Civil Case (Tel Aviv) 29231-01-23 Gideon Alis vs. Miri Zilberman - part 6

A: Look, it was sent to Shlomit and we're as writers as if in CC, so I assumed that Shlomit would take care of these things.

The Honorable Judge: You said to Shlomit - listen, I've already given it all, what are they confusing the mind?

A: Maybe I thought there were other things that were missing, I didn't understand these things that much, so maybe I thought at the time that there were more documents.

The Honorable Judge: Because if the Speaking of Fishy, the fact that you didn't inform the attorney back - listen, we're in contact with the Tax Authority, everything is being handled, it's also a kind of fishy.  Why didn't you announce?

A: (Pondering)

Adv. Lustgarten: I understand that the witness has no answer, I move on to the next question.

The Honorable Judge: Yes."

55. Moreover, it appears from the totality of the evidence that the defendant's conduct included a quick and urgent action to provide information to the Tax Authority after receiving the email from the plaintiff, without an in-depth examination or sufficient consultation, as discussed at length above (see paragraphs 32-33 of this judgment). I did not find it acceptable to accept the defendant's argument that what she had in mind was a sincere attempt to bring about the payment of real tax, since in such a state of affairs she would have conducted a preliminary examination, based her claims on verified data, and only then would she have provided the information to the CCC if not earlier or at the same time to the plaintiffs' attorney.  The fact that the information was provided without such an examination, along with the fact that the defendant herself insisted that she is a real estate appraiser who knows how such assessments are carried out in practice.  Moreover, a real estate appraiser is not allowed to give an opinion without a personal examination of the property (Regulation 1(3) of the Real Estate Appraisers (Professional Ethics) Regulations, 5726-1966), must adhere to the rules and procedures of the profession (Regulation 1(1) of the aforementioned regulations), and the assessment report must include minimal details including a permit to visit the property (Regulation 1(16) and the addendum to the aforementioned regulations).  The defendant clarified that in providing the information and assessments, she did not act as a person who provided a professional opinion.  It can be assumed that the defendant is well aware that the breach of these duties amounts to a disciplinary offense of serious negligence in the performance of a position (section 16(5) of the Real Estate Appraisers Law, 5761-2001 or conduct that is inappropriate for the profession - section 16(1) of the aforementioned law) (see also Civil Appeal 5302/93 Bank Massad in Tax Appeal v.  Levitt, 51(4) 591 (1997), at para.  9: "It may be more desirable to adopt the summary of the laws in Israel on this issue, as it appears in Dr.    Porat's article "The Law of Torts" [16].  In section 46.10 (at p.  326) of the said work, the aforesaid rulings are summarized as follows: "...The liability of the gesture of opinion under the tort of negligence arises if he expressed his opinion in his field of expertise (or in the field in which he purported to be an expert); If he should have known that the recipient of the opinion would rely on it; if the recipient of the opinion had indeed relied on it in such a reasonable manner and as a result he suffered damage; if an interim examination of the opinion was not expected before relying on it; and of course - if the indication of the opinion was unreasonable given the expertise of the opinion giver.  When the gesture of opinion has access to information that the recipient of the opinion does not have, the tendency to impose tortious liability on the former will increase."
56. It should be clarified that the aforesaid does not constitute evidence of the defendant's conduct as having provided a professional appraisal opinion.  However, all of this shows that the defendant is a professional in the field of appraisals, at the very least she turned a blind eye to the inaccuracies in the information she provided.  Both with regard to the nature of the information and with regard to the fact that the information was provided directly to the CCC when it was not asked to do so.  The position of Ms. Arza Ben-Ami, the other director, who believed that it was right not to act in this manner and even objected to it (see: at pp.  54-55 of the protégé), is also an indication that motives of sincere concern regarding true reports in relation to the company do not necessarily give rise to an appeal to the CCC in this context.  Finally, the existence of a murky relationship and legal disputes between the parties is another factor that must be taken into account when examining the defendant's actions, as well as the fact that the defendant itself intended to purchase the shares that are the subject of the transaction and even determined at the time that it tried, that the value of ILS 6 million for one-sixth of the shares (the amount paid by the plaintiffs) seemed to her to be a fair price, and not an extremely low value.  As emerged from her notice to the CCC (see p.  100 of the protégé).  The sum of these indications, and especially their accumulation, indicates that the defendant did not conduct himself in the mental element of good faith required in the framework of his duties as a fiduciary.

