From the general to the individual
- As I have already noted above, I am of the opinion that in our case, Deri can be held legally liable for his involvement in Dabush's breach of the duty of fiduciary, with all of its aforementioned derivatives; This is by virtue of the tort of causing an unlawful breach of contract. The facts that establish the imposition of responsibility on Deri by virtue of this tort have been detailed by me at length above, and therefore I will answer them only briefly.
- First, it should be noted that it is clear that there can be no dispute about the very existence of a valid contract and its breach (elements A-B above), taking into account what has been stated at length regarding Dabush's appeal. In the meantime, it should be noted that there is no dispute that Deri knew about the contract, i.e., that Debush served as a director of Himanuta at the relevant time. Deri also knew about each of the levels of the violation committed by Dabush, since he was the one who asked him to attend the meeting on October 16, 2013. Similarly, Deri knew (or at least turned a blind eye to this) that Dabush continued to violate his duty of disclosure, in light of Himanuta's willingness to continue promoting the Goldman-Himanuta deal, even after the Goldman-Saar deal was concluded. Therefore, the sequence of events indicates that Deri was also aware that Debush was violating the prohibition on being in a conflict of interest and taking a business opportunity, as well as the duty of disclosure. In addition, Deri knew that he was actively involved in these violations (Yesod D, above).
- However, this was not the end of Deri's involvement in Dabush's breach of duties; For, as stated above, he took a very active part in their completion. In practice, he is the factor for which the business opportunity was taken away from the company, since Dabush was present at the meeting in the Goldman-Saar matter in order to assist him. In these circumstances, it must also be determined that Deri's conduct was a condition without which the violations committed by Dabush should not be completed, let alone completed in an effective manner, for as stated above – we are dealing with a joint plan in which each of them performed his part (Element C above). In this context, it should be mentioned once again that the trial court held, as a factual finding, that the conduct of each of the appellants was a condition without which the plan could not be completed successfully, and so did the damage ultimately caused to the company.
- The set of facts described also expresses a high degree of guilt. Thus, we are dealing with involvement that was made out of full awareness of the violations and the damage they are expected to cause, and in fact, the intention to participate in the violations and cause this damage. Deri's active involvement, as a joint perpetrator of the aforementioned violations, as well as the high degree of culpability, exempts us from discussing the possibility of imposing liability in less serious situations, which has been recognized in common law; Thus, for example, when the third party's guilt is less high, his awareness of the violation is less high, or when his part in the conspiracy is less central – options that should be used with caution. The decision on these options should therefore be left to the time being, since in our case we are dealing with involvement at the highest level and out of guilt and particularly high awareness.
- Can it be argued that Deri had "sufficient justification" (Principle 5 above)? I can easily determine that the answer to this question is also negative. For even without planting rivets on the question of what circumstances may justify involvement in a breach of fiduciary duty of an officer, if at all, it is clear that the circumstances of our case are far from this, in view of the principles established in case law in this context (see: paragraph 180 above).
- After all, we were concerned with the director and his good friend who sought to use the company's assets for their benefit, while deliberately causing damage to its business and by exploiting the inherent representative problem. This affair testifies to the need to impose liability on a foreign party involved in a breach of fiduciary duty by an officer of the company, when Deri's actions were a condition without which the joint conspiracy could not be completed; And so, if it were not for his involvement, it would not have ended in "success." If the foreigner intervening in such serious circumstances is not held responsible, the problem of the representative in the corporation is only liable to be exacerbated, as this will be an encouragement of third parties, as well as officers, to concoct joint conspiracies by exploiting and harming the company. In addition, the exemption of the intervening stranger from liability may also, in other circumstances, encourage the parties to 'smuggle' the infringing assets into the hands of the intervening foreigner, so that the company may find itself facing a broken trough (see: paragraph 158 above).
- In any event, in the circumstances described, it should be determined that there was no justification for Deri's involvement in the breach of Dabush's duties, and even far from it. In this context, it should be noted that his claim that his actions were intended to maximize the consideration for the property being sold was also rejected by the trial court, as was also by me, inter alia, because it was proven that he also acted against the interests of his own clients (compare: paragraph 180 above).
