This position was anchored in case law, and this court found that the tort of negligence exists even in cases where it was determined that the harmful conduct was intentional. Thus, for example, other municipal applications 593/81 Ashdod Automobile Factories in Tax Appeal v. Tzizik, IsrSC 41(3) 169 (1987), it was held that the naval officers who went on strike not only could have expected damage to a third party as a result of the shutdown of the ships, but they foresaw the damage and intended that that third party would be harmed, and that their conduct was a breach of duty within the scope of the tort of negligence. Similarly, other municipal applications 2034/98 Amin v. Amin, IsrSC 55(5) 69 (1999), dealt with a claim by children against their father for emotional damage caused to them when he abandoned them. It was argued that the father was negligent and violated his duty of care towards his children, and therefore he must compensate them. The court ruled that "the fact that the father intentionally stopped caring for the children does not detract from the possibility that the element of negligence exists. Because negligence, in the technical sense, can also include deliberate acts and omissions, because the test for the existence of negligence is the unreasonableness of the conduct and expectations of the damage" (in paragraph 13 of Justice Englard's judgment; see also: Yitzhak Englard, "Liability of Public Servants in Torts," Book of Daniel: Studies in the Thought of Professor Daniel Friedman 901, 907 (2008)). In addition, in the Bank of North America case, in which the liability of directors was discussed, it was explicitly held that "there is no impediment that the same conduct itself will constitute both a breach of the duty of care and a breach of a duty of fiduciary" (Bank of North America case, para. 75).
This position, according to which deliberate conduct also amounts to negligence, was also adopted in the Financial Law Bill, 5771-2011. Section 386(b) of the bill states that the definition of negligence includes an act "including an act that was done intentionally, which a reasonable person would not have done in the circumstances", and in the explanatory notes to this section it was noted that "the proposed provision determines what 'negligence' is. 'Negligence is conduct that deviates from the standard of behavior of a reasonable person in the same circumstances. The provision clarifies that even deliberate damage that involves such deviation is negligence."
- Thus, in accordance with the case law, there is no impediment to determining that acts committed with malicious intent or full awareness will be considered negligent acts, as long as they deviated from the required reasonable standard of conduct. The same is true in our case: if my opinion were heard, I would suggest that Pinkowitz, who in his case was determined to have breached his fiduciary duty to the company, inter alia, by approving the massive transfer of funds from the company to the subsidiary, will be liable together with the other directors for this damage. Admittedly, there is a dramatic difference between the negligence that should be attributed to the other directors and the negligence that should be attributed to Pinkowitz, a difference that is rooted in both the mental element that led to the negligence and the severity of the acts attributed to them, but at the end of the day, the fact that Pinkowitz committed acts of a higher degree of severity and out of awareness or intention of their nature cannot justify removing him from the tort of negligence. As noted, negligence is a deviation from the reasonable standard of conduct, even if this deviation was done maliciously.
- In view of the aforesaid, I would suggest that Pinkowitz be liable together with the other directors for the company's damages caused by the transfer of funds to the subsidiary. As you may recall, the amount of the claim was limited for fee purposes to a total of ILS 12 million, and this is the amount I will propose to charge Pinkowitz as well. It should be noted that my determination that the damage attributed to the directors is covered by the policy does not extend to Pinkowitz's actions, which, as stated, are distinct from the acts attributed to the other directors.
- In view of the result that I have reached, I did not see fit to discuss the other arguments of Pinkowitz in his appeal relating to his obligations for breach of fiduciary, since since I found that he should be charged the full amount of the claim for the tort of negligence, there is no practical relevance to the hearing of his additional charges for other grounds.
- Division of Responsibility among the Wrongdoers
- Towards the plaintiff company, the liability of all wrongdoers found to be liable is jointly and severally (up to the amount of liability determined for each wrongdoer). In the relationship between the wrongdoers themselves, who have "shifted" the responsibility of one on the shoulders of the other, the rate of participation must be determined according to the moral guilt of each of them in relation to the rest. In general, we are dealing with three groups of wrongdoers - the three members of the board of directors who were found responsible for the damage (Reeves, Gutwein and Horn), Pinkowitz and the accountants (Milner and Shoran). In my view, it should be determined that Pinkowitz bears responsibility for most of the damage, being the active party in his creation, whose liability derives directly from his active actions, as distinct from the liability of the directors and accountants, which is based on a failure in the exercise of the powers and in the fulfillment of the duties imposed on them. Therefore, I would suggest that it be determined that Pinkowitz is responsible for 60 percent of the damage, the directors Reeves, Gutwein and Horn are responsible for 20 percent, and the accountants (each in relation to his own charge) are also responsible for 20 percent. With respect to damages beyond the amounts of damages to which the accountants are responsible (i.e., damage that exceeds the sum of ILS 4,930,483, which is the total amount of damage for which the two accountants are responsible), up to a sum of ILS 12,000,000, the division of liability between Pinkowitz and the three directors will be 70% for Pinkovich and 30% for the directors. In the relationship between the three directors, the responsibility will be divided into equal parts.
- Summary and Expenses
- Conclusion: In the case before us, a number of parties involved and responsible to one degree or another were sued for a series of actions that damaged the company and harmed its ability to advance its important goals.
If my opinion is heard, I will suggest that we cancel the judgment of the trial court, the plaintiffs' appeal will be accepted in the essence; Pinkowitz's appeal will be rejected; and the appeal of CPA Shaporan will be partially accepted, all in such a way that the following defendants will be obligated to compensate the company according to the following division:
- CPA Milner will be obligated to compensate the company in the sum of ILS 3,971,722 jointly and severally with Pinkovich, the directors Rebas, Gutwein and Horn and the insurance company. In the division between the aforementioned wrongdoers, CPA Milner will bear 20% of this amount, the directors (in equal parts between them) will bear 20% of this sum, and Pinkovich will bear 60% of this amount.
- CPA Shaporan will be obligated to compensate the company in the sum of ILS 958,761 jointly and severally with Pinkovich, directors Rebas, Gutwein & Horn and the insurance company. In the division between the aforementioned wrongdoers, the accountant who will bear 20 percent of this sum, the directors (in equal parts between them) will bear 20 percent of this sum, and Pinkowitz will bear 60 percent of this amount.
- For the rest of the Company's damages (beyond the amounts of compensation specified in paragraphs A and B above), up to the sum of ILS 12,000,000 (i.e., in the amount of ILS 7,069,517), Pinkowitz, the directors Rebas, Gutwein and Horn and the insurance company will be charged, jointly and severally. In the division between the aforementioned wrongdoers, the aforementioned directors (in equal parts between them) will bear 30 percent, and Pinkowitz will bear 70 percent.
- To the amounts stated in sections A and B above, linkage and interest differentials will be added as required by law from the date of filing the amended claim with the District Court - April 27, 2006. To the amount stated in section C above, linkage and interest differentials will be added as required from the date of filing the original claim to the District Court - January 23, 2003.
It is clarified that the obligation of Rebas, Gutwein and Milner means the obligation of their estates.