Civil Appeal 1137/23 , 1163/23 Eliyahu Deri v. 1. The Jewish National Fund - part 2

Determinations in Dabush's case

33. In Dabush's case, it was determined, inter alia, that he gave false testimony regarding the presence of Doron Goldman (who was responsible on behalf of the family for the sale of the land) at a meeting regarding the Goldman-Saar deal on October 27, 2013. It was also determined that the version he gave in his cross-examination, according to which he did not know that this meeting was intended for the signing of the agreement, was unreliable, unreasonable and contradicted what he had said earlier in a television interview.  It was also noted that with regard to what he said in this interview, he "tried to twist and claim that the words were not true, but he was unable to give an explanation as to why they said them, if they were not true."
34. On the legal level, it was determined that by actively participating in promoting the Goldman-Saar deal, while he was aware that the Goldman-Himanuta deal was being promoted by the company, Dabush took on a business opportunity for the company. It was further ruled that his mere presence at the meeting on October 27, 2013, in which he served as a mediator between the parties, constitutes a prohibited presence in a conflict of interest, all the more so when he "actively assisted in promoting the transaction".  It was also determined that Dabush breached his duty of disclosure towards the company and concealed information from it – both in relation to the very fact that the Goldman-Saar deal was being forged in the background, in relation to the price difference between the transactions and in relation to the corporate relations between him and Deri, if he had a "clear personal interest in the transaction".  It was further ruled that even though the company was negligent in not reviewing the updated land registry before the meeting of the board of directors on October 27, 2013, this does not raise or detract from Dabush's responsibility, which deliberately concealed information from the company.  Moreover, it was ruled that even though the members of the board of directors later knew, to one degree or another, about Dabush's involvement in the Goldman-Saar deal,  the depth of his active involvement in it was not brought to their attention.
35. In accordance with all of the above, the trial court ruled that in the framework of his conduct in the Yavneel case, Dabush blatantly violated the fiduciary duty imposed on him as a director, and in particular the duty of disclosure, the prohibition on being in a conflict of interest, and the prohibition on taking a business opportunity of the company. In the meantime, it was determined that the conduct of Dabush and Deri together was a condition without which the sale of the land to Saar at a low price of NIS 35 per square meter should not be held, instead of selling them to Hinumera at this price.  Therefore, the trial court ruled that the appellants caused the company the damage detailed in the statement of claim.
36. In the matter of the Falah case, it was determined that Dabush was in a conflict of interest, when he took a personal benefit for himself, while he was in a dispute with Falah, in which the possibility of him acting to promote his interests vis-à-vis the company was discussed. In this context, it was ruled that this was "serious conduct, and it may even amount to receiving a bribe."

Deri's rulings

37. As stated above, Deri's version that he knew of the approval of the Goldman-Himanuta transaction by the company's board of directors only on January 1, 2014, as raised in his testimony, was rejected by the trial court, when it was determined that his written and advance version that he knew about the transaction on the day it was approved should be preferred.
38. The trial court also emphasized that Deri was the mediator in all three transactions, including the Goldman-Himanuta deal, which was not carried out. At the same time, it was emphasized that Deri had the help of his good friend in order to promote the deal in the corridors of Himanuta.  Not only that, but Deri continued to assist Debush when promoting the Goldman-Saar deal itself, knowing that by doing so Dabush was breaching his duties as a director.  As if that were not enough, the trial court also ruled that Deri was informed of the approval of the Goldman-Himanuta deal on the day it was approved, ostensibly, using information that Dabush had in his possession by virtue of his position as a director.
39. From the very beginning, the trial court ruled, Deri offered the real estate to Saar at a low price, aware that Trustee was willing to pay a higher amount for the land and with a "well-founded expectation" that they would be sold later on to Trustee.Because he knew, from Herzl Cohen, that the price that Trustee is talking about is 60 shekels, and this is the price that will be brought to the board of directors for approval." As proof of this, the trial court held,  only one day after  the approval  of the Goldman-Himanuta deal, Deri offered Himanuta to purchase the land from Saar.
40. On the legal level, it was determined that Deri made false representations to both Himanuta and Goldman, in connection with the demands raised by each of the parties in relation to the price of the transaction, while conducting negotiations with several parties at the same time and using the information he received from Dabush. Therefore, it was ruled that not only did Deri commit acts of fraud against his clients, but also against Himanuta, from whom he also took the business opportunity that belonged to her, and all this – with the aim of selling the real estate twice.  As stated above, it was determined that there is a causal connection between these acts and the damage caused to the company, and therefore it was ruled that the lawsuit should also be accepted against Deri.

The rulings in the case of Saar and Mualem

41. As noted, the lawsuit against Saar and Muallem was dismissed. Since the respondents did not object to this determination, the conclusions of the trial court in their case will be briefly described.  In this framework, it was determined that Mualem did not know about the false representations that Deri presented to Himanuta and was not even aware that the land had been offered to her beforehand.  In addition, Mualem did not even know that Dabush was serving as a director of Himanuta and the JNF, and therefore it was also ruled that there was no basis for the claim that he was involved in the appellants' improper actions.
42. As a result, the claim that Sa'ar and Mualem executed the transaction with Goldman in advance, only in order to sell the real estate later in Hymanuta, was rejected; since it was not proven that Mualem knew of Yamanand Taa's interest in the real estate at the time he signed the agreement with Goldman.  It was emphasized that it is puzzling that already on December 31, 2013, Saar decided to sell the land to Himanuta, taking into account that at that time Himanuta had not yet known about Saar's involvement; However, it was ruled that this was not enough to establish that Mualem and Saar had a hand in the transgression.
43. For the sake of completeness, I will add that on March 10, 2024, the trial court (Judge Sheppers) approved an agreed ruling for the purposes of compromise, in which the charges imposed on the appellants were updated. Thus, it was agreed that in respect of the Yavneel affair, the appellants would pay the respondents, jointly and severally, the sum of NIS 3,943,424 (including the amount of the claim, the court fee, expenses and attorneys' fees) and in respect of the Falah affair, Dabush would pay the respondents the sum of NIS 74,569.

The Criminal Procedure

44. Following the judgment of the trial court, on January 26, 2023, an indictment was filed in the Nof HaGalil-Nazareth District Court against Dabush, Deri, Mualem and Saar – for the Yavneel affair; in the framework of it, they were jointly charged with two offenses of fraudulent receipt under aggravated circumstances, fraud and breach of trust in a corporation, fraud and breach of trust, and money laundering. In addition, the indictment was also filed in the case of the Falah affair – against Dabush and Falah; In the framework of it, both were charged with offenses of accepting bribes and giving bribes, respectively ( Crim.  66463-01-23) [Nevo].
45. Subsequently, on January 10, 2024, Fallah was convicted on the basis of his confession in an amended (and softened) indictment, as part of a plea bargain, of bribery, and on February 29, 2024, he was sentenced to 15 months in prison, along with a suspended sentence and an accompanying sentence. In the case of the other defendants, the trial continues to proceed.

Appeals against the judgment

46. The trial court's ruling was appealed by Deri and Bush on February 9, 2023 (separately), and the hearing of the two appeals was consolidated in the framework of Judge Barak-Erez's decision of March 16, 2023.  On the same day the appeal was filed, Dabush filed a motion to delay the execution of the judgment; A similar request was also filed by Deri on February 26, 2023.
47. Both of these motions were rejected in Judge Barak-Erez's decision of April 3, 2023, in which it was determined that it had not been proven that their rejection would cause the appellants irreparable damage, taking into account that this was a monetary judgment. With regard to the chances of an appeal, it was held that without addressing this question "in depth", "[that] it can be said, with the caution required at this stage, that the judgment given is largely based on findings of fact and reliability".

The arguments of the parties in the Dabush appeal (Civil Appeal 1163/23)

48. At the outset, Dabush claimed that the respondents' claim was born out of sin, while he claimed that at the relevant times of the statement of claim he served "as an assertive and active director of Himanuta who was known specifically as one who fought for integrity." It should also be noted that at the outset, Dabush appealed both the trial court's decision in the Falah case, and its decision in the Yavne'el case.  However, as stated above, following our recommendation given in the hearing we held in the appeals, he withdrew his appeal in relation to the Falah case.  Therefore, only Dabush's arguments in relation to the Yavneel affair will be described below.
49. In this regard, Dabush disputes a series of factual determinations that were determined in the trial judgment. In the meantime, it was argued that the respondents did not prove that Hymanuta would indeed have purchased the land from Goldman at a price of NIS 35 per square meter, had it not been for his conduct as detailed in the judgment.  At the same time, Dabush is of the opinion that even if he rejects his arguments on the factual level, the aforesaid rulings do not impose on him legal liability towards the respondents.  Thus, for example, it was argued that in any case Bosch had no influence on the identity of the party who would purchase the land.  Therefore, Dabush argued, no damage was caused to Himanuta, and in any case there is no causal connection between the breach of his duties as a director and the sums awarded to his debt.
50. In addition, Dabush believes that he cannot be held liable for taking Himanuta's business opportunity, where it has not been proven that he obtained a benefit for himself. In any event, it was argued that the claim that he pushed for the approval of the purchase of the land by Himanuta contradicts the determination that he took a business opportunity from her.
51. In a similar context, Dabush insisted that his breach of the duty of disclosure was also not causally connected to the alleged damage, while the meeting of the board of directors took place only after the signing of the Goldman-Saar deal, which at this stage was a fabricated act. In the meantime, it was argued that the company was negligent in not checking the updated land registry text, on which a warning note was written in favor of Saar, as early as October 21, 2013.
52. Not only that, Dabush further claimed that Himanuta made an informed decision to purchase the land at the price it paid, even after it learned of his involvement in the earlier Goldman-Saar deal. Therefore, Himanuta is silenced from raising any argument in this matter.
53. In any case, Dabush argued, where the trial court ruled that Saar and Mualem were not involved in the alleged conspiracy, the lawsuit against Deri, the main wrongdoer to Dabush's approach, also "fell," and in any case there was room to dismiss the lawsuit in his own case.
54. The respondents, on the other hand, are of the opinion that Dabush's appeal should be dismissed, while the trial judgment is based mainly on findings of fact and reliability, including his firm determination that Dabush knowingly lied in his testimony. In the meantime, in their response of 05.09.2023, the respondents relied on the conclusion of the trial court that Dabush had breached the duty of fiduciary duty imposed on him, including the duty of disclosure, the prohibition on being in a conflict of interest, and taking a business opportunity.
55. In the meantime, it was argued that Dabush was a partner in the damage caused to the company by Deri and that the claim that he did not obtain a benefit for himself is not sufficient to appeal the determination that he took a business opportunity for the company; Because, according to the respondents, Dabush acted in order to obtain a benefit for his good friend, Deri.
56. The respondents further argued that the argument that the determination regarding the taking of a business opportunity contradicts the claim that Dabush pushed for the approval of the Goldman-Himanuta deal, when these are complementary acts that together establish the conspiracy concocted by the appellants, within the framework of which the land would be sold twice, should be rejected. It was also argued that the dismissal of the lawsuit against Saar and Mualem does not exempt Dabush from liability, since the duties imposed on him as a director are independent duties, which are not derived from the duty and responsibility of anyone else.
57. With regard to the damage, the respondents argued that contrary to what was claimed in the appeal, the trial court held as a factual finding that there is no doubt that had it not been for the conduct of the appellants together, Himanuta would have purchased the land at a price of NIS 35 per square meter. Thus, according to them, Dabush's claims that the company was not in a position to execute the transaction or that he was not in a position to influence it – were examined by the trial court and rejected, on the factual level.  Similarly, it was argued that in any event, his claim that his breach of the duty of disclosure did not affect the company's conduct should be rejected, while even at the time of the approval of the Saar-Himanuta transaction, the members of the board of directors were not aware of the depth of his involvement in the Goldman-Saar transaction; since the facts as they existed became known to the company only long afterwards.
58. To complete the picture, I will note that in the margins of their reply, the respondents categorically reject Dabush's petition that we intervene in the findings of fact and reliability set out in the judgment. At the same time, and with regard to the Falah case, the respondents sought to attach as new evidence in the appeal the aforementioned sentence of the Nof HaGalil-Nazareth District Court.  In the decision of Judge Amit of June 16, 2024, it was determined that this request would be heard during the hearing of the appeals, but when Bush withdrew his appeal with respect to the rulings in the Falah case, our decision on this request became superfluous.

The arguments of the parties in the Deri appeal (Civil Appeal  1137/23)

59. Deri focused his arguments on the conclusion that he acted in a deceptive manner towards the respondent. Thus, according to his approach, the trial court's rulings constitute an infringement of commercial life and the proper conduct of real estate transactions; This is because, according to him, in the trial judgment he was obligated – for which there is no source in law – to refrain from paying the consideration for the property in question.
60. Similarly, it was argued that the trial court imposed on Deri, in practice, a duty of loyalty to Himanuta, despite the fact that he did not hold any position there. Thus, Deri argued that in the absence of a legal relationship between the parties, he was not obligated to offer the Limeauta at all, and in particular at the price at which they were offered to Saar.  Therefore, according to him, there was no room for the determination that he took away a business opportunity from her.  In the meantime, Deri is of the opinion that the Respondents' attempt to hold him responsible by virtue of his involvement in the breach of Dabush's duties, as detailed below, is a "baseless" attempt.
61. In this context, it was further argued that it was not correct to relate to him and Dabush as a "single entity", because, unlike Dabush, he does not have a duty of loyalty to society. Therefore, it is argued, the trial court erred in ordering the appellants to compensate the respondents jointly and severally.
62. Moreover, Deri also believes that since Saar and Muallem were relieved of responsibility, even though they were the ones who pocketed the profit from the round deal, there was room to dismiss the lawsuit in his case as well. Meanwhile, Deri notes that apart from "modest" brokerage fees, he did not earn anything from the three deals.
63. Deri further argued that the elements of the tort of fraud did not exist, because in any case he was not obligated to present to the respondents the price demanded by his clients, as well as the price at which the Goldman-Saar transaction was executed. In any case, even after the respondents became aware of this transaction, including the price at which it was executed, the board of directors of Himanuta ratified the transaction, because it believed that it was worthwhile.  Thus, it was argued, the respondents themselves created the damages claimed, and they have no one to blame but themselves.  On the sidelines, Deri claimed that Goldman himself was the only party who could have had any claim on the matter, but they chose not to file a lawsuit.
64. The respondents, for their part, are of the opinion that Deri's appeal is also based, to a large extent, on arguments against findings of fact and reliability, as well as on the rejection of Deri's version, which the trial court found unreliable.
65. On the legal level, it was emphasized, in the Respondents' response of September 28, 2023, that the tort of fraud applies to each and every person, even in the absence of a contractual relationship, and that the trial judgment detailed all the factual and legal foundations of this tort. In this context, it was argued that the fact that Deri also deceived  his clients does not raise or lower the level of fraud he committed against the respondents.
66. With regard to the determination that Deri took a business opportunity belonging to the company, it was argued that, in accordance with the law, legal liability can be imposed on a third party who was involved in a breach of the fiduciary duty of an officer, by way of assistance, solicitation or joint execution, or when he violated the independent judgment of a director, in violation of section 106 of the Companies Law, 5759-1999 (hereinafter: the Companies Law).
67. In more detail, it was argued that the imposition of liability for involvement in a breach of fiduciary duty is contingent upon the fulfillment of four conditions, all of which were fulfilled in our case, namely, that a duty was breached by the officer; that the defendant was involved in the breach, in a manner that encourages the breach; that there is a causal connection between the breach and the conduct of the third party; and that the conduct of the third party was guilty, which exceeds mere negligence.  At the same time, it was argued that Deri violated Dabush's independent judgment as a director, and therefore he was subject to the duties and responsibilities that apply to a director, by virtue of  section  106(c) of the Companies
68. On the level that is tangential to the aforesaid, the Respondents are of the opinion that in his actions described, Deri also violated the duties imposed on him as a mediator as well as the duty to conduct negotiations in good faith, which is set forth in section 12 of the Contracts Law (General Part), 5733-1973 (hereinafter: the Contracts Law).
69. In any event, it was argued that, like Debush, Deri's responsibility does not depend on the responsibility of Sa'ar and Mualem, since the dismissal of the lawsuit against them does not undermine the serious findings that were determined about him. It was further argued that Deri and Bosch were liable jointly and severally, not only because the former was involved in the breach of the latter's duties, but also by virtue of explicit provisions of law, which are set  forth in section 54 of  the Contracts  Law and in section 11 of the Torts Ordinance [New Version] (hereinafter: the Torts Ordinance).
70. To complete the picture, it should be noted that on November 7, 2023, Saar and Mualem responded to the appeals. In their reply, they noted that although they do not agree with the full factual determinations of the trial court or with the manner in which they were presented by the respondents, they noted that since no appeal was filed in their case, they do not intend to intervene in a dispute that is not theirs.

The hearing of the appeals and the subsequent sequence of events

71. When all of the above was collected, a hearing on the appeals was held on July 1, 2024. The hearing in Dabush's appeal focused on the foundations of the causal connection and the damage.  Thus, I stated to his counsel that I am of the opinion that his client has blatantly breached his fiduciary duty, inter alia because of his presence at the meeting at which the Goldman-Saar deal was signed, and by concealing this information and other information from his colleagues on the board of directors (pages 9-10 and 12 of the minutes).   This was also discussed by Justice Amit (pages 5 and 9 of the transcript), and it seems that Dabush's counsel also does not dispute the violation itself, but as noted, he focused his arguments on the foundations of the causal connection and the damage (pages 11-12 of the transcript).
72. In this context, it was argued that it was not Dabush who led to the engagements in the transactions (pages 11-12 of the minutes), and therefore, according to his counsel, there is no causal connection between his actions and the results of the negotiations between the parties. His counsel also reiterated the claim that no damage was caused to the company and in any case no personal benefit was derived on the part of his client (page 13 of the minutes).
73. As part of the hearing on Deri's appeal, the question was discussed as to whether he was indeed obligated to disclose to Counta the real price demanded by his clients. In the aforesaid context, and in response to my colleague Justice Amit's question on this matter, counsel for the respondents replied that "if the realtor [Deri – H. 20] had obtained from Goldman a price of NIS 60 per square meter for his client, we would have had no claim" (page 3 of the transcript).  However, taking into account the determinations set out in the trial judgment, it was argued that Deri did indeed act in a fraudulent manner, and thus also breached the duties imposed on him by virtue of  the Contracts Law and by virtue of the Real Estate Brokers Law, 5756-1996 (hereinafter: the Realtors Law) (page 5 of the minutes).
74. On the other hand, I emphasized to the parties' counsel that it was Deri who pulled the strings in all the transactions. Similarly, Justice Amit presented his counsel with the question of whether he does not have a general duty not to make false representations, as well as to conduct negotiations with several parties simultaneously (pages 6, 8 and 17 of the transcript, respectively).  Deri's counsel responded and claimed that Goldman had authorized his client to market the real estate and therefore he was free to market it at a price that he thought was as high as possible (page 8 of the transcript).
75. Shortly before the end of the hearing, we clarified to the parties that in our view, the appeal in the matter of the Falah case should be dismissed, and therefore no oral argument was requested on behalf of the respondents in this context. In the meantime, we proposed to the parties a non-protocol proposal, which would have been acceptable to resolve the disputes between the parties without a judgment in the appeals on their merits, taking into account the criminal proceeding that is taking place in parallel.  Therefore, the parties were asked to give notice by July 22, 2024 of their position regarding this proposal.
76. On July 18, 2024, we announced that Dabush was withdrawing his appeal with respect to the Falah affair, but that he was insisting on a decision on the appeal, insofar as it relates to the Yavneel affair. Like Dabush, Deri also announced in his announcement of July 23, 2024, that he was insisting on giving a ruling on the merits of the matter.  The respondents, on the other hand, refrained from expressing a position regarding the acceptance of the proposal in the Yavneel case, because it had long since become redundant in any case; However, in their announcement of July 22, 2024, they insisted on an award of costs in respect of the appeal in the Falah case.  When the parties rejected our proposal, therefore, there is no choice but to give our decision in the appeals in the Yavneel case, while addressing all the facts, circumstances and arguments as they are and in essence.

