Civil Case (Jerusalem) 71355-05-25 Moshe Gertner v. Gezel Weinroth - part 4

"The aspiration to achieve in the framework of arbitration a complete and comprehensive solution of the dispute will not be achieved if it is possible to thwart the arbitration by not incorporating a party that is inextricably connected to the dispute that is the subject of the arbitration or related to one of the parties subject to arbitration by virtue of an arbitration clause.  And there are quite a few examples of this: an heir, an estate administrator, a trustee in bankruptcy, a successor who is bound by the consent of the replacement, a guarantor, etc., provided that the party who is not a signatory to the arbitration agreement 'maintains a relationship of legal proximity (privity) with the litigant, whether as his successor or as someone who comes by virtue of him in another way whenever there is an identity of interests and representation between the two...'" And later on: "'...  There is another exception, in which anyone who was not formally a party to the agreement will also be considered to be connected to it.  This refers to someone who has a close interest, who took part in the litigation itself or whose case will be presented in the litigation.' Sometimes a party will be subject to arbitration even if it has not signed an arbitration agreement, if the intention is inferred from conduct or implied inference, sometimes by virtue of 'special proximity to the subject of the arbitration and to the parties to the arbitration'..."

86. In our case, Weinroth's heirs themselves explained, as stated above, in the framework of the proceedings conducted in the Family Court, which dealt with the relationship between the proceeding for the division of the estate and the arbitration proceeding that took place, that they "stepped into the 'shoes' of [the deceased - the undersigned] in all " They also explained that issues "... relating to the relationship between the Applicants and the deceased and/or his heirs and the theoretical right of the Applicants to certain rights in relation to the estate of the deceased, should be clarified in the framework of the arbitration proceeding", and that "the heirs step into the deceased's shoes for all intents and purposes, including with regard to the arbitration proceeding, and any matter arising from and involving the arbitration proceeding must be clarified in this framework" (emphases added).
87. Thus, in the proceeding that dealt with the division of the estate and the arbitration proceeding that took place, Weinroth's heirs presented that a rule involving the relationship between Gertner and the heirs was a matter for the arbitration proceeding. This is in support of the fact that the matter of the division of the estate or the disclosure of its details should not be discussed in a family court.  They also presented that they had stepped into the shoes of the deceased for all intents and purposes with regard to the arbitration proceeding, and that this meant that just as the arbitration proceeding was intended to end all the disputes in its affairs with the deceased, so it would be against them as well.  In addition, and at the same time, Weinroth's heirs also did not raise any objection to the arbitrator's decision that they would become a party in the proceeding, while rejecting their position that they had come only to "manage" him for the estate.  The District Court, which dealt with an appeal against the Family Court's ruling, also noted in these circumstances that investigations regarding the scope of the estate are a matter for the arbitration proceeding, which reflects its understanding of the matter of the claims of the Weinroth heirs (paragraph 12 at p.  8 of the judgment).
88. In this state of affairs, it is not possible to accept a claim from the heirs of Weinroth that the proceeding regarding the liability of the estate whose assets passed into their hands should in fact be conducted in two stages, and that the arbitration agreement and the arbitration should not be regarded as such that also applies to their personal liability by virtue of their being the heirs of the estate, or that they did not agree that this matter should be discussed in the arbitration proceeding. All this even if you conclude by saying that ordinarily the provision of section 4 of the Arbitration Law alone does not bring about such a result.
89. Another argument made by the Weinroth heirs is that the arbitrator's deviation from authority stems from the fact that the issue of their personal liability and the facts involved therein, including the division of the estate, did not arise from the pleadings in the arbitration. These pleadings were naturally submitted without such claims being included in them, and upon the death of the deceased they were not amended.  Thus, although as explained above, claims relating to personal liability of heirs to the debts of the estate involve additional claims and facts that must be clarified, including, as stated, the question of whether there are assets in the estate and whether they were divided (and to the extent that such claims are made, whether the value of the estate is less than the amount claimed).
