[...]
In order to nevertheless obligate the shareholder or the officer personally responsible for the breach of contract by the company, even though he did not personally undertake at any stage to assume the company's obligations in the contract, I am of the opinion that it is necessary to examine whether this is an exceptional case of subjective bad faith, which has signs of deception or fraud on the part of the shareholder or the officer." (emphases added)
- In light of the above determinations that no acts of forgery or fraud were committed, and since it was found that the Company breached its obligations to report truthful reports during the period in force of the License Agreement, I find that it has not been sufficiently proven before me that Mr. Ginley and Mr. Rosen have subjective personal fault in a manner that justifies the imposition of personal liability for the breach of the License Agreement by Don Gilley during the period in which the License Agreement was in effect, That is, until the end of 2015. Therefore, I found that the claim of personal liability on defendants 2 and 3 for breach of the license agreement should be rejected.
- The situation is different with regard to the tort of trademark infringement, as discussed above, with respect to the period after the license agreement was terminated in full at the end of 2015 and the defendants continued to use the trademark without a valid license agreement.
- Section 54(a) of the Companies Law states that "the attribution of an action or intention of an organ to a company does not detract from the personal liability that the members of the organ would have had it not been for that attribution".
Other Municipal Applications 407/89 Zuk Or in a Tax Appeal v. Car Security Ltd., 48(5) 661, 697 (1994) (hereinafter: "the Tzuk Or case"), the Supreme Court held (by the Honorable President Shamgar) that "the wrongful action of the organ therefore establishes dual personal liability. First, the company's personal responsibility. Second, the personal responsibility of the organist. To be precise: this does not contradict the basic principle regarding the separate legal personality of the company (or any other corporation). It is as it is written: The society is separate, and the organ is separate. Therefore, the repayment of the company's tort liability will be made solely from the company's sources. The company's tort liability may not be repaid from the organ. The same is true with regard to the liability of the organ. His liability is personal."
- It was further held, there, that the test for the purpose of imposing personal liability on an organ is the usual test of tort law - the existence of the elements of liability. Therefore, if an organ instructs a person to commit a tort, he will be liable for damages. The mere fact that a company has committed a tort does not therefore lead to the conclusion that an organ is liable. The test is the same as the general test of tort law [see: Civil Appeal 725/78 British Canadian Builders in Tax Appeal v. Oren, 35(4) 253, 256 (1981); Civil Appeal 4612/95 Matityahu v. Shatil, 51(4) 769, 790 (1997); Civil Appeal 8553/19 Alexander Oren in Tax Appeal v. Cohen, paragraphs 21-24 of the judgment of Judge Mintz (Nevo, November 17, 2020); Civil Case (Tel Aviv Economy) 62009-12-19 Springtide Ventures s.r.o v. Fox, para. 214 (Nevo, November 19, 2025); Civil Appeal 7721/22 Walter v. Stavholz, para. 58 (Nevo 24.12.2024); Civil Appeal Authority 19788-09-25 Ben Yishai v. Shammai, para. 10 (Nevo 23.2.2026)].
- In the Tzuk Or case (at pp. 698-699), President Shamgar noted the difference between personal liability in torts and personal contractual liability:
"This distinction stems from the nature of the liability. Contractual liability is based on voluntary liability. The contractual creditor is a voluntary creditor. A person is not usually forced to enter into a contractual engagement with a company. The tort liability is imposed on the tortfeasor like a tub. It is not based on the voluntary action of the injured party. The tort creditor is not a voluntary creditor. He finds himself in front of a friend. The company's contractual creditor can choose between a contractual engagement with the company only or a contractual engagement with the company and its controlling shareholders. [...] The situation is different when it comes to creating the tort connection. This connection is not voluntary. The creditor is not permitted to devise for himself a course of contact with the company alone or a route of contact with the company and other entities in it. A voluntary-contractual creditor who has entered into a contract with the company alone cannot make a complaint that the company is insolvent (except, in rare cases such as fraud). On the other hand, the tort creditor should not be harmed by the mere fact that a company committed the tort against him. To be precise: this is not a justification for lifting the veil. This justifies taking the moderate path of imposing personal liability on managers, if they themselves - personally - have fulfilled the foundations of liability in torts." (emphasis added).
- and in application for our purposes. I am of the opinion that from the point in time when the license agreement was cancelled and terminated completely at the end of 2015, as stated above, the nature of the plaintiffs changes from contractual creditors - voluntary (in view of the existence of a valid license agreement) to tort creditors - which are not voluntary (in view of the absence of a valid license agreement). As determined in the Tzuk Or case, a tort relationship is not voluntary, so that the creditor is not entitled to choose for himself a course of contact with the company only, or a track of contact with the company and other entities in it.
