The Legal Notion of ‘‘Linguistic Possibility’’: TheIsraeli Case

Sol Azuelos-Atias

� Springer Science+Business Media Dordrecht 2014

Abstract After a brief survey of the Israeli legal system, I will elucidate how the

method of judicial interpretation used in Israeli courts is applied by means of an

example of the judicial interpretation of section 37 of the Land Appreciation Tax

Law (1963) presented by Judge Grunis in the Shadmi case. This case reveals a

controversy among the judges of the Israeli Supreme Court over the notion of

‘‘linguistic possibility’’. As this notion is one of the judicial criteria for appro-

priateness of purposive interpretation, the controversy is crucially important to

statutory interpretation. One of the judicial criteria for appropriateness of inter-

pretations is that the interpretation should be linguistically possible; the contro-

versial question is what ‘‘linguistic possibility’’ means. Two views as to what

makes an interpretation of a given expression linguistically possible are suggested

in the Shadmi case:

The ‘‘empirical’’ view saying that an interpretation of a given expression is

linguistically possible if the expression is occasionally used and understood as

having the meaning suggested by the interpretation in question.

The ‘‘theoretical’’ view saying that an interpretation of a given expression is

linguistically possible if there is a method of interpretation that suggests, when

applied to the expression in question, the same meaning that is suggested by

the interpretation in question.

The Supreme Court preferred the theoretical view of ‘‘linguistic possibility’’; this

means that when a translator endeavors to translate any section of Israeli law she

must know how the section in question is interpreted by the courts when they apply

it.

S. Azuelos-Atias (&)

Department of Hebrew Language, University of Haifa, Haifa, Israel

e-mail: solaz@research.haifa.il

123

Int J Semiot Law

DOI 10.1007/s11196-014-9380-y

Keywords Legal interpretation � Linguistic constraints � Purposive

interpretation � Israeli law � Land appreciation tax

1 Introduction

The Israeli legal system is best described as a mixed system, belonging to the

Western family of legal systems, incorporating characteristics of Common law,

Continental law and religious law.1 As to the rulings of the courts, Israeli

adjudicators draw mainly from Western sources—Common law and Continental

law—and adhere to the principle of innocent until proven guilty. Originally, the

strongest influence on the Israeli legal system was that of English Common law.

However, with the passing of the years, the influence of American Common law

became predominant. Continental law’s influence on the Israeli legal system can be

found in the civil body of laws (e.g., contracts, property) and incorporation of the

requirement of bona fides. Although the Israeli legal system is based on the

Common law, Israeli courts do not use the jury system; all questions of fact and law

are determined by the judge or judges of the court concerned.2

In order to render judicial justice, judges (in Common law systems) are to

reconstruct the legal truth from the conflicting reconstructions of the discussed

occurrence presented by the litigating parties, and to apply their interpretation of the

law to this truth. Judicial justice is determined, then, by the content of ‘‘the law’’—

namely by the content of the legal norm (including acts of legislation, precedents,

judicial presumptions, and the like). The judges’ role is to interpret the law in the

context of the legally true portrayal they reconstruct from the opposing narratives.

Israeli judges can apply a purposive method of interpreting statutes. This method

(introduced by Aharon Barak) removes the Common law limitation on the

application of the mischief rule of statutory interpretation.3 The main aim of the

mischief rule (established in ‘‘Heydon’s Case’’ 1584) is to determine the ‘‘mischief

and defect’’ that the statute in question has set out to remedy, and what ruling would

effectively implement this remedy. Modern Common law courts continue to apply

the mischief rule, however, following ‘‘Re Sussex Peerage’’ (1844) they do it in a

more restricted manner: it was held, in ‘‘Re Sussex Peerage’’, that the mischief rule

should only be applied where there is ambiguity in the statute. The limitation set by

‘‘Re Sussex Peerage’’ on the application of the mischief rule presumes, according to

Barak, that if there is no ambiguity in a statute—it does not need interpretation.

Barak contends that some rule of interpretation (the ‘‘mischief’’ or another rule) is

required in order to find out whether the text is ambiguous or not: he is explicit that

1 Religious courts are authorized by Israeli law to rule in matrimonial issues of citizens of the religion in

question according to that religion’s law; rabbinical courts, for example, are authorized to rule in

matrimonial issues of Jewish citizens according to the Jewish law.2 See [8, 344–346]; [9, 24–25].3 On the method of interpreting statutes used in Israeli courts and on its relation to Barak’s jury-prudence,

see [2].

S. Azuelos-Atias

123

‘‘characterizing a text as ‘unclear’ is a result of the interpretive process, not an

occasion to begin it’’.4

According to the purposive method of interpreting statutes applied by Israeli

judges, purposive interpretations must be linguistically possible in order to be

legally valid; in this article I present an analysis of this concept—linguistic

possibility. The analysis is based on the Supreme Court’s second discussion of the

Shadmi case. The case was discussed first in The Chief Officer of the Land

Appreciation Tax—Haifa versus Naftali Shadmi 8789/02, [P.D. 58 (5) 917 (2004)];

the Supreme Court discussed it again in The Chief Officer of the Land Appreciation

Tax—Haifa versus Naftali Shadmi, 6811/04 (Further Civil Discussion, August 4,

2009, not yet published). In order to clarify the discussion I am referring to, I use

Tax authorities versus Shadmi to refer to the first discussion (8789/02) and Shadmi’s

further discussion to refer to the second (6811/04—the Further Civil Discussion).

