Shira, "The Deception" within the Law of Torts – The Miscellaneous Torts 9 (Gad Tedeschi, ed. 1995) (hereinafter: Bar-Shira)). In addition, the false representation may be made orally, in conduct and even in silence, when there is a duty to provide any information (Amos Herman Torts Law 93 (2nd edition 2020) (hereinafter: Herman); Tzipora Cohen Shareholders in the Company – Claims Rights and Remedies – Part III 121-122 (2nd Edition 2010) (hereinafter: Cohen – Shareholders in the Company)). There is also no requirement that the representation be presented by the wrongdoer directly, and thus it is possible that it be transferred to the representative indirectly (Bar-Shira, at page 13). It should also be said that similarly, in the literature there has been discussion in the past the possibility that it will be possible to view a person who has adopted a false representation of himself as someone who has this element in relation to him (ibid., at pp. 9-10).
- It should be emphasized that, as a rule, we are dealing with a representation relating to a factual situation. At the same time, a representation of an intention to do something in the future, when the presenter does not intend to do it, is also considered a false representation (Civil Appeal 614/84 Sapir v. Eshed, IsrSC 41(2) 225, 239-240 (1987); Cohen – Shareholders in the Company, on page 122; Bar-Shira, on page 10). This is the case, for example, when there is no practical feasibility for the existence of a contractual obligation that he has assumed on himself (Civil Appeal 1569/93 Maya v. Penford (Israel) Ltd., IsrSC 48(5) 705, 743 (1994)).
- The discussion of the second element mentioned above will be done concisely, while it is not in dispute in our case. Thus, it should be noted that in order for it to exist, it is required, as a rule, to prove a subjective lack of faith as to the truth of the representation (Bar-Shira, at page 12). At the same time, even when the exhibitor subjectively believed in the truthfulness of the representation, it will be possible, in appropriate cases, to impose legal liability on him by virtue of the tort of negligence (Civil Appeal 666/09 Israel Discount Bank Ltd. v. Maariv – Modiin Publishing Ltd., para. 12 [Nevo] (July 19, 2011); Herman, pp. 93-94).
- In addition, the tort of fraud also requires the existence of a mental state of intent, in the sense that the presenter intended to cause the representative to believe in the truthfulness of the representation and to act in accordance with it (element C above) (Dark Matter, at paragraph 42). However, it does not matter whether the presenter's motive was malicious or not, but all that is required is such an intention, in a very narrow sense (Bar-Shira, p. 12). It should also be emphasized that unlike the tort of negligence, it is not necessary to point to the existence of a "close relationship" between the presenter and the representative (Herman, at p. 93).
- The existence of fraud is also conditional on the fact that the misrepresentation caused the injured party pecuniary damage (Element E above) (LA 4181/22, at paragraph 15 of the opinion of Justice Grosskopf); The Dark Matter, at paragraph 46). In addition, the fourth condition mentioned above, according to which it must be pointed out that the injured party acted on the basis of the representation, is nothing more than a requirement for a causal connection between the said damage and the presentation of the false representation (Appel case, at paragraph 44; Bar-Shira, on page 14). In this context, it has been held in the past that the fact that the fraudster could have disclosed about the fraud does not sever the causal link, and similarly, the false representation is not required to be the sole cause of his conduct, but must be one of these factors (Apple, at paragraph 45; Cohen – Shareholders in the Company, on page 123; Bar-Shira, on page 15).
- At the same time, it should be emphasized that in view of the fact that the tort of fraud entails a particularly severe shade of guilt, this Court has ruled more than once that the burden of proving its foundations will be heavier than the burden required in a "regular" civil action (see, for example: LA 4181/22, at paragraph 13 of the opinion of Justice Grosskopf; Yaakov Kedmi on the Evidence – Part Four – The Law in the Light of Case Law 1778 (Combined and Updated Edition 2009)).
- I have also found that although the fraud is routinely based on contractual relations, it is an independent tort, which is not necessarily contingent on the existence of such a relationship, or in the broader sense, on any legal relationship between the parties ( SF Wing, at paragraph 24; Bar-Shira, on page 7).
From the general to the individual
- On the basis of these rules, we will now turn to examine the arguments of the parties with respect to the elements of the tort of fraud in this case. From the description of the above, it emerges that the main dispute in our case relates to elements A, D and E, as detailed by me. In this context, Deri claimed that he was not obligated to disclose to Hymanuta that Goldman was demanding consideration of NIS 35 per square meter for the land, and therefore he did not present it with a fraudulent representation. It was also argued, as stated, that in any event, no damage was caused to the company and that there is no causal connection.
- At the outset, it should be clarified that the fact that Deri also made false representations to his clients, and it is even possible that he breached his duties to them (see, for example: section 8 of the Realtors Law) – does not exempt him from liability for misrepresentations that he made towards Himanuta, even in the very same context.
Likewise, the absence of a relationship of trust between him and Himanuta does not do so, as he claims; since, as stated above, we are dealing with a tort tort, which not only is not contingent on the existence of a relationship of trust, but it is also not dependent on the existence of a relationship of "closeness" (see: paragraph 136 above). In other words, similar to the duty of good faith set forth in section 12 of the Contracts Law, the very presentation of false representation and the existence of the other elements of the tort – even without a contract being concluded between the parties and even in the absence of a prior intention to enter into a contract – are capable of confiding a cause of action in tort (compare: D.N. 7/81 Fender – Open and Building Investment Company Ltd. v. Castro, IsrSC 37(4) 673 (1983); Oren Schwartz, "Angel, Man or Wolf: On Good Faith in Contract Negotiations," 75 Years of Independence in Law 339, 341 (Dafna Barak-Erez, ed. 2023)). As stated, although this is a tort that in most cases is based on a contractual relationship, it is not a condition required for its foundations to exist.