- This distinction, which stems from the nature of the liability, requires the conclusion, as was brought in the Tzuk Or case, that the tort creditor should not be harmed by the mere fact that a company committed the tort against him. Admittedly, this does not justify lifting the veil, as stated above, but it does justify taking the moderate path of imposing personal liability on managers, if they themselves - personally - have fulfilled the foundations of liability in
- In the circumstances of our case, after the license agreement was completely cancelled at the end of 2015, and there was no longer a valid license agreement between plaintiff 2 and Don Gilley regulating the commercial relationship between them, all the defendants should have ceased any activity that included the use of the plaintiffs' trademarks. As detailed in detail above, Mr. Jinli and Mr. Rosen had clear indications regarding the plaintiffs' position and their demand to stop distributing and marketing the brand's products without a lawful license. It is also necessary to reiterate on this point the decision of the Honorable Justice Altuvia in the previous proceeding in the application for an injunction, dated November 4, 2015, where it was noted (p. 5, paras. 4-5) that "the respondent [Don Gilley - M.A.A.] would do well." If it considers its conduct with respect to future orders and their supply at the time intervals indicated by its manager [Mr. Ginley-M.A.A.] in his testimony." However, as noted, despite these warning signals, the activity of importing and selling the plaintiffs' brand products continued, without a valid license agreement beginning in 2016. Therefore, personal liability should be imposed on all the defendants, jointly and severally, for infringement of the plaintiffs' trademark, as of 2016.
The remedies to which the plaintiffs are entitled
- For the volume of imports that were not reported during the period in which the contract was in effect, including the period from the date of the notice of cancellation until the termination of the license agreement (until the end of 2015), the plaintiffs are entitled to compensation at the rate of 10% of the FOB that was not reported in accordance with the license agreement. According to the supplementary opinion of the court's expert, the actual volume of imports from 2011 to 2015 was ILS 17,333,162. From this, the missing reporting of the FOB rate reported by Don Gilley, in the sum of ILS 4,353,624 (as stated in paragraphs 34, 35 and 45 of the plaintiffs' expert opinion, which was not contradicted). This means that Don Geely did not report a volume of imports in the amount of ILS 12,979,538. Therefore, for this period, the plaintiffs from Don Gilley alone are entitled to compensation at the rate of 10% of this amount in accordance with the license agreement, in the amount of ILS 1,297,954.
- Indirect imports: Since this issue was not examined by the court's expert and was examined in the framework of the expert opinion on behalf of the plaintiffs only, and was not concealed or examined at all in the expert opinion on behalf of the defendants, then what was stated in the plaintiffs' opinion regarding the scope of the indirect import should be accepted and set at the sum of ILS 3,107,596 (p. 20 of the plaintiffs' expert opinion). The plaintiffs are entitled to compensation by Don Gilley alone at the rate of 10% of this amount in accordance with the license agreement, i.e., ILS 310,760.
- For the period following the termination of the license agreement, beginning in January 2016, in which the defendants all operated without a valid license agreement, the plaintiffs are entitled to the return of the profits taken from them due to trademark infringement. According to the calculation of the gross profit for the years 2016-2018 in the supplementary opinion of the court's expert, which was not contradicted by the defendants, and which was acceptable to the plaintiffs in their summaries, this rate stands at ILS 1,069,195. The plaintiffs are entitled to this sum from the defendants jointly and severally.
- In respect of the expenses of the previous claim, I found in the circumstances of the case and the continuation of the proceeding that the plaintiffs, taking into account also the degree of complexity of the proceeding, to set their entitlement to expenses in respect of the previous claim in the sum of ILS 100,000. The plaintiffs are entitled to this sum from the defendants jointly and severally.
- All amounts will be paid within 60 days from the date, otherwise they will bear shekel interest as per law from today until the date of actual payment.
Conclusion
- The claim is accepted in part as detailed above.
- The defendants will bear the plaintiffs' attorney's fees for this proceeding in the amount of ILS 250,000. In determining this amount, the degree of complexity of the proceeding, the number of hearings held, and the amount of relief awarded compared to the amount of relief claimed, were taken into account. To this sum will be added legal expenses in the amount of the court fee paid by the plaintiffs, plus shekel interest as required by law from the day the plaintiffs bore each payment for the fee until the date of the actual payment. In addition, the defendants will bear the payment of the plaintiffs' share of the court expert's fees as they were born, plus shekel interest as required by law from the date of payment of the fees until the date of actual payment.
The Secretariat will send a copy of the judgment to the parties' attorney and close the case.