Once the contract is cancelled, each party must return to the other party what it received under the contract, and if the restitution was impossible or unreasonable, pay him the value of what he received.
The purpose of the duty of restitution is To prevent the unlawful enrichment of one party to the contract at the expense of the other party, and to bring about the"The balance of justice" Sitting After the cancellation of the contract (Civil Appeal 7141/13 Connect Group BTax Appeal N. Dabush, [Posted inNevo] Paragraph 18 of the judge's judgment M. Mazuz (5.11.2015); Peaceful and Plant 468-469). The Judge (as he was then called) A. Barak Discuss the nature of the obligation of restitution More II-Civil Appeal 741/79 Calanit Hasharon Investments & Building (1978) In Tax Appeal v.' Hurwitz, פ"4 35(3) 533, 540 (1981):
"What, then, is the purpose of restitution? The purpose of restitution is to prevent illegal enrichment. As long as the contract was in force, each party lawfully held what it received under the contract. Once the contract has been cancelled, there is no longer any justification for this, and therefore restitution must be brought about ... In this way, the restitution remedy differs from the compensatory remedy. The former is intended to prevent unlawful enrichment, and it is activated where the sense of conscience and honesty (ex aequo et bono) requires restitution, while the latter comes to compensate for damage."
So yes, Upon Releaseof the parties to the contract From their obligations, Lying On each side The Obligation to Return Hand Held Assetsand and related to these charges - If not, The same side will be found to be rich Illegally (See: Civil Appeal 909/16 Peri v. Henna, [Posted inNevo] Paragraph 29 (February 27, 2019) and the references therein). It should be clarified: the obligation of restitution arising from the cancellation of a contract does not change due to the fact that the dispute has an aspect of insolvency, andClarification of a monetary claim within the framework of liquidation proceedings does not lead to a change in the substantive rights of the parties (see and compare: Civil Appeal 8946/04 Warner Bros. International Television Distribution v. Zvi Yochman, CPA, trustee and special manager, [Published in Nevo] Paragraph 9 (August 1, 2010)). And in our case - The scope of restitution is not affected by the fact that the claims of the Special Manager were filed as part of the liquidation proceedings of the Heftziba Group.
- The back-to-back transactions were essentially loan transactions; Their uniqueness lies in the fact that a central condition for providing the loan was the deposit of the funds in a closed deposit and its pledge in favor of the lending bank. According to this model, each of the back-to-back transactions was executed in three stages. In a dealBTB Mizrahi - Mizrahi Bank provided a loan to Heftziba Shikun; Hefziba Shikun transferred the loan money to Hefziba Investments; Hefziba Investments pledged the funds in favor of Mizrahi Bank (and later the lien was realized by the bank). This was also the case in the BTB Discount - Discount Bank provided a loan to Boaz Yona; Boaz Yona transferred the funds to Heftziba Investments; Heftziba Investments pledged the funds in favor of Discount Bank (and this lien was also realized by the bank). There is no dispute that each of the three stages in the back-to-back transactions was a condition without which the transaction could not be executed; In this situation, it is not possible to respond to the Special Manager's argument that the cancellation of the transactions entails the return of the funds only from the bank to the Arava (Hefziba Investments). The special administrator is in fact seeking to cancel only the realization of the liens by the bank - and to leave the other two stages of the transaction in place (the provision of the loan and the transfer of the funds to the guarantor company) - However, this is not possible, once it has become clear that this is a single transaction that is a whole, and that the split is artificial and sins against the purpose of the transaction. It should be noted at this point that the banks were forced to realize the liens on the eve of the collapse of the Hefziba Group when it was clear that the borrowers would not repay the loans, and in these circumstances it is clear that leaving the funds in the liquidation fund is even unjust, and constitutes illegal enrichment at the expense of the banks. Therefore, if we were to order the cancellation of back-to-back transactions - And as I said, the conclusion I have reached is that this should not be instructed - It was necessary to further order the return of the loan money to the lending banks.
Even with regard to an engineering transaction, the Special Manager claims that the restitution is only partial, in a manner that violates the purpose of the transaction and leads to an unjust result. As has already been clarified, as part of an engineering transaction, the bank allowed Mordechai Yona to transfer to Hefziba Engineering a portfolio of securities and a financial deposit that he owned - This is despite the lien on these assets in favor of the bank, and subject to their mortgage again in its favor by Hefziba Engineering. The purpose of the transaction was to exempt Mordechai Yona from his guarantee for the activities of Hefziba Shikun and Hefziba Investments, and to transfer this guarantee on the shoulders of Hefziba Engineering. The main thing is that if it were not for the pledge of the securities portfolio and the financial deposit by Hefziba Engineering in favor of Mizrahi Bank, the entire transaction would not have been carried out; Therefore, there is no basis for the argument that the cancellation of the transaction leads to the return of the funds only one "step" back, i.e., from the bank to the liquidation fund of Heftziba Engineering. The cancellation action obligates each party to the transaction to return what it received as part of the engagement - And in this case, the significance of restitution is the return of the funds to Mordechai Yona when they are encumbered in favor of Mizrahi Bank, i.e., restitution back to the bank. In this context, too, it should be noted that the realization of the lien was required in the first place against the background of the failure of Heftziba Shikun and Heftziba Investments to meet their obligations to the bank; In this situation, leaving the funds in the liquidation fund is also unjust.