In a recent ruling handed down by the District Court in Haifa (C.C. 1318/99 (Haifa District Court) Gadish Provident Fund Ltd. and Others v. Elscint Ltd. and Others (published on 11 January 2009) the Court discussed a motion to approve filing of a class action against various companies and their D&Os.
A group of Elscint's minority shareholders filed a motion to Court requesting approval of a Class Action against various defendants including Elscint Ltd., and its shareholders (Group of companies).
The motion involved various allegations raised against the Respondents relating to five different occurrences, which took place at different times.
(a) The sale of Elscint's and Elbit Imaging's main activity - development and manufacture of electronic devices in the field of medical imaging - to third parties.
(b) The sale of Elron's holdings in Elbit Imaging to Europe-Israel.
(c) The purchase of Elbit Holdings' shares owned by one of Elscint's officers by Elscint.
(d) Publications relating to the possible merger of Elscint and Elbit Imaging's activities
(e) Transactions in the framework of which Elscint purchased Europe-Israel's rights in two different properties.
In respect of each of the above occurrences, the Appellants raised different allegations.
Thus, in respect of the first occurrence the Appellants argued that Elscint should have paid dividends to all of Elscint's shareholders from the funds accumulated in its coffers as a result of the sale of its main activity.
In respect of the second case, it was argued that Elscint, Elron and Elbit Imaging failed to submit immediate reports to the Tel Aviv Stock Exchange regarding the negotiations which preceded the sale of certain companies of the Group. Allegedly, by failing to do so the companies as well as their D&O's breached their lawful duties and acted deceitfully. Appellants also argued that the sale itself constituted deprivation of Elscint's minority shareholders.
As for the third case - allegedly, the price paid for the said shares was exaggerated and hence it appears that Elscint's officer's interest was favoured on account of the interests of Elscint.
In respect of the fourth case the Appellants argued that based on the publications relating to the possible merger, Elscint's shareholders either purchased or refrained from selling their shares in Elscint, and since the merger did not take place, they sustained losses.
As for the fifth case, allegedly Elscint's intention to enter into the transaction was concealed from the public, thus misleading its investors. Furthermore, allegedly the transactions constituted deprivation of Elscint's minority shareholders' rights in favour of the controlling shareholder - Europe-Israel. The Appellants also raised allegations relating to the allegedly unlawful manner in which it was decided to approve the transactions.
The District Court in Haifa determined that the claim was not suitable to be discussed as a Class Action and hence denied the motion for its approval as such.
The Court reviewed the Class Actions Act - 2006 which detailed the conditions precedent to the filing of a Class Action. Among those conditions Clause 4 determines that in order to file a Class Action plaintiff must have a personal cause of action, and when loss is part of the cause of action plaintiff must show that he allegedly suffered such loss.
Other conditions are detailed in Clause 8 to the said act which demands as follows:
(a) a claim can only be approved as a Class Action if it involves legal and factual questions mutual to all plaintiffs;
(b) it must be established that the Class Action is the most efficient way to discuss the claim.
The Court reviewed the circumstances of the claim and determined that the motion included so many different and unrelated occurrences on the one hand and different allegations relating to each of those occurrences on the other hand, hence a Class Action is not the most efficient manner in which these disputes should be discussed.
The fact that various Appellants have different allegations in each of the occasions towards various Respondents leads to the conclusion that the claim does not involve similar legal and factual questions which all the Appellants have in common.
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