90. The question is, however, whether since an arbitrator was authorized to hear a certain matter but this matter was not actually raised in the framework of the pleadings before him (and explicit or implied amendments that occurred during the proceeding), he is considered to have exceeded his authority. As explained in Civil Appeal 256/10 Arkadi Gaydamak v.  Yosef Troim (7 November 2011), despite the fact that there were different opinions in the past on this matter, in accordance with this judgment, in order to examine the question of when an arbitrator will be considered to be deviating from his authority, "the agreement of the parties as to the procedures that will apply in the litigation before the arbitrator must be examined and it must be deduced from them what procedural authority they have chosen to entrust to him" [emphasis in original]. 
91. In our case, the parties did not condition the provision of section 14 of the First Addendum to the Arbitration Law. Therefore, the arbitrator was not connected "...  in the laws of evidence or in the procedures used in the " In these circumstances, even if he ruled on a matter that was not included in the pleadings, and this matter will be discussed in the next chapter, it seems that this alone does not mean that he exceeded the authority given to him.
92. However, as detailed below, I am of the opinion that in summary, a flaw in the proceeding should be seen since the issue of the personal liability of the Weinroth heirs - although there is no impediment to seeing it as a matter that can fall under the arbitrator's jurisdiction - was not clearly argued before him in practice. This establishes grounds for intervening in the award also by virtue of other grounds for annulment inthe Arbitration Law.  In these circumstances, it is not necessary to decide whether there is also a cause for annulment by virtue of section 24(3) of the Arbitration Law for the same reasons, even though preventing the possibility of pleading may also amount to exceeding authority.  Similarly, since in any event, as detailed below, I find that the discussion of the personal liability of the Weinroth heirs should be returned to the arbitrator's decision, which is within his authority, as stated.

Grounds for cancellation by virtue of sections 24(4), 24(6) and 24(7) of the Arbitration Law

93. Weinroth's heirs argue, as stated, that they were not given a proper opportunity to argue their claims and present their evidence regarding the question of their personal liability as heirs, and therefore the judgment should be annulled by virtue of the grounds of annulment in section 24(4) of the Arbitration Law, and in the circumstances of the case, also 24(6) (failure to provide reasoning) and 24(7) (rulings not in accordance with the substantive law).
94. As explained above, the creditor has the burden of establishing a division of the estate in order to impose personal liability on the heirs. Given this state of affairs, it is also required that the claim should emerge that it contains a claim that the estate was divided.  The manner in which the matter must be argued naturally depends on the circumstances.  It is possible to describe situations in which it is clear from the context of the claim and/or its circumstances and/or the very fact that sums are being claimed from the heir personally, that the claim that the estate was divided is also included in the lawsuit filed.
95. In such a situation, if the heir disagrees that the estate was divided, or claims that even though the estate was divided, he is not liable for the amount of the claim (in whole or in part) in view of the value of the estate, he will have to argue in his defense, and if he does not argue, then he will not be held accountable in the matter, and he will have no choice but to complain about himself if he is personally liable for the amount claimed. In such a situation, and as explained above, to the extent that he does not claim the value of the estate, it is also possible that a situation will arise in which his charge will exceed the amount of the estate.
96. As far as the case at hand is concerned, it is in fact concerned with the question of whether a claim regarding the fact of the distribution of the estate to the heirs was included in the proceeding. Insofar as Gertner's claim is to be seen as including such a claim, then if the Weinroth heirs did not defend themselves against the extent of their personal liability, if because they did not dispute the execution of a division and/or did not argue about the value of the estate to the extent that the division was made, then they have nothing to blame but themselves, and in such a situation it cannot be claimed that they were not given an opportunity to argue in the matter (or that the arbitrator did not explain his decision, or a ruling not in accordance with the substantive law).  On the other hand, insofar as no claim was made in the first place regarding the division of the estate, the heirs of Weinroth did not in fact need to argue against a matter that was not claimed against them.  In such a situation, it appears that if the arbitrator's ruling on a matter in which the Weinroth heirs were not supposed to argue, then there may be grounds for annulment by virtue of the Arbitration Law.
