Kotzer filed his claim for removal of the discrimination, based on which he claims that he was discriminated against as a minority shareholder in the company in accordance with section 191 of the Companies Law, 5759-1999 (hereinafter: the "Companies Law"); the defendants' unlawful conduct towards him and not in accordance with the agreement; the defendants' refusal to distribute dividends for years; the diversion of income between the company and DHS without his consent, and more. Kotzer claimed that the defendants waited for his retirement in order to bring about changes in the company; that the defendants did not provide him with information about the company; They refrained from holding board meetings, threatened him and acted to sell his holdings in the companies quickly and with the aim of discourageing him and causing him to sell his holdings in a lentil stew to them.
- As part of his lawsuit, Kotzer sought to give instructions regarding the gathering of shareholders, board meetings and the decision-making mechanism in the companies in a manner that would ensure that his rights would not be violated; To instruct the defendants to return to the company all that they had illegally taken from it, including their salaries that doubled after his retirement, the pension money to his credit, and more. Kotzer also requested that an investigative expert be appointed to examine the companies' books and to provide any remedy that would prevent him from being discriminated against in the companies.
- Kotzer claimed that all these years he had invested his best energy in the company, while the defendants were the ones who systematically excluded him from everything related to the company's financial situation, including the examination of the books of accounts. According to Kotzer, the defendants, and especially Zahav, ran the company all these years in the dark, aggressively and paranoidly, while ignoring the companies' laws, making false statements to the authorities, forcing Kotzer to sign a draconian non-disclosure agreement, and more. According to Kotzer, he was forced to restrain himself from the defendants' problematic conduct, but over the years this conduct led to many damages and lawsuits filed against the company.
- Kotzer added that the company and DHS are "a kind of partnership" and as such Kutzer had a legitimate expectation to take part in its management and outline its activities. According to him, his exclusion from information regarding what is happening in the companies, despite repeated requests on his part, as well as the failure to distribute a dividend despite the accumulation of a large amount of capital in the company's coffers, constitutes a blow to his expectations and deprivation. In the margins of his lawsuit, Kotzer further argued that the defendants violated the duties of care and fiduciary imposed on them as shareholders, and did not act in good faith and in an acceptable manner towards the company and Kotzer.
The Claims of the Companies and the Defendants in the Discrimination Claim and the Enforcement Claim Filed by Them
- According to the companies, Kotzer wasted the company's money when he made unnecessary purchases, granted extended liability for professional equipment in violation of the company's procedures, and more. It was claimed that Kotzer did not even act in the company's best interest - he did not promote professional meetings that were required on time, forced the company to write off debts of great value to its customers, and caused potential customers of MedLife to contract with other competing companies.
- The companies also refuted the claims of discrimination, claiming that they had acted lawfully all these years, that there was no basis for Kotzer's claim that he was not provided with financial data, since Kotzer had full access to the "Privacy" system (which produces financial reports) and could access it at any time. The companies rebuffed Kotzer's claims regarding revenue diversion and claimed that all decisions made by MedLife and DHS were made with Kotzer's knowledge and the consent of all partners. The companies noted that Kotzer was the one who thwarted the separation of the parties, while although he signed the retirement agreement, he refused to accept the valuation carried out by the company's CPA, Mr. Shlomi Ziv, and even appointed his son Liran as a substitute director on his behalf. According to the companies, Kotz's intention was to provoke chaos in the company in order to create an imaginary dispute regarding his deprivation.
- The defendants claimed that they had acted lawfully all these years, and according to them, their failure to distribute the dividend was done with the knowledge of the parties, in accordance with the partners' agreement and the need to repay the owner's loan and finance the additional investments in the company. The defendants reiterated the companies' claim regarding Kotzer's impersonation of an engineer, and his negligent activity in the company, and also claimed that Kotzer was silenced from raising claims regarding the companies' conduct as well as about the deprivation for an hour, which were not claimed before he signed the retirement agreement.
- The defendants added that the purpose of Kotzer's lawsuit is to prevent the execution of the separation while thwarting the possibility of drafting an opinion according to the agreement: according to them, upon Kotzer's retirement, he acted unlawfully when he refused to comply with the provisions of clause 16.4 of the agreement, ignored the mechanism set for the separation of the parties and created difficulties for the defendants in managing the company.
- As part of the enforcement action, the defendants petitioned to enforce the separation agreement through a valuator and also argued that they should be instructed to purchase Kotzer shares in DHS as well, after the valuator's opinion was given. According to the defendants, there was no intention at all to maintain the binding separation mechanism, and he unlawfully conditioned its execution on conditions and requirements. With regard to DHS, the defendants argued that the parties' intention from the establishment of DHS was that the partnership agreement would apply to the entire relationship between them, including their rights and obligations in DHS. The defendants argued that the parties viewed their obligations and rights in DHS as an integral part of their obligations and rights in Medlife, and that DHS would have had no purpose had it not been for the development of the Huber at Medlife itself. Therefore, according to them, they did not bother to draw up an additional detailed and detailed affiliate agreement for DHS, and the parties' intention was that the agreement would also apply to their rights in DHS. Therefore, the defendants argued that the provisions of the agreement, including the manner in which the parties separate, would apply to DHS.
