On May 12, 2020, the plaintiff sent a similar letter to Fayette and Weldon, and on June 25, 2020, an additional warning letter was sent to all the company's directors in English (attached as part of Appendix 43).
When the defendant denied the plaintiff's entitlement to the payments as claimed by her, the plaintiff filed the claim before me.
The parties' arguments:
The plaintiff's arguments:
- According to the plaintiff, in respect of the first offering, she is entitled – in addition to the financial commission paid to her – options to purchase the company's shares, at a share value of 20 cents (the value of the share in the IPO) at the rate of the full financial commission paid to her, i.e., in the sum of US$480,000. The plaintiff further claims that in respect of the second offering, it is entitled to a commission consisting of both a monetary commission in the amount equal to 4.5% of the fundraising rate in the offering, and for options to purchase the company's shares according to the value of the share in the offering, 80 cents at the full rate of the financial commission to which the plaintiff is entitled in respect of this offering.
- The plaintiff bases its claims regarding the entitlement to options in respect of the initial offering on the provision of clause 3.1.4 – which exists in both the first and second agreements and the fourth agreement. According to her, from the testimonies and evidence presented to the court, it became clear that the first agreement remained in force and that it was the agreement whose provisions the parties saw as binding on them. In this regard, it was argued that the plaintiff's version should be adopted, in light of the collapse of the defendant's version, which relies only on Don's testimony – which turned out to be unreliable – and accordingly the second (in which only half of the financial fee appears) and the third – in which clause 3.1.4 does not exist – should be given validity to the second agreements (in which only half of the financial fee appears) and the third – in which clause 3.1.4 does not exist – since it was fraudulently deleted by Don. In this context, it was argued that – contrary to Don's claims – clause 3.1.4 was not added by Peleg to the fourth agreement fraudulently, but that the parties reached an agreement at a meeting on September 25, 2019, according to which the plaintiff is entitled to the second half of the commission and that the relevant amendments will be made on top of the first agreement – in which only the second half of the commission exists. It was argued that this agreement, in practice, constitutes an agreement to return to the first agreement, in which clause 3.1.4 was also included. In light of this, it was argued that this clause was not added by Peleg fraudulently, but existed in the first agreement, which the parties agreed would remain in effect. According to the plaintiff, as part of his testimony, Don admitted to this claim. Moreover, it was argued that Don admitted the validity of the fourth agreement, when he gave the order to pay the plaintiff, with reference to this agreement. In the context of Don's confession, the plaintiff emphasizes that Don further testified that he was authorized to sign all the agreements in the name and on behalf of the company and to oblige it to sign all that this entails. In addition, it was argued that support regarding the validity of the first agreement can also be found in the CLA agreement, which refers to the first agreement as the agreement in force. It was further argued that although the first agreement relates to entitlement to commission for the investment of an "approved contact" (i.e., refers to a commission for an investment), the defendant does not dispute the applicability of this agreement in the case of an offering, i.e., it does not dispute that Armada is an approved contact person and that the plaintiff is entitled to a commission in respect of the offering.
- Moreover, it was argued that Don's version that the second agreement was the one that was in force and therefore that a dispute was discovered regarding the entitlement of Peleg and the plaintiff to the second half of the commission – which does not exist in the second agreement – turned out to be incorrect. When it became clear in the proceeding that in practice, in real time, Don did not deny the plaintiff's entitlement to payment of the second half of the commission under the first agreement – that is, that the second agreement was not valid at all and was signed at the request of Don and his reasons (which were not explained). However, the entire dispute was as to the number of payments in which the second half would be paid, as well as as to the applicability of the conversion clause – clause 3.1.2 to this half of the fee – conversion, which Don objected to. It was argued that it was clearly proven that this dispute alone was the background to the convening of the quadruple meeting – on September 25, 2019, and therefore these were the issues that this meeting focused on and the disputes on which the parties reached an agreement. It was argued that in light of this, in the framework of this meeting, the issue of eligibility for options did not come up at all. It was argued that in his testimony, Don admitted that the first agreement remained in effect, that he never denied it, and that he did not deny the company's obligation to pay the second half of the commission. In this regard, the plaintiff also refers to the evidence indicating the fraud that Don resorted to when he submitted the draft of the third agreement to Peleg's signature, when he conceals – deliberately and in light of Feig's comments – the omission of clause 3.1.4. It was argued that in order to disguise this omission, Dan even changed the numbering of the clauses in the third draft agreement. Moreover, it was argued that at this stage, when it was already clear that the offering had been successful, there was no reason for the plaintiff to waive her entitlement to the "grand prize", i.e., her entitlement to options in accordance with clause 3.1.4.
