At the beginning of the hearing, I referred to a request that would not advance us in any way. The real request that is pending is in fact to reopen the opinion and update it with reference to the bank's statements. Sharoni and Zahav objected to this, and the expert himself also responded to the request in a substantive manner, mentioning that it was an opinion that was made for a certain date based on forecasts. The court also noted that accepting the request to update the opinion according to the bank's statements will in fact lead to the fact that this is not a forecast but rather a retrospective opinion, after receiving real data, which will require us to follow the developments until at least 2028, for better or for worse. That's not the case. ... However, I noted to the parties that if and in any case a short-term person convinces the court that Sharoni and Zahava knowingly concealed receipts that were already on the agenda or contracts or any other possible source of income that was already known until the date of the separation, there will be room to take it into account, to examine with the expert whether these data were before him, whether he took them into account for the purpose of the opinion and whether, The more they are presented to him, the more they change the picture" (emphases not in the original). I also noted in the same hearing that: "If any of the parties wishes to submit a counter-opinion, they will do so together with the submission of the affidavits" (see pages 8-9 of the minutes of the hearing, paragraphs 5-7). It should already be noted that no one on behalf of the parties submitted such a counter-opinion.
- Evidentiary hearings were held on December 23, 2024, and on December 25, 2024, as part of these hearings, Kotzer, Liran, Zahav and the expert were interrogated. Sharoni did not submit an affidavit on his behalf and was not called to testify by any of the parties. All attempts to bring the parties to an agreement did not succeed, and therefore an order for summaries was issued. Once my questions have been filed, the time is ripe to render a judgment, and I will first review the arguments of the parties in their summaries.
Claims of brevity in his summaries
- Regarding the Discrimination Claim
- In his summary, Kotzer abandoned his claims regarding the discrimination and addressed only the question of updating the opinion and the question of applying the separation mechanism in the agreement to DHS. Regarding the update of the opinion, Kotzer reiterated that the defendants concealed information from him and the court's expert. It was further argued that the expert confirmed in his interrogation that data regarding potential transactions or negotiations for which the negotiation procedure was conducted in 2022 were significant, "dramatic" or "stepping stone" data that should have been addressed when preparing the opinion.
- Regarding his failure to transfer the transaction documents to the expert in real time, Kotzer argued that this does not legitimize an erroneous opinion and lead to a manifestly unjust result, all the more so when these transactions were included in the growth forecast on his behalf - which he submitted to the expert.
- According to Kotzer, the expert should be allowed to update his opinion in accordance with the data of the transactions that were concealed from him by the defendants. Kotzer claimed that he had proven to the expert that the company had a significant expectation of an increase in sales, especially in light of the fact that the expert's opinion raised the valuation presented by the defendants by about 60%, and on the basis of which the defendants tried to force him to sell his shares in the company.
- Regarding the Enforcement Claim
- In his summary, Kotzer further argued that there is no business logic in applying the partnership agreement to DHS, since DHS and MedLife differ from each other in their areas of operations, in their potential for development, in the manner in which the shares are held and the identity of their partners, in the fact that they are not at all dependent on each other, in the compensation mechanism of the rights holders in each of the companies, and more. According to the short-sighted method, the difference between the two companies illustrates the parties' own real-time view of DHS as a software company with the potential to grow meaning.
- According to Kotzer, a review of MedLife's founders' agreement indicates that it is not relevant to DHS, including those set out in clauses 3.1, 4.1, and 5.1, regarding the experience of each party; clause 7 of the agreement, which establishes provisions regarding the financing of Medlife's expenses; clause 11.3 of the agreement regarding the parties' functions, as well as clause 12 of the agreement, which relates to the decision-making mechanism. In Kotzer's view, this section ignores the existence of Mr. Gartenbeck - the fourth partner in DHS.
- The plaintiff added that the burden of persuasion and bringing the evidence to prove the applicability of the separation mechanism also in relation to DHS rests with the defendants, who are the ones who refrained from bringing appropriate evidence on their behalf, including the testimony of Mr. Sharoni in the matter, and that their testimony in the matter is based on the testimony of a single party - Zahav - who, according to the plaintiff, is not at all a reliable witness, while his testimony developed throughout the proceeding and while expanding the front.
- Kotzer argued that Zahav's testimony was an oral testimony against a written document (i.e., the Articles of Association), even though Zahav openly admitted that none of the attorneys who handled the establishment of DHS were asked to prepare a separate affiliate agreement for DHS, and that in fact there is no indication or document from which it can be learned of the parties' desire to apply the agreement to DHS as well. The page further summarizes the defendants' argument that the transfer of the Hoover development to DHS should be inferred as indicative of the parties' desire to apply the separation mechanism in relation to DHS. According to him, it is not possible to conclude from this transfer any consent of him to such a dramatic infringement of his property rights in the form of a forced purchase mechanism.
