The Board of Directors approved the cancellation and the wording of the letter to be sent to Mr. Knapfler.

In the circumstances of the case, I doubt whether this cancellation was done properly.  It appears that the board of directors could have revoked Mr. Knepfler's entitlement to an additional 8% of the French company's shares.  However, it is doubtful whether he could cancel his holding in 24% of its shares when the acquisition of Guy Development was completed.  It does not appear that the need to take into account the rest of the consideration, in accordance with the agreement reached by the parties, harmed this component.  and to the extent that the calculation on the agenda was not completed, the Board of Directors should have sent Mr. Knepfler a notice in accordance with the mechanism set out in the Agreement (in clause 7.3 (see above in paragraph 17)).

Still, this matter, as will be clarified below, cannot impose personal liability on the members of the Board of Directors, and Mr. Knepfler's address should have been the Company.

170. On November 6, 2016, ADN issued an immediate report on the transaction, at this stage without detailing the other party. According to the report, it was noted that €6 million would be transferred by the purchaser to the trustee in Israel by November 7, 2016, and €2.5 million would be transferred to the trustee in Germany by November 7, 2016.

This notice and the conduct that followed led Mr. Knafler to apply for interim relief, and the litigation between the parties was underway.

An examination of the liability of the directors (with the exception of Mr. Nehemiah) in light of the aforesaid circumstances - Mr. Knafler was not able to establish special circumstances that could impose personal liability on them; Hence, he did not establish legal status to sue them or direct rivalry with them

171. When this is the evidentiary body, I found that Mr. Knepfler was unable to substantiate his claims against the directors, and to establish the same circumstances that would give him legal standing to sue them directly and in direct competition with them.
172. The evidentiary thrust that I discussed above establishes the directors' position that the consideration that guided them in their conduct was the best interest of the company and its interest only. When the deal with Mr. Knafler was on the agenda, they supported it and promoted it. They confirmed the agreement with Mr. Knafler that the balance of the consideration of half a million euros would remain for future accounting and allocated it thirty days.  They are not responsible for the fact that Mr. Knafler did not exhaust the channel of reckoning with respect to the past.

As for the future, the deal that was on the agenda with the Dayan Group was the best that was presented to them, taking into account the serious danger to the company's future in light of the debts that required a rapid and respectable cash flow.  This was the preferred proposal that was on their operating table objectively, as well as from their subjective point of view.

173. Indeed, Mr. Nehemia was very dominant in locating and promoting the transactions, but this is not surprising. This is the person who managed the company, and it was his practical role to act to save it and locate any transaction that could help improve its situation.

Mr. Knapfler's claims that the directors did not exercise independent judgment were unfounded.  A review of the minutes of the board meetings revealed directors who asked questions, and also instructed the company to prepare for the possibility that Mr. Knepfler would not move forward with the deal.  At crucial junctures, the directors held frequent meetings to closely monitor developments (see above in paragraphs 152 ff.).  The matter reflects the responsibility that was handled while exercising real supervision over the company's conduct.

174. Knafler's claim that the directors acted with extraneous considerations, in order to make it easier for Mr. Nehemiah, so that he could be released from his personal guarantee for some of the company's debts, was not substantiated. In this regard, both the transaction with Mr. Knepfler and the transaction with the Dayan Group would have helped Mr. Nehemiah. Still, it was in the company's interest to receive as much liquid funds as possible so that it could repay its debts, and the Dayan Group's proposal was preferable to its own merits.  Against this background, the benefit to Mr. Nehemia was incidental to the course of action and not the one that led the directors on their path.
175. Knepfler's claim that the directors were responsible for making decisions without examining documents and delving into the data was not substantiated. As we have seen, the representations made in the agreement with Mr. Knafler - which are the representations of which he was aware - were accurate. This shows that the company's financial statements adequately reflected its financial situation, as did the public reports published from time to time.

Mr. Knafler's claims that the directors did not exercise discretion and did not examine data should be rejected.  First, and as you may recall, the deal was discussed under pressure conditions, in which decisions were supposed to be made quickly.  And second, in order to evaluate the proposals that were on the agenda from the perspective of Mr. Knepler and from the perspective of the Dayan Group, it was not necessary to delve deeper.  The scales were clearly tilted in favor of the latter, given the problematic relationship between the company and Mr. Knepler.  It was not established that delving into additional data, including appendices of one kind or another that were not discussed prior to the approval with the Dayan Group, would have changed the picture.

176. In these circumstances, the same special circumstances did not arise that could establish the liability of the directors for the tort of negligence. The directors did not negotiate directly with the plaintiff; They did not present any representation to him personally; The representations they were aware of were accurate; They met all their obligations to act for the benefit of society and promoted its well-being; They did not employ extraneous considerations; The dominant factor in the negotiations with Mr. Knepler was Mr. Nehemiah; They did not act in a deceptive or deceitful manner; They did not take on any personal obligations; And it is not possible to find personal fault or subjective bad faith in them.

