It should be added that Werber's claim regarding the immaturity of the system was not raised immediately, but it was explicitly raised in a letter sent to Froimovich and Werber's attorney on August 20, 2018, in which she wrote on their behalf that they "began to discover enormous gaps between the information presented by the Froimowitz about the system and its maturity and the actual reality" (Appendix 46 to Werber's evidence at p. 546; paragraph 32 of the letter). In this context, weight must also be given to the fact that Froimovich prevented Morber from having direct access to the system. This strengthens the credibility of Yonit's explanation that the announcement of the termination of the agreement stemmed from deception.
- Nor should the laconic nature of the initial cancellation letter be attributed to Werber. According to the case law, it is not necessary to explain the factual basis for the cancellation. In any event, Werber's claim that Froimovich violated clause 2.2 of the founders' agreement in light of the non-disclosure was true, as claimed in the initial cancellation letter, and in the letter dated August 20, 2018, the allegations of defects in will were explicitly raised in light of the discrepancy between the representations made regarding the maturity of the system and the actual reality. Therefore, there was no defect in the cancellation notices. There is certainly a connection between the letters and there is no reason to see Borber as not acting in bad faith, also taking into account the information gaps between the parties regarding the system that Shmulik was responsible for developing and Froimovich controlled exclusively (see, Friedman and Cohen (vol. 2), at pp. 519-522).
Hearing and Determination of the Remedies Requested in the Main Claim
Werber is entitled to a refund of the investment amount estimated from the date of filing the claim
- Werber entered into the founders' agreement, and as a result, they also agreed to the joint company entering into an agreement to purchase the system by the company, as a result of deception. Therefore, the cancellation relief to which they petition must be granted. As a result of the cancellation of the agreements, Werber is entitled to a refund of the amount of the investment in the joint venture company under the founders' agreement (which was used to purchase the rights from defendant 3) in the sum of ILS 500,000, which is estimated according to the Interest and Linkage Rulings Law from the filing of the lawsuit until the date of the judgment. The right to restitution when an agreement is cancelled due to deception is not subject to the conditions or questions of guilt, and in any case the defendants did not establish a claim that restitution is unjust (see, Civil Appeal 5393/03 Faraj v. Meital, para. 5 (January 18, 2015)). There is therefore no reason to reduce the amount.
Hearing of Additional Alleged Financial Remedies
- Alongside the remedy of canceling the agreement and restituting the investment amount, Werber petitioned for compensation for various expenses incurred as a result of the engagement.
- Where a contract is canceled due to a defect of will, including mistake and deception, the injured party may have the option of claiming reliance damages (also known as negative damages) for damages caused to him in connection with the negotiations and his reliance on the engagement (see Daniel Friedman and Nili Cohen, Contracts, vol. 4, 773-774 (2011); Civil Appeal Authority 2324/07 Burns v. Lebedansky, paragraph 8 (December 17, 2007); For details of different types of reliance damages, see Gabriela Shalev and Yehuda Adar, Contract Law - Remedies 48 (2009) (hereinafter: "Shalev and Adar"); Friedman and Cohen (vol. 1), 736-744). A possible normative source for this is in light of the violation of section 12(b) of the Contracts Law, which establishes a norm that requires good faith conduct in negotiations (see also: Civil Appeal 9019/99 Kinstlinger v. Elia, para. 9 (March 25, 2001); Civil Appeal 7730/09 Cohen v. Bnei Gazit (2000) Ltd., paragraphs 18-19 (June 6, 2011); see also Shalev and Mamach, at pp. 393-394). In some cases, the victim of deception may also have grounds for compensation under tort law (for example, according to the tort of negligence). The case law was based on the fact that these are grounds that fulfill a similar purpose of placing the injured party in the place where he would have stood had it not been for the engagement in the agreement (Civil Appeal 2720/08 Jean v. Liebman, paragraphs 27-28 (August 23, 2012)).