Damage Independence

57. The duty of care has developed as a kind of branch of tort law, based on an objective standard of conduct that requires the officer, in essence, not to be negligent in his duties (see: sections 252(a) and 253 of the Companies Law), and as a result, the cause of action for breach of the duty of care claims the existence of damage and a causal connection in the sense discussed earlier.
58. In contrast, the purpose of fiduciary duties is to protect the integrity of the fiduciary's office, and therefore the fiduciary duty focuses on the self-enrichment of the violator and his subjective motive to derive personal profit from the action (Civil Appeal 7735/14 Radnikov v. Elovitch (Nevo, December 28, 2016),  48-49).  Among other things, it was explained in the Buchbinder v.  Receiver ruling that damage is not a basis for liability for a breach of fiduciary duty (see: Civil Appeal 610/94 Buchbinder et al.  v.  Official Receiver in his capacity as liquidator of the Bank of North America, IsrSC 57(4) 289, 334 (2003)); Civil Appeal 1137/23 Deri v.  The Jewish National Fund (Nevo, May 5, 2025), paragraphs 101-102 of the judgment of Justice Kabub; Civil Case (Economic) 25839-01-19 Ben Yehuda v.  Vitner (Nevo 16.8.2021; The words of the Honorable President at the time, Justice Barak).  In the case of Biton v.  Pangaya Real Estate Ltd.  (Derivative Claim (Economic) 20136-09-12 Biton v.  Pangaya Real Estate Ltd.  (Nevo 21.10.2013)), it was held that a causal connection is also not included in the elements of the cause.  In other words, the violation is complete even if it is proven that the result would have been the same if it had not been for the violation.  and in the matter of derivative claim (economic) 18994-07-15 Yehudit de Lange v.  Israel Corporation in Tax Appeal (Nevo, April 30, 2017), officers were held liable, even though the prohibited benefit, in the case under discussion there - civil bribery, arose from the controlling shareholder and not from the company in which they served.  This, while acting for the benefit of the company.  In other words, without harming it (see: Amir Licht, "And Rain Isn't - Liability in Torts for Breach of Duty of Trust and Assistance to It," point at the end of a sentence (May 22, 2025)).  Therefore, with regard to the breach of the duty of fiduciary, it is not at all required to prove that compensable damage was caused as a result of the breach.

Beyond Necessity - Personal Liability of the Defendant as an Officer

59. In its motion dated February 16, 2026, the defendant sought to refer to the judgment Civil Case (Tel Aviv District) 41953-01-17 Knepfler v. Nehemia (Nevo 8.2.2026)), which was recently given to substantiate the claim that even if it is determined that she acted in her capacity as a director, the plaintiffs still face a high hurdle to sue her personally, due to the principle of the separate legal personality of a company.  In this context, the defendant refers to the criteria that were reviewed in that matter, regarding the need for the existence of special circumstances in order to impose personal liability on officers.
60. The case of Knafler v. Nehemia, to which the defendant referres, deals with the personal liability of officers towards a third party external to the company, and this fact is relevant to the determination there that "the person who wishes to impose personal liability on officers of a corporation must pass a hurdle, which is not low" and that "the plaintiff, who wishes to impose personal liability on them, must establish a direct legal rivalry with them, and not only with the company" (at paragraph 83 of the judgment Civil Case (Tel Aviv District) 41953-01-17 Knafler v.  Nehemia (Nevo, February 8, 2026)).  The circumstances of our case are different from those in the Knepler case, since the plaintiff is not a third party external to the company, but rather a shareholder in it, and therefore has a closer status and affiliation in terms of the law, even according to the judgment in the Knepler case itself: "The breach of the duties of the officers towards the company grants it legal status to stand guard over its interests and to demand enforcement of their duties, compensation for their breach and the return of profits (the Deri case, in paragraph 102).  The law also establishes a status for shareholders to file derivative, personal and class actions, and in appropriate cases establishes a rivalry between them and the officers" (paragraph 91 of the aforementioned judgment).  Therefore, the high hurdle that was placed in that matter in relation to a claim by third parties against the officers is not fully relevant to the present case.
61. More than necessary, I will note that in any case the criteria set out in that judgment for establishing personal liability of an officer are met. Thus, it was held that "a person who wishes to sue the officers personally will succeed in establishing exceptional cases if it is fraud on their part or personal (subjective) fault for the acts or omissions he attributes to them (paragraph 99(a) of the aforementioned judgment, with reference to Civil Appeal 3807/12 Ashdod City Center K.A.  in Tax Appeal v.  Shmuel Shimon (Nevo 2015), at para.  65; "The Honorable Justice Barak-Erez, Although it has taken a more expansive approach, it has still found that it agrees with the principle of departure outlined by my colleague, according to which the imposition of personal liability on shareholders or officers of a corporation must be reserved for exceptional cases.  There is no doubt that it is important to preserve the separate legal personality of corporations, and accordingly, to the rule that officers of a corporation are not liable, in the usual case, of personal liability due to acts or omissions of the corporation.  As determined in case law, for the purpose of imposing personal liability, it is not sufficient that the duty to act in good faith (whether in negotiations prior to a contract or in the performance of a contract), but it is required to prove that the officer is tainted by subjective personal fault for acts or omissions that constitute a tort or involve a breach of legal duty" (in paragraph 99(b) of the aforementioned judgment, with reference to paragraph 2 of the opinion of the Honorable Justice Barak-Erez Other Municipality Applications 3807/12 Ashdod City Center K.A.  in Tax Appeal v.  Shmuel Shimon (Nevo 2015)).  At the same time, the Honorable Justice Barak Erez was of the opinion that the bar should not be set too high, and ruled that "I agree that the paradigm case of imposing personal liability on an officer or shareholder will be a case in which his conduct has reached a high degree of bad faith.  However, I do not believe that the said lack of good faith should be of a degree close to fraud or necessarily involve deception" (, with reference to paragraph 4 of her opinion).  It was further determined that in the pre-contractual stage, "the more misleading and bad faith representations are concerned, the easier the way to establish personal liability, and with it the ability to acquire legal status and rivalry not only vis-à-vis the company but also vis-à-vis the officer responsible for the aforesaid representations" (paragraph 100 of the aforementioned judgment).  And on the tort level, it was held that in order to establish personal liability, " a data system that exceeds the scope of the ordinary and routine activity of an officer in the company" is required, including "the existence of a special relationship between the manager and the third party, which led to the third party giving the particular manager his trust and confidence that the manager, personally, assumes responsibility towards the third party" (paragraph 107 of the aforementioned judgment, In reference to Civil Appeal 4612/95 Matityahu v.  Shatil, IsrSC 51(4) 769, at para.  27 (1997)).  As for the tort of causing breach of contract, personal liability will arise when it is proven that the officer "exceeded his authority, or acted contrary to the best interest of the company or a foreign motive" (para.  109 of the aforementioned judgment, with reference to Civil Appeal 4612/95 Matityahu v.  Shatil, IsrSC 51(4) 769, at para.  28 (1997)).  Therefore, the hurdle to imposing personal liability on officers is not as high in our case as in that matter in light of the closer connection between the plaintiffs and the officer.  In any event, even if we were dealing with circumstances that require the existence of special circumstances, as in the Knefler case, it would appear that these exist in our case.  In other words, the judgment to which the defendant requested to refer after the submission of the parties' summaries seems to me to strengthen my conclusions so far.

