Given the considerable costs of these transactions, and since the banks were unable to point to a specific benefit or economic advantage that arose for the borrowers or Heftziba Investments as a result of engaging in them, the Special Manager argues that the necessary conclusion is that their entire purpose was to beautify and inflate Heftziba Investments' balance sheets. In the background, it should be noted that shortly after the back-to-back transactions were made, the Hefzibah Group collapsed and was caught in liquidation proceedings; and that Boaz Yona, who served together with his father as a director of Heftziba Investments, was convicted, according to his confession, of committing various fraudulent offenses, including maintaining false records in the Heftziba Group's membership books. However, this should be clarified: the Special Manager's argument is that the purpose of the transactions was Illegal And as such, it is by its very nature contrary to the good of society - This is a serious claim of a criminal nature, for which the burden of proof is great; Nevertheless, not even the first proof of the claim was brought.
- According to the Special Manager, the intention to misrepresent Hefziba Investments' financial statements through back-to-back transactions was not carried out at the end of the day, since the Heftziba Group collapsed before the company's financial statements for 2006 were prepared. However, it was claimed that the intention to distort the financial statements was realized even earlier, in the financial statements for 2005 - However, a claim of this kind must be supported by an expert opinion in the field of accounting, since it is a purely professional matter, and this has not been done. It should be emphasized: these are financial statements that were audited and signed by an accountant, and in the absence of an opinion indicating otherwise - It is presumed that they were lawfully prepared.
The bottom line is that the purpose for which Mordechai Yona and Boaz Yona conducted the back-to-back transactions remains largely vague; In this context, it should be noted that the banks, for their part, claim that the transactions were apparently part of the Hefzibah Group's tax planning, and that the group was willing to "absorb" the transaction costs (interest and fees) because the alternative would have been to bear a more expensive tax liability. One way or another, and this is the main point of our case, there is no basis for determining that the transactions are based on an illegal purpose.
- As clarified at length above, court intervention in a transaction duly approved by the company will be done with caution and restraint - And where there was no flaw in the company's decision-making process, as a rule, the court will refrain from examining for itself the business purpose of the company's engagements and their terms. In this case, the back-to-back transactions were conducted with the consent of all the shareholders of Heftziba Investments (Mordechai Yona and his wife), and in these circumstances there is no concern of harm to the company's interest or to the shareholders as a result of the engagement. Therefore, and since the Special Manager has not been able to prove that these transactions were intended for an illegal purpose as claimed by him, this is sufficient to reject the claim that the transaction was BTB Mizrahi and the Deal BTB Discount does not meet the precondition of the fixed "best interest of the company" In the section 270 30Companies Law. In this context, it should be further clarified that unlike the borrowers in the transactions (Heftziba Shikun and Boaz Yona), who are the ones who bore the costs of the loans, Hefziba Investments itself actually grew profit from the back-to-back transactions - This refers to the interest on the deposits accumulated in its accounts at Mizrahi Bank and Discount Bank. Moreover, there is no dispute that the realization of the deposits by the banks on the eve of the collapse of the Hefziba Group did not cause Heftziba Investments any damage, since its economic situation on the eve of the engagement in the back-to-back transactions remained the same even after the realization of the guarantees by the bank.
It should also be said that the Special Manager's arguments indicate that in fact he too does not believe that the back-to-back transactions were not For the benefit of the company (Hefzibah Investments), and the correct thing is that in his view, the transactions were not For the benefit of the creditors of the Hefzibah group. However, first and foremost, and as has already been clarified, the serious claim that the transactions were intended to distort the company's financial statements has not been proven at all. And secondly, the grounds for cancellation claimed by the Special Manager place us in the field of approving interested parties' transactions, and in this arena there is no room to expand the test of "the best interest of the company" to apply to the "best interests of the creditors". As detailed at length above, the purpose of the stakeholder transaction approval mechanism is to ensure that the officer of the company does not act in a conflict of interest during the performance of his or her duties, thus violating the fiduciary duty to which he owes the company - It has already been determined in case law that the officer's fiduciary duty does not apply to the company's creditors as well, except for the provisions dealing with fraud preference in insolvency laws (Criminal Appeal 6790/18 Tetro v. State of Israel, [Published in Nevo] in paragraph 32 (July 29, 2020); Mountain Appeal, p. 679 (2004); Another Hari Discussion, paragraph 4).