- Accordingly, the injured party should be awarded compensation for reasonable expenses incurred for the purpose of concluding the agreement as well as in connection with the realization of the engagement, provided that there is a causal connection between the expenses and the lack of good faith and the engagement in the agreement, and that these are foreseeable expenses by force or in practice (see, Shalev and Adar, at p. 48; Friedman and Cohen (vol. 1), 736-744).
Against this background, I will discuss the plaintiffs-Werber's claims for monetary compensation, as they are.
- The plaintiffs petitioned for a compensation award in the sum of ILS 1,000 for the costs of taking a loan for the purpose of financing the transaction, as well as for an additional compensation award of ILS 8,774 for the interest they were charged for the period from May until the filing of the claim. According to the defendants, the plaintiffs took the loan on their own accord and therefore should not be charged this amount. The plaintiffs attached a document dated May 15, 2018 regarding the taking of a loan, as well as details regarding the interest payments (Appendix 23 to the Werber evidence). It has been proven that the loan was taken for the purpose of paying Werber under the agreement (clause 1.4 of the agreement, Appendix 17 to the Werber evidence) and that these are expected expenses to finance a transaction in a substantial amount, which is an accepted practice. Accordingly, there is justification for charging the defendants this sum in the sum of ILS 8,774. I will note that Werber did not claim compensation for interest from the date the claim was filed onwards (if they had done so, there would have been no justification for making a revaluation under the Interest Ruling and Linkage Law from the date the claim was filed in light of double compensation). Therefore, it orders that the defendants be charged in the sum of ILS 9,774.
- The plaintiffs petitioned for compensation for the fees of attorney Uzi Mor, who handled the engagement between the parties in the sum of ILS 18,208 (Appendix 16 to the plaintiffs' exhibits file). According to them, even though the fees were high, they were forced to bear it in view of the timetable for signing the contract prior to the planned launch, and taking into account that Shmulik had indicated to them that his lawyer would not have time to prepare the documents before the launch of the system (paragraphs 79-80 of Yonit's affidavit; paragraphs 77-78 of Tzachi's affidavit).
Werber would not have borne this expense if it had not been for their engagement with Froimovich in the transaction due to such deception, and therefore there is a causal connection. Although the plaintiffs themselves noted that this was a high fee, the defendants did not lay an evidentiary basis for the fact that this was an unreasonable expense, given the totality of the circumstances - the scope of the work and the tight schedules for handling the transaction that Shmulik pressured to complete. Therefore, orders that the defendants be charged in the sum of ILS 18,208.
- The plaintiffs petitioned for compensation for payment to ActiveTrail from May until the date of filing the claim in the sum of ILS 1,630 (an invoice was submitted as Appendix 29 to the plaintiffs' exhibits file). According to them, in light of malfunctions that occurred in the system's previous mailing services, they contracted with the "ActiveTrail" company and bore this payment out of their own pocket. The defendants did not argue regarding this payment.
The evidence indicates that the mailing system was essential for the purposes of marketing the venture and managing customer relations. Therefore, the required causal connection exists. I will note, in this context, that from the correspondence it appears that Shmulik was aware of the use of the system, and it even emerges from the evidence that he submitted a request to connect the "ActiveTrail" mailing system to the clearing software (paragraph 19 of Racheli's affidavit; correspondence between Yonit and Shmulik dated May 12, 2018, at 22:26 (exhibit P/3) and dated May 14, 2028, min. 9:32 (P/5)). Accordingly, orders that the defendants be charged in the sum of ILS 1,630.
- The plaintiffs petitioned for compensation for payment for a conference room in Binyamina in the sum of ILS 281 that they rented in order to hold a meeting of the board of directors on May 15, 2018 (paragraph 105 of Yonit's affidavit, Appendix 36 to the plaintiffs' evidence). The defendants did not argue in this matter and Yonit's testimony was not contradicted and is consistent with the date of the invoice. This is a reasonable expense caused by the engagement and therefore orders the defendants to be charged in the sum of ILS 281.
