The father embezzled the son's money, and the brother will pay

The author is an attorney, a partner at the Firon law firm, and head of the family law department.

If you cannot trust your parents, who can you trust? The answer to this depressing question was given in a verdict handed down last month in the Family Court in Rishon LeZion, which illustrates once again how important it is to draw up clear agreements even between family members.

In 2006, the plaintiff moved to live in a foreign country, got married, established a successful company, and accumulated capital. Since a communist regime was in power in that country at the time, he wanted to avoid keeping millions of shekels in his bank account abroad and opened a joint account with his father in Israel. The father was an accountant by training, and the son trusted him to manage his funds and invest them faithfully according to his experience and discretion. The amount of funds the son transferred to his account with his father reached a total of 3.7 million shekels.

In 2018, the son discovered to his astonishment that the account had been emptied and that the millions of shekels that had been deposited in it had disappeared. When he asked his father what had been done with the money, the father told him that he had invested it in the purchase of apartments, but then it turned out that the father had transferred ownership of the apartments to his other son — despite, and perhaps even because of, the state of conflict that existed between the two brothers.

The father refused to return the money to the son and told him in this regard, "Do whatever you want." The son filed a lawsuit against his father, but before the proceedings were clarified, the father passed away. It then turned out that the father had left a will, in which he disinherited the son and bequeathed all his property to his brother, who, as mentioned, also received the apartments purchased with the plaintiff's money. The brother then sued his brother for the return of the funds.

Internal contradictions in the brother's testimony

The court ruled that the plaintiff had clearly proven that he had indeed transferred a total of 3.7 million shekels to an account in Israel managed by the father, and there is no dispute that the funds were not intended for the father's use. Furthermore, it was proven beyond any doubt that the plaintiff's money was used to purchase apartments that were transferred to the name of his brother, so the burden was on the brother to prove on what basis he was entitled to receive the apartments.

Unfortunately for him, the brother did not bother to formulate a coherent and clear version regarding the source of his entitlement to the money. On one hand, he claimed that these were funds that the plaintiff owed him as a partner in his businesses; on the other hand, he claimed that these were funds intended to be used by the whole family, since "we didn't have 'what's mine is mine and what's yours is yours'"; then he raised a third version according to which the father was actually entitled to a third of the funds in light of his involvement in the plaintiff's business; and in the closing arguments, a fourth version appeared according to which the plaintiff gave the father the funds as a gift between family members.

When the brother was confronted with the internal contradictions in his testimony, he gave the professional answer: "Say whatever you want, be my guest."

Court: The father breached the duty of trust

The court determined that the brother did not bring even one piece of evidence that he was a partner of the plaintiff in the businesses that generated the funds he transferred to the account in Israel, even though the burden of proof was on him. When asked if he reported to the tax authorities the funds that he claimed were due to him as profits, he answered in the negative, and did not hesitate to explain that in order to avoid paying tax, he attributed the funds to the plaintiff, who is not an Israeli resident.

Since it was not claimed, and in any case not proven, that the funds were transferred to the father as a gift, the court ruled that the father held them in trust for the son. He was allowed to invest the funds in real estate, but he was not allowed to transfer the apartments to a third party, as in doing so he breached the duty of trust.

The result was that although the apartments remained in the brother's name, he was ordered to pay the plaintiff the return of the funds he had transferred to the father's account for their purchase, plus indexation and interest from 2018 — the date when the plaintiff approached the father with a demand to receive his money and was refused.