At this point, it should be further clarified that since the Special Manager's claim that the purpose of the back-to-back transactions was to distort Hefzibah Investments' financial statements was not proven, the basis for the argument that these transactions were null and void as aforesaid was "an invalid contract" was dropped In the section 30 30The Contracts Law. Much more than necessary, it should be noted that even this was an invalid contract - As is well known, there may be situations in which it is nevertheless justified to order the existence of obligations from within it, by virtue of the broad application of the principle of good faith and the discretion given to the court in the matter by virtue of Section 31 30The Contracts Law (For more information, see, for example, the judge's review v. Solberg OnCivil Appeal 10159/16 Yoav Regional Council v. Kiryat Gat Municipality, [Published in Nevo] paragraphs 49-55 and references there (June 20, 2019); Gabriela Shalev and Effi Zemach Contract Law, pp. 676-686 (4th edition, 2019), Hereinafter: Peaceful and Plant).
- And now for an engineering deal. As detailed in the factual chapter, in the framework of this transaction, Mordechai Yona transferred to Hefziba Engineering a financial deposit and a portfolio of securities that he owned and pledged by him for the benefit of Mizrahi Bank, as a guarantee for the financial activity of Hefziba Shikun and Hefziba Investments; and the transfer of these assets from Mordechai Yona to Heftziba Engineering was subject to their continued mortgage in favor of the bank. According to the position of the Special Manager, Heftziba Engineering, on the one hand, put assets that it owned at risk in order to ensure the repayment of the debts of other companies in the Group, and on the other hand, it was not entitled to any consideration for the provision of the guarantees - Hence, this transaction was not "in favor" of Heftziba Engineering. It was further claimed by the Special Manager that the engineering transaction was intended only to enable Mordechai Yona to evade the repayment of a debt in the amount of millions of shekels that he owes Hefziba Engineering personally - In such a way that the debt had passed, Mordechai Yona transferred to the company's owners assets that were already mortgaged to the bank and could not be used in any other way. The District Court rejected these arguments in its decision of December 11, 2016; And I will say at once that the Special Director has not been able to point out any reason for intervening permanently there.
With regard to Mordechai's debt, it was clarified by the District Court that "The situation of the company (Hefziba Engineering-A.B.) is no worse today than it was before the transfer of the funds from Mordechai Yona to its account and their pledge to investment and housing companies. Either way, Mordechai Yona owed the company money and the company did not lose anything from the transaction, in a way that there is no impact on the debt that Mordechai Yona had towards it" (paragraph 17 of the decision). In other words, Mordechai's debt was not written off as part of an engineering transaction, but remained pending even after it; This is sufficient to reject the argument that the entire purpose of the transaction was to bring about the unlawful erasure of the debt. As for the economic advantage inherent in the deal from the point of view of Heftziba Engineering - In the District Court's decision, it was clarified that the companies in the Hefziba Group acted in a manner in which they relied mutually on each other's support, inter alia, by providing collateral and transferring assets between them; And that against this background, it is clear that the engineering deal served not only Heftzibah Engineering's best interests, but mainly the interest of the entire group.