Civil Case (N) 6110-12-22 State of Israel – The Center for the Collection of Fines, Fees and Expenses v. Nissim Baranes

Judgment

General:

1. The lawsuit concerns the granting of declaratory relief for lifting the "inverted" veil between defendant 2 and defendant 1, in accordance with the provisions of section 6(b) of the Companies Law, 5759-1999.

and a declaratory remedy whereby the plaintiff is entitled to collect, by way of offset and at the expense of defendant 1's debt, monies due to defendant 2 by virtue of a judgment given in her case in a civil case in a fast-track proceeding 9558-04-16 M.A.L.  In the Tax Appeal v.  The Ministry of Public Security - Israel Police [Nevo]. 

2. In a civil case in a fast-track proceeding 9558-04-16 [Nevo], it was ruled that the State of Israel - the Israel Police must compensate defendant 2 in an amount that today amounts to over ILS 340,000 for a vehicle that was seized by it and disappeared.
3. On December 8, 2022, the Honorable Senior Registrar Oren Carmeli, in his title at the time, issued a temporary attachment order on the rights of defendant 2 with the holder of the State of Israel - the Israel Police, up to ILS 340,000.

A request to cancel the foreclosure was rejected by a decision of December 8, 2022, and the foreclosure stands.

4. On July 8, 2024, a pre-trial was held, during which the parties agreed not to hear evidence and to submit written summaries.
5. After submitting the defendants' summaries, the plaintiff filed a motion to delete paragraphs 1-2 and 4-10 of the defendants' summaries. These sections of the defendants' summaries relate to the issue of the plaintiff's right to file the claim and the statute of limitations claim.  In a decision dated December 9, 2024, the court granted the plaintiff's request to delete the sections.

The plaintiff's arguments (in the walnut shell):

6. A criminal proceeding was conducted against defendant 1 in Criminal Case Case No. 48893-12-12 Central District Attorney's Office v.  Nissim Baranes, [Nevo], in which the defendant was convicted of a series of offenses.  On October 29, 2015, the defendant was sentenced and awarded, inter alia, compensation in the total amount of ILS 590,150 to the three victims of the offense, which was divided as follows - the sum of ILS 282,750 in favor of the Petah Tikva Municipality, the sum of ILS 217,400 in favor of the Netanya Municipality, and the sum of ILS 90,000 in favor of the "Ezra VeChesed" company.
7. Defendant 1 did not pay the amount of compensation and therefore the handling of the collection of compensation was transferred to the Center for the Collection of Fines. The payment demands and collection actions carried out by the Center did not bear fruit, and the debt currently stands at no less than ILS 1,171,903.
8. Defendant 1 is the sole shareholder and director of defendant 2.
9. Defendant 2 is inactive, does not have a bank account or files with the tax authorities. The company does not carry out business activity and is devoid of assets, and moreover, in 2014 defendant 2 was declared by the Corporations Authority to be a violator of the law.
10. In the name of defendant 2, 12 files are open with the Center for the Collection of Fines for Unpaid Corporations Authority fees, as well as police reports and unpaid fines, totaling ILS 41,117. The collection operations from defendant 2 yielded nothing.
11. On November 23, 2022, the Center for the Collection of Fines received information according to which the decision to transfer the place of hearing was given in a civil case in a fast-track procedure 9558-04-16 A.L. In the Tax Appeal v.  the Ministry of Public Security - Israel Police, [Nevo], monetary compensation was awarded in favor of defendant 2 in respect of a luxury vehicle that was registered in the name of M.A.L.  in a tax appeal - defendant 2 who was caught for the purpose of forfeiture and disappeared, which was in the custody of the defendant.  As of today, the compensation is approximately ILS 340,000.  The compensation has not yet been paid by the Israel Police.
12. After the payment of the debts of defendant 2 out of the aforementioned amount, there will be a balance that must be transferred directly to defendant 2. The plaintiff has reasonable grounds to suspect that the balance money will be transferred directly to the pocket of defendant 1 and not to defendant 2.
13. In the circumstances detailed, defendant 2's right to compensation should be attributed to defendant 1, its sole shareholder and director. Therefore, it is necessary to order the lifting of the reverse veil.

The defendants' arguments (in the walnut shell):

14. The defendants oppose the claim and petition to dismiss it.
15. The compensation awarded in favor of defendant 2 in the framework of a civil case in a fast-track procedure 9558-04-16 [Nevo] does not belong at all to defendant 1 but to defendant 2.
16. Defendant 1 detailed the background to the opening of defendant 2 and its management by him, and claimed that his three sisters helped him finance the opening of defendant company 2 in the sum of approximately ILS 73,000 each of the funds they inherited.
17. The funds were not given to defendant 1 as a gift and his sisters had the right to receive their money back from defendant 2, with the amount of compensation to be paid by the Israel Police.
18. In their summaries, the defendants claimed that the company established by defendant 1 did not have time to operate at all, and that he asked his sisters for money in order to start the activity. The purchase of the car was made with inheritance funds of the sisters and it is possible that it was going to serve as future collateral for commercial loans for the purpose of operating defendant 2.
19. In this case, no fraud was committed against Kuli Alma through the separate legal personality of defendant 2.
20. In the insolvency case 69965-11-22 [Nevo] , which was conducted in the case of defendant 1, an order was issued in favor of defendant 1 for his debts. The defendants referred to the Director-General's response of September 5, 2024, and claimed that the exemption applies to the three creditors: the Petah Tikva Municipality, the Netanya Municipality and the "Ezra VeHesed" company.
21. In the summaries of the reply, the plaintiff was required to address the claim regarding the application of the exemption order to the debts that are the subject of criminal case (R.A.) 48893-12-12, [Nevo], and it was argued that the decision on which the defendants rely was annulled. The plaintiff referred to the Director-General's response of November 19, 2024, according to which in accordance with the provisions of the Insolvency and Economic Considerations Law, 5778-2018, there is no exemption from the debt for compensation to crime victims, as this is a debt that was fraudulently created.
22. Defendant 1 did not act in accordance with the provisions of the honorable court's decision of November 19, 2024, in which it was determined that if a new application is not filed by the debtor by November 28, 2024, the court will assume that it has abandoned its request regarding the application of the exemption to the aforementioned creditors, and it will be deleted without the need for an additional decision.

The normative framework:

23. The court's authority to lift the veil between a company and a shareholder in it is enshrined in section 6 of the Companies Law, which states as follows:

"6.  (a)(1) A court may attribute a debt of a company to a shareholder thereof, if it finds that in the circumstances of the matter it is just and proper to do so, in the exceptional cases in which the use of the separate legal personality is made in one of the following: