Civil Case (Tel Aviv) 17456-12-18 Yonit Werber v. Shmuel Froimovich - part 5

For the sake of good order, and in the spirit of our recent conversations, the following is a written breakdown of our announcement.

In light of fundamental breaches on your part in the engagement between us, including, but not limited to, the Share Purchase Agreement, we hereby notify you of the termination of the agreement between us.

By virtue of the cancellation due to the fundamental breaches that were discovered before us, which had it been known to us, at the time we signed the agreement, we would never have entered into contact with you, we demand that the total amount of money transferred by us be immediately returned to us, including but not limited to the sum of ILS 500,000 that was paid by check on May 17, 2018, and the total amount of ILS 50,631 that was paid by us for the benefit of the activity.

Let us know how you would like to arrange the detailed restitution.

Best regards

Tzachi and Yonit Werber

33. After the aforementioned correspondence, the conduct between the parties was mainly through their counsel in the months of July to December 2018, when accusations were raised by each of the parties against the other in the correspondence (Appendix 30 to the Fraimovich evidence, Appendix 46 to the Werber evidence).
34. When the parties did not reach agreements, the lawsuit under the heading was filed. Werber's main argument is that Froimovich presented the system at the time of acquisition as fulfilling all the actions required for the operation of the venture, but in retrospect it turned out that the system was not fully developed and that it had many defects in a way that did not comply with the requirements of the venture. If they had known the circumstances, they would not have joined the project.
35. Froimovich claimed that they did not present the system as perfect and that it was a technological product that required adjustments and improvements. If there are deficiencies in the system, this does not justify the cancellation of the agreement and can be corrected. This is while emphasizing that the system was sold "AS IS". It was also claimed that Werber was the one who breached their obligations by ceasing to fulfill their role in the venture, and therefore Froimovich was forced to assume responsibility in the areas to which Werber was entrusted as well.

Main Claims (Werber's)

36. According to Werber, in December 2017, Shmulik contacted them and presented them with the project, which was presented as "secret" and as one that could cause "a revolution in the field of information products in Israel and around the world [emphasis in the original - L. G.]." It was claimed that Froimovich presented himself as someone who worked for a long time to establish an internet system in which many digital courses would be concentrated under one roof that would be accessible to the public at the cost of a monthly subscription that is equal to everyone (compared to purchasing a few courses from a particular lecturer at a high cost). The project was presented as one that would initially present courses in the field of knowledge products for business owners and in the future would develop into other fields.
37. It was also claimed that Lorber was presented with a plan that is expected to generate a permanent passive income, almost effortlessly, due to the affiliate marketing program. Shmulik, it was claimed, presented the venture while emphasizing that it was "a brilliant system at the technological level that he developed due to its ability to automate real-time calculations of the commissions due to the venture's marketers."
38. It was claimed that Shmulik, who knew that he had influence on Werber and was familiar with their business potential in the public, acted in a "work of thought" so that Werber would admire the venture and "the revolution that will take place in the future as a result of the system developed by the defendants and was ready to be launched in the coming weeks."
39. Werber first joined the venture as lecturers and for more than three months they worked to create courses for the project with a variety of lecturers, claiming that they significantly reduced their business activity. This is under the promise that they will be entitled to a commission as the first in the "marketing tree" in a way that will earn them hundreds of thousands of shekels for each course they take.
40. According to Werber, at a later stage, Froimovich offered them a "once-in-a-lifetime" business opportunity - to become partners in the venture. This was after Froimovich told Werber that they believed there was a sufficient base of courses, while telling Werber that they would be "the people of the people", that is, they would make the masses join while showing Werber the great potential inherent in the project.
41. It was claimed that Froimovich presented the venture as being worth millions at the time of its launch, and it was also expected that the value would increase over time. Froimovich asked for a 55% stake in the venture and Werber's balance, while allegedly allowing Werber to offer a consideration as they saw fit for their share in the company. It was further claimed that when Shmulik was asked why he needed partners when the system was operating itself and millions were flowing, he replied, "I believe in the natural laws of abundance and its distribution with others [emphases in the original]."
42. After many pleas and persuasion on the part of Froimovich, including that Schwerber would lose their "opportunity of a lifetime", Werber agreed to invest in the venture as partners in the sum of ILS 500,000, and on May 3, 2018, the parties signed the founders' agreement and the aforementioned acquisition agreement.
43. The project was launched on May 7, 2018, and later Werber held a launch party at the Herzliya Marina, to which a large crowd was invited. On May 18, 2018, Werber issued direct mailings about the project to their entire mailing list.
44. In a meeting held between the parties on May 22, 2018, Shmulik stated that there was a malfunction in the "marketing tree" that shows as a subscriber anyone who was interested in the system (and left details on the landing page) and did not necessarily purchase a subscription after he finished clearing a means of payment. This led to misleading marketers about the expected commissions they were entitled to.
45. Within a short time after the investment and Werber's becoming partners in the venture, they realized, according to them, that they had fallen victim to fraud and that there was no connection between what was presented to them and the results and capabilities of the system. They began to receive complaints from customers and lecturers about the failure to transfer commission payments as promised, the system's impropriety, and its failure to meet the obligations presented.
46. Each time Schwerber asked for information or access to the system in order to respond to the complaints directed to them, they claimed, they were blocked by Froimovich with expressions of violence that caused the plaintiffs, whose ways are pleasant ways, to feel difficult feelings and discouragement. Werber was stunned.
47. Werber and the lecturers realized that their fees were not calculated by the system or were not documented according to the calculation of the affiliate program as promised, and Werber began to receive, according to them, a flood of unpleasant complaints regarding the quality of the system and the integrity of its content, and as the complaints intensified, the good reputation that Werber had accumulated began to crack. This, while Werber is at the forefront of the customers. In retrospect, Lerber even found out, according to them, that Froimovich handles the system manually and that Shmulik enters data, while the defendants refuse to give them access to the "behind the scenes" of the system.
48. According to Werber, in the meeting between the parties, Shmulik promised that he would provide them with the necessary information and that the defendants would do everything in their power to correct the distortion and to reduce the huge gap between the misrepresentations and reality, and in order to reduce the damage resulting from a dysfunctional system. However, when Werber sent Froimovich a questionnaire with requests for clarification, the defendants gave empty answers, evasive and vague and did not allow access to the system and the necessary information.
49. As time passed, Verber realized, according to them, that they had fallen victim to false and deceptive representations on the part of Froimovich, and that there was no correspondence between what was presented to them and the system's actual execution capabilities. Beyond the manual calculation of fees that turned out to be done by Shmulik in retrospect, Lerber later found out, according to them, that Froimovich's commitments to the functions of the popularity index for various designated courses and forums were also not fulfilled. These, too, turned out to be false promises, it was claimed.
50. The mental anguish and humiliation stemmed, among other things, from the fact that Verber was presented as representatives of the system who worked to market it, while in the early stages of the business engagement it was said that Verber would be the "people people" who would promote the system through their extensive community and reputation, while Froimovich would be responsible for the technological side. When it became clear that the system was built on misrepresentations, their reputation as opinion leaders for a broad community was damaged and they had to deal with a barrage of complaints.
51. On May 31, 2018, Werber informed Froimovich that they were not continuing with the project; Because the conduct is harming their health and they are unable to continue. According to them, if they had been presented with the correct representation in the first place, they would not have entered into the transaction at all. On June 17, 2018, Werber announced the cancellation of the engagement and demanded to receive back the "investment funds".
52. In the statement of claim, Werber demands the return of the payment they made for the system in the sum of ILS 500,000; ancillary expenses that involved the engagement between the parties in the amount of more than ILS 300,000; compensation for loss of income as a result of the engagement in the amount of approximately ILS 300,000; and compensation for damage to their good name in the sum of ILS 250,000. They also petitioned for various injunctions (section 58 of the lawsuit).

The main points of the statement of defense and the statement of counterclaim (by Froimovich)

