Gutman and the company's counsel argued that these words contain threatening words against officers (and I do not address this issue at this stage). In any event, subjectively, some of those present at the meeting felt threatened by these words. One of them was the CFO who was present at the meeting, who was recruited to work for the company by the decisive director (after a period in which this position was not filled), who announced her resignation, and wrote the following:
"The general feeling is that any change I want to make, or even any comment I make, may be directed at arrows. Every issue, big and small, is tied to legal matters, and I don't want to work in such an atmosphere. This came to a head at the last meeting of the Board of Directors [the compliance meeting of July 21, 2024] , which I attended a few weeks ago, in which threats were thrown by the representatives of one of the shareholders about the liability of officers of the company, and I am not interested in being part of it" (Appendix 2 to the company's request).
At the end of the meeting, the issue of granting exemption and indemnification to officials in the company, including Gutman, was raised. The decisive director asked the company's attorney to examine the conditions for granting indemnity and exemption and to make suggestions on the matter. The company's counsel did indeed prepare proposals for exemption and indemnification, as well as a proposal to amend the company's articles of association in order to enable the granting of indemnity and exemption. Subsequently, the decisive director convened a meeting of the board of directors on September 5, 2024 to discuss the matter, but Lahav and the attorney general did not appear, and therefore the meeting was postponed to September 8, 2023, in which, as expected, opinions were divided on this issue as well. In light of the need for the approval of the meeting to amend the bylaws, the general meeting, which consists of Lahav and Gutman, convened on September 12, 2024, and it also did not announce any decisions on the issue due to the impasse.
- As noted at the outset, the parties do not disagree on the need for separation. The dispute is over how to separate. While Gutman argued all along that the company should be separated by selling the company to a third party with the highest price, Lahav initially agreed to this remedy, then did not take an unequivocal position, but at the affidavit stage he argued for the first time for a remedy of forced acquisition according to which Gutman should be forced to purchase his shares (see the description of the matter in my decision of October 31, 2024 in Gutman's request to delete parts of Lahav's affidavit). The decision regarding the manner of separation is in the final stage. The parties submitted affidavits of the main witness, and on November 12, 2024, they summarized their arguments and completed the written summaries. It should be emphasized, however, that the end of the litigation is far from over, due to additional disputes that still need to be discussed, as well as due to expected disputes that can presumably arise regarding the implementation of the path of separation, whatever they may be. May we be deceived.
- In a hearing held on November 12, 2024, the parties agreed that the court would rule on the pending motions on the basis of the motions and responses and on the basis of a short supplementary argument. The parties completed the round of arguments.
- Before I discuss the motions, I will emphasize that the determinations that have been made so far in the motions for relief and those that will be determined in this decision are prima facie determinations that are only appropriate for the interim proceedings. Moreover, to the extent that this is not necessary, I will avoid determinations that are at the heart of the disputes that are expected to be decided.
Discussion and Decision
- We will proceed to discuss the motions that require a decision, which are, as stated, three - a request on behalf of the company to provide instructions regarding exemption and indemnification to the company's officers, which was filed on September 20, 2024; A motion on behalf of the plaintiff to remove the defendant from the company's board of directors filed on September 22, 2024; and a request on behalf of the defendant to instruct the plaintiff to provide information to the board of directors, which was submitted two days later on September 24, 20244.
- It should be recalled that we are in the realm of temporary relief, and as is well known, when the court comes to decide on a request for temporary relief, it must consider two main considerations: one, the existence of a cause of action; and second, the tilt of the balance of convenience in favor of the person seeking the relief. There is a relationship between the two considerations of "parallelism of forces", but it is customary to give the balance of convenience consideration priority status (see: Civil Appeals Authority 5165/20 Estate of Mansour z"l v. State of Israel - Ministry of Transport, para. 18 (August 23, 2020); Civil Appeal Authority 4218/19 Pinhasov v. S.D. Residential Apartments Ltd., para. 10 (June 27, 2019); Civil Appeal Authority 3368/22 Erel Electromechanics v. Rotem Safety Ltd., para. 14 (July 6, 2022); Civil Appeal Authority 5435/21 Hapoel Imad Iksal Club v. Israel Football Association, para. 17 (August 8, 2021)). It seems, and this is common to all the requests, that the main point of the discussion is not the question of whether there is a cause for granting the remedies, because there is no dispute that there is a cause of action under section 191 of the Companies Law, but rather considerations of the balance of convenience and considerations of honesty (see paragraphs 49-51 of my decision of October 18, 2022). Even in light of this, the task is not easy, in light of the multitude of details and procedures and taking into account the need to steer the company to a safe shore.