2 Applying a Tax Law: A Case Study

In what follows I analyze the opinion Judge Grunis presents in Shadmi’s further

discussion. This opinion exemplifies the legal use of the purposive method of

interpretation and reveals a controversy among the judges of the Israeli Supreme

Court over the notion of ‘‘linguistic possibility’’. As this notion—‘‘linguistic

possibility’’—is one of the judicial criteria for the appropriateness of purposive

interpretations, this controversy is crucially important to statutory interpretation.

The issue discussed in the case before us—the Shadmi case—concerns land

appreciation tax. Owners of real estate in Israel usually make some profit by just

owning these properties (prices of real estate have risen more or less continuously

throughout Israeli history);5 profits owners make due to rise of prices are taxable

under the Land Appreciation Tax Law, 1963 (17 L.S.I 193). The profit made by the

sale of a real estate asset due to the rise of prices depends on the asset’s ‘‘acquisition

date’’: the taxed appreciation of an asset is the difference between the asset’s

price—its ‘‘sale value’’—and its ‘‘acquisition value’’ (its value on the ‘‘acquisition

date’’).6 The Shadmi case concerns, in particular, the rate of land appreciation tax to

be paid when (the leasing right of) a residential apartment that was acquired in a

certain kind of ‘‘combination transaction’’ is sold. Some words about real estate

combination transactions would be in place before we can continue to the discussion

4 Barak [4, 13].5 ‘‘Ownership’’ of real estate in Israel usually means leasing rights from the Israel Land Administration

for a period of 49 or 98 years; this leasing is called ‘‘long term lease’’ or ‘‘perpetual lease’’ since as a rule

it can be renewed.6 The taxed profits are calculated by deducting the shekel value of the acquisition—the acquisition

value—and certain expenses from the shekel sale value of the sold right, after accounting for the effects

of inflation in the interim period. The land appreciation tax has various types of discounts and tax-

exempts. In particular, the sale of a property by an individual who has not sold another residential

property in the 4 years preceding the sale under consideration is often exempt from real estate

appreciation tax. An apartment whose sale meets this condition or any of the other conditions specified in

the law entitles the seller to get a tax-exempt status; it is called, accordingly, an ‘‘entitling’’ residential

apartment’’.

The Legal Notion of ‘‘Linguistic Possibility’’: The Israeli Case

123

of the rate of land appreciation tax that should be paid when an apartment that was

acquired in a transaction of this kind is sold.

2.1 Real Estate Combination Transactions: Payment Apartments and Taxation

Real estate combination transactions are popular in areas in which building rights

have been expanded due to a change in the applicable City Building Plan and in

which there are, consequently, land lots which building rights are not fully utilized.

Consider, for example, a land lot that, as in the case before us, has one residential

apartment built on it when according to the applicable City Building Plan, a building

of seven apartments can be built on it. In the real estate combination transaction

regarding this lot, both sides—the land owners and a contractor—were paid in kind:

the owners entrusted the property (the residence and the land lot) to the constructor

who built on the land a seven-apartment building in place of the owners’ residence

and gave the owners two of the apartments—the ‘‘payment apartments’’—in return,

each apartment with the share of the lot attached to it.7 Namely, in a transaction of

this kind the owners get from the contractor new apartments (in place of their old

residence) and pay the contractor with the right to build the extra apartments on

their lot.

There are two kinds of combination transactions. One kind—in which the owners

keep the shares of the land to be attached to the payment apartments—is called ‘‘a

partial sale real estate combination transaction’’ (hereinafter a ‘‘partial sale

transaction’’). The other type—in which the owners first give the entire land lot

to the contractor, and then get the payment apartments in return, each with the share

of the land attached to it—is called a ‘‘full sale real estate combination transaction’’

(hereinafter a ‘‘full sale transaction’’).8 It should be noted that in a full sale

transaction, two sales take place: the owners first sell the entire property to the

contractor who builds on the land, and then the contractor sells the payment

apartments to the original owners of the property. In a partial sale transaction, on the

other hand, only one sale takes place: the owners sell only part of the land to the

contractor (in the case before us they sold 5/7 of the land), in return receiving

construction services relating to the apartments built on the share of the land that

remains the owners’ property.

Both types of real estate combination transactions begin in the same way (the

property belongs to the owners), in both types a new building is constructed in place

of an old one, and both have the same outcome (a sharing out between the owners

and the contractor of the apartments in the new building). The two types of

combination transactions are, then, similar in essence economically; furthermore,

the sides are free as a rule to choose between both types. It therefore seems that

there should be no difference in the taxation imposed in the two types of

transactions. However, it was accepted in the decree that as far as taxation is

7 If a seven apartments building is built on a certain land lot then the lot is divided formally to seven

shares and it is seen as if each apartment is built on one of these shares; each of the shares of the lot is said

to be ‘‘attached’’ to one of the apartments.8 Tax authorities versus Shadmi, 925.

S. Azuelos-Atias

123

concerned, the two types are to be seen differently.9 The difference in the taxation

imposed on the two types of combination transactions has to do with land

appreciation tax and with acquisition tax—a tax imposed on the acquisition in any

land transaction—as well.

In a full sale transaction two sales take place; the owners first sell the entire

property to the contractor, and therefore the contractor (as buyer) has to pay

acquisition tax on the entire land lot. But since the owners sold the entire property,

receiving the apartments in payment, they are seen as buyers of the land shares

attached to these apartments and, accordingly, have to pay acquisition tax on them.