סעד

62. Once it is determined that the defendant breached the fiduciary duty, the appropriate remedy must be examined. Unlike compensation for damage caused, the main remedy for breach of fiduciary duty is not regular tort damages but rather "equitable compensation", also known as "fiduciary damage".  In the words of the Honorable Justice Barak in the Kossoi ruling, "The language 'restitution' may be used in this matter...  The term 'compensation' can be used in this regard, although the manager does not compensate the company for an act of tort that he committed against it, but rather leads to the recovery of funds it spent for breach of his fiduciary duty towards it.  This can be seen as special compensation (compensation that is not damages...)(Amir Licht, "The Glass Beaver - How Will Damage and Compensation Be Assessed in Connection with a Breach of Duty of Trust?" Point at the end of a trial (April 20, 2024), with reference to Civil Appeal 817/79 Kosui v.  L.  Bank Feuchtwanger Ltd., 38(3) 253 (1984)).  The main remedy in fiduciary law is not compensation for damage, but rather the negation of the profit generated by the breach - in order to ensure that the fiduciary does not derive benefit from the breach of his duties, even if no damage was caused to the beneficiary.
63. Other possible remedies, for example, in the absence of profit for the violator, are disqualification of the action or corrective compensation (Civil Appeal 817/79 Kosui, at p. 281 [Nevo]; Derivative claim 18994-07-15 De Lange v.  Israel Corporation, [Nevo], para.  175).  The difficulty in ordering a remedy of the type of denial of profits from a breach of the duty of trust lies in the fact that it has not been claimed or proven that the defendant derived any financial profit from the breach of the duty of trust, and therefore the remedy of denial of profit does not apply.  It therefore remains to examine the possibility of awarding corrective compensation for the damage caused to the plaintiffs.  As stated, in a situation where the classic fiduciary remedies, denial of profit or disqualification of action are not applicable, the law of trust also recognizes the possibility of awarding "corrective compensation", which is intended to repair the damage actually caused to the beneficiary.
64. Most Israeli case law perceives remedies for breach of fiduciary duties as derived from existing legal systems. When we are dealing with a breach of the duty of care, the remedy is perceived as a derivative of the law of torts, whereas when we are dealing with a breach of the duty of fiduciary, the remedy is perceived as a derivative of the laws of contracts or the laws of enrichment, and not in law.  This approach is also anchored in the language of section 256(a) of the Companies Law, 5759-1999, which states that "the laws that apply to breach of duty are the laws of breach of contract, as well as in section 10 of the Remedies for Breach of Contract Law, 5731-1970, which allows for compensation for breach of fiduciary duty (Civil Appeal 1137/23 Deri v.  Jewish National Fund (Nevo, May 5, 2025), at paragraph 101: "From this it emerges that a breach of fiduciary duty is a breach of contract, with all that this entails, both in terms of the employment relationship between the officer and the company, and in the matter of the remedies granted by the company, which are defined, therefore, inthe Contracts Law (Remedies for Breach of Contract), 5731-1970, as well as in paragraphs 122-123: "To breach of fiduciary duty applies, as aforesaid, with the necessary changes, the laws that apply to breach of contract.  In the midst of all this, section 10 of the Medicines Law [...] This section limits the right to compensation, so that the damage claimed by the victim must be causally connected to the breach of contract (in our case with the breach of fiduciary), and the injured party must also indicate that this damage should have been foreseen in advance."
65. According to Prof. Licht, this approach of case law raises difficulties.  This is because the laws of trust are an independent legal system that originates in English law of honesty, and they are based on and operate according to a logic different from that of tort law and contract law (see: Amir Licht, Trust Law - The Duty of Trust in a Corporation and the General Law, 5773-2013, at pp.  262-263).  According to him, to the extent that the laws of enrichment or the laws of contracts are motivated by a purpose that is consistent with that of the laws of faith - for example, "no sinner is rewarded", then it is possible to draw analogy between these laws to the laws of trust, but when the realization of the purpose of the laws of trust, i.e., the minimization of opportunism in relations of representation and trust, is not possible within the framework of the doctrines of these laws, a different legal approach should be taken.  As a result, the issue of compensation must be determined, according to his approach, according to policy considerations (subject to the boundaries of the law and what is consistent with the legislation, as is also evident from some of the case law): "It would be unfortunate if the law recognized various obligations but did not provide an appropriate remedy for their breach.  The remedy must be commensurate with the obligation, and the remedy must suit the breach" (Kosoy, at p.  281).  According to Licht, the various doctrines that qualify and limit the scope of compensation for tort tort and breach of contract, including the requirement of reasonable expectation, consideration of the intervention of a foreign party, and contributory fault, together express a certain legal and social policy.  This policy strives to design an arrangement that gives weight to the interests of the parties involved, to their legitimate expectations, and especially to the expectations of the general society - that is, to the purpose of the legal institution of the concept of tort and the concept of contract.  In these systems, both parties, both the violator and the niffer, have interests and expectations that deserve to be taken into account, but the situation is different with regard to trust relationships.  In this context, the purpose of the socio-legal institution is to enable power-subordination relationships based on total devotion.  'The trustee takes upon himself to act as an "angel" for the benefit of the beneficiary, without fear of a conflict of interest and with full disclosure, the beneficiary agrees to entrust his affairs to the trustee.  According to Licht, in the absence of a valid consent of the beneficiary, the fiduciary, unlike the party to the contract or the ordinary tortfeasor, has no legitimate interest worthy of social protection.' In torts and contracts, when it comes to deciding how much compensation is due, the law also takes into account the interests of the party who caused the damage or breached the contract.  