Legal Updates

An organ of a company that intentionally damages legal proceedings will be personally liable for compensation to the harmed party

November 17, 2020

A person lent money to a company as part of a business venture related to a commercial center and against its obligation to repay the funds with a return on the investment and against a lien on the property. When the company went bankrupt, the creditor tried to realize the lien, but the company fought for decades, raising many false contentions, all of which were rejected, one after another, by the Courts, but at the end of the process the company was liquidated and so the creditor sought to personally obligated the controlling shareholder and the living spirit behind the company.
The Supreme Court held that the officer is personally liable for the misuse of legal proceedings. As a general rule, imposing tortious liability on the other party to a dispute for negligence in conducting legal proceedings in a civil dispute will only be possible in exceptional cases. However, a person who intentionally hinders legal proceedings and thereby causes damage or loss to an adversary party, may be liable for damages. Here the officer was the dominant factor behind the actions repeatedly taken to thwart the rights of the creditor and ultimately the creditor could not collect the debt due to the liquidation of the company. A person who acts on behalf of a corporation as one of its organs does not cease to be responsible for his own actions and therefore the officer is personally liable for all the economic damage caused, amounting to millions of shekels.