In a partial sale transaction, on the other hand, the owners sell only part of the

land and therefore the contractor has to pay acquisition tax on this part only, while

the original owners do not have to pay acquisition tax on the payment apartments, as

they did not buy the apartments, but only construction services on their own land.10

Originally, in a partial sale transaction the owners had to pay, as a rule, more land

appreciation tax than the tax paid in a full sale transaction. The point of partial sale

transactions is that only part of the land is sold to the contractor—meaning that not

all of the original residential apartment is sold and, according to the law

[section 49(a) of the Land Appreciation Tax Law, 1963], in order to be tax-

exempted due to an entitling residential apartment an individual has to sell all his/

her property rights in the apartment in question.11 Therefore, originally the owners

could be tax-exempted in a full sale transaction but not in a partial sale. However,

the Supreme Court ruled that the owners could be tax-exempted in a partial sale

transaction as well.12

It should be noted that a regular tax-exemption would be excessive in a partial

sale transaction as it would make the individuals involved tax-exempted due to that

part of the apartment that was not sold (when they are entitled to tax-exempt status

only due to the part of the apartment that was sold). The legislature chose to square

this disproportion by formally magnifying the owners’ profits in partial sale

transactions: in order to calculate the profit taxed under the Land Appreciation Tax

Law where the owner is tax-exempted, it is assumed that the entire land lot was sold

to the contractor—as tax-exemption requires according to the letter of the law13; it

should be noted that this assumption is made although the very point of partial sale

transactions, as noted above, is that only part of the land is sold. This legislative

squaring out of the disproportion of a regular tax-exemption in a partial sale

transaction is fixed in section 49a(b)(1) of the Land Appreciation Tax Law, 1963.14

9 Ibid.10 Shadmi’s further discussion, Judge Naor, Section 4.11 Ibid., Judge Naor, Section 6. The land appreciation tax has various types of discounts and tax-

exempts; the type relevant to the case before us is called ‘‘tax-exempt due to entitling residential

apartment’’. It applies to sales of residential apartments by individuals who have not sold other residential

apartments in the four years preceding the sale under consideration. An apartment whose sale meets this

condition is called an ‘‘entitling residential apartment’’.12 The Chief Officer of the Land Appreciation Tax versus Ben Ami 265/79, P.D. 34 (4) 701 (1981).13 Shadmi’s further discussion, Judge Naor, Section 6.14 Section 49a(b)(1) of the law is interpreted as saying that in order to determine the land appreciation tax to

be imposed on tax-exempted owners in a partial sale transaction, the owners’ profits are calculated by

The Legal Notion of ‘‘Linguistic Possibility’’: The Israeli Case

123

2.2 The Case’s Factual Circumstances

Mr. Shadmi (the respondent) and his mother owned a land lot in Rishon LeZion;

originally the lot was owned by Mr. Shadmi’s parents, but Mr. Shadmi inherited the

share of his deceased father. Only one residential apartment was built on the lot

when, due to a change in the applicable City Building Plan, a building of seven

apartments could be built on it. Accordingly, Mr. Shadmi and his mother sold the lot

in two stages. First they sold one part of the lot to a contractor in a partial sale

combination transaction, and got in return two payment apartments; in the second

stage, they sold the rest of the lot: Mr. Shadmi then sold one of these payment

apartments with the share of the lot attached to it.

The first stage sale took place on February 20, 1994, when Mr. Shadmi and the

mother signed a partial sale contract with the Shadmi Assets Construction and

Infrastructure Company (hereinafter the contractor), which was under the control of

Mr. Shadmi. The contractor built on the lot a seven-apartment building (in place of the

original residence); one of these apartments (hereinafter the payment apartments)—

belonging to Mr. Shadmi and the other to his mother. The second stage sale took place

on October 26, 2000 when Mr. Shadmi sold the rights in his payment apartment.

2.3 The Case’s Legal Circumstances

The question discussed in the case before us is what should be regarded as the

‘‘acquisition date’’ of the payment apartment Mr. Shadmi sold in the second stage

sale of the land lot. According to the instructions of the Land Appreciation Tax

Law, 1963 (sections 37 and 19), the ‘‘acquisition date’’ for the purpose of

calculating the land appreciation tax imposed on a given sale, is the date the seller

acquired the property. However, in the case before us—the case of Mr. Shadmi’s

payment apartment—the property in question was involved in a combination

transaction, and therefore the phrase ‘‘the sale’’ may refer to two different

transactions—depending on whether the combination transaction in question is a

full sale or partial sale transaction.

The opinions in the Supreme Court were divided at this point—whether the

combination transaction in which Mr. Shadmi acquired his payment apartment,

should be regarded as a full sale or a partial sale transaction. Judge Grunis held, for

reasons that will be discussed in detail in the next section, that although Mr. Shadmi

and his mother signed a partial sale contract with the contractor, this transaction

should be regarded, for the purpose of calculating the rate of land appreciation tax,

as a full sale transaction. On the other hand, Judge Naor held that the transaction in

question was a partial sale transaction and should be regarded as such.

Footnote 14 continued

deducting the value of the property (the apartment and the land lot) on the day of the original acquisition

from the value of the land lot entrusted to the contractor with all its building rights—including the shares

of the lot that will be attached after the construction to the payment apartments. Then, in order to take into

account the tax-exemption, the value of the original apartment without the unutilized building rights is

deducted from the owners’ profits—and the result is the gain taxed under the Land Appreciation Tax Law

in partial sale transactions where the owner is tax-exempted (Tax authorities vs. Shadmi, 926, 927).

S. Azuelos-Atias

123

In full sale transactions the owners first sell the entire lot to a constructor and then

buy from this constructor the payment apartments (including the shares of the lot that

are attached to these apartments). Therefore, in case the Shadmis’ combination

transaction is regarded as a full sale transaction as Judge Grunis holds it should, it is the

sale in which the seller—Mr. Shadmi—acquired his payment apartment. Judge Grunis

must conclude, accordingly, that the date Mr. Shadmi acquired his payment apartment

is the date of the combination transaction (the first stage sale—February 20, 1994).

