Legal Updates

A company filing a counterclaim is not exempt from the obligation to place a guarantee to secure the expenses of the opposing party

September 20, 2021

A company was sued and filed a counterclaim.

The Court held that as a condition for managing the counterclaim the company is to deposit a guarantee in the amount of ILS 200,000. Under Israeli law a limited liability company plaintiff is required to deposit a guarantee to secure the defendant's expenses. However, the Court may exempt a company from depositing a guarantee, in one of the two circumstances: A. In the existence of circumstances justifying the avoidance of the deposit; or B. In circumstances where the company demonstrates its ability to meet the payment of expenses in case the claim is dismissed and it will be charged with the expenses of the defendant; the burden of proving the exceptions is on the company seeking the exemption. Here, even though the company filed a counterclaim, it was sued in the amount of ILS 30,000,000 when the procedure is expected to be lengthy. Also, it is doubtful whether the company could meet the expenses, even though the company attached a letter from the accountant stating that it could bear the expenses of ILS 1 million insofar as decided at the end of the procedure. Therefore, the company is to deposit a guarantee in the amount of ILS 200,000.