How a Canadian Owner Won Leave to Appeal to Israel's Supreme Court

Result: Security for costs cut from NIS 45,000 to NIS 12,000 and a NIS 310,000 settlement collected · Timeline: 19 months · Challenge: Foreign claimant priced out of his own claim · Authority: Supreme Court of Israel · Financial Impact: NIS 310,000

Background

A retired engineer living in Toronto owned a four-room apartment in Netanya, bought outright in 2016 with no mortgage on it. He had the kitchen, bathrooms and plumbing risers replaced in 2023 by an Israeli contractor while the flat was empty. Within eight months the ceiling below the upstairs bathroom had failed twice and a surveyor put the cost of putting the work right at NIS 620,000, including the damage to the neighbour's flat. He sued at the Netanya Magistrates Court in March 2024, from six thousand kilometres away, with a seven-hour time difference and no intention of moving back to Israel. The contractor's first substantive step was not a defence. It was an application to make him pay for the privilege of suing.

The Challenge

Regulation 157(a) of the Civil Procedure Regulations 5779-2018 lets an Israeli court order a plaintiff to deposit security for the defendant's costs, and residence outside Israel is the classic ground for it. The logic is practical rather than hostile. If the claim fails and costs are awarded, the defendant should not have to chase a judgment through a foreign court to collect. In everyday practice the orders land between NIS 20,000 and NIS 50,000 on a mid-sized commercial or construction file, and on a claim of NIS 620,000 the Magistrates Court ordered NIS 45,000 within six weeks of the application.

That figure was the whole problem. Our client was not judgment-proof in Israel. He owned the very apartment the case was about, unencumbered, worth around NIS 2.4M, and any costs order against him could have been enforced against it without a single Canadian court being troubled. He had said so in his response and had attached the Land Registry extract proving it. The Magistrates Court acknowledged the point and ordered the deposit anyway, treating foreign residence as close to decisive. The Central District Court in Lod refused to interfere on an appeal against that interlocutory decision, at a fee of NIS 588. Two courts had now told a man that his own Israeli real estate did not count.

In Practice: Regulation 157(a) of the Civil Procedure Regulations 5779-2018 allows security for costs against a plaintiff resident abroad, and orders on a mid-sized file commonly run NIS 20,000 to NIS 50,000; the Netanya Magistrates Court here set NIS 45,000 within six weeks of the application, against a claim of NIS 620,000. Appeals against interlocutory decisions of a Magistrates Court reach the District Court, and the fee for a request for leave against an interlocutory decision is NIS 588 under the Courts Regulations (Fees).

What We Did

The next decision was the expensive one, and we put it to the client in writing before spending anything. Section 41 of the Courts Law [Consolidated Version] 5744-1984 splits appeals three ways. A District Court judgment given at first instance goes to the Supreme Court as of right. An interlocutory decision of the District Court, and a District Court judgment given on appeal, both need leave under Section 41(b). Ours fell squarely in the second category, because the Central District Court had been sitting as an appellate court. Israeli lawyers call this the third round, and the honest advice in most files is that it does not open. Leave is granted where the question reaches beyond the two parties in the room, not where a litigant has lost twice and remains convinced he is right.

We took the view that this one did reach further, and we said why in fifteen pages rather than fifty. Decisions of the Magistrates and District Courts had been treating unencumbered Israeli real property owned by a foreign claimant inconsistently, some regarding it as an answer to the security application and some regarding foreign residence as sufficient on its own. That inconsistency affects every non-resident who owns Israeli property and wants to litigate about it, which on any view is a class of people larger than our client. We filed the request for leave in September 2024, in Hebrew, electronically, at a fee of NIS 1,187. An appeal that lies as of right against a first-instance District Court judgment would have cost NIS 3,539, and the gap between those two numbers is the system telling you what it thinks of third rounds.