Things are different if the combination transaction in question is regarded (in line

with Judge Naor) as a partial sale; the whole point of a partial sale transaction is that

the owners keep the shares of the lot to be attached to the payment apartments.

Judge Naor holds, accordingly, that when Mr. Shadmi sold his payment apartment

he was not selling a property that was acquired in the combination transaction—but

one share of a property that another of its shares was sold in the combination

transaction. Judge Naor concludes that the date Mr. Shadmi acquired his payment

apartment (or more precisely, the share of the land lot this apartment was to be

attached to) is the date he inherited his deceased father’s share (the ‘‘historic date of

acquisition’’—November 4, 1964).

3 Judge Grunis’s Purposive Interpretation

Judge Grunis applies a purposive interpretation to the phrase ‘‘the acquisition date’’

in section 37 of the law in order to demonstrate that this phrase refers, in the case

before us, to the date of the combination transaction. Judge Grunis bases this

purposive interpretation on two judicial interpretive rules—the principles of

continuity and uniqueness of taxation. Tax laws are hardly ever simple or easy to

understand, and the Israeli Land Appreciation Tax Law is, to say the least, no

exception. Therefore, in interpreting this law, Israeli courts often make use of these

two interpretive rules in order to determine the rate of tax imposed on a given sale.

The principle of continuity of taxation says that unless the law specifies otherwise

explicitly, the appreciation of any land lot over any period of time should be taxed.

The principle of uniqueness of taxation says that if the appreciation of a land lot

during a certain period of time was already taxed, it should not be taxed again.

Judge Grunis is explicit that his interpretation of ‘‘the acquisition date’’ in this

case is based on the view that unique taxation is one of the objective purposes of the

law and is consistent with the principle of continuity of taxation:

We came then to the conclusion, that a purposive approach wishing to refrain

from imposing double taxation compels us to hold that the ‘‘acquisition date’’

of the payment apartments in the case of a partial sale transaction in which the

owner was tax-exempted due to residential apartment is the date of the

combination transaction. …we also came to the further conclusion that this

result is consistent with the principle of continuity of taxation.15

15 Shadmi’s further discussion, Judge Grunis, Section 15.

The Legal Notion of ‘‘Linguistic Possibility’’: The Israeli Case

123

The starting point of the considerations leading Judge Grunis to interpret the phrase

‘‘the acquisition date’’ in this case as the date of the combination transaction, is the

peculiar way the tax rate imposed on the sellers in this transaction was calculated.

Land appreciation tax should be paid whenever a real estate asset is sold; Mr.

Shadmi and his mother sold the lot in two stages and had to pay land appreciation

tax in each of them. In the first sale—in the partial sale transaction—they obtained a

tax-exempt status due to an entitling residential apartment. According to section 49

of the law, in case the seller in this kind of transaction has this kind of tax-exempt

status, the tax rate is calculated as if the entire lot was sold (namely as if the

transaction was a full sale—although it was a partial sale and only part of lot was

sold).16 This peculiar way of calculating the tax rate is Judge Grunis’s starting point.

Judge Grunis explains that this way of calculating the tax raises a question about

the meaning of the phrase ‘‘the acquisition date’’: he explains that in the

circumstances of the case before us this phrase has two possible interpretations.

According to the first interpretation, we should conclude from this peculiar way of

calculating the tax in the first stage sale, that the tax rate in the second stage should

also be calculated as if the first stage sale was a full sale transaction—and the

payment apartments along with the shares of the lot attached to them, was acquired

then—in the first stage sale:

One possibility is to say that since [according to section 49] ‘‘the value of the

sale’’ in a partial sale transaction in which the owner is tax-exempted is equal

to what … [the value of the sale] would be if the transaction involved was a

full sale transaction, the ‘‘acquisition date’’ and the ‘‘acquisition value’’ of the

payment apartments should also be determined as if a full sale transaction was

involved. According to this possibility, ‘‘the acquisition date’’ of the payment

apartments will be the date of the combination transaction and the ‘‘acquisition

value’’ will be inferred from their value at that date. This approach is

advocated by [Mr. Shadmi].17

According to the second of Judge Grunis’s possible interpretations, the tax rate

imposed on the second stage sale should be calculated on the basis of the historic

date of acquisition of this property—the date Mr. Shadmi inherited his share of the

land lot on which the payment apartment was to be latter built:

The other possibility, advocated by the Chief Officer [of the land appreciation

tax—the appellant], is that ‘‘the acquisition date’’ and ‘‘the acquisition value’’

should be based on the historic acquisition date and acquisition value of the

property. This [second possibility] is similar to the rule regularly applied

[when the seller is not tax-exempted] to payment apartments acquired in a

partial sale combination transaction.18

Judge Grunis is explicit that in his view, the first of these two possible

interpretations should be preferred:

16 Tax authorities versus Shadmi, 926; see footnote 14.17 Shadmi’s further discussion, Judge Grunis, Section 9.18 See Shadmi’s further discussion, Judge Grunis, Section 9.