- In the margins of his summary, Kotzer added that although he had no intention of agreeing to the application of the separation mechanism set out in the agreement with respect to DHS as well, in the spirit of his desire to promote practical solutions and in order to appease the defendants' fear that he intends to conduct DHS in a confrontational manner and make it difficult for DHS to manage DHS, he is willing to deposit his shares in a recognized trust company. According to Kotzer, the trust plan is a better solution than the solution of forced purchase of his shares, a solution that, as stated, severely violates his proprietary rights.
The defendants' arguments in their summaries
- Regarding the Discrimination Claim
- In their summaries, the defendants further argued that Kotzer's claim and his claims of discrimination against the minority turned out to be baseless and were refuted during the evidentiary hearings. According to the defendants, the purpose of the lawsuit was nothing more than to sabotage the agreed separation process and to force new negotiations on the terms of the agreement, and unlawfully. The defendants added that Kotzer admitted in his interrogation that he had all the documents, and that he had in fact presented the expert with all of his arguments - including the documents and arguments raised in his summaries.
- The defendants argued that Kotzer was not entitled to object to the appointment of a valuation appraiser by the president of the CPA Institute in accordance with the provisions of the binding separation mechanism, and that his failure to fail the separation mechanism was done in bad faith and with the improper purpose of thwarting the mechanism of the agreement. According to the defendants, the actions of Kotzer and Liran, upon the termination of his employment, were done in order to create an imaginary dispute over his discrimination and to force the defendants to purchase his shares not as stipulated in the mechanism in the agreement. The defendants added that the fact that in his summaries Kotzer abandoned his claims regarding his discrimination shows that the plaintiff's claims were intended only to serve as leverage to exert pressure on the defendants and as a tool for tactical bashing in an attempt to force the defendants to submit to his business demands.
- As to the expert's opinion, the defendants claimed that Kotz was the one who acted all along in bad faith, with the intention of thwarting the separation proceeding, to fail the expert and to make retrospective claims about a result that did not satisfy him. The defendants claimed that Kotzer was the one who concealed from the expert, at the time required to do so, evidence regarding additional transactions of the companies and sought to rely on them in his cross-examination. According to the defendants, Kotzer did not even present a counter-opinion, as required by the court's decision of June 21, 2023, and in fact, his choice to request that transactions be added to the opinion after it had already been delivered was a deliberate, cunning and bad faith act in a manner that indicates his attempt to thwart the expert's work in preparing the opinion.
- The defendants added that during the course of the proceeding, Kotzer admitted that he had all the documents that he chose not to present, while he lied to the defendants that they were the ones who did not hand over the documents he requested: the defendants claimed that Kotzer had access to the company's bank accounts, the financial statements, the "piracy" system - a system used to manage the company's accounts; to the orders and growth forecasts; and even tender transactions of the companies. The defendants further added that they did not believe that the transactions that were not signed by December 31, 2022 should be taken into account in the opinion.
- The defendants claimed that even at the time the expert's opinion was formulated, it was Kotzer who informed the expert that the company's vegetation forecast would be only 2% (letter dated November 20, 2023), but later on December 11, 2023, Kotzer complained to the expert for ignoring data on his behalf and even claimed that it was not possible to formulate a growth forecast without data for 2023. According to the defendants, the expert examined all the information given to him and even examined the parties' predictions in depth and finally made his own predictions and did not choose between the forecasts brought by the parties.
- The defendants added that it was Kotzer who repeatedly during the course of the proceeding did not exercise his right to file a counter-opinion or present documents that turned out to be in his possession, even though he was given many opportunities to do so, and therefore, he was now late in bringing additional evidence to the opinion. It was further argued that Kotzer's refusal to present a counter-opinion, even though he admitted that he had invited two different opinions for valuation, was also attributable to his duty and required the rejection of his version. According to the defendants, the expert's interrogation stage has ended, a shorter who acted in bad faith is prevented and silenced from raising his claims, which constitute improvements, and the status of updating the opinion should not be allowed to turn the opinion into a retrospective opinion after receiving true data.
- Regarding the Enforcement Claim
- In their summary, the defendants referred to clauses 12.6-12.7 of the agreement, where it was determined that the parties could decide to change the company's areas of activity and even to sell or grant the company's assets. According to them, the fact that they agreed to develop their businesses outside of Israel through the establishment of DHS indicates that an agreement was reached even before DHS was established regarding the development of the parties' businesses abroad.
