Abuse of legal proceedings – whether and from whom can financial compensation be claimed?

Abuse of legal process means that a party to a legal proceeding abuses his right to resort to legal proceedings or conducts legal proceedings in a manner that harms the opposing party. Examples that may be considered abuse of legal process include: Filing claims Lacking any chance in order to cause the opposing party financial expenses, repeatedly submitting irrelevant requests in order to delay the hearing, and taking legal actions in order to thwart an existing court decision.

בית המשפט העליון במקרה בו נעשה שימוש לרעה בהליכי משפט על ידי חברה (ע"א 8553/19 אלכסנדר אורן נ' יהודית כהן), אשר גרמה לנזקים כספיים. עלתה השאלה האם הנפגע זכאי לCompensation for abuse of legal proceedings, and is it possible to demand Financial compensation Only from the company (חברה בע"מ) Or also from an officer in the company?

Officer to pay compensation for abuse of legal proceedings

The Supreme Court ruled that abuse of legal proceedings may lead to a situation in which the company's officer (and not just the company itself) may also be liable for damages caused by the futile proceedings that were taken.

Among other things, the court ruled as follows:

I believe that the doctrine of abuse authorizes the court to impose on a person who abuses legal proceedings – alongside or in lieu of other sanctions – the obligation to compensate the injured party for his damages and losses. The existence of such a remedy of compensation eliminates the need for the tort of negligence as a basis for imposing the obligation to compensate the injured party on a person who caused that injured party losses or damages by abusing legal proceedings.

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However, the war of attrition that was waged, as it was waged, under the direction of Ms. Cohen, was itself an abuse of legal proceedings, which was done intentionally and which entails liability and liability for compensation - and with this I will suggest to my colleagues that we be content to confirm the operative part of the preliminary ruling without any change.

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The doctrine of abuse of process, as its name suggests, is intended to prevent abuse of the process and of the rights and powers that the rules of procedure grant to litigants – in order to prevent waste of judicial time, minimize the overall social cost of litigation, and protect litigants from improper and harmful conduct by their opponents. To achieve these goals, the doctrine authorizes the courts to impose various sanctions on litigants who abuse the process. The purpose of these sanctions is to create a deterrent against abuse of the process and to protect all litigants who are harmed by the abuse.

The doctrine imposes these sanctions only on those who have intentionally abused the legal process – this is to prevent excessive deterrence of plaintiffs and defendants and in order not to block people’s access to the courts. The doctrine of abuse is therefore rooted both in public law – as an instrument that aims to ensure the proper functioning of the legal system – and in private law, as an instrument designed to establish corrective justice between the offender and the injured party. This is a general legal doctrine that applies to any act that constitutes an abuse of the legal process and that is done intentionally, as distinct from negligence or mere mistake.

Liability for negligence towards an opposing party, on the other hand, has a very narrow outline. This liability is imposed on a party who harms the interests of his opponent by violating a duty of care that stems from a special relationship between the two. Such relationships are created by virtue of a legal provision or, alternatively, based on a promise or representation that the offending party gave to the injured party in order to create reliance on him. It is therefore a tort liability that is rooted, for the most part, in private law and its purpose is to achieve corrective justice between the injured party and the offender. As has been stated more than once in our case law, in imposing such liability, its rules must be strictly observed so as not to create a chilling effect on litigants who seek to exercise their rights in good faith and in a civil manner (as clarified, among other things, by Judge Hayut in the Pasal case, on page 45 of her ruling).

And note: The lack of liability for damage that a litigant causes to his opponent through his negligence does not mean that that litigant, who does not owe his opponent a duty of care, can do whatever he pleases in the proceedings – he must act to exercise his legal rights while refraining from abusing the legal process. In other and simpler words: the fact that a litigant is permitted to be negligent towards his opponent when he does not owe that opponent a special duty of care does not release him from the obligation to avoid intentionally harming the proper conduct of the legal process; and the matter is clear.

However, Ms. Cohen acted, as stated, with deliberate intent to thwart the exercise of Oren's rights under the arbitration agreement that had the force of a judgment. As part of the Cohen group, she waged a legal war of attrition against Oren, replete with improper moves that constituted an abuse of legal process. For these reasons, as I have already noted, Ms. Cohen should be required to compensate Oren for his full losses and damages under the doctrine of abuse of legal process.

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Ms. Cohen complains that the trial court lifted the veil of association, which separated her from the companies she controlled, in order to hold her financially liable for Oren's damages and losses.

However, this complaint has no basis since the trial court held Ms. Cohen personally liable for her own actions and expressly stated this in its judgment (see paragraphs 33-35 of the trial judgment). In this matter, the trial court was absolutely right: a person who acts on behalf of a corporation as one of its organs does not cease to be liable for his actions, as a person. …

Frequently Asked Questions Regarding Abuse of Legal Proceedings