97. In the circumstances of the case, I am of the opinion that on a general basis, and although there is some ambiguity in the matter, which may have been convenient for both parties, each for its own reasons, it cannot be said that a clear claim was raised by Gertner that the estate was divided, in a manner that required a response in this matter on the part of the Weinroth heirs.
98. The starting point in this matter is that there is no dispute that the original statement of claim filed by Gartner in the framework of the arbitration against Adv. Weinroth did not include a claim relating to the division of the estate, since at that time the matter was not relevant at all. Upon the deceased's death, and in accordance with the arbitrator's decision, Weinroth's heirs became the parties in the deceased's place.  However, the statement of claim was not amended at this stage, and therefore it is not possible to understand from it that in practice a claim was included in the proceeding regarding the division of the estate, and the personal responsibility of the heirs of Weinroth for the claim as a result.
99. In this regard, it should be noted that as explained by Sussman, Civil Procedure (1995) at p. 209, where a new litigant is attached in the circumstances of Regulation 38 to the old Regulations, which deals, inter alia, with the addition of an heir as was done in the present case, this may require the amendment of the claim so that it will be clear what the new defendant's interest in the proceeding is.  Such an amendment is made possible by the very permission to add the new litigant.  This was not done as stated in our case, with an explicit clarification that from the moment the deceased passed away, Gertner wishes to see the Weinroth heirs as those who are personally responsible for the claim in light of the division of the estate, i.e., a transition from a regime under section 126 of the Inheritance Law, to one under section 128
100. Gartner points out that the Wainroth heirs became litigants in the proceeding, which followed an application under Regulation 38 of the old Regulations, allowed the Weinroth heirs in accordance with Regulation 41(a) of the old Regulations "... to file another statement of claim stemming from the transfer of the rights to him." This is also learned from Civil Appeal 8602/12 Aviva Menachem v.  Ze'ev Golan (16 January 2013) ("the Golan Case").  According to Gertner, at this stage, the heirs of Weinroth should therefore raise their defense arguments as the heirs of the deceased, if they wished to do so, including regarding the division of the estate or its value, and since they did not do so, they have no choice but to complain about themselves for the fact that no company was formed on the matter, and no questions were raised regarding the division of the estate or its value as a condition for imposing personal liability on the heirs.
101. However, since the original statement of claim does not include a claim regarding the division of the estate, and it was not amended or updated with the addition of the heirs, it is not necessarily clear whether what was claimed in the framework of it at the time of the addition of the heirs as litigants, included from that time also an argument that the estate was divided, in a manner that establishes personal liability for them and requires the amendment of the defense in order to defend against it.
102. The ambiguity in this matter is sharpened in light of the fact that it is not at all clear whether the estate was already divided at the time when Weinroth's heirs were added as litigants, or at least because Gertner saw it as having been divided at that time, and sought to include this cause of action at that stage. Thus, in Grant's letter to the arbitrator dated November 26, 2019, in which they reported that their application for the appointment of an estate administrator had been rejected, and that an appeal had been filed, they stated that "the estate is supposed to be managed, as of this date, by the heirs of the deceased" (emphasis added).  In other words, even though at this stage the estate no longer had executors, Gertner still saw it as being managed, i.e., it had not yet been divided.  This, according to them, is also possible that it will once again be managed by an estate administrator if the appeal that was filed is accepted.
103. In fact, the matter continued even afterwards, since, as it appears from the appeal proceedings that were conducted around the decision not to appoint an executor of the estate, both in a district court and in the Supreme Court, and for a period of about a year after the Weinroth heirs were added as litigants, Gertner's argument in the framework of which was as stated above, that "it is forbidden to divide the assets of the estate before the conclusion of the investigation of the debt claim of the Gertner brothers against the estate" (emphasis in original) (paragraph 249 of the notice of appeal); and that "the delay in the distribution of the estate will not cause negligible harm, but will cause very significant damage to the respondents" (paragraph 7 at p. 6 of the District Court judgment in the appeal).  In other words, the starting point was ostensibly even at these stages, because the estate had not yet been divided, and at the very least, this was how it was possible to understand the matter.