Against this background, Mr. Knepler was unable to establish a legal relationship between him and the directors.  He has not been able to establish data that compares to their conduct characteristics that go beyond those of the professional activity of directors in the performance of their duties in the company.

177. In addition, Mr. Knafler was unable to establish the liability of the directors for the tort caused by the breach of contract. Even if I assume that the contract with him was breached - an assumption that is not unequivocal (see the discussion below on this matter at paragraph 220) when I refer to the counter-plaintiff's claims against Mr. Nehemiah). Still, all the actions of the directors were done without deviating from their authority, for the benefit of the company, and without applying extraneous considerations.

In these circumstances, the written claim of tort liability for the tort caused by the breach of contract is ADN and not the directors.  The same is true with respect to the claim that the cancellation of the agreement with him was done unlawfully.  Even if there is doubt as to the company's ability to cancel the entire agreement with Mr. Knafler (as opposed to canceling his right to the additional eight percent of the shares of the French company), the directors' decision can obligate the company in this regard.  This decision, in and of itself, will not be able to establish personal liability on the part of the directors.

178. Mr. Knafler's claim that the directors did not ensure that there was a sum left that would allow him to return his investment cannot be changed.  Mr. Knefler argued that while ADN was in the midst of insolvency, the directors should have ensured that after canceling the agreement with him, his rights as a creditor would be guaranteed.

However, even this matter will not be able to establish the personal liability of the directors.  As noted, they had no other avenue of action other than to approve the deal with the Dayan Group.  In addition, Mr. Knepfler himself did not insist on repaying his investment.  He was not willing to cancel the deal, but rather fought for its existence and enforcement, as well as for the cancellation of the deal with the Dayan Group.  Only five years after the lawsuit was filed was a settlement agreement with the company formulated.  In this framework, the investment funds were returned to him.  It is quite possible that if he had insisted on restitution earlier, it would have been accepted.  In any case, the matter does not create those special circumstances that only in their existence will the personal liability of the defendants arise.

179. Knafler sought to impose liability on the directors by virtue of tort law, but it should not be forgotten that in the background was his contractual engagement with ADN. This is not an "involuntary creditor" of the company. I accept the words of Yaad Rotem, who wrote that "creditors who voluntarily entered into a contract with the company - understanding that they do not enter into a contract directly with the officer - voluntarily chose to do so, and they can also take appropriate precautions in advance, prior to engaging with the company, in order to protect against harm to them" (Yaad Rotem, "The Duty of Care of Officers of Small and Medium-Sized Companies Towards the Company's Creditors" Sefer Eliyahu Matza 813, 839 (Aharon Barak, Ayala Procaccia, Sharon Hans and Raanan Giladi eds., 2015)).  These things are especially good for a situation in which we are dealing with sophisticated business parties, such as those before me, who have invested effort and thought in drafting their contractual engagement with the company.

In our case, Mr. Knefler could have reduced the risks associated with the transaction in the framework of the agreement with ADN.  He could have ensured that certain representations that were claimed to have been presented to him would be anchored in the representations of the agreement.  He could have demanded personal guarantees.  He didn't do all of that.  The person who has a say in the claims regarding the damages caused to him is the company.

180. While a close relationship between Mr. Knepfler and the directors has not been established, and there are no circumstances that can establish personal liability, Mr. Knepfler has not established legal standing to sue them for personal liability, nor is there a direct rivalry with them. Hence, his claim against them is to be dismissed.

Decision-making that is not in the special procedural format in the Companies Law does not change the outcome in terms of the directors' personal responsibility towards Mr. Knepfler

181. The last issue, which I will address in this section, will examine the significance of the assumption that I assumed, regarding the classification of the transaction with Mr. Knefler and the transaction with the Dayan Group as a transaction of a personal interested party as far as Mr. Nehemiah is concerned, which requires a special approval procedure in accordance withthe Companies Law.

As will be recalled (see above at paragraph 122), I assumed to the detriment of the defendants - without determining that the matter was indeed substantiated - that both transactions grant Mr. Nehemia benefits that create an excess connection from his point of view, which amount to a personal interest.  Therefore, they had to be approved by a special procedure, and this was not done.

182. In the realm of corporate law, the procedural requirement is necessary to be realized, since otherwise the transactions are invalid (section 280(a) of the Companies Law). It is important to quote here the words of the Honorable Judge, as he was then described as a colleague in the Vardnikov case (at paragraph 87):

Section 280(a) of the Companies Law states that a transaction with an officer or controlling shareholder, which did not receive the approvals required by the law or that there was a 'material defect' in the approval process - is invalid vis-à-vis the company and the interested party (and even against a third party, under the conditions listed in section 280(b) of the Law).  In any case, it is difficult to imagine that the courts would allow the company's managers to 'bypass' the language of the law and overcome the need to obtain the required approvals, on the assumption that a transaction tainted by a personal interest will be validated only because it is 'fair' [emphasis in the original and the last one added].