- The plaintiffs petitioned for compensation for expenses incurred for the launch event for lecturers planned at the Herzliya Marina in the total amount of ILS 26,448. This sum includes a total of ILS 11,407 for photography services; 600 ILS for makeup for photoshoots; ILS 1,844 for refreshments; 133 ILS for sweets; 5,756 ₪ for graphics; 351 ILS for prints; 562 ILS for the purchase of rollers and transportation; ILS 5,795 for renting a place in the marina in Herzliya (the invoices were attached as Appendices 24 and 37 to the plaintiffs' evidence). According to the defendants, the original plan was to hold a launch at a lower cost by broadcasting on the Facebook page, but the plaintiffs were the ones who insisted on a "luxurious event at a very high cost" (paragraph 74.2 of the statement of defense). This is despite the fact that those who were already lecturers and subscribers of the project were invited to the event in a way that did not bring much benefit to its development, and taking into account that many of the invitees announced that they would not come to the event or did not confirm their arrival. According to the claim, the defendants raised these questions to the plaintiffs, but they insisted that this was their area of expertise. Because Werber was indeed in charge of this area, Froimowitz cooperated, they claimed, even though they believed that from the outset they should act differently. It was also claimed that the photography services provided also included private photographs of Werber, which were not related to the project.
There is indeed a causal connection between the expenses for the event to launch the venture and the deception. However, I do not believe that these are expenses that meet the test of expectation and reasonableness. Yonit testified that the launch event was in consultation and transparent with Shmulik, but admitted that he had reservations about it a few days before the event, noting that it was a waste of time and money (paragraph 109 of Yonit's affidavit). This testimony supports Shmulik's testimony that before the event they understood that few people had approved to attend the event and that most of them announced that they would not be able to attend and thought it was better not to invest the money in the event, but Yonit did not agree and promised that the event would be a great success (paragraph 93 of his affidavit). In these circumstances, we are dealing with, as stated, expenses that do not meet the tests of expectation and reasonableness, and the plaintiffs' demand for compensation for which is denied.
- The plaintiffs petitioned for compensation for payment to Racheli Zusiman in the sum of ILS 1,740 (an invoice was submitted as Appendix 26 to the plaintiffs' evidence). Yonit testified that shortly after the system was installed, they contacted Froimovich to ask whether all the tests had been performed. After being told that there were additional tests that needed to be completed, they turned to Racheli, whom they had used in the past, and asked for her help in this matter while paying her out of their own pockets. They made a connection between Racheli and Froimovich, with Keren sending Racheli a test sheet for execution (paragraphs 88-90 of Yonit's affidavit; paragraphs 86-88 of Tzachi's affidavit). Shmulik testified that Racheli did not work through them, while Yonit was Racheli's direct manager (paragraphs 81 and 110 of his supplementary affidavit), but his version cannot be accepted. The evidence indicates that Racheli received direct instructions from Keren (Appendices 25 and 48 to the plaintiffs' evidence; paragraph 4 of Racheli's affidavit and her testimony - transcript of December 31, 2024, at p. 35, paras. 1-3). This is an expense that meets the tests of reasonableness and causal connection, and accordingly orders that the defendants be charged in the sum of ILS 1,740.
- The plaintiffs petitioned for compensation for payment to attorney Irit Hacohen for legal advice for drafting agreements for lecturers at Biz Academy in the sum of ILS 16,848 (Appendix 5 to the plaintiffs' evidence). According to the defendants, the engagement with Adv. Hacohen was not in connection with their relationship with the defendants, but rather a personal service for the plaintiffs regarding their collaborations with lecturers for the purpose of creating courses outside the framework of the venture. It was further argued that the invoice submitted did not include details regarding the services provided.
The plaintiffs have not been able to raise the burden of proof to establish that there is justification for compensating them for this cost, and therefore the demand for compensation is denied.