Previous Proceedings
- The action that is the subject of the proceeding was originally filed on November 2, 1999, together with an application for a visa as a class action by virtue of the provisions Securities Law, 5728-1968 (hereinafter: Securities Law), or alternatively by virtue of the Regulation 29 30Civil Procedure Regulations, 5744-1984 (hereinafter: Regulations). Among the group that the appellants sought to represent were those who held the shares of Elsynt on September 6, 1999, the date of the notice of the termination of the contacts between Elbit Imaging and Alcinet regarding the tender offer, and continued to hold them at the time of filing the claim (except for the defendants). The appellants' motion to certify the class action was heard before the President of the Haifa District Court at the time, Judge M. Lindenstrauss, which on August 16, 2000, ordered its deletion. An application for leave to appeal against this decision was filed, and on November 21, 2001, a hearing on the application was held before this court (the President). Lightning, and the judges Englard andRivlin) at the end of which it was decided to grant leave to appeal as requested. Then, There were a number of events that could affect the precedent regarding the approval of class actions, including the issuance of the judgment in the Civil Appeals Authority. 3126/00 State of Israel v. A.S.T. Project Management & Manpower Ltd., P.D. 57(3) 220 (2003), and the entry of Class Actions Law Effective (Posted on 12.3.2006). In view of these developments, the parties were asked to update their pleadings.
- On December 14, 2006, the judgment was given in the appeal, in which we held that the Class Actions Law Weaknesses on the grounds created prior to its entry into force andEven pending appeal proceedings (Civil Appeal Authority 7028/00 IBI Fund Management (1978) inTax Appeal Elsint v. Tax Appeal ([Published in Nevo], 14.12.2006)). In the concrete circumstances of the case, we found that it was possible to sue on a cause of action for discrimination of the minority shareholders, according to the provisions of the Companies Law, and therefore the circumstances of the case are governed by the Permanent Transitional Order. In section 45(c)(1) 30Class Actions Law, and the cause of action has not yet become statute of limitations. Therefore, we ordered that the hearing be returned to the District Court in order for it to hear the motion to certify the action as a class action in accordance with the provisions of the Class Actions Law. When the hearing of the application was returned to the District Court, the court ordered (the Vice President G. Ginat) to the parties to submit updated pleadings in accordance with the change in the law as detailed above (decision of April 11, 2007). The appellants filed an updated statement of claim and an updated motion to certify the class action and submitted, in accordance with the court's order, a statement of detail in which each defendant was assigned the grounds for which he was sued.
- The statement of detail contains about ninety causes of action in the fields of corporate law, securities law, contract law and tort law, all of which are based on one central claim that the defendants joined together in a combined process in which they transformed Alcint from an active company in the field of medical imaging into a cash fund, which they divided between them while depriving shareholders from among the public. Thus, according to the claim, Elron made profits by selling control of Elbit Imaging to Europe-Israel at a price that represented a particularly high control premium; Gil took his share when Elsynt purchased his shares in Elbit Imaging from him at a price that significantly exceeded parity on the stock exchange; Finally, Europe-Israel emptied its cash coffers in the hotel and marina transactions, in which Elsynt purchased real estate assets from the Euro-Israel Group at an exorbitant price. All this, while misleading investors by creating a false representation of an intention to make a tender offer. According to the appellants, when a large cash fund was created in Alcinet that was not intended for profit-bearing activity, the company should have divided the funds among all the shareholders equally by means of a dividend. However, instead, the controlling shareholder, Elron, preferred to sell its shares at maximum profit, while showing indifference to the identity of the buyer. In this last context, it was argued that the sale of control to Europe-Israel was accompanied by circumstances that should have served as red flags regarding Europe-Israel's intentions regarding Elsinte's future. Among these circumstances, the appellants enumerate the high premium that Elron received in exchange for its shares in Elbit Imaging; the identity of the controlling shareholder in Europe-Israel (Respondent 5) whose name was linked to the affair in which two companies collapsed under suspicious circumstances (see: paragraph 9 of the District Court's decision); and financing the transaction by way of a leveraged acquisition. The appellants also claim that the agreement for the sale of control from Elron to Europe-Israel included an indemnity clause on the part of Europe-Israel to Elron in the event that Elron sued Elron for Elbit Imaging's return of its intention to make a tender offer (this is evident from the report of the Euro-Israel Board of Directors, Exhibit 34 to the appellants' summaries). According to them, this indicates Elron's awareness that there is a high probability that Europe-Israel does not intend to take into account the expectations of the minority shareholders in Alcinet. According to the appellants, the warning signs surrounding the sale of control of Elbit Imaging proved to be well-founded with the execution of the hotel and marina transactions after they were approved by a board of directors that was mostly tainted by a personal matter, without being brought to the shareholders' meeting for approval.
- On the other hand, the respondents present the events in a completely different light. According to them, the sale of Elsynt's assets was a necessary step in light of the impact of the recession in the global economy on the medical imaging market and Elsynt's ability to continue to compete in it. After the sale, the company looked for new avenues for operation and development. Against this background, the Gil transaction and the hotel and marina transactions should be viewed as legitimate transactions in which Elsynt took advantage of business opportunities that occurred on its way to create new investment channels. Thus, they claim, through the Gil deal, Elsynt was able to enlist by its side the person considered a "name" in the field of high-tech investments, while at the same time ensuring that the proceeds for the shares would be used to advance its own goals. This is because as part of the deal, Gil undertook to invest the proceeds he received from Alcinet (after repaying loans) in a new company that was established jointly with both parties. With regard to the hotel and marina transactions, it was claimed that these transactions were duly approved by the company's authorized institutions after an examination process and obtaining an opinion from first-class economic and legal experts. According to the respondents, the transactions proved themselves to be worthwhile in the test of reality and yielded a high return for Elsynt's shareholders.
In a hearing held on November 15, 2007 before the trial court, it was agreed between the parties that the hearing of the motion to certify the class action would take place by way of hearing oral arguments, and that the decision would be made thereafter on the basis of the written material and the oral argument without the declarants being cross-examined. It was also agreed that the decision would address, if necessary, the questions in dispute between the parties at the stage of the motion to certify the class action, and it was clarified that the very waiver of the interrogation of the declarants would not be considered as an admission or agreement by any of the parties to the facts presented therein or to the admissibility of any documentation (p. 10 of the transcript of the hearing before the trial court of January 15, 2007).