- The defendants added that Medlife's intention was to market the "Hobar" in Europe, and all the parties agreed to establish DHS as a new company, inter alia, in light of the recommendation they received to manage the sale of Hobar's services abroad through a strategy that does not focus solely on the Israeli market. The defendants added that insofar as they wished to see DHS as a separate company, they would not have transferred the "Huber" component without consideration and without safeguarding the interests of MedLife and its partners - and it is precisely the fact that they chose to "reorganize their businesses" (see paragraph 104 of the summaries) that shows that they viewed both companies as companies in which they were partners in accordance with the understandings that existed at the time.
- The defendants argued in their summaries that the implementation of the separation mechanism for non-DHS would significantly reduce the valuation of Medlife's shares alone - since 70% of DHS is reflected in Medlife's financial statements, since DHS is an inherent part of Medlife. The defendants also added that DHS is a loss-making company that is considering shutting down its overseas operations altogether.
- In the summaries, the defendants further argued that since DHS has no purpose without the explanation, then it was clear to all that the activity deriving from the partnership between the parties was covered by the partnership agreement signed between them with all its clauses, and by virtue of that agreement the parties acted, with the intention and legitimate expectation of the parties that the separation mechanism they set out in the partnership agreement would also apply to the parties in connection with DHS with all that this entails. In any case, Kotzer did not claim otherwise in real time.
- The defendants also sought to build on the fact that Kotzer did not bring Sharoni, defendant 2, to testify to prove his claims regarding the agreement that applies to DHS, and even argued that it is reasonable to assume that the parties who were careful to anchor their rights in the framework of the partnership agreement in Medlife would not have left an opening for coincidences regarding their rights in DHS.
Short-sightedness Response in Both Claims
- In his response summaries, Kotzer reiterated that the defendants did not dispute the fact that they themselves chose not to disclose all the transactions to the expert, nor did they dispute that the expert determined that the transactions that were hidden from him could dramatically change his opinion. Kotzer claimed that he did not transfer the documents of the transactions to an expert on his own initiative, as he believed that the presentation of the transactions in the framework of the vegetation forecast was sufficient and did not require the separate production of the documents, which was naturally supposed to be carried out by the company's management, which had complete and up-to-date information about its transactions.
- According to Kotzer, the defendants were the ones who deliberately concealed the documents of the transactions that were conducted during 2022 and matured in 2023, and the expert even confirmed that the company chose not to provide him with any data regarding potential transactions for which negotiations were conducted in 2022. In the margins of his remarks on the matter, Kotzer argued that even if he could have at a certain stage identified the defendants' failures and exposed the documents himself, this is a mistake, at the very least, a mistake made in good faith that should not be attributed to him, all the more so when it comes to updating an opinion in a focused and specific manner that is intended to correct procedural inequality.
- Kotzer further claimed that the defendants raised a new improper claim regarding their desire to close DHS operations in light of its zero value. According to Kotzer, this is a nasty attempt on their part to discourage him, especially when they insist on applying the provisions of the partnership agreement to DHS, including the possibility of forcibly purchasing his holdings in DHS as well.
Discussion, and the beginning of the decision in a nutshell
- The two cases before me are a clear example of a good and long-standing partnership relationship that was "entangled" in vain, especially in view of the fact that the parties were able to formulate an efficient, clear and clear separation mechanism at the time with regard to Medlife. When the moment of truth came, each side felt that the other side was being harassed; the level of suspicion increased; mutual arguments were pulled out of the threshing floor and the winery; lawyers were recruited by both sides for the campaign; each side climbed a tall tree, and almost every ladder extended to the parties, even during the proceedings, was rejected. It is good that the parties were able to make use of the court's expert "ladder" (a mechanism that also got into trouble in vain), and so we are now left with two single questions that require a decision: is there a need to update the court's expert opinion, all within the limited framework of my decision of June 4, 2024 (see the quote in paragraph 32 above, including the emphases); And is there room to apply the provisions of the separation agreement to DHS as well?
- I will preface the latter and clarify already now - I have reached the conclusion that there is no reason to update the opinion since all the data was before me Kotzer and the expert and was taken into account by him when he prepared the growth forecast and as a derivative, the valuation; As a result, Kotzer should be obligated to sell his shares in accordance with the separation agreement and the procedural agreement that was formulated, according to the price set by the court's expert to Medlife. I have also come to the conclusion that there is no reason to apply the separation mechanism to DHS as well, since it is a separate company with a different legal personality. At the same time, I would suggest to the parties to consider an arrangement, and see my words in paragraph 98 below.
And now to my reasoning, with a brief reference to the questions that were neglected by the parties, and in more detail to the questions that remain to be decided.