Against this background, Mr. Knepfler claimed in his affidavit that there was a huge gap between the data presented to him in connection with the negotiations he conducted with Mr. Nehemia and the data that was known to the company in real time. He added that if he had been aware of this gap, he would not have entered into the deal.
- After reviewing the arguments of the parties, I found that Mr. Knepfler's arguments in this matter should be rejected.
- First, if there were indeed such significant representations on the part of the plaintiff, the question arises as to why he did not bother to anchor them in the agreements - were they the drafts that were formulated around the possible engagement with the Tamir-Fishman Fund or in the agreement that he himself made with ADN? After all, the agreement anchored the representations presented by the company. The agreement referred to the 2015 reports and the various reports given by it as a public company. What is simpler and more obvious - if this is an indispensable condition in Mr. Knafler's approach to entering into a transaction - to anchor these prima facie basic representations?
Mr. Knepfler did not provide an adequate answer to this basic difficulty, and this is an experienced businessman, who certainly had this possibility before his eyes in real time.
- Second, Mr. Nehemiah's argument that the forecast document, which was prepared at Mr. Knefler's request, was sent to him on May 18, 2016 (Appendix 1 to Nehemiah's affidavit). Although this was before Mr. Knafler signed the agreement with the company, it was after he had already signed the draft agreement for the purchase of the shares of Guy Initiation, in his capacity as a controlling shareholder of the Tamir-Fishman Fund, on May 16, 2016. Hence, the causal connection between the forecast document and Mr. Knafler's enthusiasm for the deal at hand is omitted.
- Third, when Mr. Knefler filed his first request for an injunction on November 7, 2016 (N/5), after ADN sent him the notice of cancellation of the agreement with him, he claimed (in paragraph 26) "It should be emphasized that prior to the signing of the agreement, [ADN] made a false representation, [according to which] the total free cash flow deriving from the assets is €50,000 per month, and [Mr. Knapfler] is therefore entitled to 80% of the total disposable income stated in [the company's] representations."
It follows from this that on the date much closer to the occurrence of the events, Mr. Knepfler claimed that the cash flow presented to him, and on which he relied, was 600,000 euros per year, of which he was entitled to 450,000 euros - a figure that is directly consistent with the figures that Mr. Knepfler claims were presented to the company's board of directors. Therefore, it is not clear what deception we are talking about. And in any case, these sums are completely far from those 1.7 million euros, even if we deduct 20% from them. The presentation of so many different sums renders Mr. Knafler's version on this matter unreliable, and I reject it.
- Fourth, it is also necessary to take into account the fact that the cash flow in the forecast document to which Mr. Knepfler refers is based on assumptions that were clear to all in real time that they had not yet been fulfilled, first and foremost the assumption that the properties were leased when they were fully occupied. We have already seen that the problems with occupancy were well known and were also published in the company's reports and reports, which Mr. Knepfler could have examined (see above at paragraph 140), and that the staff of the Tamir-Fishman Foundation did indeed examine them (see above at paragraph 137). An additional assumption included in the forecast document was that a figure that was not correct at the time of the engagement would be refinanced (see paragraph 33 of Nehemiah's affidavit). Of course, this figure requires updating and changing the revenues in the forecast.
In addition, I accept the defendants' position that there is a difference between the concept of NOI, which reflects the income from the assets, and the concept of cash flow. Indeed, it should be mentioned that Mr. Knepfler did not acquire ownership of the assets, but rather ownership in the companies that controlled the assets. Therefore, the relevant figure for it is not the direct rent flow (which relates to rental income minus the expenses directly related to the properties). Consideration must also be given to the expenses incurred by the companies, a figure that makes the cash flow generated by the companies lower than that of the direct rent collected from the properties.