S. Azuelos-Atias

123

The decision we are facing is not simple at all. Still, after consideration I came

to the conclusion that the first possibility mentioned… above, according to

which the ‘‘acquisition date’’ of the payment apartments will be the date of the

partial sale transaction, is to be preferred…19

Judge Grunis uses the principles of continuity and uniqueness of taxation in order

to conclude from the peculiar way of calculating the tax in the first stage sale, that

the ‘‘acquisition date’’ is the date of the partial sale transaction. The crucial point,

according to Judge Grunis’s position, is that in the first stage sale Mr. Shadmi (and

his mother) paid all the tax on the appreciation of the entire lot—including the

shares of the lot attached to the payment apartments. Judge Grunis prefers to

interpret ‘‘the acquisition date’’ in cases of the kind of Shadmi’s payment apartment

as the date of the combination transaction. This view means that a partial sale

transaction in which the owner was tax-exempted due to residential apartment is

seen, for the purpose of calculating rates of land appreciation tax, as a full sale

transaction.

This conclusion of Judge Grunis’s reasoning—a partial sale transaction in which

the owner is tax-exempted is seen, for the purpose of calculating the tax, as a full

sale transaction—is innovative: it is different than the way the Land Appreciation

Tax Law was interpreted before the decision in the case before us. Therefore, I will

survey Judge Grunis’s reasoning in some detail.

Judge Grunis admits that the peculiar way of calculating the tax specified in

section 49a(b)(1) was interpreted as a Sui generic—as meaning that a partial sale

transaction in which the owners are tax-exempted due to residential apartment is

seen as a full sale transaction—for the purpose of calculating the rate of land

appreciation tax in this combination transaction (in the first stage sale) only. Judge

Grunis holds, however, that a transaction of this kind should be seen as a full sale

transaction—for the purpose of calculating the rate of land appreciation tax in the

sale of the payment apartment as well (in the second stage sale). He explains that

once the Chief Officer of the Land Appreciation Tax has treated the partial sale

transaction involved in the case before us as a full sale transaction, he can no longer

treat it as a partial sale:

…The [tax-]exemption is a promissory note with all the implications resulting

from its being ‘‘conditioned’’ on payment of land appreciation tax as if a full

sale transaction had taken place and the entire lot was sold to the

contractor…20

Judge Grunis concludes from this doctrine (that the tax-exemption is a

promissory note with all the resulting implications) that Mr. Shadmi and his

mother have paid the appreciation tax on the entire land lot—including the shares

attached to the payment apartments—up to the first stage sale (the combination

transaction). The date of this sale marks, then, the end of the period of time

regarding which the land appreciation tax imposed on these apartments was paid.

19 Ibid., Judge Grunis, Section 12.20 Shadmi’s further discussion, Judge Grunis, Section 13.

The Legal Notion of ‘‘Linguistic Possibility’’: The Israeli Case

123

Therefore, according to the principle of uniqueness of taxation the ‘‘acquisition

date’’ of these apartments cannot precede the date of the combination transaction—

if the ‘‘acquisition date’’ of the apartment sold in the second stage sale was to

precede the date of the combination transaction, then double taxation would be

imposed:

It follows from what has been said so far that owners of land lots wishing to

obtain tax-exempt status due to an entitling residential apartment are taxed on

the appreciation of their entire lots up to the date of the combination

transaction. Therefore, when they sell the payment apartments the tax on the

appreciation of the rest of the lot before the date of the combination

transaction, should not be imposed on them again.21

Judge Grunis emphasizes that partial combination transactions in which the

owners are tax-exempted due to a residential apartment, that are seen as full sale

transactions for the purpose of calculating the tax rate in the first stage sale, should

be seen as full sale transactions for the purpose of calculating the tax rate in the

second stage sale—the sale of the payment apartments—as well:

Once the fiction that they were involved in a full sale transaction is applied to

the owners and as a consequence the tax imposed on them is calculated as if

they were involved in a full sale transaction and sold their entire lots, this

fiction should be applied in the stage of selling the payment apartments too.22

According to the principle of uniqueness of taxation the ‘‘acquisition date’’ of

Mr. Shadmi’s payment apartment cannot precede, then, the date of the first stage

sale. Furthermore, the date of this sale marks the end of the period of time regarding

which the land appreciation tax imposed on the apartment was paid and therefore,

according to the principle of continuity of taxation, the ‘‘acquisition date’’ cannot

succeed the date of the first stage sale. Of course, it is only natural to conclude, as

Judge Grunis does here, that since the ‘‘acquisition date’’ cannot come before the

date of the first stage sale nor can it come after it—it must be the date of the first

stage sale (the combination transaction).23

21 Ibid., Judge Grunis, Section 14 (my emphasis S.A.-A.).22 Ibid.23 In fact, this natural conclusion is based on the metaphysical assumption that (outside science fiction)

there are no loops in time, which can be phrased in the terms of mathematical set theory as follows:

The order relation ‘B’ (defined: ‘y B z’ if ‘z is not prior in time to y’) on the collection of dates is anti

symmetric; namely: if x and y are dates then

If y� z and z� y then z ¼ y:

This metaphysical assumption is indeed necessary for Judge Grunis’s reasoning; it is necessary in

order to infer from the assumptions that the ‘‘acquisition date’’ cannot come before the date of the

combination transaction nor can it come after it the conclusion that the ‘‘acquisition date’’ is the date of

the combination transaction. Suppose that there was a loop in time and a certain time unit repeated itself.

