Civil Case (Netanya) 24733-08-21 Emanuel Keinan v. EDI. Designs Ltd.

1. We are dealing with a monetary claim filed in the amount of ILS 233,110 by Mr. Emanuel Keinan (hereinafter: "the Plaintiff"), an independent business owner in the field of industrial design services, development management and product design, against IDI Designs in a tax appeal (hereinafter: the "Company" and/or the "Defendant") and against Mr. Dov Ophir (hereinafter: "the Defendant") who is the sole shareholder in the Company, who serves as a sole director and is an industrial designer by training.
2. In the statement of claim, the plaintiff seeks to obligate the defendants, jointly and severally, to pay the plaintiff the sums detailed below, bearing linkage and interest differences from the date of filing the claim until the date of actual payment, to which must be added the plaintiff's expenses, including attorney's fees:
3. The sum of ILS 180,000 paid by the plaintiff to the company's trust out of consideration for his services to the company during the period of the engagement, which he claimed was intended to be used as the sum of the plaintiff's investment in the purchase of part of the company's share capital from the defendant's hands.
4. The sum of ILS 28,110, which constitutes a debt of the company to the plaintiff in respect of the balance of the amounts that were not paid to him for the months of March, April and December 2020.

• The sum of ILS 25,000 for mental anguish caused to the plaintiff due to the defendants' conduct.

The parties' arguments in the pleadings

The Prosecution's Arguments

3. According to the plaintiff, the engagement between the parties began on January 12, 2020, following lengthy negotiations that took place and which matured into an agreement in accordance with which the parties acted.

The details of the initial engagement between the parties (hereinafter: the "Program"), dated October 20, 2019, detailing the rationale of the engagement, its purpose and the division of powers between the parties, and which was attached to Appendix C 1 to the statement of claim, formed the basis for negotiations that lasted for several months, during which a number of adjustments were made to the program, at the request of the defendant and on behalf of the company, and at the end of the negotiations the parties agreed to enter into a binding agreement, based on an agreed outline that was attached in Appendix D to the statement of claim dated 01.01.2000 (hereinafter: the "Agreement" and/or the "Agreement dated 01.01.2020").

4. The main points of the agreement dated 01.01.2020, according to the plaintiff, in paragraph 11 of the statement of claim, are as follows:
5. A period of 6 months has been set as a running period, during which the plaintiff will serve as the defendant's deputy in the management of the company, during which the parties will act in accordance with the division of powers detailed in the program, and will examine the cooperation.
6. At the end of the running period, if it is successfully crowned, the plaintiff will become the owner of the company together with the defendant, at the rates agreed upon and a full partner in its management, as detailed in a detailed agreement between the parties.

• The consideration to be paid to the plaintiff during the implementation period will be ILS 30,000 including VAT, half of the amount will be paid to him monthly against a tax invoice, and half of the amount will be held in trust by the company until the end of the implementation period.

1. To the extent that at the end of the Execution Period, the parties choose to realize the merger between them, the amount paid by the plaintiff to the trust will constitute the amount of the plaintiff's investment in the purchase of his share of the company's share capital from the defendant, as well as the terms of employment of the plaintiff and the defendant in the company, the division of duties and the distribution of profits.
2. To the extent that at the end of the running period, the parties choose not to realize the merger between them, the plaintiff will be refunded the amount he paid to the trust.
3. The Ottoman Settlement [Old Version] 1916 It was also agreed between the parties that there would be no competition between them in the circumstances of the termination of the agreement between them.

12-34-56-78 Chekhov v.  State of Israel, P.D.  51 (2)

5. According to the plaintiff, on 07.01.2020, a meeting was held between the plaintiff and the defendant, during which they reviewed the clauses of the agreement one by one, and it was agreed at the defendant's request that the amount to be paid to the plaintiff against an invoice would be in the sum of ILS 14,000 instead of ILS 15,000, and in accordance with the agreed terms, the running period began.
6. After several months of the implementation period had passed, the plaintiff approached the defendant from time to time in an attempt to promote the drafting of a detailed agreement regarding the terms of the merger, but at the defendant's request, the hearing was postponed time after time. After a number of further rejections on the part of the defendant, and when it became clear to the plaintiff that the defendants were deceiving him, he sought to activate the separation mechanism that he claimed was agreed, demanding the return of the amount of his investment strengthened by the trust, as well as to receive information regarding the existence of engagements that were concealed from him in accordance with his right set forth in the non-compete clause agreed upon between the parties.
7. When the defendants refused the plaintiff's demands, a lawsuit was filed.

The defendants' arguments

8. On the other hand, according to the defendants in the statement of defense, the claim should be dismissed, while the plaintiff is liable for expenses and attorney's fees.
9. According to the defendants, the plaintiff is trying to create a factual basis out of thin air, since no agreement was entered into between the plaintiff and the defendants for the establishment of a partnership and/or holding in the company's shares, and in any event, the trial period of the parties was not successful. In addition, the plaintiff refused to pay or invest funds in accordance with the real value of the company in order to receive shares in the defendant (see paragraph 3 of the statement of defense).

There is nothing in the "proposal" or drafts that the plaintiff made, which were not approved or signed by any of the defendants, to bind them.

10. The defendants add that the plaintiff actually provided services to the company for about 5.5 months, due to the spread of the coronavirus and the lockdowns that prevailed at that time. The company paid the plaintiff the consideration agreed upon between them for the services in the sum of ILS 14,000, including a tax appeal per month, and even more, since the plaintiff reported a higher number of hours than he actually invested, and despite this, he received full compensation for the hours reported by him.  The plaintiff is not entitled to any monetary consideration.
11. Contrary to the plaintiff's claim, no funds were paid and no funds were held in trust by the company for the plaintiff. The plaintiff's offer was not approved by the defendants.

In fact, the claim is based on the plaintiff's desire to be a partner and shareholder in the company on the basis of services he provided to the company and for which he received compensation, without agreeing to invest even a single shekel for the partnership or the purchase of the defendant's shares, while clearly ignoring the company's reputation and value, as well as ignoring the defendant's refusal to accept the plaintiff's offers.  Therefore, in the absence of any consent, a partnership or holding shares has not been established and cannot be established by the plaintiff in the company.