It was also stated by Justice T. Strasberg-Cohen that:
"Too stringent requirements should not be placed regarding the degree of persuasion, because these may place an excessive burden on the parties and the court in clarifying the preliminary issue, which may cause the trial to drag on, duplication of litigation and the discouragement of potential class plaintiffs. All of this must be prevented by a balanced criterion on the subject of the burden and the degree of proof required of the class plaintiff, which on the one hand will not exempt him from the duty of persuasion, and on the other hand will not impose on him an excessively heavy burden" (Magen and Keshet Case, at pp. 329-330).
- The legislature saw fit to grant the court hearing a motion to certify a class action a large number of aids and powers intended to assist it, in the event that it finds that the claim deserves to be clarified in the framework of a class proceeding, to prepare the case in order to streamline and simplify the hearing. Hence the broad powers of the court to approve a class action subject to any change it decides on (Article 13 to the law); "to approve a class action even if [all] conditions have not been met... if he finds that the existence of these conditions can be ensured by way of the addition or replacement of a representative plaintiff or representative, or in any other way."Section 8(c)(1) to the law); Define the group on whose behalf the claim will be conducted (Section 10(a) to the law); "to define a subclass, if it finds that questions of fact or law arise with respect to some members of the class, which are not common to all members of the class", and "to order the appointment of a representative plaintiff or representative representative to the subclass, if it finds that this is necessary to ensure that the matter of the members of the subclass is appropriately represented and managed" (Section 10(c) to the law). In this sense, there is a certain similarity between the powers granted to a pre-trial judge and the powers of a judge hearing a motion to certify a class action, both of which are intended to enable the judge to play an active role in order to assist the parties in defining their disputes and to address a limited number of questions that can be discussed in the framework of a legal proceeding (compare: Civil Appeal Authority 10538/08 The Arab Academic College of Education in Israel in Haifa v. Muhammad Hassan Kanaan ([Published in Nevo], 12.4.2009)). The broad powers granted to a court hearing a motion to certify a class action indicate the law's intention not to place procedural or other obstacles to the potential class plaintiff in cases where, on the face of it, the class action constitutes the most efficient and fair way to resolve disputes between the parties. This, taking into account the public interest served by the class proceeding.
- In addition to the aforesaid, the case law held that despite the desire not to be strict with the potential class plaintiff whose claim represents a defensible public interest, sometimes the accumulation of procedural flaws in the conduct of the potential class plaintiff may lead to the conclusion that it is not appropriate to certify the class action. It was also held that the performance of a plaintiff during the preliminary proceedings for the approval of the class action has an impact on the question of the plaintiff's being an appropriate representative (Civil Appeal Authority 378/96 Weinblatt v. Moshe Bornstein Ltd., IsrSC 55(3) 247, 268 (2000) (hereinafter: the Weinblatt); פרשת Shield and Bow, at p. 330; Parashat Darin, at p. 692). In our opinion, the possibility of rejecting the motion to certify the class action but due to the class plaintiff's procedural conduct should be reserved for exceptional cases. This, inter alia, takes into account the purpose of the class proceeding to deal with the failures that exist in the "regular" litigation mechanism and to reduce the power gaps between the plaintiff and the defendant. This was discussed by the scholar Alon Clement in his article "Guidelines for the Cases of the Class Actions Law, 5766-2006" The Attorney 49 131, 148 (2007):
"In a small market like the one in Israel, the large and experienced lawyers are often employed by large and powerful entities, and therefore many of them will refrain from filing class actions against these entities lest this harm their future business. In such a market, incentives should also be given to the less experienced lawyers so that they want to file proper class actions. Their disqualification due to their lack of experience will frustrate this goal."
- Thus, the power disparities between the parties to the class action may also be expressed in the level of representation. This is the case in almost every class action, and especially in class actions in the field of corporate and securities law, where the aforementioned gaps are sharpened. Therefore, strict adherence to the potential class plaintiff may disrupt the goals of the legislation. Indeed, "it is not the role of the court to formulate causes of action for the plaintiffs" (paragraph 40 of the trial court's decision). However, where the court is of the opinion that from a material point of view the potential class plaintiff has pointed to grounds that should be clarified in the framework of a class proceeding, it should consider the possibility of overcoming the difficulties raised by the action in terms of the prerequisites for its certification as a class proceeding, by means of the use of the powers granted to it by the legislature. Against this background, we will examine the rulings of the trial court, which the appellants complain about before us.