For example, if a tortfeasor acted negligently but the injured party also contributed to the damage by his behavior, the law reduces the compensation - because it recognizes that the tortfeasor has the right to act freely, and it is not fair to impose full responsibility on him when he is not the sole party.  The doctrines express a recognition that both sides have interests that deserve consideration.  For Emunai, the situation is different.  The trustee took upon himself to act solely for the benefit of the beneficiary.  This is the essence of the relationship, the believer from the outset, unlike the tortfeasor or the party to the contract, is not a free agent to act in the world as he sees fit.  Hence, the doctrines that reduce damages in torts and contracts, the rationale of which is a balance against the interests of the compensating party as a free agent, are irrelevant in a relationship of trust, because there is no counter-interest that the law recognizes as legitimate, which must be balanced against it.  Therefore, there is room for a requirement of basic causation only, which will ensure that the compensation claim will not be arbitrary.  Beyond this threshold, civil law must mobilize all its efforts to deter the trustee from violating the law, and if he has done so, hold him responsible.  In particular, when the various restitution remedies are not possible and Nifer only has a claim for compensation.  Trust damages fulfill this policy by granting the beneficiary a claim for everything that might have arisen had it not been for the breach, even in the wisdom after the fact (Amir Licht, Trust Law: The Duty of Trust in the Corporation and the General Law (2013), at pp.  368-369; see also: Ruth Plato - Shinar Banking Law: The Duty of Banking Trust (2010), at pp.  289-293: "According to the doctrine of special compensation, the court is authorized to 'soften' the ordinary rules of compensation and to flex the tests of causation, The distance of the damage, the contributory fault and the obligation to reduce the damage, on the basis of which the entitlement to compensation and its amount are determined.  The court is also authorized to "soften" the requirements regarding the calculation of the amount of damage [...] The special compensation is intended to repair the damage caused by the victim and is based on a compensatory rationale, however, this main purpose is joined by two side purposes, which are intertwined: punishing the violator in a manner that is commensurate with the severity of the injury, and adequate deterrence against similar injuries as part of the mechanism for directing behaviors.  Specifically, the special compensation is not punitive compensation for its own sake: punitive compensation in its name is explicitly based on punitive foundations and is intended to ensure that the defendant will be punished for his disgraceful behavior.  The punitive 'compensation' is not compensation at all, but its purpose is to punish the violator").  Thus, according to this approach, it is possible that the fiduciary compensation will be "corrective" compensation and not one that negates the profits of the breacher, but such compensation is not necessarily even subject to my perception, to the more stringent rules of causation and damage estimation of tort law and contract law.
66. It should be noted, however, that this interpretive approach is not necessarily consistent with the rule of case law. Thus, there is also a certain 'tension' with the wording of section   (a) of the Companies Law, 5759-1999, according to which: "Breach of an officer's fiduciary duty towards the company shall be subject to the laws applicable to breach of contract, with the necessary modifications." However, the provision of the law does not drop the ground under interpretation.  As a sustainable interpretation consistent with these provisions, Licht proposes to interpret the box as a "contract relevant in the context at hand," i.e., as a fiduciary contract that establishes unique circumstances.  It is certainly possible to reconcile this approach with the provisions of the legislation, since section 256(a) of the Companies Law, despite its language referring to contract law, can be interpreted in a way that allows the adjustment of the remedies to the special nature of the fiduciary duties, in the sense of "the required changes".  Reinforcement for this interpretation can be found in the provision of section 256(c) of the Companies Law, which allows the court to order additional remedies beyond those prescribed in the Medicines Law.
67. Even in case law, although it is not uniform in its attitude to the issue, evidence of an interpretation that is consistent with Prof. Licht's approach described above.  Thus, for example, compensation in accordance with such an approach was recognized by the Supreme Court, unanimously, in the case of Curtin v.  Securities Petition (Civil Appeal 3654/97 Curtin v.  Securities Petition (2000) Ltd., 35(3) 385 (1999)).  In that case, the fiduciary duty was breached by an investment portfolio manager, who purchased certain securities for his clients due to his personal interest in them, while acting in a situation of conflict of interest throughout the mission period.  Thus, in the same case, the Honorable Justice Englard ruled that: "The appellants have a cause of action in contracts against the respondents.  They are therefore entitled to compensation for the damage caused to them as a foreseeable result of the breach of the fiduciary duty" (Civil Appeal 3654/97 Curtin v.  Securities Petition (2000) Ltd., 35(3) 385 (1999), at para.  20).  In that case, there was significant difficulty in determining a causal connection to the damage and estimating the extent of the damage when it became clear that during the relevant period there was a general decline in the securities market, and according to the usual rules of causation in contract law, the compensation was supposed to express only the difference between the decline in the value of the clients' investment portfolio and the general decline in the value of the market.  In the words of the court: "At this stage, the question of causation arises in all its severity.  Indeed, the respondents' argument that the causal connection between the acts of breach and the loss of investments has not been proven, constitutes a real obstacle on the way for the appellants to receive compensation", but despite this, due to the difficulty in deciding the question of causation, and because it was a breach of fiduciary, the court chose to compensate the clients for the full decline in the value of the investment portfolio, including the decline in value that stemmed from market fluctuations.  