Namely, suppose that there was some number K such that the time unit at the Kth place in the sequence of

time units repeated itself and occurred in the Nth place as well as in the Kth. In that case any time unit that

precedes the Kth place comes definitely before the unit that repeats itself, and any time unit that succeeds

the Nth place comes definitely after the unit that repeats itself. However, any time unit placed between the

Nth and the Kth places does not come before the time unit that repeats itself (as it succeeds its first

S. Azuelos-Atias

123

4 The Linguistic Possibility of Judge Grunis’s Interpretation

I surveyed, in the last section, Judge Grunis’s interpretation of the phrase ‘‘the

acquisition date’’ (in section 37). I also surveyed there Judge Grunis’s interpretation

of the peculiar way of calculating land appreciation tax in cases of the kind of

Shadmi’s payment apartment [specified in section 49a(b)(1)]; according to this

interpretation, this way of calculation means that a partial sale transaction in which

the owner is tax-exempted is seen as a full sale transaction. In order to show that

these interpretations are legally appropriate, Judge Grunis has to show, among other

things, that his interpretation of these sections of the law is linguistically possible.24

In his discussion of the linguistic possibility of his interpretation of the

‘‘acquisition date’’ (in section 15 of his opinion), Judge Grunis admits that in the

circumstances of a partial sale transaction the language of sections 19 and 37 gives

the phrases ‘‘the sale’’ and ‘‘the acquisition date’’ the meaning suggested by Judge

Naor’s literal interpretation:

…it seems that a strict literal interpretation [of the ‘‘acquisition date’’ as the

date the rights were acquired] compels us to conclude that the ‘‘acquisition

date’’ is the historic acquisition date of the property…25

However, he emphasizes that there is another linguistically possible interpretation:

But it seems that the language of the section opens the way for another

interpretation according to which ‘‘the acquisition date’’ is the date of the

combination transaction.26

Judge Grunis discusses his interpretation of the peculiar way of calculating land

appreciation tax in cases like Shadmi’s (in sections 13 and 15 of his opinion). He

explains that the Chief Officer of the Land Appreciation Tax has actually turned the

date of the combination transaction into ‘‘the acquisition date (of Mr. Shadmi’s

payment apartment)’’ by calculating the tax rate imposed on Mr. Shadmi in the first

stage sale—in the combination transaction—according to section 49a(b)(1) of the

law (surveyed in footnote 14). This explanation is based on the doctrine that if the

seller in a partial sale transaction (the owner) is tax-exempted then the transaction is

seen, for the purpose of calculating the rate of imposed tax, as a full sale transaction:

… section 49a(b)(1) sets as noted the fiction that when a tax-exempt status due to

a residential apartment is obtained in a partial sale transaction, it is seen as if the

owners are involved in a full sale transaction and they are taxed accordingly.27

Footnote 23 continued

occurrence) nor does it come after it (as it precedes its second occurrence). The crucial point is, of course,

that there is no reason to assume that all time units that are placed between the Nth and the Kth places are

identical to the one that repeats itself. This metaphysical assumption is an example of a semantically cued

unspoken assumption of the kind discussed in [1, 728].24 On the other judicial criteria for appropriateness of purposive interpretation see [2].25 Shadmi’s further discussion, Judge Grunis, Section 15.26 Ibid.27 Ibid.

The Legal Notion of ‘‘Linguistic Possibility’’: The Israeli Case

123

Judge Grunis derives this doctrine in section 13 of his opinion. There he explains

that the legislative solution which consists of calculating the tax rate imposed on the

owner in a partial sale transaction as if the entire property was sold in this

transaction—the solution chosen in section 49a(b)(1) for squaring the disproportion

of excessive tax-exemption in transactions of this kind—does not shed the best light

on the law. From this [the fact that the solution presented in section 49a(b)(1) does

not shed the best light on the law], Judge Grunis draws the doctrine that calculating

the tax rate in a partial sale transaction according to this section is a promissory note

with a voucher attached to it: this method of calculation turns the transaction in

question into a full sale transaction for the purpose of calculating the rate of land

appreciation tax in the second stage sale—the sale of the payment apartments—(as

well as in the first stage sale—the combination transaction):

…the legislative solution chosen for the disproportion in question is not an

exact setoff of the excessive tax-exemption but a creation, for the purpose of

calculating the rate of taxed appreciation, of a fiction that the owner was

involved, as it were, in a full sale transaction. This [creating this fiction] is

done by enlarging the value of the reward [the owner gets] in a partial sale

transaction until it reflects, conceptually, the reward for the entire land lot,

including the share that was not sold in reality to the contractor. It is obvious

that the excessive tax-exemption given to the owners in partial sale

transactions is not always equal to the increase in the tax rate resulting from

the enlargement in the value of the reward… It then results that the tax-

exemption due to an entitling residential apartment is a promissory note with

voucher attached, in the sense that it is ‘‘conditioned’’ on payment of land

appreciation tax [in the sales of both parts of the property] as if a full sale

transaction had taken place and the entire lot was sold to the contractor…28

Judge Grunis’s derivation of the doctrine—that calculating the tax rate in a

partial sale transaction according to section 49a(b)(1) turns the transaction in

question into a full sale transaction—from the fact that the solution presented in this

section does not shed the best light on this section of law is based, it would seem, on

Dworkin’s view of legal interpretation according to which legal claims are justified

when they are shown to be based on principles (like justice, fairness, procedural due

process) that offer the best account of society’s legal practice.29

Indeed, Judge Grunis’s interpretation sheds a better light on section 49a(b)(1) of

the law. The rate of land appreciation tax imposed on the owners in the first stage of

selling their property—in the partial sale transaction—is calculated as if the

transaction was a full sale, making the owners pay more tax. Without Grunis’s

doctrine, the rate of land appreciation tax imposed on the owners in the second stage

of selling their property—selling the the payment apartments—would be calculated

on the assumption that the first stage sail was a partial sale transaction, again making

the owners pay more tax! It would certainly shed better light on the law if the tax

28 Ibid., Judge Grunis, Section 13 (my emphasis S.A.-A.).29 Dworkin [7, 355, 356].

S. Azuelos-Atias

123

rate imposed in both stages of the sail of the property was calculated—one way or

another—in the same way!

