The parties' arguments please
- According to defendant 4, plaintiff 4, who is a member of a tax appeal, should be required to deposit a guarantee of no less than ILS 150,000 to secure the defendant's expenses in the lawsuit by virtue of section 353A of the Companies Law, 5759-1999 and by virtue of Regulation 157 of the Civil Procedure Regulations, 5779-2018. It was argued that in accordance with section 353A of the Companies Law, the rule is that when the plaintiff is a member of a tax appeal, the default is her obligation to deposit a guarantee in order to secure the defendant's expenses in the proceeding, unless the defendant proves that he should be exempted from doing so. It was also argued that plaintiff No. 4 did not mention an address in the statement of claim, and in accordance with Regulation 157 of the Civil Code, this constitutes a consideration for obligating a plaintiff to deposit a guarantee. As to the chances of the lawsuit - it was argued that they are low for defendant 4 in particular in light of the failure to pay sufficient fees and the lack of grounds. Regarding the non-payment of the fee, defendant 4 reiterated its claims as claimed in Motion 4. Regarding the lack of cause, it was first argued that defendant 4 served as a trustee and did not make representations to the plaintiffs and acted in accordance with the trust agreement, which includes, inter alia, exemptions from liability that omit the land under the lawsuit. Second, the plaintiffs were represented in the loan transaction by a professional entity, consciously and voluntarily assuming commercial risk. Third, the plaintiffs' arguments relate to the feasibility of the transaction and there is no causal connection between the alleged damage and defendant 4, who acted skillfully, professionally and reasonably in her role as a trustee. It was claimed that the plaintiff acted in bad faith while abusing the legal proceedings when she filed the lawsuit, which was intended to stop the statute of limitations as claimed by the plaintiff. Regarding the amount of the guarantee, defendant 4 petitioned for a guarantee of 5% of the amount of monetary relief stated in the statement of claim, which is over ILS 22 million, and at least in the amount of ILS 150,000. It was argued that the sum requested reflects the amount of defendant 4's real expenses in the proceeding, in light of the delay in filing the claim and the efforts in locating evidence, the multiplicity of parties, the value of the remedy and the expected duration of the proceeding.
- According to plaintiff No. 4, she should be exempted from depositing bail. As for the chances of the lawsuit, it is claimed that they are high. Regarding the non-payment of the fee, the plaintiff provides a reiteration of the main points of her arguments in the framework of Application 4. Regarding the cause of action, it was claimed that defendant 4 was negligent in its role as a trustee. As part of its role, it had to supervise the transaction in an optimal manner in accordance with the general duty of care that applies to a trustee by virtue of section 10 of the Trust Law, 5739-1979, even if this was not specified in the trust agreement. Defendant 4 did not act with faith and diligence as a reasonable trustee would, did not envision the best interests of the trust only and safeguard the trust assets, did not warn the plaintiffs that the collateral given to them was precarious and inadequate, and thus did not act to protect the trust assets and did not act to achieve the purpose of the trust. Defendant 4 did not contact the plaintiffs, did not attend the meetings and did not warn them of the problems in the loan transaction. With regard to the financial situation of plaintiff No. 4, it is generally claimed that she is financially strong. In the affidavit of plaintiff 3, who is one of the shareholders of plaintiff No. 4, it was claimed that the plaintiff is engaged in infrastructure planning, has no debts or registered lieens, and from plaintiff No. 4's annual report for 2023, which was attached, it appears that it is stable and has a positive cash flow and profit before tax in the amount of over ILS 1.8 million. With regard to the rate of the guarantee, it was argued that plaintiff 4 should be obligated to bail at the rate of up to ILS 5,000 in accordance with the rate of the loan provided by plaintiff No. 4 only, and not in accordance with the relief requested in its entirety. It was argued that although the claim was filed on behalf of all the plaintiffs jointly and separately, there is no connection between plaintiff 4 and the other plaintiffs except for plaintiff 3, and there is no reason to oblige her to be a guarantor of their debts. In addition, the rate of the guarantee must be determined in accordance with the realistic rate of expenses that the courts rule are reasonable, necessary and proportionate.
- Defendant 4 submitted a response to the response in which she added that the plaintiff did not meet the minimum burden of proving financial strength. It was argued that since the claim relates to the same set of facts relating to the same loan agreement with the same party on identical claims, plaintiff 4 should be obligated in accordance with the scope of the relief sought in its entirety and as a guarantor on behalf of all the plaintiffs. In addition, in accordance with the case law, the company and its shareholders, who are plaintiff 3, should be viewed as a whole with regard to their obligation to be guaranteed, especially when the shareholder has not proven financial strength. It was argued that the failure to specify an address in the statement of claim does not relate only to the plaintiff who is a foreign citizen and constitutes a separate consideration for obligating the plaintiff to deposit a guarantee.
- After examining the motion, the response and the response, I determine that plaintiff 4 must deposit a guarantee to secure defendant 4's expenses in the proceeding, but at a lower rate than was requested, for the reasons that will be detailed below.
- First of all, it should be noted that Regulation 157 of the Code of Civil Procedure, to which defendant No. 4 referred, deals with the obligation to deposit a guarantee of a single plaintiff, and there is no place for a company to be charged by virtue of it. Therefore, I am not required to address the arguments of the parties regarding its applicability in this proceeding.
- In Civil Appeal 882/24, the Honorable Justice Ronen details the stages and issues that must be examined in the application under section 353A:
"In accordance with the section, the default in the case of a plaintiff who is a member of a limited liability is that she is obligated to deposit a guarantee against legal expenses; whereas granting an exemption from a guarantee is within the scope of the exception. At the basis of this default is the concern that a defendant who won the case will not be able to be reimbursed for his expenses by a plaintiff hiding behind a separate legal personality of a limited liability company. Accordingly, it was determined that the question of the exemption of guarantor companies should be examined in a three-stage test, with the burden on the company to show why there is no reason to impose a guarantee on it. In the first stage, the company's financial capacity will be examined, in which "the court will take into account the plaintiff's financial situation, the amount of the claim, the nature of the expected proceeding, including its complexity, the need for experts or unusual disclosures, the expected fees and the chances of the lawsuit" in order to assess the company's ability to meet the expenses if they are awarded (Taub case, at paragraph 14). In the second stage, and if it has not been proven that the company will be able to pay the guarantee if it loses the law, the question will be examined whether the circumstances of the case justify charging the company with the guarantee. At this stage, the constitutional rights of the parties (the right of access to the courts and the right to property), the good faith of the parties, and sometimes also the chances of the proceeding (in cases where the chances of the proceeding are very high or very low). In the third stage, the amount of the bail will be examined (see: Civil Appeals Authority 10376/07 L. v. Computer Engineering in a Tax Appeal v. Bank Hapoalim Ltd., paragraphs 12-13 [published in Nevo] (February 11, 2009); Neot Oasis at paragraph 6; Civil Appeal Authority 7496/15 Or in the Port of Little Tel Aviv in Tax Appeal v. North Hayarkon Tel Aviv Ltd., para. 4 [published in Nevo] (February 14, 2016))."