The possible argument that duties should be imposed on the board of directors in the absence of procedures or an orderly plan designed to prevent or reduce violations of the law in the companies' main area of activity comes into the framework of the discussion. There is no dispute that a negative by-product of the companies' activities – the risk of damage to the environment and the realization of the risk. It would therefore be appropriate to examine what the officers of the companies did in this regard, what resources were invested and what was done in light of the "red flags" raised by the authorities. Carmel's argument that it is not enough that sanctions were imposed on the companies for harming an environment that is acceptable to me, and therefore in order to establish liability, it will be necessary to examine the circumstances related to these violations, and most importantly – what was the attitude of the officers to the violations (and it will not be possible to ignore in due course of time the observations that may have implications between a number of situations: making an active decision that the board of directors must act in a certain way; dragging one's feet from making a decision – whether consciously or unconsciously – and the relationship between these situations and the rule of business judgment; and in general – to the limits of the directors' responsibility).
In short, these are all issues that this is not the stage to decide, and it certainly should not be done in isolation from the set of facts related to the circumstances of the case before us.
- The application for approval submitted by the Applicant includes an orderly argument, which cannot be ruled out in preliminary motion, whereby the officers did not set a policy, did not supervise the implementation of a policy outline, and did not allocate appropriate resources to ensure its existence (see, inter alia, paragraphs 3, 4, 64, 69 and 70 of the motion for approval). I do not accept the argument that no evidentiary basis has been laid for these claims. In my view, an infrastructure was laid that would at least allow the request for summary disposal to be successful. In her application, the Applicant detailed a number of data sets, including, inter alia: details regarding the severity of the sanctions imposed and the circumstances of their imposition, disclosure of the officers and information regarding the sanctions that were imposed, the business activities of the companies operating in a field that carries risks to harm the environment, the gradual enforcement procedures carried out by the authorities, which included sending alerts and obtaining and discussing with the companies (see paragraphs 64-81 of the application and the appendices attached). It would therefore be a premature step, and even too hasty, to discuss the possibility of dismissing the application without conducting an inquiry as to the fulfillment of the duties of the officers of the companies individually, after discussing the limits of their liability conceptually in connection with the lively discussion in case law and among the legal community in Israel on these issues. Both the general questions and the specific questions are weighty questions with significant broad implications, which are not at all suitable for discussion in the framework of a motion for summary dismissal.
- Additional arguments raised by Carmel are related to the fact that the application for approval embodies multiple derivative claims, and in this case a double derivative claim, given the existence of a single link in the chain between the parent company Bazan and Carmel and Gadiv, both of which are subsidiaries. In the judgment given in LCA 2903/13 Intercolony Investments Ltd. Shkedi [Nevo] (August 27, 2014) (hereinafter: the Intercolony case), the Supreme Court recognized the possibility of filing a "multiple derivative claim", i.e., the right of a shareholder in a parent company to file a claim on behalf of a company that is located down the chain of holdings, a subsidiary or even a granddaughter company, against a third party (in this case the defendants are the officers; a separate question that may arise – officers of which company? Are the defendants officers of the parent company or the subsidiary on whose behalf the plaintiff is sought? However, this issue relates to the obligation of "cross-supervision" in the cluster of companies, and as we will see below, the discussion of the question is not required in this case).
It should be noted that one of the conditions required for recognition of the right of the shareholder in the parent company to file a claim on behalf of the companies down the chain of holdings is the existence of a "chain of control". In the Intercolony case, the question of what is the test for determining the existence of control was discussed. In the case before us, there is no need to address this issue, since there can be no dispute that Carmel and Gadiv are fully controlled by BAZAN, which holds 100% of the shares of each of the subsidiaries, and we are therefore dealing with a simple situation – a situation of wholly-owned subsidiaries (Intercolony case, paragraph 47 of the judgment of the Honorable Justice Naor; for more on this matter, see: Roy Sasson, "Multiple Derivative Claims: A Critical Look at the Test of Control," Mishpatim on Site 12, 229 (2019)).