"This is a clause of setting a general and flexible norm for the intervention of the court in order to establish a norm of fairness in the commercial field of running a company... The expression 'deprivation,' which replaced the expression 'oppression of the minority,' brought with it a liberal interpretation that makes it easier for the disadvantaged minority to receive relief against the discriminatory majority... The discrimination of the minority in a company is essentially a situation of unfair distribution of resources in the context of the relationship between the controlling shareholders of the company and minority shareholders in it... In the case of discrimination, the court is given extensive discretion with regard to determining the normative principles on this issue, and the appropriate remedies. The decision is made in each case on its own merits, and thus content is poured into the general framework set out in the law" (see paragraphs 7-11 of her judgment).
- The purpose of the remedy for the removal of discrimination is to provide the court with tools to deal with situations in which there is a concern of unfair distribution of resources between the shareholders, especially when it comes to a controlling shareholder versus a minority shareholder [see: Civil Appeal 8712/13 Adler et al. Livnat et al., at para. 65 of the judgment of Justice Danziger (Nevo, September 1, 2015) (hereinafter: "the Adler case")]. In addition, the provision is intended to provide relief to the deprived person and not to punish the deprived person - as a result, the existence of discrimination depends on the question of whether there is a depriving result regardless of the motives of the deprived person [see, for example, the Adler case, at para. 65; Opening Motion (Economic) 58628-11-17 Yoel Bondorovsky v. Uri Segal, at paragraphs 3-4 for the hearing of my judgment (Nevo, December 30, 2020) (hereinafter: "the Bondorovsky case")].
- The burden of proof that is placed on shareholders seeking relief in a case of discrimination is to prove prima facie the existence of the discrimination [see: Civil Appeal 5025/13 Pert Industries v. Dadoun Habib, at paragraph 8 of the judgment of Justice Hayut (Nevo, February 28, 2016) (hereinafter: " the Peret Industries case")]. To the extent that the plaintiff meets this burden, the burden of proof will shift to the defendant to show, according to the balance of probabilities, that the company was not managed in a manner that amounts to discrimination against the minority (see, for example: Civil Appeal 8857/21 Ginzburg v. Medipower, at para. 35 of the judgment of Justice Stein (Nevo, February 26, 2023) (hereinafter: "the Ginzburg case")].
- The court may grant a variety of remedies for the purpose of removing discrimination in a company or for the separation of powers between its shareholders [see: Civil (Economic) Case 56376-01-20 Tidhar Development and Real Estate Investments in a Tax Appeal v. Samuel Group in a Tax Appeal, at paragraph 43 of the judgment (Nevo, December 14, 2021) (hereinafter: "the Tidhar Case")]. When deciding on the appropriate remedy in the circumstances of the case, the following considerations may be considered, inter alia:
"...Considerations of justice; the good faith and cleanliness of each party; 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 that will be 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 special connection of each party to the company or its areas of business; and the power disparities between the parties - both economic power disparities and gaps on other levels." in verse 15].
- The court may grant a remedy of separation of powers in the event that a loss of confidence arises between shareholders in a company that is characterized as a "quasi-partnership", even without proof of discrimination in the circumstances of the case [see, for example: the Adler case, at paras. 72, 74; the Reiten case, at para. 21]. This is because in a company that is characterized as a kind of partnership, there is, among other things, a legitimate expectation of the parties to jointly manage the company [see: Adler, at para. 66; Civil Appeal Authority 9646/04 Haski Alon Initiation of Construction and Investments in a Tax Appeal v. Arie Michelson Entrepreneurship Company Ltd., 59(3) 380, at paragraph 4 of the judgment of Justice A. Grunis (2005) (hereinafter: "the Haski case")]. It should be noted that there is an approach according to which the remedy of separation of powers should be taken sparingly and only in exceptional cases [see: Civil Appeal 2376/21 Yosef Levy v. Yona Levy, at paragraph 13 of the judgment of President E. Hayut (Nevo, August 13, 2023); Civil Appeal 94/20 Tuvia Luskin v. Giv'ot Olam Oil Ltd., at paragraph 15 of the judgment of Judge N. Sohlberg (Nevo, August 18, 2022) (hereinafter: "Giv'ot Olam Case").
Is the company a kind of partnership?
- As a rule, the examination of a company as a kind of partnership for the purpose of granting relief for the removal of discrimination or the separation of powers must be done carefully, while analyzing the circumstances of each and every case. In the Adler case, Justice Danziger detailed an open list of auxiliary tests for the purpose of classifying a company as a kind of partnership for the purpose of discussing the cause of discrimination:
"Is the company's activity characterized by personal relations between the shareholders, which involves mutual trust; whether there is an understanding between the shareholders about joint management of the company's business; whether the shareholders have decided to impose restrictions on the transfer of shares in the company; What is the number of shareholders; And what are the relations of their holdings... Is it a family company; the extent to which the company's business is diversified; What is the company's profit-sharing and guarantee-taking policy; and how the parties chose to present themselves among themselves and vis-à-vis third parties - although it can be argued that these tests place too much emphasis on the form of the relationship between the shareholders rather than focusing on their essence" [Adler, at para. 77].