- In order to prove their claims regarding the intent of the parties, the defendants sought to rely on a number of facts and arguments: one, the fact that both MedLife and DHS were held by the same shareholders and in an equal division of the rights in the shares; second, the fact that DHS had no banking framework or operational infrastructure. Third, that the development of the Hoover was done at MedLife and was transferred for business considerations to DHS without consideration and with the approval of the Tax Authority that the transfer of the development of the Hoover should not be considered a tax event. In this regard, the defendants further argued that the transfer of the development from MedLife to DHS without consideration was made on the assumption that the rights of the parties as set out in the partners agreement were preserved for them - otherwise they would not have endangered the development core of the Huber that was in Medlife - to DHS, which is another company in which their rights are not regulated in accordance with their wishes.
- The defendants further alleged that DHS did not hire employees on a day-to-day basis and that DHS management overheads were passed on to MedLife in the manner in which the resources, labor, and costs necessary to operate DHS were carried out by MedLife. The defendants further claimed that it was agreed that in return for the provision of ongoing services, DHS would pay MedLife a commission in an amount that reflects 30% of the value of any sale made by DHS. According to the defendants, the very fact that DHS was managed by MedLife shows itself that the parties saw their rights and obligations in DHS as an inseparable part of each other. In the margins of their lawsuit, the defendants added that failure to accept the claim for the sale of shortened shares in the two companies together would cause financial damages to the companies due to the need to double the management system of the companies and due to the imbalance in the ownership of the parties in each of the companies. Therefore, the defendants also petitioned for split remedies to the extent that such damages would be caused.
Short Response to the Enforcement Claim
- Kotzer argued that there was no reason to order the enforcement of the agreement, since the defendants were the ones who refused to provide him with information and forecasts regarding the company's situation and thwarted the existence of the separation mechanism, while demonstrating complete indifference to his distress and even depriving him of his pension funds and other rights that he deserves and needs for his ongoing livelihood, for extortionate motives. Kotzer refuted the defendants' claim of impersonation, claiming that he had never presented himself to the defendants or to Madlife's customers as a certified engineer. Kotzer added that MedLife never demanded that he present documents regarding his education and training. It was further argued by Kotzer that his son Liran's request to the defendants for information about the companies was anchored in the law, and that the defendants' refusal to cooperate and transfer the requested information stemmed from extraneous considerations and their desire to skew in advance the position of the expert who would be appointed to examine the value of MedLife.
- Kotzer argued that in practice, the dispute between the parties relates to the information itself and the various forecasts that underlie the methodology for valuing the company, as well as to the very application of the mechanism set out in the agreement to DHS. According to Kotzer, there is no basis for the defendants' attempt to import the partnership agreement to DHS, and there is no basis for their claim that the parties expected that the separation mechanism set out in the agreement would also apply in relation to DHS. Kotzer argued that DHS and MedLife are different companies that are not related in their business activities. Thus, MedLife is engaged in the trading and marketing of medical equipment, the development and marketing of various software in Israel, and DHS is engaged in the marketing of the "Hubbar" software in Europe through a Dutch distributor and other distributors, and this is a separate company in which large sums of money have been invested for the purpose of standardization and software development in order to adapt the "Hobar" for sale in Europe.
Developments in the framework of the claims before me and the procedural decisions made during their investigation
- The first hearing of the parties' claims took place on June 21, 2023 (even before the filing of a statement of defense on behalf of Kotzer in the enforcement action), in which the parties agreed to consolidate the claims, and also agreed to jointly contact an agreed accountant in order to carry out the valuation of the two companies, as of December 31, 2022. The parties also agreed that after clarification questions are submitted, and if any of them does not receive the expert opinion regarding the two companies or one of them, he will be entitled at his own expense to present a counter-opinion within 30 days from the date of the notice that he does not adopt any of the opinions. The counter-opinion must be based on the same documents that were before the court-appointed examining expert" (see p. 3 of the transcript of the hearing in paragraph 7).
- On December 17, 2023, the court's expert opinion, CPA Avraham Zohar of S.K.A. Economic Consulting in Tax Appeals, was submitted (hereinafter: the "opinion" and "the court expert" or "the expert" respectively). Simultaneously with its submission, the defendants petitioned to order the sale of Kotzer shares in companies owned by them, since, according to them, upon completion of the opinion, all the conditions for the separation proceeding were met. It should be noted that in their application they stated that it was filed despite the fact that the value of the two companies, as determined by an expert in the court, was ILS 6 million higher (ILS 5 million for MedLife; ₪1 million for DHS) than the value as determined in the defendants' opinion.
- On January 25, 2024, Kotzer attached to the court the answers of the court expert to the questions he referred to him, as well as his response to the answers. Subsequently, the defendants attached the full clarification questions that were submitted by Kotzer (see decision of February 26, 2024). Kotzer also requested that MedLife's bank account statements for 2023 be attached to the file, in light of his claim that at the time the opinion was prepared, the defendants concealed data from the expert, and that this data could enable anyone on behalf of Kotzer to estimate the value of the company without "consciously ignoring reality" - see Request 19. The defendants objected to the request in the application.
- An additional pre-trial hearing was held on June 4, 2024, in which I gave my opinion to Motion 19 and instructions were given to advance the hearing of the case as follows:
"Applications submitted by both parties indicate that Kotzer still maintains his claims with respect to DHS, and in any event, a factual clarification and a legal determination will be required as to whether the agreed separation mechanism regarding MedLife also applies to DHS. It also appears that Kotzer believes that the opinion does not show a correct picture of the company's value. Kotzer attributes to Zahav and Sharoni allegations of concealment of data, actions with lack of transparency, and misrepresentation that was allegedly presented to the expert. Kotzer wishes to refer to the bank statements of 1923, which he apparently had access to at all times, in order to support his claims, and also claims that he has evidence of the alleged concealments. Therefore, he also submitted the request to attach the bank statements.