Introduction
Facts
Rehovot Magistrates' Court
Lod District Court


Introduction

Clause 11 of the Aviation Services Law 2012 (ASL) allows the court to award exemplary damages of up to 10,590 new Israeli shekels per passenger in cases where it finds that the operator has knowingly breached its main obligations under the ASL. Such breaches mainly occur where operators fail to grant benefits to passengers due as a result of:

  • flight cancellations;
  • delays;
  • advancements of flights; or
  • denied boarding.

This issue has been raised in many court cases dealing with the ASL. Most judgments have been granted by the small claims courts. In fact, the courts have a wide discretion to decide whether to apply the provision of clause 11 of the ASL in a specific case.

In a recent judgment concerning an appeal filed by United Airlines,(1) the Lod District Court reversed the Rehovot Magistrates' Court decision to award compensation for exemplary damages.

Facts

Eight claimants filed a claim with the Rehovot Magistrates' Court(2) for 80,000 new Israeli shekels. The claim related to alleged cancellations of three flights.

United Airlines argued that the flight cancellations had been due to circumstances that were beyond its control and in order to secure the safety of the passengers. Therefore, the claim against it should be dismissed.

Rehovot Magistrates' Court

The Rehovot Magistrates' Court accepted the claim and obliged United Airlines to pay each passenger(3) statutory compensation for flight cancellation (3,050 new Israeli shekels per passenger) since United Airlines had not proved that the cancellation was due to "special circumstances" as required by clause 6(e)(1) of the ASL.

In addition, the Court awarded each plaintiff 1,500 new Israeli shekels as exemplary damages, explaining the importance of deterring airlines from breaching the law.

Lod District Court

United Airlines filed an appeal with the Lod District Court. The Court denied the appeal as regards the statutory compensation, but accepted the appeal regarding the decision to award exemplary damages.

The Court stated that in order to impose on an operator a payment of exemplary damages, the passenger must prove that the non-payment of the statutory compensation (ie, the breach of the operator's obligations under the ASL) was made intentionally.

The Court clarified that after the flight cancellation is proven by the plaintiff, the burden is shifted to the defendant to prove the special circumstances defence. In this case, the special circumstances defence had not been proved by admissible evidence, but rather by hearsay evidence not based on personal knowledge. The Court did not interfere with this finding of the lower court, being a factual finding based on the credibility of witnesses.

However, the Court decided differently concerning the exemplary damages. According to article 11(a) of the ASL, in order to impose on the operator exemplary damages, each of the passengers has the burden of proof of the elements required by law for these damages.

The Court stated that in this specific case, the plaintiffs had not submitted evidence on their behalf and had not proved that they had previously approached United Airlines with a demand for statutory compensation and been refused.

In addition, the Court concluded that the subject matter raised a factual dispute between the parties as to the alleged argument that a prior approach had been made by the passengers and that United Airlines had "knowingly" refused to pay the statutory compensation.

The Court further stated that when considering the issue of exemplary damages, the Court is required to take into account that exemplary damages are of a punitive nature, the purpose of which is to discourage an operator from breaching their obligations under the ASL.

In this case, the Court decided that there was no reason to award exemplary damages. It had been proved that prior to filing the defence, United Airlines had offered compensation to the plaintiffs as it had opined that there was a true and honest dispute between the parties regarding the existence of the special circumstances exemption. The Court stated that the plaintiffs had not proved that it was necessary to deter the airline because it had ignored the passengers previously or because it had knowingly breached its duties according to the law.

Based on the above, the Lod District Court reversed the Rehovot Magistrates' Court judgement with relation to the exemplary damages and obliged the passengers to pay United Airlines' legal costs of 9,000 new Israeli shekels.

For further information on this topic please contact Peggy Sharon or Keren Marco at Levitan, Sharon & Co by telephone (+972 3 688 6768) or email ([email protected] or [email protected]). The Levitan, Sharon & Co website can be accessed at www.israelinsurancelaw.com.

Endnotes

(1) United Airlines v Justin and others, CA 45537-10-21.

(2) Justin Kagan and Others v United Airlines, CF 10402-08-18.

(3) At some point, the claims of two of the plaintiffs was struck out. The judgment was thus given in relation to six plaintiffs.