Written by Tal Ron
On September 21, 2022, a decision was given by the Central-Lod District Court, the Hon. Judge Merav Ben-Ari, in Civil Action 45627-09-22 Chodin v. Bank Leumi of Israel Ltd., in a motion for an urgent injunction directing Bank Leumi to receive and deposit an amount of approximately NIS 35 million in the Applicant’s account that is held at the Bank. According to the motion, these are funds belonging to the Applicant, which are held in foreign accounts belonging to her. The Applicant also petitioned for an injunction directing the Bank to open a trust account for the benefit of her counsel, in connection with a purchase transaction of a real estate asset. Financial relief in the amount of about NIS 2.5 million was further sought in respect of the damages caused to the Applicant following the Bank’s conduct.
According to the Motion, the Applicant and its holders are wealthy people with many assets and businesses abroad, while they resided in Russia and Cyprus until 2019, at which point they relocated to Israel. In June 2022, the Applicant sought to purchase a real estate asset in Herzliya Pituach, and before signing the sale agreement, contacted the bank and provided notice of the intention to purchase the asset. Allegedly, a representative of the bank agreed to issue a bank check for the first payment of the consideration, and she informed him that the remainder of the consideration would come from her accounts abroad. The bank representative expressed no objection to this. Thereafter, the Applicant attempted to perform a number of actions in order to exercise her share of the transaction and encountered refusals on the Bank’s part, and while she ultimately attempted to transfer funds to her personal account from her bank accounts abroad (specifically, bank accounts in Russia), this request was refused.
According to the Applicant, under the Banking Law (Customer Service), the Bank was required to accept the funds since they are valid, she and her husband are decent people, have no criminal record, and the State of Israel has not imposed sanctions against Russia. It was further alleged that the Bank bears the burden of proving reasonable grounds for its refusal to deposit the funds in the account; however, it failed to meet this burden and provided no reasonable explanation. It was also argued that the damage that would be caused to her is irreversible and infringes on her proprietary rights.
On the other hand, the Bank argued that its refusal to approve the deposit of the funds arises from the sum amount, as well as its inability to inspect its origin, in addition to the regime of economic sanctions imposed against Russia (although Israel did not join it) – all in accordance with the instructions of the Supervisor of Banks. Thus, the combination of facts above substantiates its refusal as reasonable.
The Honorable Court considered the relevant law, including the Civil Procedure Regulations, according to which there are two main parameters for the examination of whether temporary relief should be granted: the first is whether there is sufficient prima facie evidence of the existence of a cause of action, and the second is an examination of the balance of convenience, according to which the damage that may be caused to the applicant in the absence of the temporary relief, compared to the damage that may be caused to the respondent (or a third party) if the relief is granted. The stronger the cause the action, the more lenient the approach to the requirement of burden and the balance of convenience, and vice versa. Additional considerations are also listed in the Regulations, for example, considerations of good faith and laches.
In light of the fact that the transfer of a huge sum was requested, it was an amount whose transfer had yet to be requested within the management of the Applicant’s account, no sufficient explanation was provided regarding the source of the funds, in addition to the fact that caution is required at present in light of the international sanctions regime and instructions of the Supervisor of Banks, cause was not established according to which the court could, in the stage of a petition for temporary relief, replace the Bank’s discretion with its own. This is the case since even the Bank provided prima facie reasonable grounds for refusing the money transfer request, while the Applicant’s cross-examination was unable to refute the Bank’s reasons for the same. In terms of the balance of convenience, the court ruled that according to the circumstances and evidence before it, the damage that might be caused to the Applicant can be cured by way of financial compensation. On the other hand, the damages that might be caused to the Bank are weighty, since granting the remedy will harm the Bank’s ability to act in accordance with its obligations under law – damage that cannot be cured by way of financial compensation, and that has significant consequences for the general public and the enforcement of the law. The court also added that the Motion was filed with an unreasonable delay [laches].