Legal Updates

Showing a bank balance and agreements on income is not sufficient to exempt a claiming company from depositing a security for expenses

November 7, 2021

A tenant in the cannabis field vacated the property after a short period when it discovered that it could not use it to establish a farm for growing medical cannabis. When the leasing company filed a lawsuit against it, the tenant demanded that deposit of a security for its expenses.

The Court ordered the plaintiff company to post a security for the costs of the defendant. A plaintiff may be required to post a security for the defendant's expenses, as a condition for managing the claim, where in a request to charge a company with a security deposit the default is that the company will be required to post the security. In order to avoid this, the plaintiff company must show that if the claim is rejected, it will be able to pay the defendant's expenses and that the circumstances do not justify its obligation to deposit a security. A company that contents to be of financial robustness must present a complete factual picture regarding its financial strength and ability to meet expenses by proving a list of its assets, rights and obligations. Here, the company's financial statements show that its profits are a result of capital gains and not a result of its business activities and the company is loss-making. Therefore, the plaintiff company must deposit a guarantee in the amount of ILS 100,000 as a condition for continuing the proceedings.