More than that. A review of the agreements shows that they clarify the possibility that the permits for the construction of the number of housing units marketed will not be accepted. This arises from the "emission mechanism" set out in clause 5.8 of the sharing agreement, according to which in the event that the group members are left without housing units, they will be expelled from the group with a return on their investment.
In this context, it is important to note that the plaintiffs refer in their summaries to the transcript of the meeting of the class members of November 10, 2014 (in paragraph 432 of their summaries, note 194), which was attached as Appendix 14 to Mr. Shinar's affidavit (on page 174). They claim that in the transcript, Attorney Nof says that if it turns out that Ms. Or sold the tenants something on which an apartment cannot be built, then it means that "she has to return the money to you [emphasis added]." However, the defendants argued in their summaries with respect to this point (at paragraph 149) that from listening to the recording of that meeting, it emerges (Exhibit P/12, approximately from the minute 00:41:10) that the correct transcription of Adv. Noff's words is not "that she should return the money to you" (Appendix 14 to Shinar's affidavit, at page 174, Q. 27), but "the money must be returned to you." Indeed, after listening to the recording of the meeting (ibid. 00:41:28-29) I found that the defendants were right on this point. It is explicitly stated there that "it is necessary" to return the money to you. In addition, shortly before and after that quote, Adv. Nof did indeed explain about the emission mechanism anchored in paragraph 5.8 of the sharing agreement.
In this regard, it is not semantic. To the extent that Adv. Nof noted that Ms. Or would bear the additional fee, this reflects that the risk in this matter lies with her. But he did not say so, and according to the agreement, the person who is at risk is the entire group of 102. In the event that there are not enough housing units for all its members, the entire group will have to return their investment, which means that as a result, its financial balance will decrease.
- All of these show that the business solution that was found to the problem that there would not be enough apartments for the members of Group 102 was not to shackle the members of Group 104, but to formulate a compensation mechanism for those who would be left without an apartment after the completion of the work of the planning authorities. This is a solution that is indeed accompanied by a significant risk, but this risk was visible and known and was noted in the agreements signed by the plaintiffs. It was not the defendants who conceived the group's business structure, and as far as they were concerned, they fulfilled their duty while the state of affairs was evident from the contractual framework they formulated.
The plaintiffs' claim of negligence on the part of the defendants that they did not establish a fiduciary mechanism
- The plaintiffs claim (in chapter 15 of their summaries) that the defendants were negligent in not establishing in the agreements a fiduciary mechanism that would allow the money to be kept until the purchase of the land or until a building permit was granted.
- In order to evaluate this argument, it will be worth mentioning that the defendants did not represent the plaintiffs at the stage of negotiations prior to the conclusion of the sale agreement. Indeed, in a number of cases, a fiduciary mechanism was added to the request of concrete plaintiffs in the framework of a law they held (see, for example, paragraph 14 of Mr. Geva's affidavit). Nof estimated that there were a few cases in which class members raised a demand for this (p. 720, Q. 24-18), and no violation of those provisions was established where they were included.
- The plaintiffs did not prove their claim that the existing agreements included a general undertaking to hold the funds in trust. They referred to clause 3.6 of the joining form, where it was written that the initial contribution amount would be transferred "to the order of Adv. Guy Nof in trust", but immediately afterwards came clause 3.7, which states that "the initial contribution amount will be transferred [to] a seller and will be used, inter alia, for the purpose of making payments to the purchaser of the land by the owner". This indicates that there is no guarantee in the agreement that the amount paid will be held in trust even after the purchase of the land from the selling company. As may be recalled, clause 8.1 of the sale agreement (which lasted about four pages) stipulated that the provisions therein are exhaustive and do not apply to previous representations or promises of changes without anchoring them in writing.
The plaintiffs were also aware, or could have been aware of, that the money they paid was, in most cases, transferred directly to Green-City by bank transfer or by checks at its command. Therefore, their argument should not be accepted in their summaries (at paragraph 398) because only in retrospect did they learn that there was no trust account at all.
- After all this, the question arises whether the absence of a trust mechanism constitutes a deviation on the part of the defendants from reasonable standards? Should they have insisted - vis-à-vis Ms. Or - that the agreements would include such mechanisms, and does such non-insistence amount to negligence?
The defendants refer to paragraph 4.4 of the sale agreement, where another collateral, which is not a trust, was established for the proceeds. This is a registration of a lien with the Registrar of Companies on the rights of the seller in the sale, which will remain in effect until a warning note is registered in favor of the various purchasers. The plaintiffs, on the other hand, claim that this collateral is insufficient, since Ms. Or paid for the land in two installments, and if she had not completed the payment, the class members would have faced a broken trough.