104. Given a situation where, as of the date on which Weinroth's heirs were added to the proceeding, it could have been understood that Gertner still views the estate as having not yet been divided, and in any event they do not explicitly raise any other claim, there is a difficulty in reaching the conclusion that at the time of the addition of the Weinroth heirs as litigants in the proceeding, the pleadings arose, which, as stated in their original version, do not include such a claim, a clear claim that this is an estate that was divided. This means that it was actually claimed in the course of the proceeding that the heirs were personally liable for it.
105. It should also be noted that if Gertner believed at the time of joining the Weinroth heirs in the proceeding that the estate had already been divided, and that the arbitration proceeding was in fact also dealing with the personal liability of the heirs as a result of this, then the question may arise as to why, in fact, according to their approach, they were required to exhaust the appeal proceedings that were intended to prevent the division of the estate, after they realized that the Weinroth heirs did not raise defense arguments in the matter. According to Gartner's explanation, they conducted the proceedings for the appointment of an estate administrator in light of their concern that if the estate was divided, "it would not be possible in the future to collect the debts of the estate from the heir" (paragraph 289 of the notice of appeal).
106. However, since the Weinroth heirs did not raise a claim regarding the limitation of their liability as heirs, according to Gertner, their liability became unlimited. Prima facie, therefore, they did not need at that stage to exhaust the appeal process.  Their behavior can therefore indicate that at that stage no Gertner necessarily believed that the arbitration proceeding was already dealing with the personal liability of the Weinroth's heirs, and that it is therefore possible to learn from their alleged absence in the matter an acknowledgment of their personal responsibility for the estate's debts.
107. The aforesaid does not ignore the fact that it is very possible that the actual estate was divided very close to the date on which the court's decision was given that an estate administrator would not be appointed for it, and in any event, it is very difficult to assume that it was not distributed during the following years when the arbitration proceedings were conducted. This is inferred from the fact that the main argument of the Weinroth heirs against Gertner's request to appoint an executor of the estate was that this would delay the distribution of the estate, which would harm them.  The court, for its part, ruled in its decision that this infringement was not negligible, and saw this as one of the reasons why the request for the appointment of an estate administrator should not be granted.  Weinroth's heirs also clarified that they agree that for a period of 20 days from the time the executors of the estate, who were then in office, they will not act to divide the estate, in order to allow Gartner to submit any requests they wish to submit in the framework of the ongoing arbitration proceeding.  Hence, their intention was to act to divide it afterwards.
108. It stands to reason that those who demonstrated a clear desire to distribute the estate as quickly as possible, therefore did not wait long for this to be possible. However, the aforesaid does not change the conclusion that at least as of the date on which the Weinroth heirs were added as a party to the arbitration (December 22, 2019), it is not known whether the estate was already divided at that time; And what is more important is that as it emerges from the above sequence of events, such a claim was not included among Gartner's claims, and in fact, it emerges from what they claim that it is not at all clear whether this claim even occurred as of that date.
109. 00In this regard, I also accept the argument of the heirs of Weinroth, that the determining date for examining the question of whether the arbitration proceeding included a claim regarding the division of the estate, which it should defend against, is the date of the addition of the heirs of Weinroth as parties in the proceeding. Events that occurred afterwards cannot have an impact on the question of the companies in the file, unless the pleadings were clearly amended, or it was agreed to change the front on the matter, which has no basis, and is not even claimed.
110. 0For this reason, I also consider at the end of the day to be less important on this point to the fact that in the framework of the document in which Gartner prepared a summary for the new arbitrator (Orenstein) regarding the arbitration, they noted that the heirs of Weinroth must return to them the monies that were claimed from the deceased, or that in the concluding paragraphs of their summaries they argued that the heirs should be obligated jointly and severally for the amount of the claim. In standard paragraphs of this type, in my opinion, there is nothing to change the front of the claim, or to generalize within the framework of a cause of action of the type in question, to the extent that it was not part of it even without them.  This, even if, as noted above, statements of this kind, which came without the protest of the other party, strengthen the existence of estoppel on the part of the Weinroth's heirs with regard to the scope of the arbitrator's authority.
