"Therefore, the distress, the mental or physical weakness and the lack of experience must be weighty, and the court must be convinced that they acted on the oppressed person and diverted his judgment from his correct path... Considerations of legal policy also require the protection of the security of commerce, which we must not undermine by any prevailing wind."
Other Municipal Applications 5490/92 Pegas v. Pegas, in paragraph 8 (Nevo 29.12.1994), it was held that:
"The condition of the oppressed, i.e., his distress, his mental or physical weakness, and his lack of experience, must be severe and extreme in order to satisfy the aforesaid element of the cause of oppression, ... The preference for relative disadvantages does not yet create a situation of distress, i.e., the need to sometimes choose between two evils does not create those extreme circumstances that should justify the granting of approval for the retroactive cancellation of a contract, since there is also a public interest in the existence of contracts and in the stability of engagements, and the intervention of the judicial instance should be directed to those cases in which difficult personal circumstances are added to the considerations of feasibility that create a situation of lack of choice. And they do not leave a reasonable alternative for those who have been pushed into a corner from which there is no way out."
It is clear that this was not Segal's mental state when he signed the series of agreements with Baruch, and there is no such claim on his part.
- Moreover, even if the claim of coercion was proven (and it was not proven), then an agreement in which there was a defect in its conclusion is not automatically null and void, and the party who entered into the agreement was charged with a defect in the desire to notify the other party of the cancellation of the contract, "within a reasonable time after he became aware of the reason for the cancellation, and in the case of coercion – within a reasonable time after he became aware that the coercion had ceased" (section 20 of the Contracts Law)). In the present case, no such cancellation notice was ever given, and in fact, the first time that the claim of economic coercion was raised was in the framework of the response to the enforcement request, about two years after Segal admitted a debt in the sum of NIS 5 million to Baruch, and after a reasonable period of time had already elapsed for the issuance of a cancellation notice.
- Indeed, the third addendum of June 8, 2023, by virtue of which the bond for enforcement was created, came into existence against the background of the loan agreement and the consultancy agreement. These agreements anchored, as stated, Segal's existing debt to Baruch, when the third addendum "affixed" to him an "updated expiration date" (after the dates specified in the first and second addendums had passed), so that the date agreed between the parties for the repayment of a certain part of Segal's debt was until June 18, 2023, and another part of it was until June 30, 2023 (paragraphs 1 and 4 of the third addendum). Even if we assume that the loan agreement and the consultancy agreement are intended to conceal the true nature of the transactions from the tax authorities, and even if we assume that they ostensibly amount to an ostensible contract or an invalid contract (sections 13 and 30 of the Contracts Law; Civil Appeal 4305/10 Ilan v. Levy, paragraph 29 of the judgment of Justice A. Vogelman and paragraph 3 of the judgment of Justice N. Hendel (Nevo, May 9, 2012)), does not negate Segal's obligation to return what he received from Baruch, whether by virtue of the laws of enrichment and not in the law, insofar as we are dealing with a contract for the sake of appearance, or according to the provisions of sections 21 and 31 of the Contracts Law when it comes to an invalid contract (ibid., in paragraphs 17-19 and 21 of the judgment of Justice A. Vogelman). Therefore, the defects that occurred in these agreements in any case cannot help Segal to evade the fulfillment of his explicit obligation to repay his debt on the date set for this in the Third Addendum, if only so that he would not be a rewarded sinner. This is all the more intense, given that Segal was a party to the creation of those agreements and when he repeatedly admitted to the debt to Baruch in the framework of the first additions to the first, second and third additions. It follows that Baruch has the right to act to realize the collateral given to him under the Third Addendum (see paragraph 5 of the Third Addendum). It should be noted that there is no basis for Herbert's referral to provisions in the field of penal law on the grounds of forgery of the documents, since in any case we are not dealing with a criminal proceeding.
- Towards the end of the discussion in this section, I will note that a dispute arose between the parties on the question of who drafted the loan agreement, and there is no dispute that Baruch's attorney at the time (Adv. Kobi Michael) drafted the consultation agreement and the first addendum (Appendix 16 to the response to the answer). According to Baruch, Segal was the one who drafted the loan agreement (in English), while Herbert denied that Segal was the one who drafted the agreement. There is no need to address this dispute since it does not affect the binding validity of the agreements between the parties in connection with the obligations created by Segal towards Baruch.
- Interim Summary - From what has been said so far, it appears that Baruch and Segal entered into agreements aimed at lending Segal considerable sums of money. Segal has a strong and existing debt to Baruch, which found expression in those agreements and in the various additions to the loan agreement. This debt was not repaid on the dates set out in the Third Addendum, which secured the debt, inter alia by pledging the shares of the Souda company held by Herbert. It follows from this that there is a ground for enforcing the registered lien, subject to the fact that it is indeed a valid lien. Let us therefore now turn to the question of the validity of the lien.
Validity of the Lien
- As is well known, a pledge is a pledge of an asset as a guarantee for the obligation, and it entitles the creditor to be repaid from the pledge if the obligation has not been cleared (section 1 of the Pledge Law, 5727-1967) (the "Pledge Law"). "Lien" as defined in Section 1 of the Companies Ordinance [New Version], 5743-1983 (the "Companies Ordinance") is a mortgage as well as any other form of granting assets as collateral. In our case, the debt that is the subject of the application is Segal's personal debt to Baruch. In order to ensure the repayment of the debt, Herbert worked out some of her shares in Sawda. Therefore, a herbert is a person who pledges his assets to secure the debt of another in accordance with the provision of section 12 of the Pledge Law, which states as follows:
"If a person's property is mortgaged as a guarantee for another person's obligation, the property owner shall be subject to the same law as the person who guaranted that obligation, but the property owner may not be repaid except upon the realization of the pledge as stated in this law."
- The law governing the methods of creating liens on the assets of companies is enshrined in the relevant part of the Companies Ordinance that was not repealed with the enactment of the Companies Law (section 367(a)(1) of the Companies Law). Section 165 of the Companies Ordinance recognizes the authority of a company to pledge its various assets:
"A company may, subject to any limitation in the Memorandum, its Articles of Association or its Regulations, pledge its assets – real estate and movables, held and proper, existing and future, including equity capital that has not yet been paid, payment demands that have not yet been paid and goodwill – as a guarantee for existing, future or contingent liabilities; However, serial bonds may not be issued except with an express license from the Minister of Finance, and a company with a permit under section 32 shall not issue any bonds except with such a license."