A: Me, opposite Kobi Michael. I sent him my comments and he... Adjust them.
Q: In other words, you yourself do the work, which I can call an agreement adjustment, it is a job that has... Let's call it... It has a legal nature, right?
A: If you look at it that way; I look at it commercially."
(p. 93, paras. 1-5 of the transcript).
We are not dealing with a layman who is not at all familiar with commercial and business contracts. It is therefore difficult to imagine that a person like Segal would sign a "fake" agreement out of necessity or coercion on the part of a person with whom he has done business for many years. It is therefore clear that the writing of a false date in relation to the date of conclusion of the loan agreement, as well as the signing of a fictitious consultancy agreement, were intended only for the tax purposes of either party.
- To this, it should be added that Segal was involved in the negotiations that preceded the signing of the loan agreement and the consultancy agreement and did not "watch from the stands" with his hands idly by. We will clarify that Segal was not a passive participant, but rather an active participant for all intents and purposes in connection with the "birth" of those agreements. As evidence, the correspondence between Baruch's counsel and Segal from 01.11-31.10.2022 (Appendix 13 to the response to the reply), in which counsel noted, inter alia, as follows:
"Following yesterday's meeting, please send us the set of documents you proposed for the purpose of anchoring the provision of 6 units in the Beit Shemesh to the Moon project."
This indicates that in the framework of the meeting of the parties on October 30, 2022, Segal referred to documents related to the preparation of the consultation agreement, which is in fact the agreement intended to anchor Baruch's rights in housing units in the Beit Shemesh project, as Baruch explained in his interrogation. This agreement was transferred to the accountant in Lange, who had a previous acquaintance with Segal (p. 95, para. 26 of the transcript). Nor is there any dispute that the draft of the loan agreement in Hebrew (which is indeed not in fact compatible with the loan agreement in the English language that was signed at the end of the day) was placed at Segal's door prior to the signing of a final agreement (Appendix 5 to the Answer). It should be noted that this draft referred to the Zerubavel Agreement in connection with Baruch's investment by way of a converted loan agreement, as is clearly evident from what is stated in the second paragraph of that draft.
- Our eyes see that the agreements that are the subject of the application before me did not land on Segal (or Herbert) like thunder on a clear day. Segal didn't have to sign a pre-prepared contract with "Gun to the Head" that he had nothing to do with formulating and drafting it. On the contrary, from the circumstances of the conclusion of the agreements, it becomes clear that Segal was a full and active partner in their design, and at least took part in the negotiations that took place between the relevant parties in the period prior to the signing of the agreements in their final form. By virtue of those agreements, the additions to the loan agreement and the bond were therefore "born", which, according to Herbert's own admission, are accompanying and secondary documents to the loan agreement (see paragraph 34 of its summaries).
- I cannot accept the argument that Segal was forced to sign those agreements (and the additions to the loan agreement and the bond) as a result of unacceptable pressure and threats on Baruch's part. According to the claim, Baruch threatened Segal with bankruptcy proceedings against him following the loss of the economic investment in the Zerubavel project. Indeed, according to Section 17(a) of the Contracts (General Part) Law, 5733-1973 (the "Contracts Law"), a person who entered into a contract due to coercion imposed on him by the other party or another on his behalf, by force or threat, is entitled to cancel the contract. Case law recognized that certain circumstances, such as the provision of information that may lead to a criminal conviction or the threat of criminal proceedings, may amount to coercion (Civil Appeal 784/81 Shafir v. Appel, IsrSC 39(4) 149 (1985)).
In contrast, section 17(b) of the Contracts Law states that a good faith warning about the exercise of a right does not constitute a threat. Thus, it was held that the threat of civil proceedings, including bankruptcy, liquidation or execution proceedings, does not amount to coercion or coercion (Civil Appeal 419/70 Kiefer Electric Industries inTax Appeal v. Wolf, IsrSC 25(1) 396 (1971); Daniel Friedman and Nili Cohen Contracts, Vol. 2 346 (Second Edition, 2020)). As this is the case, it is clear that a "threat" by Baruch to drag Segal into insolvency proceedings cannot be considered coercion that constitutes grounds for canceling the agreements, especially given the fact that Segal does indeed have a substantial financial debt to Baruch. In any event, since the aforementioned agreements were concluded until today, no claim has been filed to cancel the agreements, so that they are valid in any case, even if there was a real claim of coercion. Moreover, it is unacceptable, to say the least, that a general threat of insolvency proceedings would lead an experienced businessman such as Segal, and even an ordinary person from the community, to sign agreements that include an admission of a debt in the sum of NIS 5 million, if in fact it is a debt that does not exist. After all, if the debt did not exist, it is presumed that Segal would have easily repelled insolvency proceedings that would have been taken against him.
- In any case, such a "threat" in taking insolvency proceedings is as far from East as West from what is called "economic coercion". The rule is that "economic coercion that qualifies for cancellation must meet two tests: the quality test and the intensity test. It must be morally, socially or economically unacceptable (the quality test) and must also be such that 'the contractor cannot escape its jaws in the circumstances (the strength test)' (Gabriela Shalev, Contract Law – The General Part Towards the Codification of Civil Law 332 (2005)).
As emerges from a long list of judgments that have examined this issue, it is not enough to exploit a "regular" distress for it to be considered economic coercion, but it is required that it be severe and weighty distress, to the extent that it has the power to skew the rational judgment of the caller. As held in other municipal applications 403/80 Sassi et al. v. Kikaun IsrSC 36(1), 762, 768 (1981):