There is also no substance in his claims regarding the rental status of the properties in France. A review of the company's financial statements shows that they included the material data from which it could be learned that some of the properties were not rented, and that an existing tenant was even given an option to reduce the scope of her rent.
As for the forecast document, to which the counter-plaintiff devoted a substantial argument, it was not part of the company's representations. The plaintiff, who initially signed the agreement with the company in his capacity as the controlling shareholder of the Tamir-Fishman Fund, did so before the forecast document was sent to him. This document was hastily edited, and it turned out that a correct reading of it did not involve deception. This was because it was clear that the assumptions on which he relied did not actually exist, and the matter was known.
- Knafler admitted that he had found out about the false representations, which were denied, from the very beginning and decided to proceed with the transaction anyway. The examination of the feasibility of the transaction made by the Tamir-Fishman Fund raised problems, of which Mr. Knepfler was aware. Against this background, he cannot claim that if it were not for the representations, he would not have entered into the transaction. Instead of canceling it, at the stage when he invested only about 550,000 euros, he chose to continue it, to inflate his damages, to invest a total of 3.5 million euros and now sue for 10 million shekels. In these circumstances, his claims for compensation should be rejected. At most, he can claim the amount of his investment, which he received. According to Mr. Nehemiah, he is not entitled to this sum either, since it was Mr. Knepfler who breached the agreement with ADN.
- In the circumstances of the case, the transaction at issue was with a company that was on the verge of complete collapse, whose reports included a going concern note. The counter-plaintiff was aware of this. He knew that this was a company on the verge of insolvency. Against this background, it was clear to him that this was a deal that needed to be executed quickly, hastily, a fire sale. Under these circumstances, the consideration formulated in the agreement with ADN was extremely low from the outset, and Mr. Knepfler could not have come back and tried to reduce it. There is no basis for the claim that he was promised a return of at least 20% per year.
- The counter-plaintiff is the one who breached the agreement. He was the one who made false representations, claiming that he had the financial strength required to fulfill the obligations he had undertaken. He did not meet the set payment schedule. His claim that he did so should be rejected after it became clear to him that the company's situation was different from the one presented to him. This was in fact due to the financing difficulties he encountered.
- At this point, it was Mr. Knepfler who sought to take advantage of the fact that the company was in a severe cash flow crisis, in order to force it to accept his dictates. Only on August 28, 2016, did he offer to repay the debt to Ravad, and about half a million euros would be withheld for future "consideration". The company had no choice but to accede to this blatant conduct. Then Mr. Knepfler tried to produce a new deal, in order to acquire the remaining rights of the company in the properties in France. At this stage, it was clear to all parties that in light of the counterclaimant's breach of the undertaking to pay the balance of the consideration, the company was entitled to try to locate a better transaction. Indeed, the deal with the Dayan Group was like this.
- The plaintiff's claims against the deal with the Dayan Group are baseless. At this stage, the plaintiff did not have the right of veto, since he was the one who breached the agreement. There was no talk of a counter-deal. In view of the non-completion of the consideration of the original transaction, ADN could, at this stage, sell its holdings at 8% in the shares of the French company beyond those held by Guy Development.
There is also no basis for the claim with respect to the personal matter attributed to Mr. Nehemiah, since even if the counter-plaintiff had promoted his transaction, it would have helped Mr. Nehemia in the same way. As far as he was concerned, it was not important whether the loans would be repaid as a result of funds from the counter-plaintiff or the Dayan Group. And while the deal with the Dayan Group was better, the company should certainly have preferred it.
- Nehemia received legal advice according to which the original agreement with Mr. Knefler should be canceled. And to the extent that the company improperly cancelled the agreement with him, this matter does not constitute personal liability on his part.
- There is no basis for Mr. Knafler's claims regarding attempts to circumvent the injunction given by the Honorable Justice Kirsch, and he himself admits that the outline to which he referred was not implemented. His claims regarding the failure to ensure his ability to pay the debt against him are also liable to be rejected, when in fact his investment was returned to him in the settlement agreement that was entered into with the company.
- The counterclaimant's arguments regarding the damage claimed by him should also be rejected:
- There is no room to rule in favor of an alternative profit. He knew about the gaps between the representations, according to him, and the state of the company, and decided to move forward with the investment anyway. Nor has he established a proven alternative investment path. In this regard, he presented only general statements, and moreover, from the conduct of the plaintiff against himself, it appears that he did not have liquid resources at the time, to make such an alternative investment.
- His claims regarding reimbursement for expenses should also be rejected. He is the one who declared in the agreement with the company that he owns resources. It turned out that this statement was baseless and he was forced to take funding. In these circumstances, he cannot claim financing costs at all when he breached the representations and undertakings he made. There is still no room to rule in his favor, when the transaction and the calculation all along was in a foreign currency, the euro.
In addition, there is no reason to charge Mr. Nehemia for the expenses of the proceeding, when a significant part of it was devoted to negotiations for a settlement with the company, and there it was determined that no expenses would be imposed on any of the parties.
- In conclusion, this lawsuit should never have come to light. The counter-plaintiff made a hasty investment, which he did not have the financial resources to support. He got out of it as part of the settlement agreement, received restitution and additional compensation, and was supposed to make do with that. Instead, he chose to file a claim that does not carry itself, has no cause and does not establish claimable damage.
- The claim should be dismissed and appropriate expenses should be imposed on the plaintiff.
The main arguments of the directors
- The directors did not negotiate with Mr. Knepfler and did not present him with any representation. They did not make a personal commitment to him and did not guarantee the company's obligations to him. An agreement was brought for their approval in which everything stated in it was correct, from their point of view. They exercised discretion and acted in the best interest of society.
In fact, the lawsuit undermines basic concepts in corporate law, first and foremost the principle of separate legal personality. Only in exceptional cases will it be possible to impose personal liability on officers for the company's actions, acts and omissions. When a contract is concluded between a third party and the company, the legal party is the company, and the officers are "out of the picture." Imposing personal liability on them may create a chilling effect, and harm proper commercial activity. It should not be imposed.
- Knafler is trying to hold the directors liable by virtue of the torts of negligence and causing breach of contract. But he did not establish the rare circumstances that could lead to liability for them. He did not establish the foundations of the various injustices. He also did not meet the obligation to detail that the statement of claim he filed should have met. He treated all four defendants as made of one piece, and this should not be done.
In any event, Mr. Knepfler did not claim and did not prove that the directors owed him a duty of care. The officer has a duty of care towards the company. In order to impose personal liability, circumstances that deviate from his usual and routine activity must be established. The duty of care can only be formed when the director acted with the counter-plaintiff personally and not in his capacity as a director. There was no such thing. A causal connection has also not been established.