- We will discuss each request separately. We will first review the arguments of the parties and then decide on each request. I will note that the supplementary arguments submitted by the parties overlap to a large extent with what is claimed in the motions and the replies, and therefore, I will not make a distinction between what is argued in the application and in the reply and what was added, to the extent that it was added, in the supplementary argument, and I will review the arguments in one breath.
Gutman's request to remove Lahav from the board of directors
- Gutman is asking the court for temporary relief, according to which Lahav will be removed from the company's board of directors, banned from attending board meetings, will not take part in them, and will not have the right to vote. Alternatively, it is requested that the court appoint an observer on behalf of Lahav.
The parties' arguments
- Gutman referred to the sequence of events and the previous decisions made by the court. According to him, the temporary relief was required due to Lahav's abusive conduct, which has intensified recently, created a risk to the company's existence and is liable to lead to the destruction of the company's value. According to him, Lahav's conduct finds expression on a number of levels: a campaign of persecution and threats ("mafiosis" as he puts it) against the decisive director, and against the CFO, which led to her resignation; threats against other officers who refused to fulfill his demands, including the company's attorney, the legal advisor and the auditor's accountant; paralyzing the board of directors and making it difficult for it to function whenever the agenda does not match its wishes; exploiting the board of directors for his personal purposes - such as proposing to remove Gutman from his position as CEO of the company and torpedoing the decision to pay his salary; Harming the possibility of selling the company to third parties, by seeking to force the sale of his shares by Gutman (according to the company's value in 2021) and at the same time working to destroy the value of the company. It was claimed that Lahav raises harsh allegations against the company, including the commission of criminal acts, the purpose of which is to severely harm it. It was argued that Lahav deliberately thwarts the implementation of the April 13, 2023 resolution, when it carries out actions that amount to a breach of fiduciary, acts to disrupt the work of the board of directors and causes damage to the company, hence the temporary relief required in light of the court's determination in that decision that "it will be necessary to examine the functioning of the board of directors in its new composition from the perspective of time." It was further argued that although the parties are on the way to separation, there are still substantive issues on the agenda.
- Lahav vehemently opposes the application and believes that it should be rejected, because it does not meet the conditions required for granting temporary relief. Lahav argues that the purpose of the application is the same - to conceal Gutman's nefarious actions in the company that led to its harm, and to prevent proper supervision of what is happening in the company, especially in light of information recently discovered that the company is committing criminal offenses - according to the claim, and conducts illegal activity with customers, inter alia through the Comma software. According to Lahav, he presented real evidence that the company created a platform to lure investors fraudulently, in order to generate profits for the company, and therefore he should be seen as a kind of "whistleblower." Lahav argued that the existence of a functioning board of directors is of great importance, especially in light of the acute dispute between the parties and the lack of proper reporting by Gutman to the board of directors, a situation that has been going on for a long time. Lahav categorically rejects the allegations of threats and defines them as "baseless." According to him, he did not threaten the decisive director and the officers of the company, and his words were a warning intended to inform and advise as part of the performance of his duties. Lahav even claimed that his attorney did not make any threat at the board meeting on July 21, 2024, but rather expressed a professional position, while denying the claim that the CFO's resignation was made under the circumstances claimed by Gutman. As for the relationship between Lahav and the decisive director, it was noted that the two discussed the concerns during the meetings and Lahav apologized to him. In addition, Lahav's attorneys categorically ruled out the possibility that anyone from their firm would threaten an official on behalf of the court, both on the factual and moral levels. Finally, Lahav sought to reject Gutman's claim that he was causing disruption in the board's activities. According to him, it was Gutman who tried to promote issues related to him and ignore issues for the benefit of the company, which Lahav sought to promote. Lahav rejected the claim that he was sabotaging the possibility of selling the company. Lahav sought to reject Gutman's claim that he is not making proper use of his position as a director and that he is making false claims in order to harm the company. In the meantime, Lahav addressed the issue of crypto wallets (a topic that will be addressed later) and the investigation in Germany.
