The Securities Authority decided to commence administrative enforcement proceedings against the officers of Africa Israel Industries Ltd ('Africa Israel') in respect of offences of use of inside information, breach of reporting duties and of misleading the Authority by failure of disclosure in a purchase offer. The background to the offences was the negotiations which were conducted between Negev Ceramics Ltd, a subsidiary of Africa Israel, and the Canadian company called Olympia Tile International Ltd. The Authority claimed that the negotiations between the companies started during June-July 2011 and became serious in December 2011 – January 2012. Against this, the respondents claimed that no serious business contacts were conducted between Negev and Olympia throughout the entire relevant period, and only towards the end of May 2012 did intensive negotiations start between the representatives of the companies. These negotiations, it is claimed, lasted some 4 days only and they led to the signing of an agreement between the companies on May 24, 2012.
The Administrative Enforcement Committee of the Securities Authority found that the respondents were liable for the alleged breaches and accordingly, imposed financial sanctions in an amount of NIS 5 million on the company as well as personal financial sanctions on the officers of the company who were respondents to the proceedings.
The central question which came before the District Court of Tel-Aviv-Yaffo (the Economic Court) in this matter discussed the nature and decisiveness which is likely to shape the way much future litigation of companies in breach which are interested in appealing administrative enforcement proceedings of the Securities Authority. The question was whether the Court's examination of the decision of the administrative enforcement, which was established by Amendment 45 of 2011 to the Securities Law, should be a purely administrative review or whether the Economic Court is authorized to conduct a wide examination of the administrative discretion and thereby act as an 'appeal' court. In the last case the Court took the place of the administrative authority in the decision and took a decision which was on the enforcement authority to take – namely, the court was entitled to hold a de novo discussion. While the Authority claimed that the court must restrict its authority to a mere administrative review, the respondents claimed that it is necessary to interpret the authority of the court broadly way.
The Tel-Aviv District Court, with Her Honour Judge Ruth Ronen presiding, decided that the scope of the intervention of court is derived from a number of factors, including inter alia the nature of the tribunal which made the decision, the type of proceeding before the court (petition or appeal), the essence of the rights which the decision is likely to affect, the expertise of the body which made the decision as well as the question whether what is under consideration is a decision in respect of which the deciding body has an advantage by virtue of its special expertise. Also it is necessary to distinguish between intervention in a legal matter and intervention in factual aspects.
The court mentioned that the panel under consideration is an administrative tribunal which was established in order to ease and shorten the discussion in proceedings which beforehand were handled in criminal legal proceedings. The panel is comprised of 3 members of which one is to be qualified to be appointed as a District Court judge (in practice this means a retired judge), and the other two are experts in the field relevant to the case. In addition, the possible damage within the framework of the administrative enforcement proceedings is less severe than that caused to defendants in criminal legal proceedings: the offenders are not exposed to the risk of loss of their freedom and even the stigma attributed to the sanctions which are imposed by the panel are substantially less than the stigma following a criminal conviction. Accordingly, the court found that the scope of the intervention in the decisions of the panel needs to be limited, not only in light of the nature of the proceeding (an administrative petition) but also because of the rights damaged and the composition of the panel – an enforcement committee of three members.
In conclusion, the administrative petition against the decision of the Administrative Enforcement Committee will not be examined de novo. To the factual determinations of the panel there will be applied the presumption of validity according to which the starting point is that the decision is valid subject to the reasonableness test. Factual determinations will not be examined anew from the perspective of the conclusions drawn from them or their reliability and the court's intervention will be only to a limited extent concerning the question whether the panel was mistaken in the application of the tests and attribution of weight in a manner which substantially deviates from what is reasonable. Nevertheless, it was found that - insofar as the matter concerned decisions of a panel on legal subjects - then the enforcing panel had no advantage over the court. Therefore, the court was entitled and must intervene in the decisions of the panel on these subjects, while setting down clear guidelines by which to examine the panel and the infringers in proceedings in the future.
Another substantial matter which the court decided concerns the burden of proof required to discharge before the panel – whether it is sufficient to prove on a balance of probabilities or whether what is required is a higher level. In this respect, the court deferred to the language of the law which authorized the panel, since the legislature chose the standard of proof required in the administrative proceedings and that is usually similar to the civil standard of balance of probabilities and not a more severe standard.
Reference: ATM (TA District) 37447/10/13 Africa Israel Industries Ltd – v – The Securities Authority, District Laws (02/08/2014) 526 (145) 2014
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