53. According to Froimovich in the statement of defense and the counterclaim they filed, they met Werber several years before the formation of the "Biz Academy" venture. This venture was developed by Froimovich with a considerable investment of knowledge, time, money and effort. Froimowitz hung their professional and economic future on him.
54. In one of the meetings, Schwerber and Froimovich held from time to time, Fraimovich told Werber about the project, and after Werber was enthusiastic about the idea, contacts were held to add Werber as lecturers whose courses would be included in the project, and later Werber even worked to recruit additional lecturers.
55. In contrast to Werber's version, according to which Froimovich suggested that they join as partners in the venture, according to Froimovich, at one point Froimovich and Werber told them casually that they did not understand why they were trying to raise the venture on their own and did not offer them to join as partners. This statement fell on a listening ear to Froimovich, who recognized the many advantages that Werber could bring to the venture, including their expertise in affiliate marketing and content creation. Froimovich believed and expected that the partnership would contribute to the venture and that the joint work of the four would enable the realization of the venture's business potential. The parties negotiated and it was agreed that Schorber would join as partners, in accordance with their proposal, in exchange for a sum of ILS 500,000 for 41% of the share capital in the joint company. The aforementioned agreements were signed between the parties - the founders' agreement and the agreement to purchase the system - and the venture went live shortly afterwards.
56. According to Froimovich, it was agreed that Shmulik would be responsible for the technological aspect of the activity; Keren will be responsible for customer service and bookkeeping; Tzachi will be responsible for the relationship with the marketing partners; And Yonat will be the community manager of the project, including responsibility for activities on Facebook, recruiting lecturers and ongoing contact with them. This was, it is claimed, the basis for the partnership.
57. For a short period of time, Schwerber seemed to be cooperating and making joint efforts to develop the venture and promote the joint company's activity. However, after a short period of time, Werber announced "as a surprise and without any prior notice" that they wanted to withdraw from the venture and asked Froimovich to purchase their shares in exchange for the amount they invested, plus additional sums that they later invested.
58. Froimovich rejected this announcement and clarified that a binding agreement had been signed between the parties and that Werber was not entitled to demand the cancellation of the agreements unilaterally. They also added that Werber plays an important role in the development and success of the venture, and that in any case, Froimovich does not have the necessary financial resources to acquire Werber's share in the joint company. In response, Werber announced that they were disappointed with the response and that they intended to operate in the company only as shareholders and directors, while stopping activity in the areas for which they were responsible and causing damage to the venture.
59. Froimovich did not understand, according to them, the change in Werber's approach and assumed that it was a temporary crisis, after which Werber would return to cooperating with them on the venture. It was claimed that Froimovich did not have the knowledge and experience in the areas in which Werber was entrusted and that they could not pay third parties to fulfill their duties because Werber refused to inject additional funding into the venture.
60. It was also claimed that Schurber disavowed the venture and even had time to invest in new ventures, while Froimovich continued to invest in the company's activities. In the absence of cooperation on the part of Werber, and since according to the founders' agreement, the signing rights in the company are shared by both parties, Froimovich was forced to manage the venture through KSA (defendant 3).
61. On June 11, 2018, a meeting of the Board of Directors was held. Froimovich asked Schwerber to pay them a salary for their work at the company in the sum of ILS 15,000 each in light of Werber's abandonment of their positions in the company, as well as to make a decision on the injection of capital into the company by the shareholders for the purpose of financing it. The parties did not reach an agreement because Werber objected to bearing the funding of the salary. On June 14, 2018, a meeting was held via video call, during which Werber announced that they were not willing to appoint a CEO for the company or to inject capital into the company, and that they were looking for an investor to acquire their stake in the company. Werber also refused to sign documents that would allow the company to open a bank account in a way that did not allow the company to open a file with the tax authorities and in a way that caused the company to not be able to pay the ISI thetax appeal for the purchase of the system.
62. Shortly thereafter, on June 17, 2018, Werber announced the cancellation of the agreement between the parties in light of fundamental violations. Froimowitz claimed, in this context, that Schwerber did not explain the alleged infringements, but rather noted in general that the system did not conform to the representations made about it. In this context, Froimovich claimed that no representations were made regarding the system; that the system has performed all the actions it was required to perform; that Werber tested the system through a third party on their behalf and found it to their satisfaction; Because Froimowitz did not present the system as perfect; that according to the purchase agreement, the system was sold "AS IS" while the meaning of this term was explained to Lorber; and that Werber was represented by an attorney on their behalf.
