Civil Appeal 1137/23 , 1163/23 Eliyahu Deri v. 1. The Jewish National Fund

Civil Appeal 1137/23

Civil Appeal 1163/23

Judge Khaled Kabub:

1. We have before us two appeals against the judgment of the Central-Lod District Court (the late Judge Z. Dotan) in Civil Appeal 44266-12-19 [Nevo] given on December 14, 2022.  In the background, a "circular transaction" in which land located in the areas of the Yavneel Local Council was sold to respondents 4-5 in Civil Appeal 1137/23 (respondents 3-4 in Civil Appeal 1163/23; hereinafter, respectively: Asar and Mualem); and immediately thereafter, to respondent 2 in the appeals (hereinafter: Himanuta or the Company) – in the higher sum of NIS 2,651,380.
2. Within the framework of the judgment, legal liability was imposed on the appellant in Civil Appeal 1163/23 (hereinafter: Dabush), who served as a director of Himanuta and its parent company, respondent 1 in the appeals (hereinafter: the JNF; hereinafter: the Respondents), for his active involvement in this affair, which later became known as the "Yavneel Affair"; and due to the breach of the fiduciary duty towards the company, on a number of different levels. Liability was also imposed on the appellant in Civil Appeal 1137/23 (hereinafter: Deri), Dabush's 'good friend' who served as an intermediary in all of the aforementioned transactions – for the false representations he made to Himanuta and its representatives, and for taking away the business opportunity from it.
3. The judgment also dealt with another serious affair, known as the "Falah Affair", in which Dabush took money in the sum of NIS 67,541 from Mr. Ghannam Falah (hereinafter: Falah), and in connection with Falah's expectation that Dabush would assist in promoting real estate transactions in respect of which he had been in contact with Himanuta.
4. This is in a nutshell, now more broadly.

Background

5. The JNF is a public benefit company, founded in 1901, and currently operates by virtue of the Jewish National Fund Law, 5714-1953 (see, for example: Civil Appeal  9612/11 Shitrit v. Dabush, para. 4 [Nevo] (July 17, 2012); For further information, see also: HCJ 6411/16 The National Committee for the Heads of Arab Local Authorities v. Knesset [Nevo] (June 19, 2018)).  As is well known, the JNF owns and manages many real estate assets, which are spread throughout the length and breadth of the State of Israel (ibid., in paragraph 1; Haim Zandberg, Commentary on the Basic Laws: Basic Law:  Israel Lands 191 (2016) (hereinafter: Zandberg)).  To this end, the JNF also holds 100% of the shares of Himanuta, a private company established in 1938, which also operates a large number of real estate assets and carries out various transactions in them (see, inter alia: Yehoshua Weissman, Property Law – General Part 215 (1993) (hereinafter: Weissman); Zandberg, on page 153).
6. For several years, Dabush was employed as a director of the JNF and Himanuta, until his dismissal on October 16, 2018, against the background of the affairs that are the subject of the appeals. Labush has a good friend, and even an "excellent" friend, Eliyahu Deri.  According to the statement of defense that Deri submitted to the trial court, he is engaged, inter alia, in real estate brokerage, and in the past he even brokered real estate transactions in which Himanuta was involved; This is despite the fact that the trial court's judgment later determined, as a finding of fact, that in the framework of the transactions that are the subject of the Yavneel-Deri case, Deri did not hold a valid license to broker real estate.
7. In any event, the Yavneel affair began with Deri's April 2013 request to members of the Goldman family (who are not parties to the proceedings) regarding 166 dunams of agricultural land in Yavne'el, which was owned by them at the time (hereinafter, respectively: the land and Goldman). To Goldman, Deri presented himself as someone who works with the JNF and Trustee in various real estate transactions, while seeking to interest them by selling the land for them.  Subsequently, the parties signed a brokerage agreement, in which Goldman granted Deri exclusivity for a period of three months.
8. Shortly thereafter, Deri worked to interest Himanuta in purchasing the land. This, initially, was in the framework of his letter to Mr. Herzl Cohen, Director of the Company's Transactions Department in the Northern District (hereinafter: Cohen); Immediately following this, on May 1, 2013, a "transaction file" was opened in the company's records.
9. At each stage of the negotiations for this deal, hereinafter referred to as the "Goldman-Himanuta deal," Deri acted while concealing information and misleading both sides of the barricade, both Goldman and Himanuta's representatives, as I will detail in detail below. It should also be noted at this time that this transaction did not go into effect, and this – as determined in the judgment of the trial court – as a result of the conduct of the appellants, Deri and Dabush, together.
10. What is this about? From the very beginning, Goldman informed Deri that they were interested in selling the land at a price of NIS 35 per square meter. At the same time, as part of the response to Deri's initial request, Cohen noted that Himanuta could offer him a much higher sum – 54 shekels per square meter.  Rather, Goldman falsely told Deri that he had not succeeded in interested Himanuta in the purchase of the land, while hiding the fact that not only was this not the case, but that Himanuta had submitted a much higher offer than necessary.  At the same time, Deri noted to Himanuta's representatives that Goldman is demanding a sum of NIS 64 per square meter.
11. This is where Dabush's part in Parashat Yavneel begins. At a certain social event, which took place after negotiations for the Goldman-Himanuta deal began, Deri met with his good friend and asked him to use his influence in Himanuta in order to promote the deal.  Dabush agreed to his friend's request and connected Deri with the chairman of the board of directors of Himanuta at the time, Mr. Menachem Leibowitz (hereinafter: Leibowitz).  In this context, it should be added that it later became clear that Dabush even tried to check who the appraiser was chosen by Himanuta in order to assess the value of the land, but he was not involved in determining the assessment itself.
12. Within the story of the act in its entirety, these were the following three events that are important for the purpose of understanding the actions of the appellants, in their proper context: about three months after Deri's initial application to Cohen, on August 8, 2013, the assessment for Himanuta was completed, and the transaction was transferred to the professional bodies on its behalf. About a month and a half later, on September 30, 2013, a notice was sent to all the members of the Board of Directors, including Dabush, informing them of a meeting regarding the Goldman-Himanuta deal, which was scheduled for October 27, 2013.  We will return to what happened in this yeshiva later.
13. At this stage, and in parallel with the progress of the Goldman-Himanuta transaction, Deri began to act to sell the land to Saar to Rotem Holdings (2002) Ltd., which is owned by Mualem (hereinafter: the Goldman-Saar deal). It should be noted that Mualem had a prior acquaintance with Deri, stemming from a previous deal in which the two were involved; As well as basic acquaintance with Dabush, due to the fact that they are both residents of the city of Shoham.  I also found it necessary to add that before the trial court the respondents argued, and this was not contradicted by any of the parties, that Sa'ar is not engaged in the purchase of agricultural land and is engaged in the vehicle business.
14. It should be emphasized that Deri's claim that during the period in which he worked to promote the Goldman-Saar deal, there was a break between him and Himanuta was rejected by the trial court, after it was found that he was in constant contact with elements on Himanuta's behalf, and that the transaction even progressed at a faster pace than other transactions. Moreover, the judgment stated that Deri hastened to promote the sale of the land to Saar and Mualem as quickly as possible, while in his aforementioned application of September 2013 he offered them for sale at a price of NIS 35 per square meter, as Goldman demanded; However, this was despite the fact that he demanded a much higher sum than Hymanuta, and when he knew that it was right to purchase the land for such an amount.
15. The lawyers on behalf of the parties began exchanging drafts of the agreement and a meeting regarding the Goldman-Saar deal was scheduled for October 16, 2023, just 11 days before the long-set date for holding a meeting of the board of directors of Himanuta regarding the Goldman-Himanuta deal. It should be noted that between me and me, and in preparation for the meeting, the necessary preparations for the approval of the deal continued to advance in the corridors of Himanuta.  For example, on October 13, 2013, the company's professional bodies approved the engagement, and on October 15, 2013, Cohen forwarded his recommendation to the board of directors for the purchase of the land in the amount of NIS 60 per square meter (provided that the land is attached to water rights), following the assessment of NIS 45.5 per square meter and Deri's demand for a payment of NIS 64 per square meter.
16. The day before the meeting regarding the Goldman-Saar deal, on October 15, 2023, Deri called his friend, Dabush, in the evening, and stated that he would not be able to reachher. Therefore, Deri asked that Dabush appear for the meeting in his place, according to his testimony, in order to act to protect his interests at the meeting.  It should be noted that Dabush later confirmed that he served as a mediator at this meeting and that his main role was to make sure that the parties appeared to it and to make acquaintances between them.  I will recall that Dabush was present at this meeting, even though he had already been sent notice of the meeting of the Board of Directors scheduled for October 27, 2013, which was intended to approve the sale of the land to Himanuta; And even though the day before, Cohen's recommendation for their purchase had been sent.
17. Yael and Doron Goldman – on behalf of the sellers, and Mualem – on behalf of the buyer, also attended the meeting, all accompanied by their lawyers.  In this context, it should be noted that Dabush did indeed attend the meeting as Deri asked him to, without mentioning that he serves as a director of Himanuta.  However, in the trial judgment, the respondents' argument that Dabush served as Saar's representative was rejected; However, as noted, at this meeting, Dabush wore his hat as a friend of Deri's, the mediator in the deal.
18. Although he did not remain at the scene until the signing of the agreement, Dabush knew that the meeting was scheduled for the purpose of signing the Goldman-Saar deal. These words were determined by the trial court, based on Dabush's own words, as he testified that he "knew the transaction and was asked [by Deri – H. 20] to explain it to the parties."  About 15 minutes after the meeting began, Dabush left the scene.  In this context, it should be said that the trial court noted that his departure may have stemmed from his awareness of the severity involved in his presence at the time, when the parties signed a transaction that contradicted the Goldman-Himanuta transaction.
19. On the same day, the parties signed the Goldman-Saar deal, for a consideration set at NIS 35 per square meter, as demanded by Goldman from the outset. In the framework of the proceeding that was conducted before the trial court, it was not proven that Dabush  knew in practice that the  agreement had indeed been signed; however, at the same time, the trial court further commented on this matter that there was difficulty in adopting his version on this matter, since "Dabush knew that the meeting was intended for the signing of the agreement, and what could be simpler and more obvious than calling his good friend Deri and asking him (if only out of curiosity) whether the agreement was indeed signed."
20. Further to the above, on October 21, 2013, a warning note was recorded regarding the real estate, in respect of the Goldman-Saar transaction. This fact was not presented to the Company's Board of Directors at its meeting on October 27, 2013.  This, according to the respondents, is because the land registration document was produced already on October 13, 2013, the day the transaction was approved by the professional bodies – and even before the transaction was signed and the note was registered.
21. As a result of all of this, on October 27, 2013, Himanuta's board of directors convened to discuss a transaction that was no longer topical, and when all the members of the board of directors, with the exception of Dabush, were unaware of it. During the entire meeting, Dabush did not see fit to mention that he had attended the meeting regarding the Goldman-Saar deal only 11 days earlier, even when the question "who is the owner" was thrown into the air, and even when it was answered with " Goldman."  Similarly, Dabush did not see fit to point out to his board members that the price discussed in the negotiations between Goldman and Saar was NIS 35 per square meter, despite the fact that the board of directors discussed, and later approved, the purchase of the land at a much higher price.  In this context, the trial court held, as a matter of fact, that "Dabush's silence, where he should have spoken, contributed significantly to the fact that the board of directors discussed, on October 27, 2013, and again on October 31, 2013, a transaction that does not exist."  The trial court also ruled that on the one hand, Dabush did not push for approval of the deal, but on the other hand, he noted that it was a "good" deal.
22. Later in the meeting, the transaction was approved with the support of all the members of the Board of Directors, including Dabush himself, with the exception of Director Ze'ev Neumann (hereinafter: Neumann), who voted against it. Only towards the end of the meeting, after the deal was approved, and only in response to Neumann's question as to whether he was involved in the deal in any way, did Dabush reply that he was in a relationship with the broker in the deal, Deri.  In the meantime, I would like to emphasize that the trial court rejected the claim that the other directors were familiar with Dabush's connections with Deri, with the exception of only one director.
23. To complete the picture, I will note that the price approved by the Board of Directors at this meeting, in accordance with Cohen's recommendation, was NIS 60 per square meter – with water rights, and NIS 52 per square meter – without water rights. However, already at the time of the approval of the transaction, it was clear to all the members of the board of directors that water rights were not expected to be purchased.
24. Based on Deri's later writings, the trial court ruled that it had already learned of the approval of the Goldman-Himanuta deal, and that he had even made sure to inform Mualem about it. How did Deri learn about the approval of the deal by Himanuta? In this regard, the trial court noted that "prima facie and without conclusively establishing a finding," the approval of the transaction was brought to Deri's attention by his friend, Dabush, who was present at the meeting and voted in favor of the transaction.
25. The Goldman-Himanuta deal was canceled shortly after its approval, for reasons unrelated to our case, but was formally reaffirmed in the framework of a meeting on December 31, 2013, in which Dabush was not present. The very next day, on January 1, 2014, Deri was summoned to the company's offices in Haifa, and then he informed its representatives for the first time, that in fact, the real estate had been sold to Saar two and a half months earlier, and already on that date he had offered the company to purchase the land from Saar.
26. Subsequently, the parties began negotiations for the sale of the land from Saar to Himanuta (hereinafter: the Saar-Himanuta transaction). It should be clarified that from the early stages of the negotiations, Himanuta knew that the land had been sold to Saar at a lower price than what had been offered to her.  In light of the aforesaid, on March 19, 2014, a small meeting of the Board of Directors was held, in which Dabush's involvement in the Goldman-Saar transaction was put on the agenda, as well as the price differences between this transaction and the price approved in the Goldman-Himanuta transaction, and was even re-examined at the same stage, in connection with the Saar-Himanuta transaction (hereinafter: the limited meeting).  It should be noted that at this meeting, Dabush's conduct was indeed discussed, and it was even noted that the things described were, ostensibly, "serious".  However, its participants did not make any operative determination on the matter.  This puzzling conduct is only sharpened in light of the fact that Hymanuta refrained from disclosing the minutes of the hearing to the trial court – until judicial decisions were made on this matter.
27. Ultimately, on May 1, 2014, less than seven months after the signing of the Goldman-Saar deal, the Saar-Himanuta deal was signed, at a price of NIS 8,466,000 (NIS 51 per square meter), which is NIS 2,651,380 higher. At that time, Saar had not yet completed the payments to Goldman.  Therefore, the outline agreed upon by the parties is that Himanuta will pay Goldman directly the balance of the payments in place of Saar, and at the same time transfer to Saar the net profit it generated, while covering the payments that have already been made.
28. The Yavneel affair "exploded" only a short time later, as part of an inquiry conducted by President (ret.) Prozhinin, following complaints filed by KKL-JNF employees against Dabush, and in accordance with the procedures established by the JNF in this regard. The audit report submitted on June 13, 2018 made serious findings regarding Dabush, including that he had breached his fiduciary duty, inter alia, in the Yavneel case (hereinafter: the audit report).  Based on these findings, President (ret.) Prozhinin recommended  the removal of Dabush from the Board of Directors; indeed, the JNF's general meeting convened as recommended on October 16, 2018, to discuss his dismissal.  Although Debush announced his resignation shortly before the meeting, the General Assembly voted in favor of his removal, in case he retracted his resignation.
29. Against the background of all of the above, on December 17, 2019, Himanuta and the JNF filed their claim in the trial court, against Deri, Dabush, Sa'ar and Mualem. In summary, it should be said that the amended statement of claim dated March 26, 2020, attributes to Bosch various breaches of the duty of fiduciary duty imposed on him, as someone who served on the board of directors of Himanuta.  In addition, regarding Deri, it was claimed that he acted deceitfully towards Himanuta and was involved in taking a business opportunity that belonged to her.  The respondents also claimed that Sa'ar and Mualem were involved together in the actions of Dabush and Deri, and therefore they must compensate the respondents.
30. To complete the picture, it should be noted that, as stated above, the claim dealt with another affair in which only Dabush was involved, the Falah affair. According to the findings of the trial judgment, Dabush received from Falah the sum of NIS 67,541; This was when Falah was in talks to enter into real estate transactions with Himanuta, and after the parties discussed the possibility that Dabush would help "release the 'stuck' transactions [between Falah and Haymanuta]."  It should be noted at this time that since Dabush retracted his appeal in the matter of the Falah case, these findings are no longer contested in this proceeding.  However, it is clear that this does not express a position with respect to the criminal proceeding in the matter, about which I will elaborate below.

