As part of an appeal on a lower court's decision to approve a class action The Israeli Supreme Court ("Supreme Court") discussed the legal status of a pre-ruling issued by the Israel Securities Authority ("ISA") .
In this case, the request to file a class action concerned a transaction in which the Delek Group Ltd. ("Delek") purchased shares held by the Cohen and Tadmor families (the "Shareholders") in Cohen Development and Industrial Buildings Ltd. (the "Company") and whether the means by which the Shareholders held their shares constituted "joint" or "separate" holdings and consequently whether the Shareholders should be classified as control holders that would exempt the transaction from the special tender offer rules.
Prior to the transaction, despite past filings submitted by the Shareholders that adopted a conflicting position, the Shareholders requested a pre-ruling from the ISA stating that the Shareholders are "joint" holders of the Company's stock. The Supreme Court noted that the ISA transmitted its response orally and did not present a clear position on the mater presented to it. The ISA only stated that it would not express a position regarding an updated report that the Shareholders intended to submit to the Israeli Stock Exchange stating that the Shareholders constituted a control group and that the ISA would not send any response to the Company following publication of the report.
The Supreme Court ruled that an ISA position provided as a response during a pre-ruling process only has effect vis-à-vis the pre-ruling supplicant and the ISA. Thus, Delek Group Ltd could not rely on the pre-ruling given to the Shareholders.
Additionally, the Supreme Court held that while an ISA pre-ruling represents the professional preliminary position of the ISA with respect to the matter at hand, and may even bind the ISA to the position it presented, a pre-ruling does not create new, or change existing, legal norms regarding control persons and special tender offers.
The Supreme Court also discussed the applicability of Article 6 of The Torts Ordinance, which provides protection against liability in tort for a person acting with reasonable belief or in good faith that there was legal authorization for the wrongdoing committed. It was determined by the Supreme Court that such defense would only be applicable if the ISA had the authority to authorize a certain action – which was not the case in the matter at hand. In addition, given that the ISA did not explicitly grant the requested pre-ruling, the Supreme Court could not find reasonable belief in the existence of legal authorization by the Shareholders of an exemption from the requirements of the publication of a special tender offer. As the Shareholders did not have relief under Article 6 of The Torts Ordinance, Delek as well could not benefit from this protection.
The filing of the class action against the Delek and the Shareholders was approved.
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