The members of the board of directors gave the green light to progress with the contrary transaction when they knew that Mr. Knefler had the right to veto such engagements with respect to the assets in France, and they chose to ignore it. There was no unfounded concern that Mr. Knepfler would not be able to complete the payment of the consideration, when he had paid the lion's share. And in the contrary engagement, there is also no reference to Mr. Knefler's rights, from good to bad. The company, with the approval of the directors, sold to the Dayan Group rights that belonged to the counter-plaintiff, through his holding in Guy Development, and it made his property mature. All of this was done so that the company could repay the loans that Mr. Nehemia personally guaranteed them.
- With regard to the approval of the contrary deal with the Dayan Group, there were serious flaws. The company's board of directors did not receive the information required to make a well-founded decision. He did not receive the appendices to the contrary, nor did he receive an economic analysis, which would have reflected the violation of Mr. Knapfler's rights. It is not surprising that when the contrary transaction reached the stage of realization, difficulties were discovered. Thus, a trust agreement was supposed to be signed for the property sold in Germany, but it was never drawn up and in any case was not presented to the board of directors. In this way, the debts that Mr. Nehemiah personally guaranteed were covered, but the receipts that were supposed to lead to the return of the funds to Mr. Kneffler were not received. The board of directors believed that following the contradictory transaction, the company would have received 3 million euros, but this did not happen, and the board of directors' decision was made without awareness of anything.
In the circumstances of the present case, it should be remembered that the company's officers acted when ADN was in an "insolvency environment". In such a case, they should also have taken into account the interests of the creditors, including the ability to repay the obligations to Mr. Knafler.
- In addition, the approval of the contrary transaction was illegal, since Mr. Nehemia was present at the hearing and participated in the vote, and in fact was the main pusher for its approval, all this when he had a personal interest in it. And now, despite all this, the transaction was not approved in the required procedures relating to an "interested party transaction". The directors were aware of the personal matter, and chose to ignore it. An examination of the minutes of the relevant meetings shows that Mr. Knepfler's case and his rights were not discussed at all, and the board of directors approved the contrary transaction, thus causing the company to breach the agreement with Mr. Knepfler.
- The cancellation notice sent to Mr. Knepfler on November 6, 2016 reflected a fiction created by the Board of Directors, since it was clear to the directors that Mr. Knepfler would not receive back the money from his investment. And even when they received the warning letter he sent, they did nothing.
- In addition, the defendants sought to act fraudulently and circumvent the restrictions imposed on them at the beginning of the litigation by the Honorable Justice Kirsch. In December 2016, they tried to promote a direct sale of shares from the French company to the Dayan Group, but this was thwarted.
- All of these establish the liability of the counter-defendants. The fact that a defendant is an organ of a company does not grant him immunity from torts, and he cannot hide behind its legal personality in order to evade responsibility for his actions. In the appropriate circumstances, it will be possible to impose personal liability on the officer also for causing a breach of contract on the part of the corporation. This is especially the case when the organs were acting out of improper motives and self-indulgent.
- The defendants' deviation from the proper standards is also reflected in the fact that they approved the contrary transaction with the Dayan Group without obtaining the special approvals in the Companies Law, 5759-1999 (hereinafter: the Companies Law). This also shows how eager everyone was to advance Mr. Nehemiah's personal interests.
- The defendants will not find salvation in the defense of the "business judgment rule". This applies only at the level of the relationship between the director and the company, and not where it is a matter of defense against claims raised by third parties. In any case, where the directors chose to rely on the CEO, on Mr. Nehemiah, blindly, there is no basis for applying the rule. This is also the case when the approval of the contradictory transaction with the Dayan Group was done in a conflict of interest on the part of Mr. Nehemiah, and when the directors chose to act in order to alleviate the risk he faced. In addition, the directors made uninformed decisions and without requesting - and in any case not receiving - relevant background materials. They also acted in bad faith. All of this negates the protection of the public.
The defendants will not be able to claim that they relied on legal counsel when they came to cancel the engagement with Mr. Knapfler. Dr. Wekselman, who advised them, did not give them a written opinion. They did not explain the full facts to the advisor, and he was not even present at the board meeting at which the cancellation was discussed.
- From an evidentiary point of view, the counter-plaintiff does indeed bear the initial burden of proving his claims. But it presented so many flaws that the counter-defendants were obligated to do so that the burden of proof shifted to their shoulders and they did not meet it.
- As to the question of the damage and compensation claimed, Mr. Knefler reiterates that he was not cross-examined at all in relation to these elements of the claim, and they should be accepted. He pointed to three ways in which its damage could be quantified:
- the contractual profit presented to him in order to persuade him to make the investment; The counter-plaintiff noted that in light of the court's comments at the conclusion of the last evidentiary hearing, he agrees that this possibility is no longer on the agenda, since there is no certainty that the 20% annual return promised to him could have been derived from these assets.
- The alternative return he would have achieved had it not been for his investment in the acquisition of Guy Development; a tort claim aimed at restoring the situation to its former state. Therefore, he must be compensated for an alternative transaction that was not executed. Had it not been for the misrepresentations, Mr. Knepfler would not have invested in the transaction with the company, and this would certainly have been the case if he had known that the company preferred to promote Mr. Nehemiah's personal interest.
In the circumstances of the present case, this is not speculation for the purpose of calculating the alternative profit, since he simultaneously invested in the public company of Maslawi, throughout 2016. The total investment amount was ILS 43.7 million. This investment generated a return of more than 3 times over a period of about 5 years compared to the date of filing the amended counterclaim. The amount claimed for this head of damage - ILS 10 million - reflects a return of 12.6% per year, which is modest compared to the actual investments he invested.
- Alternatively, it is only necessary to quantify the various components of damage relating to financing expenses, rate differences, and more.
With regard to this head, the counter-plaintiff claims that when he invested in the transaction with the company, he should have entered into a loan with Mr. Lorenzi, which he took out at a high interest rate. He expected that this would be a bridging loan for a period of up to three months, and the high interest rate was acceptable for such a relatively short period. After the decision regarding the injunction, Mr. Lorenzi demanded that the loans be repaid immediately. The cost of interest was ILS 1.5 million.