Legal Updates

A person with investment experience who owns a stock portfolio may be deemed to have 100% contributory fault for decreasing its value

September 4, 2022

Yossef Elovitch, brother of Shaul Elovitch who was charged with fraud and breach of fiduciary duties, contended that the State's seizure of the stock portfolio jointly owned by him and his brother in equal parts and the manner in which the funds were released long after it has realized that half of them is owned by Yossef, amount to negligence and caused the value of the portfolio to decrease.

The Court held that the seizure of the portfolio was not done in a negligent manner, and that in any case Yossef’s contributory fault is 100% at fault. Israeli law stipulates that in order to classify a conduct as negligent, it is necessary, inter alia, to show the existence of a causal connection between a duty of care and the damage caused, among which we examine whether the breach is conditio sine qua non for causing the damage. However, it is possible to reduce the compensation awarded to the injured party where it is partially responsible for the damage caused, according to the proportion of its contributory fault. Here, the State seized the portfolio pursuant to a Court order, when the ownership could not be separated at the time of seizure. As for the date of release, the State could indeed release the part belonging to Yossef at the time it realized that he is the owner of at least 50% of the portfolio, however its conduct is not a conditio sine qua non for the decrease in the value of the portfolio, as there have been other factors that could have influenced it, such as the volatility of the market, the criminal case that was opened against Shaul Elovitch, etc. In addition, Yossef is a businessman who used to make decisions regarding the portfolio without any consulting, and because he never instructed the State to sell his share or manage it in a certain manner, he is deemed to have 100% contributory fault.