- In light of all this, it was argued, as stated, that the first agreement is the agreement that remains in force in the relationship between the parties, including clause 3.1.4 of this agreement, which grants the plaintiff the right to receive options at the rate of the full financial commission to which she is entitled. With regard to the provision of clause 3.1.4, it was argued that, since this is a clear contract with full stipulation and clear language, in accordance with the law, its interpretation must adhere to its language – from which it clearly implies that the plaintiff is entitled to options in addition to the financial commission. The plaintiff learned this both from the word "also" in this section, which indicates that it is an additional consideration in addition to the monetary commission, and from the word "options" – plurally – which indicates that these are options for the exercise of shares and not an option to convert the monetary commission money into shares. Moreover, it was argued that contrary to Don's claims, clause 3.1.4 is not a clause that exists in duplicate to clause 3.1.2, since it is a matter of substantially different clauses. Thus, in clause 3.1.2, the conversion is forced and the exercise value is different – and stands at a value at a discount of 20% compared to the IPO value , whereas in clause 3.1.4 there is no obligation to exercise the options, the period of time for exercising the options is 12 months from the date of the offering, and the exercise value is the value of the share in the offering. It was argued that the differences indicate that this is not a double conversion clause – but rather two different clauses.
- Moreover, it was argued that this interpretation is also supported by the external circumstances of the agreements between the parties. In this regard, the plaintiff referres, inter alia, to the fact that at the time Peleg lent $100,000 to the company, it was a loan at risk, in light of the company's poor financial situation, and in addition, the plaintiff claims that in practice, the two offerings that the company made saved the company from insolvency. It was further argued that in the course of his testimony, Don admitted that the plaintiff's obligation to convert the money of the financial commission to which she was entitled to the company's shares stemmed from a demand of the company and did not constitute a benefit for the plaintiff, but rather put her money at risk. This is because, even if the value of the shares had decreased, the plaintiff was still obligated to convert the financial commission to which she was entitled into shares. It was argued that in these circumstances, it is clear that the forced conversion – set forth in clause 3.1.2 – is not in place of the plaintiff's entitlement to options in accordance with the provisions of clause 3.1.4 of the agreement (as to which the plaintiff has the option of choosing whether to exercise). It was further argued that evidence that this is a clause that was deliberately added can be learned both from the fact that as detailed above – this is not a double clause to clause 3.1.2, which relates to conversion, but rather a substantially different clause, which relates to entitlement to options with completely different exercise options, and from the fact that the clause was not removed from the wording of the binding agreement – the first agreement – which was entered into between the parties and which is the one that is in effect. As approved by the defendant. The plaintiff further argues that usually when it comes to success in turning a company into a public company, the remuneration consists of two components – a percentage of the amount raised in capital and a capital component – i.e., options. In support of the latter's claim, the plaintiff refers to a prospectus from which it appears that Ananda also received consideration both in the form of a monetary commission and options. In addition, the plaintiff refers to the correspondence between the parties, in which she claims that it was expressly agreed – prior to the signing of the first agreement – that clause 3.1.4 would be added. The plaintiff further points out that unlike Dan – who was assisted by a draft agreement drawn up by lawyers – Peleg was not assisted by legal counsel regarding the agreement.