Once the doctrine (that calculating the tax rate in a partial sale transaction

according to section 49a(b)(1) turns the transaction in question into a full sale

transaction) is accepted, Judge Grunis can easily demonstrate the linguistic

possibility of his interpretation of the ‘‘acquisition date’’ as the date of the

combination transaction:

In a full sale transaction the owners sell the entire land lot to the contractor,

and the contractor sells the payment apartments to the owners, including the

share of the lot attached to these apartments. Namely, if the payment

apartments come from a full sale transaction, then when they are sold their

‘‘acquisition date’’ will be the date of the combination transaction.30

Judge Grunis’s crucial point is:

As section 49a(b)(1) of the law sets as noted the fiction that the owners are

involved in a full sale transaction and the entire land lot was sold to the

contractor, this fiction can also be applied to the aforementioned alternative

[the definition of the ‘‘acquisition date’’] and [it is linguistically possible] to

interpret [this alternative] in such a way that the ‘‘acquisition date’’ of the

payment apartments will be the date of the combination transaction, like the

‘‘acquisition date’’ of payment apartments coming from a full sale

transaction.31

If the doctrine that calculating the tax rate in a partial sale transaction according

to section 49a(b)(1) turns the transaction in question into a full sale transaction is

accepted, Judge Grunis’s purposive interpretation of sections 37 and 19 is, indeed, a

linguistically possible interpretation of the phrase ‘‘sale date’’ in these sections.

5 The Legal Notion of ‘‘Linguistic Possibility’’

The crucial advantage of the purposive method of legal interpretation is, of course,

its flexibility. It may happen, because of the balance of political power, that the

legislature is unable to solve a certain urgent social problem; such a situation may

arise, for example, if none of the possible solutions to the problem is supported by a

majority of members of parliament. The flexibility of the purposive method of legal

interpretation may enable the Court to solve social problems the legislature is

unable to solve.

The question is, naturally, whether the purposive method of legal interpretation is

not too flexible. Applying too flexible a method of interpretation to a text is

tantamount to assuming that the text’s author is communicating in the fashion of

30 Shadmi’s further discussion, Judge Grunis, Section 15.31 Ibid.

The Legal Notion of ‘‘Linguistic Possibility’’: The Israeli Case

123

Humpty Dumpty.32 Judge Naor’s criticism of Judge Grunis’s interpretation is that it

is too flexible: using Barak’s words,33 she explicitly asserts that the language of the

relevant sections cannot sustain, in her opinion, Judge Grunis’s interpretation:

My colleague gives section 37 of the law an interpretation that according to

his own words is ‘‘less conceivable’’ from the linguistic point of view but

should be preferred in the unique circumstances of the case before us in view

of section 49a(b)(1). In my opinion the language and the purpose of

sections 37 and 49a(b)(1) cannot ‘‘sustain’’ this interpretation.34

Judge Naor holds that Judge Grunis’s doctrine that in partial sale transactions tax-

exempted owners are to be seen as if they are involved in a full sale transaction, is

not a linguistically possible interpretation of section 49a(b)(1):

My colleague Judge Grunis agrees that the enlargement of the value of the

reward [calculating the tax rate in partial sale combination transaction as if the

owners had sold the entire land lot] is the legislative solution that was chosen

in order to square the disproportion of granting a tax-exempt status due to the

entire residential apartment to a taxpayer who sold only part of it. Still, my

colleague goes on to state that this enlargement [creates] the fiction that once

tax-exempt status due to a residential apartment is granted in a partial sale

transaction, the owners are seen ‘‘as if’’ they were involved in a full sale

transaction. I cannot join this conclusion. In my opinion, section 49a(b)(1)

does not aim to create a fiction, neither from the point of view of its language

nor from that of its purpose, as if the owners were involved in a full sale

transaction to all intents and purposes.35

Judge Naor notes that Judge Grunis agrees that ‘‘section 49a(b)(1) does not aim

to create a fiction, neither from the point of view of its language nor from that of its

purpose’’.36 These points—regarding the express and implicit language of

section 49a(b)(1)—are consistent, indeed, with Judge Grunis’s reasoning: he does

not claim that section 49a(b)(1) aims to create the fiction in question, but tries to

show that the section’s language can sustain—when interpreted in Dworkin’s way—

this fiction.

32 Humpty Dumpty said to Alice (in a rather scornful tone): ‘‘When I use a word… it means just what I

choose it to mean—neither more nor less’’ [6, 269].33 Barak emphasizes that ‘‘[i]n interpreting a constitution, as in interpreting every other legal text… [o]ne

should not give the constitution a meaning that its express or implied language cannot sustain’’ [5,

127]. The Hebrew word Barak uses for ‘‘sustain’’ (in ‘‘…cannot sustain’’) is

—see, for example, [3, 180]; in this context this Hebrew word also

means ‘‘tolerate’’ (namely ‘‘…cannot tolerate’’). This seems to be the meaning of the quotation marks that

Judge Naor adds to the word ‘‘sustain’’ in the following quote.34 Shadmi’s further discussion, Judge Naor, Section 3.35 Ibid, Judge Naor, Section 6.36 The language and purpose of section 49a(b)(1) of the Land Appreciation Tax law are surveyed in the

last paragraph of Section I.A—‘‘Real estate combination transactions: payment apartments and

taxation’’—including footnote 14.