- It should be recalled that the trial court ruled that the definition of the group that the appellants seek to represent in the action also includes shareholders who purchased their shares after the sale of control from Elron to Europe-Israel and after the Gil transaction. Therefore, these shareholders were not deprived of those events, and the legal and factual questions that arise in connection with these events are not shared by all the members of the group. The trial court further ruled that the date of the purchase of the shares is also relevant to the causes of action that originate from representations regarding the intention to make a tender offer. This is because the various publications and reports published during the period relevant to the claim in this matter differ from each other in the manner in which the intention to make a tender offer is presented. The court noted that it is possible to legitimize some of the aforementioned causes of action for clarification in a class proceeding by defining a subclass by virtue of the prescribed authority In section 10(c) to the law. However, since the parties did not address this possibility in the pleadings, the court did not consider it necessary to do so on its own initiative. With regard to the Gil transaction, the court further noted that a class action should not be approved for it even on the grounds that the damage caused as a result of it - to the extent that it was caused - is damage caused by the company alone, which does not establish a personal cause of action for the shareholders. At the same time, it was determined that there was one event that occurred with certainty while all the members of the group held shares of Elsynt, and which raises questions that are common to all members of the group. This is the engagement event in the hotel and marina transactions. In relation to this event, it was determined that it establishes a cause of action by the shareholders. However, at the same time, it was ruled that a class action cannot be upheld for three reasons: first, the appellants did not meet the burden of proving, even prima facie, that they suffered damage; Second, the chances of a lawsuit are not high because it has not been proven that the price at which the properties were purchased was unfair; Third, due to the attribution of a large mix of causes for each event, it is highly doubtful whether the class action will constitute the most efficient and fair way to resolve disputes.
Rejection of some of the appellants' arguments
- We will preface the latter and note that we did not find room to intervene in the determinations of the trial court with regard to the "tender offer" which, according to the appellants, was presented in Wortman's letter. In our impression, the trial court was correct in holding that the causes of action rooted in this incident are not worthy of clarification in the framework of a class action. As noted in the decision of the trial court (paragraph 38), the diverse nature of the representations made throughout the period between Wortman's letter and Elbit Imaging's announcement of the termination of the contacts between it and Elsynt creates a difference between the purchasers of the shares, which will disintegrate the group and require the management of a series of separate trials. Therefore, this cause of action is not suitable to be clarified in the framework of a class action (see: Civil Appeal 6887/03 Haim Reznik v. Nir Cooperative National Cooperative Society for Settlement, paragraph 27 ([Published in Nevo], July 20, 2010) (hereinafter: the Matter Reznik)). In addition, none of the representations brought before the trial court indicate a cohesive undertaking to execute a tender offer. From reading the various representations published in Israel and abroad regarding the tender offer, it is not possible to get the impression that at any point the negotiations between Elsynt and Elbit Imaging reached "such an advanced stage, that the terms of the agreement are known, and it would have been concluded had it not been for that bad faith behavior that prevented the conclusion of the agreement 'at the last minute'" (see: Civil Appeal 6370/00 Cal Building in Tax Appeal v. A.R.M. Ra'anana Construction & Rental Ltd., Piskei Din 56(3) 289, 300-299 (2002)). In the absence of evidence for such a cohesive offer, the appellants did not properly substantiate the claim that the officers of Elcinit acted improperly in that they did not insist on the "enforcement" of the tender offer. It should be noted that the appellants themselves were also inconsistent in their arguments in this context, and while at first they accused Elbit Imaging of breaching a valid undertaking to make a tender offer, and accusing Europe-Israel of causing a breach of contract, at the stage when the hearing was returned to the trial court, the claim of bad faith in the negotiations was changed. This change was made under protest on the part of the respondents (see, for example, p. 128, lines 4-5 of the minutes of the hearing in the trial court of January 21, 2008). In any event, he points to the weakness of the appellants' arguments regarding the formulation of a binding tender offer. It should also be noted in this context that the appellants wish to rely on the price stated in Wortman's letter ($14 per share), as a reference point from which the shareholders should be compensated for any decrease from it. However, in view of the above, the price stated in Wortman's letter has the power to be only an indication of the value of Elsint shares in the period following the realization of the company's assets, and not the end of the story. It should also be noted that according to the case law, as a rule, due to the speculative dimension inherent in the valuations regarding the future value of shares, there is a reluctance to award subsistence damages in such claims (see, Weinblatt, p. 263). The appellants seek compensation for any decline in the price of Alcint shares below $14 per share. However, this remedy means, in effect, the granting of subsistence compensation for the expectations of the shareholders that were denied.
- We are also of the opinion that the trial court held that a cause of action - to the extent that such was created - in respect of the purchase of shares of Elbit Imaging by Elsynt from Gil, should be clarified in the framework of a derivative claim and not in a personal claim by the shareholders. This, in accordance with case law that has consistently held that Damage caused to the shareholders by the decrease in the value of their shares as a result of a transaction in which the company sold an asset at a loss - and in our case, purchased an asset at a price that was claimed to be exorbitant - does not, as a rule, establish a cause of action by the shareholders (see: The Shield and Bow; פרשת Darin; Civil Appeal 9014/03 Greenfeld v. Lesser ([Published in Nevo], December 14, 2006) (hereinafter: The Case Greenfeld)). The appellants did not show that in the circumstances of the case, one of the qualifications enumerated in this rule applied, such as: deprivation of the shareholders or a difference between the damage caused to some of the shareholders and the damage caused to others. Thus, for example, no evidence was presented that the consideration given to Gil in the framework of this transaction was related to the promotion of the interests of the controlling shareholders at the expense of the minority shareholders. Nor was any other justification presented for determining that in the circumstances of the case there was an exception to the rule Shield and Bow (See discussion of exceptions below). Moreover, the fact that most of the consideration that Gil received for his shares was not directed to his pocket, but was invested by him in a joint venture between him and the company, also reflects on the way in which the Elsynt Board of Directors exercised discretion in approving the transaction.