111. In practice, it seems that even Granter does not claim that the aforementioned paragraphs in and of themselves lay the basis for the personal liability of the heirs of Weinroth, but rather they see their existence as support for the fact that it was clear that the proceeding was conducted around the personal liability of the heirs of Weinroth. However, as analyzed above, it cannot be said that it is clear that this was the case at the time of the inclusion of Weinroth's heirs as litigants.
112. For similar reasons, I also do not see in the statements made by Arbitrator Goren during the hearing of October 24, 2019 that the division of the estate can lead to the establishment of a personal liability on the heirs, as a determination that this is the case. These words do indeed clarify that the arbitrator apparently considered himself authorized to also discuss the personal liability of the heirs; And likewise, when there was no objection regarding them - certainly after his decision was rendered, which showed that the Weinroth heirs did not enter the proceeding only in order to "manage" it - they reinforce the above conclusion that the arbitrator's authority existed to rule on this matter in the circumstances of the case; However, they certainly cannot be seen as a determination that this is the case, when at that stage the Weinroth heirs had not yet been added to the proceeding, analyzing the manner in which the matter was done and what emerges from it, as was done above.
113. I also do not accept Gertner's argument that even if at the time of the addition of the Weinroth heirs the estate has not yet been divided, this does not change it, and that even where an heir is sued on the basis of a factual situation in which the estate has not yet been divided (to the extent that it is determined that this was the case), he is not entitled to act to distribute it during the proceeding, and thus in effect thwart the claim against him, since after the judgment was rendered, Ya'ala argued that his responsibility as the heir to whom the estate was distributed should now be established.
114. It appears that where a claim has been filed before the estate has been divided, and therefore no claim is raised regarding the personal liability of the heirs, then if the creditor wishes to ensure that he will not be forced to conduct another proceeding regarding the personal liability of the heirs after its submission to the extent that it is divided in the meantime, the way for him to achieve this is by filing an application for a temporary order, which, if received, will prevent the distribution of the estate as long as the proceeding continues. This will prevent the need to conduct a separate proceeding against the heirs, to the extent that the estate is divided during the conduct of the proceeding.  Alternatively, the creditor may request to amend his claim while conducting the proceeding, to the extent that the estate was divided after it began, in order to include a personal cause of action against the heirs.  Needless to say, however, that it is naturally required that a claim be conducted against the heir before the distribution of the estate, that if he distributes the estate in the meantime, he will preserve the full documentation relating to the estate prior to its distribution, as well as with regard to the manner and manner in which it was distributed, when failure to do so may act against him on the issue of burdens of proof.
115. To the extent that an estate was indeed divided at the time of the proceeding, and the statement of claim was not amended to reflect this, it seems that in such a situation, it is indeed possible that the creditor will be required to initiate an additional proceeding against the heirs, insofar as they wish to claim that in light of the value of the estate that was distributed to them (and the burden of proving its value is on them), their liability is less than the amount awarded.
116. In support of their arguments, Gertner points to the judgment in the Golan case, in which the court explained that the heir must raise defense arguments stemming from the fact that he was sued as an heir for a debt of the deceased, and also pointed out that where an heir was added as a substitute for a party who died during the course of the proceeding, he can amend his defense (by virtue of Regulation 41(a) of the old regulations) and raise a claim regarding the value of the estate. As it emerges from the aforesaid judgment, since the heir did not act in this way, he has no one to blame but himself if he finds himself personally indebted, even in an amount that exceeds the value of the estate.  Hence, they say that when Weinroth's heirs were added to the proceeding, they should have amended their defense, insofar as they wanted to argue regarding the value of the estate.
117. I don't see things that way. The Golan case related to a burden that is not in dispute, as deriving from section 128(b) of the Inheritance Law, which applies to an heir to prove the value of the estate at the time of its distribution to him, and in order to limit his liability with respect to an amount that exceeds that.  In our case, however, the question is whether the claim raised an argument that the estate was divided, since as long as it was not divided, the heir should not prima facie establish its value as a claim intended to limit the extent of his personal liability in respect of it.