- With regard to the second offering, the plaintiff argues that in accordance with the provisions of clause 3.1.3, there are two criteria for the payment of an additional commission – one is that a transaction is formulated within 12 months of the first transaction, and the second is that it is a transaction for which the finder was entitled to a commission. It was argued that these two conditions are met – first, the company confirmed that the plaintiff was entitled to a commission in respect of the first offering, and the second offering occurred within 12 months of the first offering. It was argued that in this regard, the company's argument should be rejected accordingly that the plaintiff's entitlement to commission in respect of the first offering relates to an offering transaction and not to an "approved contact" since it is not of the nature of the matter. This is after both conditions under the section have been met. It was further argued that there was no substance to Don's claim in the affidavit that this was a remnant of a draft agreement that was irrelevant, when he admitted in his testimony that this was a valid clause, but that the conditions for the payment of the commission in this case were not met.
- It was further argued that although the plaintiff did not make a demand regarding these options, this is only since, in accordance with the regulations in Sydney, the options from the first offering are blocked for exercise and trading for two years from their grant, i.e., until January 29, 2021, whereas the options for the second offering were blocked until May 29, 2021, and therefore there was no urgency in applying at an earlier stage.
- In light of all this, it was claimed that in accordance with the first agreement, the plaintiff is entitled to 724,792 options for the company's shares at an exercise price of 13.29 Australian cents per share and 2,700,000 options for the company's shares at an exercise price of 20 cents per share. For the second offering, the plaintiff is entitled to a total of AUD 1,350,000 (4.5 percent of the amount raised) and 1,687,000 options for the company's shares at an exercise price of 80 cents per share. It was argued that since it is not possible to receive these options in practice, the plaintiff is entitled to damages as a result of the defendant's breach of the undertaking. It was argued that the damage should be determined in accordance with the highest price of the share, starting from the date on which the block was lifted with respect to each of the options. This is in light of a presumption in favor of the plaintiff according to the case law, according to which she would have sold the shares at the highest price. It was argued that in accordance with the price at that time, the damages due to the plaintiff are expressed in the difference between the highest price of the share after the release from each of the blocks multiplied by the number of options that were supposed to be allocated in each offering, and this amount should be converted into shekels and linkage and interest differentials should be added to it until the actual date of payment. Accordingly, the plaintiff claims that it is entitled to the sum of NIS 11,687,698 for the first offering and the sum of NIS 3,916,370 for the second offering, and in total – plus linkage differentials and interest as required by law until the date of filing the claim – the sum of NIS 16,246,097.
the defendant's claims;
- At the beginning of its summaries, the defendant argues that the plaintiff's arguments are missing the essence – since the plaintiff's summaries focus on the question of which of the four agreements that were signed between the parties is the binding agreement, but the plaintiff ignores the fact that in any event, and to the extent that the first agreement is binding according to her approach – the circumstances in any case indicate that clause 3.1.4 of this agreement is intended to be a conversion clause and not a clause that grants entitlement to options in addition to the financial fee. In this context, the defendant claims that the plaintiff did not show a single piece of evidence indicating that the company agreed to give the plaintiff options in addition to the monetary commission it received (and Peleg even admitted that there was never an offer to provide options in addition to the monetary commission). Moreover, it was argued that the evidence shows that the opposite – since, from the correspondence between the parties, it can be clearly learned that the negotiations between the parties revolved only around a monetary commission to which the plaintiff would be entitled and the conversion of this monetary commission into shares, however, the granting of entitlement to options to the plaintiff in addition to this fee was never discussed or agreed. It was claimed that in the course of his interrogation, Peleg explicitly admitted that Don's offer of a commission – as it emerges from the documents – did not include any allocation of options in addition to the financial fee. It was argued that after the parties reached an agreement regarding the commission to which the plaintiff would be entitled in the event of an offering, clause 3.1.2 was added, which exhausted all the commercial agreements between the parties in relation to the consideration that Peleg would receive in respect of the offering, and clause 3.1.3 of the agreement – which became clause 3.1.4 of the agreement – became irrelevant to the offering. This is partly because the commission for an offering was regulated in the specific section, which is clause 3.1.2. It was argued that support for this can be found, as stated, in the correspondence between the parties, and in addition, in the company's prospectus that was published prior to the initial offering, in which Peleg was not included in the list of those entitled to receive options. In this regard, it was emphasized that although the prospectus was transferred to the party, it did not raise any claim in real time in this regard. Moreover, it was argued that support for the lack of agreement regarding options can also be found in Peleg's conduct after the initial public offering, including his activity for 15 months in order to receive an additional payment of a monetary commission, which he believed he was entitled to, while failing to raise any claim regarding eligibility for options worth millions. It was argued that Peleg's silence shows that his suppressed demand for options was invented retroactively. Moreover, it was argued that further support for the lack of agreement on the matter can be learned from the transcript of the meeting of September 25, 2019, which was held after the second offering – in which no claim was raised regarding options, and moreover, although Ben Shabbat explicitly asked in the framework whether there were other disputes besides disputes over the second half of the commission and the possibility of conversion – Peleg replied that there were no additional disputes. It was further argued – with regard to the addition of clause 3.1.4 to the fourth agreement – that it was added by Peleg to this agreement without the latter disclosing about its addition, and all this after Peleg learned that the clause had been omitted from the third agreement.