This method restored the clients to their situation on the eve of the investment, by granting them the full value of their investment - i.e., compensation for the negative interest that restores their situation to the situation before the conclusion of the contract, as if it had been canceled, even though the compensation in contract law is generally for the expectation interest only.  It was the fact that this was a breach of fiduciary duty that led to this determination, and by virtue of it, the clients received a remedy that they would not have received under the regular contractual compensation rules.  The court was aware that according to this method, "a customer may gain a real economic advantage that exceeds the degree of compensation to which he would have been entitled according to the traditional causation tests, because it is possible that the client would have invested in the market even if the defendant had not breached his fiduciary duty", but justified this, inter alia, on the grounds of deterrence (ibid., at para.  24).  The court based its approach, inter alia, on the Supreme Court of Canada's ruling in Hodgkinson v.  Simms (1994) 117 D.L.R.  (4th) 161, where it was held that when it comes to a breach of a fiduciary duty in a fiduciary relationship, there is justification for imposing the market risks on the violator and restoring the injured party to its pre-engagement situation, for reasons of a policy of deterring fiduciaries and of preserving the social mechanism of the trust relationship (ibid., at paras.  29-30).
68. Thus, despite the use of the terminology of "cause of action in contracts", it can be seen that the Honorable Justice Englard awards fiduciary damages as defined by Licht (see in this context also: Civil Appeal 189/85 Kugler v. Schussheim, 34(1) 241 (1989) "It is doubtful in my view whether such a case, in which the trustee himself takes from the trust assets and transfers them to another, is intended to be section 12(a), which deals with damage and loss.  However, in any event, the remedy provided by section 5(a) of the Guardians Law, to which section 12(a) of the Trust Law referres, i.e., compensation, should not be regarded as an exclusive remedy, which can be obtained against the trustee.  In accordance with its general authority, the court may issue any order it deems appropriate, if necessary to protect a person's right, including an injunction.  Another interpretation does not stand the test of logic.").
69. A similar approach of a certain softening of the requirement of causation for reasons of deterrence can also be found in the Agrifarm case (Civil Appeal 8728/07 Agrifarm International in Tax Appeal v. Myerson (Nevo, July 15, 2010)), which dealt with a violation of the right of first refusal in shares.  In that case, the Supreme Court held that the benefit that arose to the respondents from the sale of the shares was indeed not out of the appellant's pocket, but it was found that if the appellant had been given the opportunity to purchase the shares in advance, and she had realized it, she would have benefited from the entire increase in the value of the share, and from this it can be held that the enrichment of the respondents was "at the expense of the appellant".  The court was aware of the criticism of this expansive approach by associating the "conceptual" profits of the infringer with the injured party, and the difficulty in proving the causal connection, since the profits of the infringer derive from his action to maximize the profit and not from the breach of the agreement itself; At the same time, it was held that a causal connection is not determined only according to the factual element, but is also derived from legal policy, and that taking away the possibility from the appellant is sufficient in order to uphold the element of causal connection.  Beyond that, and more than necessary, it was held that even if the respondents' argument that the enrichment was not "at the expense of the appellant" had been accepted, it would have been appropriate to apply the rule according to which "the sinner does not get rewarded", by virtue of the doctrine of "deterrent restitution".  The court was of the opinion that recognition of the respondents' enrichment is liable to lead potential breaches of contracts to believe that a breach of an agreement may be profitable, and to encourage a breach of agreements rather than their existence in good faith.  At the same time, it was also ruled that the use of the tool of "restitution" should be done sparingly, while examining considerations such as the severity of the defendant's conduct, the importance that the law attributes to the rule that was violated, the existence of actual malice, the relationship between the plaintiff and the defendant, while in situations where there is a breach of a duty of trust or loyalty, the willingness to order restitution will increase, the existence of alternative enforcement measures and the degree of their effectiveness - in an unclosed list (Civil Appeal 8728/07 Agrifarm International in Tax Appeal v.  Myerson (Nevo, July 15, 2010), paras.  38-43; See also Yoram Danziger and Liat Babloki-Pillersdorf "Deterrence Restitution - When? On the Margins of Civil Appeal 2167/16 Sanofi v.  Unipharm Ltd., Miriam Naor Book 645, 665-666 (Aharon Barak, Dafna Barak-Erez, Michal Gal, Ronen Poliak, Avisham Westreich and Stav Cohen eds., 2023)).
70. In our case, with all due respect, my opinion is the same as that of Licht, and therefore there is justification for awarding relief to the plaintiffs, and a question remains as to its rate. Since there is no quantifiable profit for the infringement for the violator, it is justified to seek remedial remediation.  As stated above, unlike in tort and contractual contexts, since we are within the framework of fiduciary law, a certain causal connection between the breach and the damage is sufficient, and there is no need for a strict test such as "the irreplaceable cause"; In addition, there is no requirement to accurately estimate the extent of the damage.  However, in our case, the softening of the requirement of causation and the exact estimate does not necessarily help, and I will explain: the damage that the plaintiffs identify is the difference between the tax they actually paid and the tax they would have paid according to the initial assessment.  However, as stated above, the rule states that the payment of real tax is not compensable damage - and this is detached from the question of the causal connection, the payment of real tax should not be defined as damage.
71. The question therefore arises whether even in these circumstances it is justified to award the plaintiffs the full relief requested by them.  A related but separate question also arises: is there any application to the principle of "wrongful embezzlement shall not produce a remedy" in these contexts, in order to examine the defendant's claims relating to the lack of good faith in the plaintiff's conduct.

