Following the judgment in the Reichert case (calculation of damages), scholars Sharon Hanes and Alon Clement published an article, "Calculation of Damage in a Class Action for Securities Deception," Sefer Eliyahu Matza, 729, 731 (2015) (hereinafter: Hans and Clement)). According to Hans and Clement, the damage due to a misleading detail should be calculated (ex-post), with a focus on the fall in the price of the security upon the discovery of the deception to the market, and not according to the alleged damage caused at the time of the purchase. This approach was applied in Civil Case (Tel Aviv District) 1134/95 Heirs of the late Moshe Shemesh v. Reichert, (January 24, 2010), an appeal against the judgment ended in a compromise (Civil Appeal 2046/10 Judgment of March 29, 2011). In the Harel Pia case, the court expressed, without planting rivets, the position that the transition to the method of calculation proposed in Hans and Clement's article is desirable (ibid., para. 158) (and see also: 41280-03-21 Golovinsky v. ICL Group Ltd., para. 53 [Nevo] (October 9, 2024)). The calculation of damages according to this approach may also be complex, for example in a situation where the depreciation, in part or in full, stems from the discovery of various data other than the deception (for more information, see Hans and Clement, p. 772).
- The plaintiff did not present a calculation of damages, according to any of the aforementioned methods of calculation.
The plaintiff's argument in our case is that he is entitled to a full refund of the full amount of his investment, since if it were not for the misleading report of September 8, 2013 regarding the discovery of "significant oil marks", he would not have purchased Shemen's shares. In addition, the plaintiff claimed that he was also entitled to restitution by virtue of section 35 of the Securities Law. As will be detailed below, I cannot accept the plaintiff's claim that he is entitled to a full refund of the full amount of his investment, since he has not proven that there is a causal connection between the loss of his money and the misleading individual.
- Where it is proven that had it not been for the defendant's breach of duty, the investor would have completely avoided his investment, there is no difficulty in placing the full damage on the defendant's shoulders (Civil Appeal 654/97 Curtin v. Petition for Securities (2000) Ltd., IsrSC 35(3) 385 (1999), para. 22 (hereinafter: The Keratin Matter)). In the same matter, the court accepted the argument that the plaintiff was entitled to the full refund of the investment amount due to a prolonged breach of the fiduciary duty on the part of the investment portfolio manager. It was held that in such circumstances, a person who acted in a conflict of interest over time should not be heard on the grounds that the victim could have lost his money even if the investment portfolio was properly managed. In the Reichert case (calculation of damages) It was held that it is appropriate to limit this compensation to situations in which it has been proven that there was a contractual relationship between the plaintiff and the defendant so that "restitution compensation" is required "... of the nature of the claim and the nature of the relationship between the parties."Reichert on Damage paragraphs 82-84).
In the Reiss v. Hagshama Fund in a tax appeal, the court examined the question of in which cases it would be appropriate to return to the plaintiff the full amount of his investment (Class Action (Tel Aviv District) 59659-02-20 Reiss v. Hagshama Fund Ltd., para. 102 [Nevo] (April 20, 2021) (hereinafter: the Reiss case)). The court there concluded that it would be appropriate to award restitution where it is a matter of material deception that harms the basis of the transaction. It was held that tortious conduct should be regarded as one that harms the root of the transaction, where it dramatically changes the risk and chance inherent in the security, and it cannot be said that the transaction in which the investor entered into is the one he wished to enter into (Rice, para. 103; Civil Case (Tel Aviv District) 45609-07-11 Adv. Gissin v. Tel Aviv Stock Exchange Ltd., paragraphs 161-163 [Nevo] (June 6, 2014); Hans & Clement, 731). The logic of things is clear. When, due to a breach of duty by the defendant, the injured party is engaged in a transaction that is fundamentally and substantially different from the one in which he intended to engage, it is reasonable to assume that he would not have been involved in it if it were not for the wrongful conduct. In this situation, there are circumstances in which it was determined in the Keratin case that there is no difficulty in placing the full damage on the defendant's shoulders. It is equally clear that in the absence of proof of material and fundamental harm to the characteristics of the investment, there is no basis for such a determination (the Rice case, paragraph 103).