- Moreover, it was argued that even the interpretation of clause 3.1.4 does not support the plaintiff's version. With regard to this, the defendant begins by arguing that the language of the section is not unequivocal and therefore it is necessary to refer to the external circumstances for its interpretation. This is because, according to the defendant's approach, Peleg relies mainly on the first part of clause 3.1.4 and the words options in the plural and in addition (also), but he ignores the second part of the clause, which includes the phrase "investing all finders fee back to the company", which indicates the return movement of the commission into the company and teaches that this is a clause intended to deal with the right to convert the commission through a reinvestment in the company and not to options in addition to the monetary fee. In these circumstances, it was argued that since the language of the agreement is not unequivocal, external circumstances should be referred to, for the purpose of its interpretation, and that this should be done even more intensely in the case at hand, in which we are dealing with a clause that was drafted by parties who are not represented and are not jurists, and therefore, in accordance with the case law, considerable weight should be attributed to the external circumstances. In this regard, the defendant also refers to Peleg's own admission, according to which decisive weight should be attributed to the external circumstances. It was argued that the totality of the evidence shows that this is only a conversion clause and this is how Peleg even saw it, and therefore this is the interpretation that should be given to him. Thus, according to the defendant, this interpretation can be learned from the email correspondence between the parties from 28/3/18 and 1/4/18, which explicitly indicate that clause 3.1.4 is intended to be a conversion clause only. This is because, in the framework of this correspondence, Peleg wrote that he was adding the clause in order to give the plaintiff the opportunity to invest all of Finders Pi back to the company – that is, to return the entire commission to the company. It was claimed that this interpretation was also given by Peleg when he spoke with Ackerman in a meeting on September 24, 2019. In this regard, the defendant refers to Peleg's cross-examination, in which she claims that when she told Ackerman at this meeting that there was another section of conversion, she was referring to clause 3.1.4. Kerry admitted that in the course of the conversation between him and Ackerman, he himself referred to clause 3.1.4 as a conversion clause. As for the meeting of September 25, 2019, it was argued that Peleg's arguments that the starting point for this meeting was that the first agreement was valid should be rejected – arguments that contradict Ben Shabbat's statement to Peleg at this meeting, who questioned the validity of the first agreement in light of the signing of the second and third agreements. It was claimed that Peleg even confirmed that Ben Shabbat reflected this risk to him, and that in light of this risk, he even agreed to reach agreements in the framework of this meeting. Moreover, this is what he even testified in his cross-examination when he admitted that it was a conversion clause and testified that the difference between clauses 3.1.2 and 3.1.4 is that the former revolves around forced conversion, whereas according to the latter, he has the option of deciding whether he converts or not and is not obligated.