S. Azuelos-Atias

123

Judge Naor’s rejection of Judge Grunis’s reasoning is based, it would seem, on

what might be called an ‘‘empirical’’ view of ‘‘linguistic possibility,’’ according to

which an interpretation of a given expression is linguistically possible if the

expression is occasionally used and understood as having the meaning suggested by

the interpretation in question.

In paragraph 6 of her opinion, Judge Naor shows, indeed, that from the point of

view of its language, section 49a(b)(1) does not aim to create a fiction as if the

owners were involved in a full sale transaction; namely, she shows that this section

was not used (by the legislature) as having the meaning suggested by Judge Grunis’s

interpretation. In paragraph 7 of her opinion, Judge Naor presents quotes from the

decree (verdict 911/97 of the appeals committee under the Land Appreciation Tax

Law that was accepted by the Supreme Court) and from an authoritative legal

scholar (the advocate professor Yitzhak Hadari) showing that creating the fiction

that the owners were involved in a full sale transaction was never seen as the

section’s purpose. These quotes show that section 49a(b)(1) was not understood (in

the decree or by legal scholars) as having the meaning suggested by Judge Grunis’s

interpretation.

On this empirical view of ‘‘linguistic possibility,’’ Judge Naor can conclude,

therefore, that

Section 49a(b)(1) is indeed designed to state a formula of calculation in a

narrow sector and as a Sui generic and this formula is not enough to create a

general fiction according to which a partial sale transaction will be seen as if a

full sale transaction took place.37

I suggested in Section III that Judge Grunis establishes the linguistic possibility

of his interpretation by means of a Dworkin-style reading of section 49a(b)(1) of the

law: he demonstrates that his interpretation of ‘‘the acquisition date’’ (in section 37)

as referring to the combination transaction is linguistically possible by showing that

this interpretation is derivable from his reading of section 49a(b)(1) of the law. The

notion of ‘‘linguistic possibility’’ behind this reasoning can be called the

‘‘theoretical’’ view of ‘‘linguistic possibility’’—namely, that a legal interpretation

of a certain expression is ‘‘linguistically possible’’ if there is some section of law in

which the expression can be read—according to some method of interpretation

recommended by a well known scholar—as implying the meaning suggested by the

interpretation in question.

On the other hand, the empirical notion of ‘‘linguistic possibility’’ behind Judge

Naor’s reasoning is that an interpretation of a given expression is linguistically

possible if the expression is occasionally used with the meaning suggested by the

interpretation in question and understood as having this meaning.

As in the case before us the majority of the judicial forum sided with Judge

Grunis against Judge Naor, we must conclude that the theoretical view of ‘‘linguistic

possibility’’ is the view accepted in the Israeli legal system. This view of the notion

of ‘‘linguistic possibility’’ means that Israeli law cannot be translated literally.

37 Shadmi’s further discussion, Judge Naor, Section 10.

The Legal Notion of ‘‘Linguistic Possibility’’: The Israeli Case

123

6 A Concluding Remark About Translating Sections of Law

A translation of a section of law is correct if the translator manage to express in the

target language the section’s authoritative judicial interpretation—the one held by

the judges that apply the section in court. In any legal system, the judicial

interpretation of a section of law might be quite different than the correct linguistic

interpretation—the one reconstructing the meaning intended by the section’s author

(regardless of who this author is: the member of parliament who initiated the

particular section of law, the legal adviser who phrased it, the members of

parliament who supported it, or ‘‘The Legislature’’). Sections of law are meant to be

applicable in a variety of circumstances to an indefinite number of particular

cases—their formulation must be, therefore, very abstract: they have linguistic

meanings but these are rather general and in certain circumstances might leave

important questions open when it comes to application.

In other words, there are linguistic constraints on judicial interpretation but these

constraints cannot be too strict and some legal systems loosen them even further. I

showed that one of these legal systems is the Israeli system. The Israeli legal system

acknowledges a purposive method of judicial interpretation according to which

judicial interpretation must be ‘‘linguistically possible’’.38 This method loosens the

linguistic constraints on judicial interpretation by using, as I showed in the last

section, extremely flexible notion of ‘‘linguistic possibility’’. The fact that the

linguistic constraints on judicial interpretation in any legal system cannot be too

strict means that when a translator endeavors to translate any section of law (and, in

particular, a section of Israeli law) she must know how the section in question is

interpreted by the courts when they apply it.

References

1. Azuelos-Atias, S. 2010. Semantically cued unspoken assumptions in the legal text. Journal of

Pragmatics 42: 728–743.

2. Azuelos-Atias, S. 2013. The purposive method of legal interpretation in practice. International Journal

of Law, Language and Discourse 3(1): 30–54.

3. Barak, A. 2004. The judge in a democracy. Nevo, Keter: Haifa.

4. Barak, A. 2005. Purposive interpretation in law. Princeton: Princeton University Press.

5. Barak, A. 2006. The judge in a democracy. Princeton: Princeton University Press.

6. Carroll, L. 1970. Through the looking glass and what Alice found there, In The Annotated Alice.

Penguin: Harmondsworth.

7. Dworkin, R. 1997. In praise of theory. Arizona State Law Journal 29(2): 353–376.

8. Edrey, Y.M. 2002. A brief introduction to the legal system and legal education in Israel and the

curriculum at Haifa faculty of law. South Texas Law Review 4: 343–353.

9. Zemach, Y.S. 2002. The judiciary of Israel. The Institute of Judicial Training for Judges in Israel (3rd

Ed).

38 For a survey of the purposive method of judicial interpretation used in Israeli courts, see [2].

S. Azuelos-Atias

123