(a) in a manner that may defraud a person or deprive a creditor of the company;
(b) in a manner that harms the purpose of the company and while taking an unreasonable risk as to its ability to repay its debts, provided that the shareholder was aware of such use, and taking into account his holdings and the fulfillment of his obligations to the company under sections 192 and 193 and taking into account the company's ability to repay its debts.
(2) For the purposes of this subsection, a person shall be deemed to be aware of the use as stated in paragraph (1)(a) or (b) even if he suspects the nature of the conduct or the possibility of the existence of the circumstances that caused such use, but refrains from ascertaining them, except if he acted negligently only."
- A "full" lifting of the veil, therefore, deals with attributing a debt to a shareholder in it, and this in practice eliminates the separation between the company and the shareholder and ignores the limited liability of its shareholder. The ruling stated that "in view of the fact that this is an extreme and far-reaching measure, the law enumerates a number of conditions designed to ensure that it is carried out only in appropriate cases. Thus, the provisions of section 6(a) of the Law stipulate that a full lifting of the veil will be done if it is found that in the circumstances of the case it is "just and correct to do so", and only in exceptional cases where the use of the separate legal personality is made in a manner that is capable of defrauding a person or depriving a creditor of the company, or in a manner that harms the purpose of the company while taking an unreasonable risk as to its ability to repay its debts. In addition, in order to lift the veil, awareness is required, and at the very least, "turning a blind eye" on the part of the shareholder to such use, and consideration must also be given to the extent of his holdings, the fulfillment of his obligations to the company, and the company's ability to repay its debts" [see: Investment Cells Case, paras. 15-16 and the references there (emphasis in original)]. As is well known, accepting a claim on the basis of lifting the veil requires laying a proper and comprehensive factual basis [see: Civil Appeal 8845/12 Rom v. Zeevi, para. 6 (Nevo, November 25, 2014)].
- From the fabric of the evidence before me, no basis has been laid to assume that the actions of Mr. Ginley and Mr. Rosen and the use of the separate legal personality of Don Gilly were done for fraudulent purposes, in a manner that could defraud a person or deprive a creditor by emptying the company of its assets, or in a manner that harms the purpose of the company while taking an unreasonable risk as to its ability to repay its debts. From the fabric of the evidence a clear picture emerges, according to which we are dealing with a contractual-business dispute concerning an agreement for the use of the brand and a trademark, where the activity through Don Gilly was carried out in accordance with the authorization given to them by Mr. Hasson, the plaintiffs' authorized representative and agent in Israel. Therefore, it was not found that the actions of Mr. Ginley and Mr. Rosen meet the conditions stated in section 6(a) for the purpose of lifting the corporate veil against them, and in any event, in the circumstances of the case, it is not even right and proper to do so.
- Moreover, even if I were willing to accept the plaintiffs' argument that the actions of Mr. Jinley and Mr. Rosen were done for the purpose of fraud (and I do not determine so), in any case a "just" fraud committed by a company, or organized by a company, is not enough. A basic condition is the use of the legal personality itself as a means of conducting the fraud. The plaintiffs had to prove that not only was the conduct of Mr. Ginelli and Mr. Rosen tainted by fraud and lack of good faith, but also that Don Gilley's legal personality served as a buffer protecting the perpetrators of the fraud and its shareholders from liability [See: The judgment of my colleague the Honorable Judge (Lieutenant) Erez Jakoel z"l in a civil case (Tel Aviv District) 32589-04-19 Walthstone Real Estate 23 v. Moriano, verses 21-22 (Nevo 19.10.2025)]. This, too, has not been proven before me, and for this reason it has not been found that the corporate veil should be lifted against Mr. Ginley or Mr. Rosen with respect to the period during which the license agreement was in effect.
Personal Responsibility as Directors
- The plaintiffs in their summaries (at para. 36) petition to impose personal liability on Mr. Ginley and Mr. Rosen, since, despite the principle of separate personality, fraud committed by the company is a clear example of imposing personal liability on a director, and that they have laid a proper factual evidentiary foundation as to their personal awareness, regarding the fraudulent activities and counterfeiting of products made through the company.
- It is alleged that Mr. Ginley's liability derives from his being a director and controlling shareholder, who was personally a signatory to the license agreement and was personally involved in the entire chain of fraud, false reports, false testimonies to the court, fraud and fabrication. His version of the false reports he issued collapsed and it was claimed that he acted in extreme bad faith. Therefore, as the manager and person in charge of Don Gill's activity, he bears direct contractual and tort liability for the results of his actions and for the corporation's debts, even without lifting the veil.
- As to Mr. Rosen's responsibility, it was claimed that he was a full active partner in the day-to-day management of Don Gilley as a director and executive director. His claim that he was a "warehouseman" was completely contradicted, and it was proven that he was involved in the management of Don Gilley as a full partner; that he signed the directors' statements and financial statements every year; Engaged in reporting to CPAs; guarantor of the lease agreement; His name appears as the contact person in the customs documents; and that he was well aware of the warning letters in real time, and despite this, he continued to sell infringing products from Don Gilly's warehouses and to enjoy the profits of the infringements. Therefore, he should be subjectively blamed for the fraudulent acts, both by virtue of actual awareness and by virtue of turning a blind eye to the actions and omissions of his business partner, Mr. Jinli.
- The plaintiffs also argued that Mr. Rosen's testimony that he relied entirely on his partner does not serve as a defense for him, and even constitutes grounds for imposing liability, since as a reasonable director he should have supervised and prevented the fraud, but chose to lend a hand to it. As such, he is equally responsible together with Mr. Jinli without being able to cover under the guise of incorporation. It was further argued that the attempt to distance Mr. Rosen from responsibility for the alleged acts stemmed from the fact that he owned most of the foreclosed real estate that he purchased during the years of fraud.
- In their summaries, the defendants claim that no personal action of any of the defendants justifies a personal charge has been proven. It was claimed that the conduct of Mr. Ginley and Mr. Rosen was in good faith in accordance with the instructions of Mr. Hasson - the plaintiffs' agent, when they submitted models for approval with Mr. Hasson and received his approval, submitted quarterly reports at his request, paid royalties and ceased activity as soon as they became aware of the dispute. This conduct is not consistent with a "network of forgeries", "concealment" or "bypass" claimed by the plaintiffs, but with the conduct of a party acting in good faith vis-à-vis the plaintiffs' agent. Therefore, it was argued that Mr. Ginley and Mr. Rosen should not be charged personally.
- Before I discuss the question of the personal liability of Mr. Ginley and Mr. Rosen, the allegation that Mr. Rosen served only as a warehouse in Don Gilley must be removed from the chapter. I am of the opinion that it has been proven before me that defendant 3 was an accomplice in all intents and purposes of Don Gilley (transcript of the hearing of November 13, 2025, p. 431, s. 7 - p. 432, s. 20):
"Q: [...] My question to you, would it be correct to say that you and Shalva withdrew exactly the same 50-50 withdrawals from the company?