Wrongful embezzlement and/or contributory fault?

72. A significant part of the defendant's arguments focused on the fact that the plaintiff acted in bad faith according to her approach. These include his inconsistent reports to the tax authorities and his "two voices" regarding the classification of the company as a "real estate association." Below I will examine the implications of the plaintiff's conduct, insofar as it is not in good faith, on his entitlement to the requested remedies, and in particular on the scope of the compensation to which he is entitled for breach of fiduciary duty.
73. The doctrine of trust damages is not consistent and coherent in Israeli case law, and accordingly there is no uniform case law regarding the consideration of contributory fault in respect of them, or in principles such as "wrongful embezzlement shall not produce a remedy" and "no sinner shall be rewarded" in all matters relating to the beneficiary, as opposed to the trustee (see, for example, inCivil Case (Beer Sheva District) 58242-07-15 Hattab v. Y.  Davidi Real Estate Investments in a Tax Appeal (Nevo, February 8, 2021), which approved other Municipality Applications 2628/21 Ashkelon Economic Company in Tax Appeal v.  Hattab et al.  (Nevo, May 26, 2022, where it was ruled that a duty of care and a duty of trust was breached, and yet the compensation was reduced due to contributory fault, but it should be noted that these were reduced specifically in the context of the breach committed by negligence but in the absence of a mental element of bad faith, as in our case).  According to Delicht, in Israeli law there is no room for taking contributory fault into account in estimating compensation in connection with a breach of a fiduciary duty, and the reason for this is the distinction discussed above in the basic concepts of tort law and contracts as opposed to those underlying the law of trust (see: Amir Licht, "Fashionable Negligence," point at the end of sentence (July 13, 2019).
74. In view of the ambiguity in the laws of trust on this issue, it is possible to examine how Israeli law relates to the lack of good faith or the lack of cleanliness of the hands of plaintiffs in other legal contexts: in the law of unjust enrichment, in the law of contracts, and in remedies of honesty in general, and to try to draw an inference from them, with the necessary changes, to our case. Despite the traditional rule that "wrongful embezzlement will not give rise to a right of action", Israeli law usually leaves the possibility of granting relief even to a party who was an accomplice to the illegality, in order to prevent a violator from using the claim of illegality as a cover for evading his duties and enriching himself unlawfully (Daniel Friedman, Nili Cohen Contracts - Vol.  3 (2003), at p.  587).
75. In case law, it has been determined more than once that the injured party should be awarded his actual damage, even if in the past he submitted false reports to the tax authorities about his income. In other words, the sins of a victim in proceedings before the authorities do not in themselves rob him of damages (Civil Appeal 200/63 Tzuf v.  Ushpiz, IsrSC 17(3) 2400, 2404-2406 (1963); Civil Appeal 4797/92 Riani v.  Machluf, para.  5(c) of the judgment of the Honorable Justice Matza (Nevo, December 9, 1993)).  Thus, for example, in the Tzuf case, it was held that "it should not be said at all that the plaintiff's declaration to the Income Tax Authority serves as a kind of estoppel or admission on his part that binds him in his status as a compensation plaintiff." The court clarified that "if, for example, the plaintiff was able to prove with evidence, which is beyond any doubt, that he deceived the tax assessor and that in fact his income was greater than that which he declared in his declaration to the Income Tax, the court would certainly be obligated to award him his actual damage, and there would be no argument on the part of the defendant that he, the plaintiff, should not claim an amount that exceeded the amount that would have been received according to his declaration to the Income Tax."
76. Similarly, in the Buskila case, it was held that "it is inaccurate to say that a declaration to the Income Tax Authority or to another body, which contradicts any other evidence, is a quasi-estoppel or admission on the part of the declarant, which obligates him when he comes to claim compensation." The court erred in saying that when income is proven at a rate that exceeds the reporting to the authorities, it should be ruled according to it "even though it exceeds the income declared in the report" (Civil Appeal 813/81 Zion Trust Company in Tax Appeal v. Estate of Buskila, IsrSC 38(4) 785, 789 (1984)).  This position has been repeated many more times in case law.  For example, in the Riani case, relying on the Tzuf ruling, it was held that "the injured party is not prevented from proving, within the framework of his claim for compensation, that his income was in fact higher than the income that he declared before the tax assessor" (Civil Appeal 4797/92 Riani v.  Machluf, para.  5(c) of the judgment of the Honorable Justice Matza (Nevo, December 9, 1993)) Hasna Israeli Insurance Company in Tax Appeal v.  Levy, para.  4 of the judgment of the Honorable Justice Levin (Nevo, December 11, 1996)).  In its guiding judgment on this issue, the case of Ararat v.  Ben Shevach, the Supreme Court noted the rationale underlying this rule:

"This damage is the damage when it is calculated according to the real income of the deceased, even if he declared at one time another, lower income...  The injured person should not be punished, and certainly the same applies to those who depend on him, because of his sins...  The way to punish a person who made a declaration that is not true before the tax authorities does not necessarily necessitate the denial of what he is entitled to by virtue of the law of torts [...] If it turns out that a certain person made a statement that is not true before the tax authorities, it is possible to ensure that he pays what he owes, what he did not pay in the past, by having the content of his evidence and the judgment that will be given in his matter be reported to the tax authorities [...] In this way, he will both receive what he is entitled to as an injured person and pay what he owes as a taxpayer [emphasis added]" (Civil Appeal 5794/94 Ararat Insurance Company In Tax Appeal v.  Ben Shevach, IsrSC 51(3) 498-500 (1997)).