118. According to Gertner, where an heir is sued for debts of a testator, the burden is on him to claim that the estate has not yet been divided or with respect to the value of the estate, to the extent that it has been divided, to the extent that he wishes to limit his personal obligation. According to them, insofar as the heir does not do so, he is "at fault" for the fact that there was no division in the question of the division of the estate or its value, and he should not complain except about himself if, at the end of the day, he is personally liable for the debts of the estate, and even in an amount that exceeds them.  Thus, since there is no claim on his part in the matter, it is impossible to know that there is any dispute on his part regarding the division of the estate or its value.
119. This approach finds its expression, as it appears in the explanation given by the court, for example, in the Family Appeals Authority (Tel Aviv) 26138-08-20 A. v.  Z.A.  (1.11.2020) (leave to appeal was rejected, in the framework of the tax appeal 8058-20 Anonymous v.  Anonymous (23.11.2020); and see also Family Appeals Authority (Tel Aviv) 41083-08-21 L.L.V.  D.B.  (16.11.2021)).  The matter of the proceeding was a claim against heirs personally for a specified and defined sum, with the cause of action explained by the fact that they were the sole heirs of the deceased and hence they were liable for his obligations.  The court ruled that since the heirs did not claim that the estate was not divided into their hands or with regard to the value of the estate, they are unable to raise claims of this kind when they seek to exercise a judgment given against them in respect of the debt.  This is the case since all of the defense's arguments should have been interpreted in the statement of defense.
120. As explained above, it is certainly possible that the personal liability of the heir will arise from the statement of claim, which is a claim that is included in the claim that the testator's estate was distributed to the heir. Therefore, an heir who wishes to deny this must argue this in his statement of defense, whether by way of raising a claim that the estate was not distributed to him, or that its value is less than the amount of the claim against him.  However, in my opinion, this does not negate the need for the statement of claim to emerge from the outset that this is what was claimed against the heir, whether the matter is explicitly raised in the framework of the claim, or stems from what is stated therein.
121. Thus, for example, a review of the case law shows that where the parties did not address the question of the personal liability of the heirs during the proceeding, the court decided not to rule on it, but rather to postpone it to a separate proceeding. see, for example, Civil Case in Summary Proceedings (Division H) 23663-05-20 Rafi Shua v.  Taliar Tamam (August 2, 2023) ("Shua Case"); and Civil Case (Center) 384-07-09 Aryeh Cohen v.  Nat East Holdings Limited (July 27, 2015) ("Cohen Case").
122. In our case, as stated, this is a statement of claim that did not originally include a claim relating to the liability of the heirs. These were added later, but the statement of claim was not updated or amended, and in the circumstances of the matter - as analyzed above, I do not believe that the situation that was created was clearly such that the burden was placed on the heirs of Weinroth to deny a claim, which is not clear that it was raised at the time of their incorporation, and at least from the time when ambiguity was created on the matter, then in view of its implications, in the overall balance there is no room for it to act against them.
123. It would seem appropriate to explain the court's explanation of other municipal applications 8845/12 Ze'ev Rom v. Gad Zeevi (25 November 2014) (the "Rom case") regarding the need to provide clear and unsurprising details of the claims and grounds in the claim.  The same case was, inter alia, the question of the required detail regarding a claim of personal liability by virtue of a mission or lifting the veil, when in this regard the court noted that the claim requires the laying of a proper and comprehensive factual basis.  See, for this, the explanation of the Honorable Justice Hendel (para.  6) (the emphases below are not all in the original):

"...  Accepting a claim on the basis of lifting the veil or sending requires laying a proper and comprehensive factual basis ...  The matter is not limited to the evidentiary level, but also to the procedural level.  A plaintiff who bases his claim - even if only as an alternative - on the principles of lifting the veil, is required to state and detail the facts that in his opinion justify lifting the veil.  The same applies to a plaintiff who bases his claim on the foundations of the mission.  In other words, even if it is not necessary to name the explicit name - 'mission' or 'lifting the veil', all the relevant factual elements must be specified already in the statement of claim."