Decision details
| Date | 2013 |
|---|---|
| Court | Central District Court (Petah Tikva) |
| Case | Not stated in the source (claim of about NIS 829 million against seven banks, including Mizrahi and Igud) |
| Type of decision | Judgment |
| Amount | NIS 48,500,000 |
| Topic | Default interest during receivership on pledged shares |
| Source | Source |
Background and facts: default interest on a loan to buy shares
The details here are based on the contingent liabilities note in Mizrahi Tefahot Bank's financial report, and on a report on Bizportal of July 22, 2013. The full text of the judgments was not found openly online.
According to the report, in November 2009 the bank received a claim of about NIS 804 million, filed as an originating motion in the Central District Court in Petah Tikva. The defendants were Mizrahi Tefahot, Hapoalim, Leumi, First International, Discount, Mercantile Discount and Bank Igud. In January 2010 the court ordered that it be heard as an ordinary monetary claim, and in February 2010 a statement of claim of about NIS 829 million was filed.
The report describes the plaintiffs as "the applicants". According to Bizportal, this is the claim of businessman Gad Zeevi. The background to the claim is a loan from 1999 to buy shares, in which Mizrahi Tefahot's share was 10%. According to Bizportal, these were Bezeq shares. The shares were pledged to the banks, and when the debt was not repaid a receiver was appointed over them.
The parties' arguments
According to the applicants, upon the appointment of the receiver the shares were taken out of their control, and the decision on when to sell them was in the hands of the banks and the receiver. Despite this, according to them, the banks continued to charge them "default interest" throughout the receivership period. According to Bizportal, it was argued that default interest was intended for a short interim period and not for such a long period. Bizportal does not set out the banks' arguments. According to the report, the banks filed statements of defense in March 2010.
What the court held in the default interest claim
According to the report, evidence was heard from March 2011 to April 2012. In July 2013 a partial judgment was given against the banks. According to Bizportal, Judge Binyamin Arnon of the Central-Lod District Court held that the interest is agreed compensation under section 15(a) of the Contracts (Remedies for Breach of Contract) Law, and so the court has the power to intervene in it. The default interest rate was reduced from 3% to 2.5% for the period from January 1, 2007.
In November 2013 a supplementary judgment was given. According to the report, the banks were ordered to pay about NIS 48.5 million, plus linkage differentials and interest from November 9, 2009. In addition they were ordered to refund the court fee of about NIS 0.5 million and to pay legal fees of about NIS 4.2 million. According to the opinion of the bank's legal advisers, Mizrahi Tefahot's share is identical to its share in the financing, 10%.
The banks appealed to the Supreme Court and asked to stay execution. The plaintiffs also appealed. According to the report, the parties agreed to a stay of execution, and the appeal was set for a hearing in January 2015. The sources checked do not state the outcome of the appeal.
What it means for Mizrahi Tefahot customers
The proceeding dealt with large credit and with share collateral, and not with an ordinary private customer. However, it shows that the court can review default interest set in a contract as agreed compensation. Information on calculating debts appears on the page How much do you owe Mizrahi Tefahot.
Sources
- Mizrahi Tefahot financial report, contingent liabilities note
- Bizportal: Court holds that the banks charged excessive interest, July 22, 2013
Status and caution
The full text was not found openly online; according to the bank's annual report both sides appealed to the Supreme Court, and the outcome of the appeal was not found
More court rulings against Mizrahi Tefahot on credit, set-off and duty of care
- Mizrahi Tefahot v. Orly Haran: the bank will bear half of the damage from speculative options trading
- Dishonored cheques and a restricted account: Bank Mizrahi ordered to pay USD 327,800 plus NIS 150,000
- Leave to Appeal (Civil) 2549/09 I.C.M.: Mizrahi Tefahot has no right of set-off in shares of a customer in liquidation
- Machsanei Hashmal v. Bank Mizrahi: on appeal it was agreed that the bank will pay NIS 4.5 million
All 39 decisions in the database ›
Questions and answers
What was decided in the default interest claim against the seven banks?
According to Mizrahi Tefahot's financial report, in November 2013 the banks were ordered to pay about NIS 48.5 million plus differentials, a refund of the court fee and legal fees of about NIS 4.2 million.
What is Mizrahi Tefahot's share?
According to the opinion of the bank's legal advisers, as cited in the report, its share is identical to its share in the financing, 10%.
May a bank charge default interest during a receivership period?
In the partial judgment, according to Bizportal, it was held that the interest is agreed compensation in which the court has the power to intervene, and its rate was reduced from 3% to 2.5% from January 2007.
Was an appeal filed?
Yes. According to the report, the banks and the plaintiffs appealed to the Supreme Court, and the hearing was set for January 2015. The outcome of the appeal does not appear in the sources checked.
Where can I read the full text?
The full text was not found openly online. You can search for it by case number in the Net HaMishpat database of the Israeli Judiciary.