77. These laws can be applied to our case, and even more leniently. As noted, the doctrines that qualify the scope of compensation in torts and contracts express a policy that gives weight to the interests and expectations of both parties.  However, this is different in relationships of trust, in which the purpose is to enable relationships of absolute trust.  Therefore, if in tort law - where there is justification for taking into account the fault of the injured party - it was ruled that compensation should not be denied due to false reports to the tax authorities, all the more so in the laws of trust a violating trustee should not be allowed to benefit from the improper conduct of the beneficiary.  Otherwise, a result will be created in which a trustee who has breached his duties will be rewarded.
78. In application in our case, the conclusion from the cases reviewed above is that even if the plaintiff is not in good faith as the defendant claims, this does not negate the compensation to which he is entitled by virtue of the law of trust. At the same time, a difference that nevertheless exists and is relevant to our case, is that in the cases reviewed it was not determined that the mere payment to the tax authorities constitutes damage, but rather that the defendant should not be allowed to build on the plaintiff's lack of good faith in proceedings before the tax authorities in order to reduce the compensation due for other damage, such as loss of earnings.  In those cases, the erroneous reporting was relevant only for the purpose of calculating the amount of the damage itself, and did not constitute the damage claimed.  In our case, on the other hand, the plaintiffs claim that the direct damage is the difference between the amount of tax they actually paid and the amount they would have paid according to the initial assessment.  Such an estimate raises a difficulty, since it would mean that the assessment of truth is the damage that is compensable, and this determination, as stated, contradicts the case law (Civil Appeal 153/04 Rubinovich v.  Rosenbaum (Nevo, February 6, 2006), at para.  6(2) of the judgment of the Honorable Justice Rubinstein, which quotes the District Court's ruling).
79. We find that while it is justified to award fiduciary damages despite the plaintiff's possible lack of good faith, it should not be determined that the payment of the truth tax is the damage. For the sake of clarity, I will mention that the "catch" with regard to the remedy in our case is as follows: the classic remedy in fiduciary law is the denial of the infringer's profits; Where such a revocation is not possible in the absence of such profits, the court turns to corrective compensation, which Israeli case law usually perceives as deriving from tort and contract law - i.e., compensation contingent on proof of concrete damage caused and the existence of a causal connection.  As to the causal connection, this does not drop the ground under the lawsuit, since within the framework of the law of trust, and as discussed above, any causal connection is sufficient and no causal connection is required according to the strict standards of tort law, but this does not cure the difficulty regarding the definition of damage in our case.  It is true that even in the case of corrective compensation within the framework of trust law, it is possible to make a hypothetical or relative damage estimate, but such an estimate must also have a connection to the actual damage caused.  in our case it is not possible to deny the profits of the infringing trust, there is nothing but to award corrective compensation for actual damage caused, which is not the inability to avoid paying real tax.  In our case, the plaintiffs pointed to such damages apart from the difference between the assessments: appraisal expenses in the amount of ILS 52,709 and legal expenses in the appeal proceeding in the amount of ILS 50,000, a total of ILS 102,709.  These are actual expenses, which have a causal connection between them and the defendant's actions, which constitute a breach of fiduciary duty.  In my opinion, this approach is consistent with case law, since it does not define the payment of the truth tax, in and of itself, as damage.
80. Although I have not lost sight of the plaintiff's conduct, as is reflected, for example, by the "speech with two voices" expressed in the declaration in the agreement with the sellers dated September 25, 2019 that the company is a real estate association, along with the claim denying this fact in front of the CCC, as well as from inconsistent reports to the tax authorities, without determining whether this behavior was an attempt by the "successful method", to pay a lower tax as claimed by the defendant, or indeed, as the plaintiffs claim, it was an accident and a response to the request of the other party's lawyer; Thus, in our case, even under the strictest assumption with the plaintiffs, in the circumstances of the case and in response to the request of the CCC, the plaintiffs acted and submitted new appraisal estimates, without knowing at all about the defendant's actions and her letter to the CCC, and given the fact that there are legal tools whose purpose is to deal with incorrect reporting to the tax authorities, I did not find it correct to deny the plaintiffs the remedy to which the plaintiffs are lawfully entitled for the defendant's breach of fiduciary.
81. The plaintiff's actions, to the extent that they are indeed tainted by bad faith, must be dealt with in the appropriate framework, since an injustice is not corrected. This is also the trend of case law as reviewed above, which prefers to rule in accordance with the remedy due in response to the infringement insofar as the legal conclusion is that there is a basis for such remedy, even if the injured party conducted himself in a problematic manner vis-à-vis the tax authorities, while leaving the handling of his "sins", if any, to the relevant hostel.  What's more, in the end, a compromise arrangement was reached with the tax authorities as aforesaid.

