Mr. Knepfler did not establish deception on the part of the directors with regard to the representations contained in the agreement between the parties, which were approved by the Board of Directors
- A significant part of the counterclaimant's arguments are devoted to misleading, including rosy and incorrect representations regarding the company's situation, and the ability to derive a handsome cash flow return from the investment, as a result of the rent they will bring in from the properties. However, Mr. Knefler has not been able to establish all of these (except for the failure to disclose a financial dispute with the asset management company in France, which I will address when I discuss Mr. Nehemiah's case).
- As far as the representations are concerned, the starting point is difficult for Mr. Kneffler. As may be recalled, clause 5.3 of the agreement included ADN's declaration that "its most recent financial statements faithfully reflect its situation and it is not aware of any material information that may materially affect the value of the assets and/or the property companies and/or Guy Development and/or [the French company], which was not disclosed in the company's reports and/or its reports to the public." This refers to the 2015 reports published in March 2016 (with the agreement at the end of May of that year). The directors were aware of this representation when the engagement between the company and Mr. Kneffler was approved.
The Tamir-Fishman Fund's due diligence relied on the financial statements and found in them many signs of ADN's problematic financial situation
Contrary to what was claimed by the counter-plaintiff, there were no rosy representations of any kind in relation to the company's situation. Its significant problems were well reflected in the aforementioned reports. They were visible to anyone who wished to delve into them. As may be recalled, prior to the company's engagement with Mr. Knafler, he suggested that the engagement be done with the Tamir-Fishman Fund; The fund's due diligence, which was based, among other things, on what was stated in the reports, revealed financial difficulties that ADN was experiencing.
- Thus, Mr. Knepfler testified that already in the due diligence that was done at the fund, the problems were identified in light of the reports (at p. 114, Q.19): "I said the basis that Tamir Fishman did due diligence on the basis of the basic financial statements thatD.N. has, the person who did it mainly was Tal Levy, who is an accountant by profession, he checked the reports and decided that the transaction was not worthwhile, and therefore in the course of the negotiations because I received comments from him as to why it is not true what Avi Nehemia says, The agreement is different between the first agreement and the second agreement... In the second agreement, I am supposed to buy 32% and receive 80% of the cash flow of these assets."
In other words, according to Mr. Knefler, Mr. Nehemia presented him with a rosy forecast - Mr. Nehemia and not the directors - regarding the company's situation, but this was contradicted from the reports, and therefore it was agreed upon his rights in the income stream from the assets in France, and other changes.