- Before concluding this part, I will note that I am of the opinion that even if the conditions formulated in the foreign law had been applied in our case, in particular the one that applied in Delaware, the same legal result would have been obtained, namely, that Deri should be held liable for his involvement in the breach of Dabush's duties. Because, as stated above, the elements of the cause of Aiding & Abetting are tangential to the elements of the tort of causing an unlawful breach of contract; and so it should be said only for the purpose of the discussion that I have already discussed the fulfillment of conditions (i), (ii) and (iv) which deal with the existence of a duty of fiduciary, its breach and the damage caused as a result (see: paragraph 168 above). In addition, Deri was actively involved in this violation, which involves guilt and a high level of awareness ("knowing participation"), which fulfills condition (iii) above.
At the same time, it should be emphasized that the imposition of liability in our case is not based, of course, on foreign law, but, as stated, on an explicit provision of law, which is set forth in section 62 of the Torts Ordinance, and the reference to foreign law was made, naturally, only as a source of inspiration and as the common basis of the two doctrines.
- In summary, Deri should also be held responsible for his active and deliberate involvement in Dabush's breach of the duty of allegiance, with all its derivatives; And so it seems to me that the trial court did when it ruled that it had taken a business opportunity of the company. Therefore, for this reason as well, I am of the opinion that there is room to order the dismissal of his appeal.
Pre-Finish Notes
- The Yavneel case recounts a serious sequence of events, in which the appellants sought to take advantage of the corporate veil and the representative problem, while deceiving the members of the board of directors in which Dabush served; All this in order to lead to the sale of the land twice, at a close time to each other, by causing millions of shekels in damage to the company. In these actions, Dabush blatantly violated his duty of loyalty, and Deri acted in fraudulent ways towards the company.
More than anything, however, this case illustrates the importance of protecting the relationship of trust in a corporation against the improper interference of third parties, in view of the fact that the activity through corporations 'invites' many opportunities for it to concoct joint conspiracies, such as the one concocted by the appellants together. The courts should act in the future to deter those third parties from carrying out such schemes, and to provide adequate compensation to the company – where they were not prevented in advance (see the Delaware court's words in this context: "The threat of liability helps incentivize gatekeepers to provide sound advice, monitor clients, and deter client wrongs" (In re Rural Metro Corp. Stockholders Litig., 88 A.3d 54, 88 (Del. Ch. 2014))).
- In the margins, and despite the dismissal of the appeals, I found it necessary to note that the description of the matter does not also shine a fairly positive light on the conduct of the respondents themselves. The continuation of his tenure on the board of directors of someone who breached his fiduciary duty to Himanuta and acted with its assets as his own – could and should have been prevented even before his dismissal on October 16, 2018. It seems that the limited meeting that took place on March 19, 2014, about four and a half years earlier, was an appropriate opportunity for this. The problem is that it should be said on the face of it, and with the necessary caution, that apart from the questions that were asked on the matter in the framework of this meeting, nothing was done to examine Dabush's conduct, until the complaints were filed by the employees and the audit report that followed, when the Falah affair also took place in the interim period.
- It is therefore expected that the JNF – which, as noted, has statutory status, which in the past was even classified as a dual-substance entity (see: paragraph 5 above; Assaf Harel Dual-Substance Bodies and Officers 81-82 (2nd edition 2019)), which holds many assets and influences public interests – will draw the appropriate conclusions from the cases in question and will act to prevent the recurrence of such cases, as well as to properly treat them, where they are. Unfortunately, it happened.
Conclusion
- If my opinion were to be heard, we would order the dismissal of both appeals, with all their parts. I will also suggest to my colleagues that it was determined that the appellant in Civil Appeal 1163/23 will bear the respondents' expenses, in a total of NIS 20,000; andthat the appellant in Civil Appeal 1137/23 will bear the respondents' expenses, in a total of NIS 20,000.
| Khaled Kabub |