In addition, I do not find it correct to rule that the plaintiff's conduct in this proceeding amounts to bad faith, which would turn the option clause into a combination charge. Such a decision will be made sparingly and in exceptional circumstances that justify intervention in an agreement between the parties [Shalev and Mach, at p. 581]. Admittedly, doubts may arise as to the plaintiff's refusal to bear the company's legal expenses. However, the existence of a dispute between the parties regarding the plaintiff's liability to fund legal expenses, in and of itself, does not attest to a lack of good faith that justifies such a decision. This was against the background of the dispute regarding the debt that the company allegedly owed to Gazit, and at a time when such a claim was not explicitly raised by the defendant. At the same time, it was not claimed that the agreement was void due to a breach on the part of the plaintiff and that upon its cancellation the option clause was canceled. No evidence was presented that a cancellation notice was sent. It seems that the claim was made obviously, with all due respect.
What is the appropriate remedy for the separation of powers between the parties?
- In light of the above, I have reached a number of conclusions in the circumstances of the case:
- The company operates as a kind of partnership between the parties.
- A loss of trust has arisen between the parties, which requires a remedy of separation of powers.
- In certain respects, the defendant behaved in a manner that constitutes discrimination against the plaintiff, or there is a substantial fear that he will conduct himself as aforesaid.
- The defendant's arguments regarding the unwillingness to exercise the option clause should not be accepted.
- It seems to me that there is justification, in the circumstances of the case, to order a remedy of separation of powers under section 191 of the Companies Law - however, the correct way to carry out such a separation must be examined. In the Magenzi case, Justice Amit discussed the considerations that must be taken into account when determining a mechanism for removing discrimination or separation of powers in society:
"Considerations of justice; the good faith and cleanliness of each side; the willingness of a party to resolve the dispute peacefully; the degree of deprivation; the holdings of each party and the amount of its investment; the benefits that each party will derive against the damages caused to each party as a result of the relief that will be given; damages that will be caused as a result to third parties such as employees and suppliers (the winery employed seven or eight employees, as indicated in Appendix H to Levy's summaries and the liquidator's reports); the special affinity of each party to the company or its areas of business; and the power gaps between the parties - both economic power gaps and gaps on other levels" [Magenzi case, at p. 15].
- First, I will address the plaintiff's request to liquidate the company with a division of its assets in kind. As is well known, companies that are characterized as quasi-partnerships are subject to certain principles that were directly derived from the law of partnerships, particularly in matters related to the dissolution of the corporation [Adler, at para. 74; Civil Appeal 283/62 Avraham R. Hess v. Helena Laszlo, 17 SC 758, 764 (1963)]. In partnership law, the dissolution of a partnership can derive, inter alia, from a partner's demand to dissolve the partnership or by virtue of the court's determination that it should be dissolved for reasons of justice and honesty [ibid.; Section 45(6) of the Partnerships Ordinance]. Israeli case law has also applied the principles in question to companies that are characterized as quasi-partnerships [see, for example: Civil Appeal 161/76 Amos Stiebel v. Stiebel Ltd., 32(1) 510, 514-15 (1978)].
- However, the liquidation remedy is an extreme remedy with regard to the separation of powers between the parties. The trend in case law is that liquidation relief will be granted sparingly and in rare cases, taking into account the possibility of granting an alternative remedy to the liquidation remedy [see: Adler Case, at para. 84; Civil Appeal Authority 5596/00 Shulamit Stavi v. Shauli Nahusi (Nahum), 57(1) 149, 156 (2002)]. This is a place where the company has found itself in a complete paralysis between the shareholders, so that it is not possible to bring about a solution in an alternative way. There is a tendency to prefer alternative remedies for liquidation that derive from the court's powers by virtue of section 191 of the Companies Law, including remedies of forced acquisition and various methods of pricing [Adler, at para. 90].
- In our case, I am of the opinion that there is no reason to order the liquidation of the company with a division of its assets in kind. The non-joining of the company as a litigant constitutes a consideration , albeit not exclusive, against the granting of relief with such significant implications for it. Moreover, the plaintiff did not meet the burden of proving how a liquidation remedy is necessary in the circumstances of the case when there are alternative remedies that can protect the plaintiff from future deprivation. The plaintiff herself chose the remedy of enforcing the exercise of the option in her hands as the primary remedy. In such a situation, I see no need to deviate from the path of the king.
As stated, the plaintiff did not prove why a liquidation relief is preferable to alternative remedies in the present proceeding, and I have not found that there is complete paralysis in the company to the extent of justifying such a remedy [compare: Giv'ot Olam case, at paragraph 118 of the judgment of Justice D. Barak-Erez]. It is not superfluous to note that the liquidation of the company may entail procedural implications, taxes, and implications for third parties, against an unproven benefit, even in a basic and prima facie manner, in the present proceeding.
- What, then, is the most appropriate separation of powers mechanism in the circumstances of the case? In the Adler case, it was held as follows:
"The court has at its disposal a very wide range of remedies, each of which has advantages and disadvantages that characterize it. Due to the unique characteristics of the remedies, for any situation in which the court requires a separation of powers between the shareholders, the most appropriate remedy can be tailored to it: in the classic situation in which there is a disadvantaged and a disadvantaged - the way to go is to purchase the shares of the disadvantaged by the disadvantaged according to the value of a company that takes into account the deprivation; In a situation where there is a need for a separation of powers between the shareholders and in which there is no discrimination, or where it is exploited by the conduct of the disadvantaged - the way to go is to bid between the parties using the envelope method. It should be clarified that the aforesaid does not deprive the court of the possibility of applying to a particular case, in view of its unique characteristics, a different method of pricing" [ Adler, at para. 90].