Coordination from Toronto shaped the mechanics more than the law did. The affidavit supporting the request was sworn before a notary public in Ontario and apostilled, which Canada has been able to issue since the Apostille Convention entered into force there on 11 January 2024 and which removed the consular legalisation step that would have added three weeks. The exhibits, including a fresh Land Registry extract and the municipal valuation, were pulled online rather than by courier. Every call sat in a narrow window between 9am Toronto time and the end of the Israeli working day.

In Practice: Under Section 41(b) of the Courts Law [Consolidated Version] 5744-1984, a District Court judgment given on appeal reaches the Supreme Court only by leave, and the fee is NIS 1,187 against NIS 3,539 for an appeal as of right from a first-instance District Court judgment. Requests are usually decided on the papers by a single justice within three to six months of filing, and the appeal period under Regulation 137(a) of the Civil Procedure Regulations 5779-2018 runs 60 days from service on your Israeli lawyer, not from the day the judgment reaches you overseas.

Leave was granted in February 2025, five months after filing, and the appeal was heard that June. The Court accepted that foreign residence starts the inquiry rather than ending it, and that an unencumbered Israeli asset within the reach of the same enforcement system that would collect the costs order is a material answer to the risk the rule exists to address. The deposit was reduced to NIS 12,000, which reflected the residual risk of enforcement costs rather than the full exposure.

Back at the Netanya Magistrates Court, the contractor's position changed within weeks. A defendant who has spent eighteen months arguing about procedure and lost the argument at the top of the system is a different negotiating partner. The parties exchanged surveyors' reports, the contractor's expert accepted the plumbing failure and disputed the scope of the making good, and the file settled in October 2025 at NIS 310,000 plus release of the deposit.

The Outcome

The client recovered NIS 310,000 on a NIS 620,000 claim, released NIS 12,000 from the court, and had the NIS 45,000 he had deposited returned to him in stages across the process. Nineteen months passed between the original security order and the settlement, and roughly NIS 96,000 of that went on Israeli legal fees and expert reports across three courts. He never boarded a flight. The apartment was re-let in January 2026 at NIS 6,900 a month, which had been the practical object of the exercise all along, since a flat with an open water-damage defect and a live neighbour claim is not a lettable asset.

On the Canadian side, his accountant reported the Netanya apartment on Form T1135 as he had done since purchase, the threshold being CAD 100,000 of total cost of foreign property. The settlement itself was treated as a reduction in the cost of the improvements rather than income, so it changed the adjusted cost base rather than that year's return. Getting that characterisation right before the money moved avoided an amended filing later.

Key Takeaways

What this case illustrates for non-residents in similar situations:

1. Assume a security-for-costs application will follow your claim, and prepare the answer before you file. Regulation 157(a) is aimed at residence abroad, and the strongest response is proof of an unencumbered Israeli asset, filed with a current Land Registry extract rather than asserted.
2. Understand which appeal you actually have. Under Section 41 of the Courts Law, a District Court decision given on appeal needs leave, and the NIS 1,187 fee for asking buys a request usually decided on the papers by one justice without anyone being heard.
3. Leave is granted on the question, not on the injustice. A request that says the lower courts weighed the facts badly is refused. A request that shows lower courts going different ways on a recurring point, with the conflicting decisions attached, is a different document.
4. Watch the clock from service, not from receipt. Regulation 137(a) gives 60 days from service on your Israeli lawyer, and a client who spends three weeks arranging a translation of the judgment has already used a third of the window.
5. Deposits are recoverable but not free. Money sitting in court for nineteen months is money not earning anything, and on claims below roughly NIS 300,000 the deposit alone can make an otherwise good case uneconomic.

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Facing a Similar Situation?

If an Israeli court has ordered you to deposit security because you live abroad, the order is not automatically the end of the claim, and the answer usually lies in what you own in Israel rather than in where you sleep. Our guide to appealing an Israeli civil judgment from abroad sets out the routes and deadlines, and our answer on appealing a District Court appeal decision to the Supreme Court explains when the third round is worth asking for.

Contact us for a confidential consultation about your Israeli legal matter.