Punitive Damages

82. The plaintiffs petitioned for punitive damages that would reflect the severity of the defendant's actions and deter her and others from similar acts in the future, in the sum of ILS 1,000,000.
83. Punitive damages, or synonymous with exemplary damages, are damages that do not reflect an assessment of the damage caused to the wronged party, but rather their purpose is to punish the wrongdoer for his harmful behavior (Yitzhak Englard, Aharon Barak, and Mishael Cheshin, Law of Torts - General Torts, Vol. 3, 579 (1976); Elyakim Rubinstein, "Punitive Damages - A View from the Customs of Law," Book of Light 93, 103 (2013)).
84. Israeli law has recognized the authority of the courts to award punitive damages in exceptional cases, when the tortfeasor's conduct is particularly serious and condemnable, and the tort was committed with intent or malice (Civil Appeal 140/00 Ettinger Estate v. The Company for the Reconstruction and Development of the Jewish Quarter in the Old City of Jerusalem Ltd., IsrSC 58(4) 486 (2004); Civil Appeal 9656/03 Estate of Marciano v.  Singer (Nevo 11.04.2005)).  In the context of a breach of fiduciary duties, the Supreme Court left an explicit opening for the imposition of punitive damages "when the time comes and in an appropriate case", emphasizing that this remedy will be reserved for extreme cases of "serious breach and grave guilt" (Civil Appeal 9225/01 Zeiman v.  Komran (Nevo, December 13, 2006), para.  25).
85. In the case of Ben Yehuda v. Winter (Civil Case (Economic) 25839-01-19 Ben Yehuda v.  Vitner (Nevo 16.8.2021)), which dealt with an officer in a private company who served as VP of Technology and an observer on the board of directors, who supported one of the groups of investors with whom the company negotiated for the investment, without disclosing to the directors and shareholders that he had entered into agreements with it regarding terms that he would receive if it was the one to invest; the court ruled that the defendant breached the fiduciary duty by not disclosing the conflict of interest, However, it rejected the monetary claim in the absence of a causal connection to the plaintiffs' losses - it was held, however, that the case "could have been a case that would have been appropriate and appropriate to impose punitive damages on the defendant in our case", and that "it is clear that his case is a case that meets the great severity required by the Supreme Court in order to award punitive damages, which would have also overcome the hurdle of excessive caution required by the Supreme Court", but the remedy was not actually granted for procedural reasons, since the relief was not requested in the statement of claim and they did not find a request to amend it (ibid., paras.  84, 94-95).  At the same time, there as well, Justice Kabub noted in his judgment that:

"I do not believe that whenever we are dealing with a breach of an officer's duty of disclosure, and even a duty of disclosure regarding a conflict of interest in which he was involved, there will be room to impose punitive damages on the officer.  Far from it.  Every case deserves a careful examination in view of the severity of the officer's actions in the specific circumstances of the case" (Ben Yehuda, para.  94).

86. Regarding this, it is written in the literature that these words "lay the groundwork for the use of this tool also in connection with the breach of the duty of trust, in line with the framework that the Supreme Court has designed so far," and that from now on, these "must be before the eyes of believers in general as well as of believers in society" (Amir Licht, "In order that they will be seen and feared - in preparation for punitive damages for breach of fiduciary duty?", a point at the end of a sentence (October 17, 2021)).
87. At the same time, the justification for imposing punitive damages in trust laws is significantly smaller than in other civil charges. As discussed at length above, the reason lies in the fact that in any case the system of doctrines that has developed in fiduciary law imposes on the breaching fiduciary much broader liabilities than those that apply to a breach of torts or contracts.  This is compounded by the rules that are particularly expansive in comparison to the usual rules of causation in civil law for determining connection and liability.  As a result, the space in which there may be justification for imposing punitive damages in order to strengthen the deterrence is reduced, and the addition of punitive damages may be in the form of double compensation ordisproportionate deterrence.  As a result, the probability component of imposing liability may also increase, thereby increasing the expectation of deterrence of remedies independent of punitive damages (Amir Licht, Trust Law - The Duty of Trust in a Corporation and the General Law, 5773-2013, at pp.  394-396).  However, I have found that the case in question is suitable for awarding punitive damages in addition to that.  Although compensation of this type is the exception rather than the general and is reserved for exceptional and particularly severe cases, it seems that they have not yet been ruled in the context of breach of fiduciary duty.  It seems to me that a place where a trustee acts out of extraneous considerations, out of a whimsical vengeful scent, by presenting unchecked information to the authorities on his own initiative, while concealing the existence of a direct contact with the tax authorities from the sender, while in fact deviating from the mission that he actually took upon himself by directly contacting the authorities even though he was not asked to do so, while using the information he received in his capacity as an official in the company and while presenting himself as such to the authorities.  I believe that there is room to determine punitive compensation, even if it is in a proportionate amount.  I found that the sum of ILS 66,000 constitutes adequate expression as punitive compensation in this case.

Conclusion

88. Therefore, the claim is accepted in part in the sense that the plaintiffs are given a declaration stating that the defendant breached a fiduciary duty towards them. It was also determined that the defendant would pay the plaintiffs compensation in the total amount of ILS 102,709, which constitutes corrective compensation for damages caused to them: appraisal expenses in the amount of ILS 52,709 and legal expenses in the appeal proceeding in the amount of ILS 50,000.  These sums will bear linkage and interest differentials from the date of filing the claim until they are actually paid.
89. In addition, the plaintiff will pay the plaintiffs punitive compensation in the total amount of ILS 66,000. The plaintiff will bear the plaintiffs' expenses, including the plaintiffs' attorney's fees in the amount of ILS 32,000, as well as the amount of the fee that the plaintiffs are liable for.  These amounts will bear interest and linkage differentials as of today, unless paid within 30 days from today.

Given today, March 05, 2026, in the absence of the parties.