- The defendant further argues that the plaintiff's claims that she is entitled to a commission in respect of the second offering should be rejected. With regard to this, the defendant begins by claiming that the plaintiff changed the front in her summaries in her arguments regarding this entitlement. Thus, it was argued that while in the framework of the lawsuit the plaintiff claimed that entitlement to the commission was contingent on the existence of three conditions: 1) an additional investment transaction took place, 2) it took place within 12 months of the previous investment transaction, and 3) the plaintiff was entitled to a commission in respect of the previous transaction. The plaintiff further argued that the conditions were met since the Patterson company was the one that led the second offering, and it was included in the group of investors led by Armada Capital (the lead of the IPO). Thus, in the framework of the plaintiff's summaries – when it became clear that Morgan was the one that carried out the second offering and not Patterson – the plaintiff suddenly claimed that the entitlement to pay the commission was not contingent on three conditions (as claimed in the lawsuit), but only on two conditions – 1) entitlement to commission for the first offering, and 2) the additional offering took place within 12 months. Kerry omitted the condition surrounding the existence of a previous investment transaction. Moreover, the plaintiff further argued that the defendant's claims in this matter are not of the nature of the matter. According to the defendant, in light of this, the plaintiff's claims due to the widening of the façade should be rejected. It was argued that in any event, the plaintiff's arguments in the framework of her summaries are inconsistent with the language of section 3.1.3. Accordingly, Peleg is entitled to a commission in connection with any investment transaction occurring within 12 months from the date the latest investment transaction with respect to which Finder was entitled to fee was consumed" – i.e., according to this section, the entitlement to the commission is contingent on three conditions, including the existence of a previous investment transaction as defined in the agreement. It is claimed that the terminology "Investment Transaction" is defined in clause 1.3 of the Agreement as a transaction executed with an approved contact. It was argued that this indicates that only a transaction executed with an entity that Peleg linked to the company would be considered an investment transaction that entitles the plaintiff to a commission. In light of all this, the defendant argues that even if the plaintiff's argument that Armada should be viewed as an approved contact person is accepted, in any case this does not establish the plaintiff's entitlement to commission in respect of the second offering, since in any case Armada was not the one that promoted the second offering. Finally, it was argued that the very claim regarding entitlement to commission in respect of the second offering is a suppressed claim that was raised about a year after the second offering, i.e., it was not raised in real time, and for this reason it should also be rejected.
- The defendant further refers to bad faith conduct, which amounts to the coordination of testimonies, between Peleg and his partners – Ackerman and Ben Shabbat – which, according to her, leads to giving zero weight to their testimonies and leading to the dismissal of the lawsuit. In general, according to the defendant, the plaintiff deliberately refrained from submitting affidavits of the main witness of Ackerman and Ben Shabbat, which there was no impediment to their submission, and thus placed the defendant at a procedural inferiority. Moreover, it was claimed that as part of their testimonies, Ben-Shabbat, Peleg and Ackerman admitted to coordinating versions and to holding joint meetings with the plaintiff's lawyers, in which Peleg also participated. In addition, it was argued that the negative evidentiary presumption that works against his version should be placed against Peleg, as a result of his failure to bring Keren to testify – even though Keren is a partner of Peleg, who was involved in the negotiations with Don. It was also claimed that Peleg tried to conceal material documents, including email messages, which contained content that acted to his detriment, and also presented the transcript of the recording of the conversation dated September 24, 2019, which was interrupted without explanation.
- More than necessary, it was argued that in any event, the plaintiff did not provide any evidentiary basis to prove the very existence of damage, let alone to prove the alleged scope, and even for this reason the claim should be dismissed. In this regard, the defendant specifies that the plaintiff did not present minimal evidence, including an expert opinion, a calculation, and not even a document to prove damage in the huge scope of more than NIS 16 million. It was further argued that the plaintiff did not prove that the options to which the plaintiff claims to be entitled were indeed subject to the blocking according to the rules of the regulation, what was the date of the release of the block for each group of options, and that the terms of the options and their exercise prices, which are not supported by an external difference of view, were not proven.
- In light of all this, the defendant argues that the lawsuit should be dismissed.
Discussion and Decision:
- In the proceeding, two evidentiary hearings were held, in which they testified – on July 8, 2024 on behalf of the plaintiff: Mr. Uri Ackerman, Mr. Kobi Ben Shabbat and Mr. Guy Peleg, and on July 9, 2024, on behalf of the defendant: Mr. Gil Don and Mr. Alon Feit.
As an introductory note, I will note that the evidentiary hearings took place on tape, the page numbering in each of the transcripts of the hearings begins anew, and therefore, there is a duplication between the numbers of the minutes pages. In light of this, the reference to the testimonies of each of the witnesses is to comply with the protocol of the day on which his testimony was heard.