A group of 63 buyers, who bought new apartments from "A. Dori" construction company, in the “Tel Aviv Towers” Project, lodged a lawsuit valued approximately at ILS 9,800,000 against the company.
The lawsuit is based on the contract the parties executed, which determined liquidated damages in the event of a delay in hand-over of the apartments.
The buyers were concerned due to the company’s poor state, and they asked the Court to impose foreclosures on various company assets. A foreclosure means seizing an asset that belongs to the debtor, preventing its sale or alteration.
The Court granted the motion and imposed foreclosures on company assets in the sum of ILS 9,000,000.
A. Dori Ltd. lodged a counter-motion to rescind the foreclosures with the Court.
The District Court in Tel Aviv heard the motion to rescind the foreclosures, and ruled that the buyers received their apartments after a significant delay of more than a year. Moreover, the Court ruled that the parties’ contracts indeed contain a “liquidated damages” clause in the event of delayed delivery.
However, the main issue that ought to be determined in the motion to rescind the foreclosures is: is the execution of judgment secured? That is to ask: will apartment buyers actually be able to regain their money from the company, or does the company’s financial situation mean it will not have any funds or assets to pay the buyers what is due to them.
In other words: does the company’s situation mean that when the buyers will be awarded damages at the end of the proceeding, the company will not have any assets for the buyers to avail themselves?
The buyers argued that the company is doing poorly. Another argument made by he buyers was that the company failed to complete five construction projects it had started, and assigned them to other parties, and that its financial statements indicate a substantial decrease in its revenues and assets.
On the other hand, the company argued that it is taking measures to recover and improve its financial situation, and that the foreclosures will cause it major harm.
It is also worth noting that the main foreclosed asset is funds the buyers are in possession of, that are due to be paid to the company.
The Court eventually ruled that foreclosures ought to remain valid, up to a sum of ILS 9,000,000, as it was established that should the foreclosures be rescinded, the execution of ruling will not be secured, and because the company will not be harmed by the foreclosures, as the buyers themselves are in possession of the funds, and it is inappropriate for buyers to transfer funds to the company prior to their eligibility for damages (or lack thereof) in accordance with the lawsuit is decided.
- Case 32905-01-17, Shlomit Spiegelman and Others v. A. Dori Construction Ltd., awarded at the District Court in Tel Aviv, by the Honorable Judge Noa Grossman, on February 16, 2017.