A lawyer who failed to identify warning signs in a loan deal that turned out to be a fraud scheme will compensate his client about 510,000 ($138,000) shekels plus expenses. Judges at the Lod District Court — Yaakov Shpaser, Guy Shani and Meirav Kfir — recently upheld a ruling by the Rishon LeZion Magistrate’s Court, which found the attorney had acted negligently.
The November 2024 ruling detailed an unusual chain of events. The client agreed to lend 1.2 million shekels ($324,000) to a woman he had never met, intended to cover debts incurred by her nephew in the informal credit market. In return, a mortgage was registered on her apartment. It later emerged that the woman had never requested the loan and had not agreed to mortgage her rights in favor of the lender.
The woman later went to court and succeeded in canceling the mortgage, leaving the lender empty-handed, without his money and without any security to recover it. He subsequently filed a lawsuit against several parties involved in the transaction, including the attorney who represented him in the deal.
The Magistrate’s Court found the attorney negligent for failing to take reasonable precautions and for ignoring clear red flags. For example, when asked why the borrower was absent from the critical signing meeting, he was told she was out at sea and unreachable, an explanation he accepted. In addition, no copy of her ID was presented at the meeting, an unusual omission.
The attorney’s liability was limited to 900,000 shekels (≈$243,000) out of the total amount the client had lent. After one-third contributory negligence was also assigned, the court ordered him to pay 510,000 shekels in compensation for professional negligence, plus legal costs and attorney’s fees.
The attorney appealed to the District Court through attorneys Hillel Ish Shalom and Hadar Rosenberg. The lender was represented in the appeal by attorney Itamar Katz. The judges unanimously upheld the lower court’s conclusion that the attorney had been negligent and must pay the compensation, without intervening in the amount or the contributory negligence rate, although they noted it could have been increased.
“We are satisfied that in this case there were warning signs that should have raised the appellant’s suspicion and we find no defect justifying intervention in the lower court’s conclusion regarding negligence,” the judges wrote.
They emphasized that part of a lawyer’s duty is to protect a client from wrongdoing by others, but in this case he failed to do so, amounting to professional negligence.
The appellate judges also accepted the finding on causation between the negligence and the damage suffered. They noted that had the attorney acted as a reasonable lawyer would, it is highly likely that “the veil would have been lifted from the scam and the damage would have been prevented.”
The ruling noted that this was an unusual case involving a woman requesting a large loan to help her nephew escape debts in the informal credit market, without the parties ever meeting her in person, circumstances that should have raised suspicion. The appeal was therefore rejected and the attorney was ordered to pay 20,000 shekels (≈$5,400) in legal fees.