- The company supports Gutman's position. According to the company, Lahav is taking advantage of his position as a director to attack Gutman in the framework of the bitter dispute between them, and in doing so, he harms the company and its employees, its continued operations, and even endangers its existence. It was also claimed that Lahav exploits his access to the company's systems to harm it, raising allegations of criminal acts by the company; He hides information in his possession and pulls it out from time to time in order to attack Gutman and harm the company, he "invents" issues in order to bash the officers, but on the other hand, he drags his feet away from holding a substantive discussion of them, especially the issue of compliance. In this context, it was claimed that Lahav is raising claims regarding the Comma software in order to harm the company and its employees. It is also claimed that Lahav is taking advantage of the fact that an investigation is being conducted by the German authorities in order to advance his interests. It is claimed that the company was willing to hold a dialogue about the investigation, but Lahav thwarts this. It was also claimed that by his actions, Lahav was violating the fiduciary duties imposed on him. It was also claimed that Lahav is thwarting the court's decision to appoint the decisive director, intimidating the decisive director and exerting improper pressure on him, as well as threatening officers (inter alia at the meeting of the board of directors on July 21, 2024), who are acting under a sense of constant fear. On the other hand, it is claimed, Lahav thwarts the possibility of creating security by changing the bylaws in order to enable the granting of letters of indemnity to officers. Finally, it was claimed that Lahav was disrupting the proper functioning of the board of directors.
- The company's response was accompanied by the decisive director's position in a separate letter that includes very poignant remarks regarding Lahav's conduct. Among other things, the letter noted that the decisive director was astonished by Lahav's affidavit in which he accuses the company of defrauding end customers. The decisive director noted that Lahav had never raised this claim before him or in any forum in the company. The decisive director noted that if Lahav was right in his claims, he should have warned about it and brought the matter to his attention, because "the failure to disclose this fact and to preserve it apparently as a 'weapon' for the legal discussion that allows the company to act and carry out the alleged actions throughout the period constitutes a direct breach of his position as a director of the company"; And if Lahav's claims are not true, then even then it is serious conduct. The decisive director further noted, regarding the scheduling of board meetings to discuss the issue of compliance, that Lahav "played a double game", because on the one hand he demanded to hold meetings on the matter and complained about their non-existence, and on the other hand he thwarted the attempts to hold them. In light of this, the Director is of the opinion that Lahav is failing and harming the activities of the Board of Directors on a subject of great importance to the Company's activity and its very existence. In summary, the decisive director noted that he supports Gutman's position. The decisive director is aware of the unusual position, but he believes that there are far-reaching circumstances and he emphasizes that he takes this position "with a heavy heart." The decisive director also noted that in any case he has a dual right to vote (by virtue of his position as chairman of the board of directors), so that in the event of a dispute with Gutman, his voice will increase, and in this way he will prevent unilateral actions that harm Lahav. The decisive director emphasized in his letter that he is committed to preventing infringement of Lahav's rights.
In the supplementary argument, Lahav referred to Shalhav's letter. Lahav chose to call the decisive director appointed by the court "a puppet of the company's attorney, who in turn acts solely for Gutman's benefit," and claimed that he "views the letter with great severity." According to him, the letter reveals that the decisive director did not examine the serious allegations raised by him and "is trying to distance himself from the criminal acts committed in the company during the period he served as chairman of the board of directors."