Discussion and Decision

77. After I have reversed the matter, I am satisfied that the appeals should be dismissed – in all their parts – and so I will suggest to my colleagues that it be done. For, as I will point out more broadly, I am of the opinion that the judgment of the trial court is detailed, reasoned, balanced and rests on stable legal foundations.  Therefore, I do not believe that there is a clear reason for our intervention in it.
78. Needless to say, the judgment is based to a considerable extent on findings of fact and reliability, which were determined after the trial court conducted a long and complex evidentiary proceeding before it, while rejecting the version presented by the appellants, inter alia, on the witness stand. The appellants' appeal does not point to any ground for unusual intervention in such findings, all the more so when it is clear that the trial court 'dived into the depths of the evidence' and examined the factual claims thoroughly and in detail (see, among many:  Civil Appeal  3605/21 Korea Motors Israel Ltd. v. Ungar, para. 9 [Nevo] (February 26, 2024), and the schemas therein).  These words are only reinforced in Dabush's case, taking into account that it was found that he knowingly lied on the witness stand (see, for example:  Civil Appeal  3589/23 Kadosh v. Gendler, para. 24 [Nevo] (August 1, 2023), and the references therein).
79. It is also worth emphasizing in this context that the trial court made a number of factual assumptions in favor of the appellants that were kind to them, even though the circumstances that surrounded them could easily have been attributed to their duty. In this context, it will be mentioned, for example, that Dabush did not know about the signing of the Goldman-Saar deal on the day it was signed, even though he knew that the meeting was scheduled for this purpose.  In Deri's case, for example, the fact that the trial court did not determine, as a positive finding, that it became aware of the approval of the transaction by Himanuta from an insider of the company, namely Madbush.
80. In the meantime, and before addressing the substance of the matter, I found it necessary to emphasize that there is no basis for the "domino" claim raised by the appellants, according to which from the moment the claim against Muallem and Saar was dismissed, there was also room to dismiss the claim against Deri, and thus in the chain of events, to exempt Dabush from liability as well. Contrary to the manner in which the matter was presented in the appeals, the claim that a "round transaction" was made was not rejected by the trial court at all.  Thus, all that was determined was that Saar and Muallem were not involved in the conspiracy in advance, but that it was the appellants who acted with a well-founded expectation that after the completion of the transaction with them, they would act to sell the land again.  It is therefore clear that in these circumstances, the liability of the appellants does not depend on the liability of Sa'ar and Mualem – both on the factual and legal levels – and in any case it does not depend on their mutual responsibility.
81. From here, therefore, I turn to discuss the appellants' arguments on the legal level. The order of matters will be as follows: At the outset, I will discuss Dabush's appeal, including the trial court's determination that he breached his fiduciary duty to the company, on a number of different levels.  Afterwards, Deri's claims will be examined, and in particular the claim that the tort of fraud, as well as his involvement in Dabush's breach of duties, do not allow him to be held legally liable to the company.  In the midst of all this, I will also discuss the appellants' joint claim that no damage was caused to the company and that in any case there is no causal connection between this alleged damage and their actions.
82. I will say at this point that I am of the opinion that even on the legal level, the conclusion of the trial court that Dabush breached the duty of fiduciary, including its three derivatives, is based on the law. In addition, in my view, Deri's actions satisfy all the elements of the tort of fraud, and I also believe that he can be held responsible by virtue of his involvement in Dabush's actions.  Moreover, as held in the trial judgment, it was the actions of the appellants together that caused the damage claimed by the respondents, and therefore it must be determined that they were legally required to compensate them – jointly and severally.

This is in summary, now in more detail.