The Trial Judgment

31. A lengthy evidentiary proceeding was conducted before the trial court, at the end of which, on December 14, 2022, the judgment that is the subject of the appeal was rendered. After leaving no stone unturned and addressed the arguments of the parties at length, the trial court determined, based on the totality of the testimonies and evidence, the findings of fact and reliability, as described above.
32. In light of the aforesaid, the claim against Dabush and Deri was accepted, in the sum of NIS 3,128,628 – the difference between the amount paid in the Saar-Himanuta transaction and the amount paid in the Goldman-Saar transaction, plus the VAT paid by Himanuta Beitar as a result, and with a lawful ruling of interest and linkage (a total of NIS 3,339,041). In addition, the trial court ordered Dabush and Deri to pay the respondents' expenses in the proceeding, in the sum of NIS 150,000.  At the same time, and in connection with the aforesaid, the trial court dismissed the claim against Saar and Mualem, while charging the respondents their expenses in the proceeding, in the sum of NIS 65,000.

For the sake of completeness, I will note that the claim was also accepted in relation to the Falah case, and in terms of relief, Dabush was asked to transfer to the company the sum of NIS 67,541 that he received from him.  The following will be detailed, therefore, the main determinations that were determined in the judgment of the trial court, and which are required for the purpose of our decision in this appeal.