Background
Tzvi Shilo Law Office sought certification of a class action against the Jerusalem Municipality, alleging that the city failed adequately to notify taxpayers of credit balances arising from overpaid municipal property tax and failed to return those balances. Relying on the municipality’s 2020 audited financial statements, the firm sought repayment of approximately NIS 88 million. It alleged a personal claim based on a credit generated by pandemic-era tax discounts that the municipality had not brought to its attention.
The municipality denied withholding refunds and said that it notified taxpayers whenever credits arose. During the proceedings, it agreed to improve its practices, including directly depositing credits into eligible taxpayers’ bank accounts, disclosing unused credits in annual tax demands, considering text and email notices, and offering additional refund channels to vulnerable populations. After the parties initially agreed to pursue a consensual cessation notice, negotiations failed and the municipality filed its own notice. The Jerusalem District Court accepted that notice under Section 9 of the Class Actions Law, denied certification, and awarded the firm NIS 15,000 and its counsel NIS 75,000 plus VAT.
The Court’s Holding
By a 2–1 majority, the Supreme Court dismissed the appeal without costs. Justice Ofer Grosskopf, joined in the result by Justice Yehiel Kasher, held that a court may, in exceptional circumstances and before certification, extend the statutory 90-day period for a public authority to submit a cessation notice. The District Court validly extended the period here after the parties accepted a court-proposed cessation framework. Once extended, the municipality did not need the firm’s continuing consent to file a legally sufficient notice, because the statutory mechanism depends on cessation of the challenged conduct rather than agreement by the class applicant.
The majority also rejected the argument that the notice had to state the total historical overcharge or establish mechanisms supervising repayment. A cessation notice ordinarily concerns ending the challenged collection practice going forward and does not necessarily require full repayment of previously collected amounts. The Court nevertheless emphasized that its judgment did not decide precisely what measures municipalities must take to return accumulated taxpayer credits and cautioned that settlement or withdrawal may be preferable where defining legally sufficient refund measures is difficult.
The Court declined to increase the representative award or attorney’s fee. It found no basis to disturb the District Court’s overall assessment, particularly given the weaknesses it identified in the proposed class action, the firm’s shifting procedural positions, and the difficulty of quantifying the proceeding’s benefit. The percentage method could not justify the requested NIS 582,000 award and approximately NIS 21 million fee. Justice Ruth Ronnen dissented, reasoning that the late, unilateral cessation notice should not have been accepted without a reasoned application and exceptional justification; she would have remanded the case for further proceedings.
Key Takeaways
- After the statutory 90-day period expires, an Israeli court may permit a public authority to file a cessation notice before certification, but that authority is exceptional and should be exercised sparingly.
- An applicant’s consent to an extension is relevant but does not itself transform cessation into a consensual mechanism or give the applicant a veto over a later unilateral notice.
- A cessation notice need not ordinarily quantify or supervise repayment of all historical overcharges, and fees need not be calculated as a percentage of the asserted credit balance.
Why It Matters
The decision clarifies the stages at which Israel’s special cessation procedure for restitution class actions against public authorities may operate: freely during the initial 90 days, exceptionally by court-authorized extension before certification, and not after certification. It also confirms that an extension can remain effective even if the contemplated consensual notice ultimately becomes unilateral.
At the same time, the divided opinions expose continuing uncertainty over late cessation notices and proceedings alleging inadequate refund administration rather than a conventional unlawful charge. The majority’s narrow disclaimer leaves unresolved what concrete notification and repayment steps municipalities must take to satisfy their obligations toward taxpayers holding credit balances.