British Accountant Loses NIS 400,000 in Urban Renewal Projects, Ordered to Pay Agent NIS 32,000

A British accountant has lost NIS 400,000 (approximately $107,000) of his pension fund invested in urban renewal projects in Holon, Bat Yam, and Petah Tikva. The investor sued the owner of the investment companies and the agent who recruited him for NIS 628,000, alleging they misled him about the projects' viability. The Jerusalem Magistrate's Court dismissed the claim against the agent but ordered the investor to pay the agent NIS 32,000 in expenses and legal fees.

The investor discovered the projects through the website of American Israel Group (AID), which advertised investments in Tama 38 (urban renewal) projects with first-rank liens and investor returns. He claimed he approached the agent because the agent's LinkedIn profile described him as an investment advisor. The investor alleged that the defendants knew the developer was misusing funds before the investment and concealed this, instead praising the developer. He further claimed the agent emailed him that he had personally invested in the projects and received a 14% return, and that he was shown an appraiser's report projecting a NIS 4.2 million profit on a project that later proved problematic.

The owner of the companies eventually informed investors that the funds were likely lost, and the company with which the loan agreement was signed entered liquidation proceedings. The owner did not appear for the evidence hearing, and a default judgment was entered against him for the full claim amount. The case proceeded against the agent alone.

The agent argued he was an independent contractor who received a NIS 14,000 commission and presented himself as a business development manager, relaying only information he deemed credible from the company owner. He explained his email about personal investment referred to his commission earnings. Judge Orna Sandler-Eitan called this explanation "disingenuous and unreliable" but gave it little weight, as the investor testified he did not believe the agent had invested his own money and did not rely on that statement.

The judge ruled that the investor failed to prove a causal link between the agent's statements and his investment decision. She noted the investor relied on the company owner and the loan agreement itself, not solely on the agent. Furthermore, the investor did not refute the agent's claim that he believed the information he provided was accurate and presented no evidence of a conspiracy between the agent and the company owner. The judge also cited a previous ruling against the same company owner, which suggested he may not have known the material facts until after this investment was made, making it unlikely the agent, who was more distant from the company, would have known earlier.

The ruling highlighted that the investor, despite describing himself as risk-averse, acknowledged some risk and had engaged with the company for four months without consulting a lawyer, deeming it too costly for the investment sum. This was despite the loan agreement explicitly stating there was no personal guarantee for repayment. The judge pointed out that the investor, an experienced accountant in his home country, could have investigated the company's partners or shareholders and that he himself had written to the agent about conducting an independent review before investing. The judge also suggested that even if the agent were found liable, the investor would bear significant contributory negligence as the most effective party to prevent the loss.