63. Froimovich further claimed that they did not present any representation or promise that the venture would generate income of hundreds of thousands of shekels without any effort, and that this was a discount based on Werber's feelings. It was argued that as with any business venture, the venture in question also requires investment, including marketing, recruiting lecturers, technological development and renewal, and more. Otherwise, it is prone to failure. According to the business model underlying the venture, it is possible to profit from recruiting subscribers for up to five generations, but this does not create an income of hundreds of thousands of shekels without any such effort. According to Froimovich and Werber, they saw only the economic potential inherent in the venture and had no intention of investing effort in realizing this potential. With regard to Werber's claim regarding the remuneration of lecturers according to the popularity index, it was argued that the parties have not yet formulated the method of calculating the remuneration and the criteria that will apply in this matter.
64. With regard to Werber's claim that the system does not calculate the fees as required, it was claimed that at the time of the launch, the system did indeed introduce the marketers to customers who had only expressed interest and did not complete the actual subscription purchase process in the "marketing tree", but the calculation of the fees was accurate and was based only on customers who had completed the registration process. It was argued that a distinction must be made between the calculation that was correct and the display that was wrong. This is not a flaw in the system, as Werber claims, but rather a development that required adjustments and improvements.
65. In response to the claim that Froimovich did not allow Werber access to the system, Schurber and their expert, Ms. Zusiman, were given access to the project's email box and the system's software as admins. Only after Werber unilaterally announced their withdrawal from the project did Fromovich block their access to the system. It was renewed again after an attempt was made to bridge the disputes, and was blocked again after Werber refused to cooperate with the project and announced that they were "considering their next steps."
66. According to Froimovich and Werber, the founders violated the agreement by illegally sending a cancellation notice and ceasing to fulfill their obligations in the venture in those areas that were under their responsibility. In doing so, they caused damage to the company and to Froimovich.
67. It was argued, in this context, that Yonit, who was responsible for the relationship with the lecturers and was responsible for managing the lecturers' Facebook group, caused significant damage to the project. It was also claimed that not only did Yonit ignore the questions of lecturers in the joint group in a way that left questions and questions unanswered for days, but on August 1, 2018, she also published a post that caused damage to the project and led to negative reactions among the lecturers - who are the most important asset in the project - in the following words: "Dear friends, as you have probably already understood... There are issues with BizAcademy, and indeed things in reality are far from those that have been presented. Since we have also been in the dark for some time, I suggest that you direct all questions to the email address..."
68. Even after this post that Yonit made in the group of lecturers, it was claimed, Froimovich continued to make enormous efforts in order to save the project and develop it, while spending very high sums of money for this purpose. However, in parallel with Froimovich's efforts to save the venture, and Werber filed the lawsuit against them in order to exert pressure on them and in violation of their obligations.
69. In the statement of counterclaim (which was filed for the purpose of a fee in the sum of ILS 600,000) and in the statement of defense (as an offset claim), Froimovich recounts claims of various damages caused to them as a result of Werber's conduct:
70. According to Froimovich and Werber, in their conduct, they caused damage of ILS 85,000 by not agreeing to sign the joint company's account opening documents. This resulted in the fact that it was not possible to pay the tax appeal to defendant 3. Werber ultimately signed the accounting documents only on December 20, 2018, and as a result, Froimovich did not have time to submit the invoice issued by KSA to the company, and therefore the amount of ILS 85,000 was not deducted from the tax appeal as input tax. It was also argued that Werber should be charged the sum of ILS 6,641 for interest taken by KSI to finance the payment of the tax appeal in the transaction for the purchase of the system.
71. Froimovich also claimed that a loss of ILS 341,587 should be attributed to Werber of KSA. Werber's non-cooperation in the venture meant that it was not possible to continue managing the venture through the joint company. Froimovich, who wanted to continue the venture's activity, were forced to do so through KSA, which remained in deficit. According to Froimovich, the venture's revenues were ILS 169,288 and its expenses were ILS 474,353 (commissions for marketing partners in the amount of ILS 36,522 and salaries for Froimovich in the amount of ILS 474,353). According to Froimovich, Werber should be charged Shmulik and Keren for their work in connection with the venture in the sum of ILS 15,000 per month each).
72. According to Froimovich, Werber should also be charged the sum of ILS 570,000 for the purposes of rehabilitating the venture, as well as the cost of recruiting officials for the venture in the areas of responsibility that were imposed on Werber.
73. Froimovich further argues that Werber should be charged the sum of ILS 1,826,300 for Froimovich's share of the profits that the venture might have yielded had it not been for Werber's conduct, and that Werber should be ordered to pay compensation in the sum of ILS 349,200 for a breach of the non-competition provision in the founders' agreement (in clause 11.2), which Werber allegedly violated.
74. Froimovich further claims that damage was caused to their good name and for this they petition to charge Werber in the sum of ILS 250,000.
75. Finally, it was argued that Werber should also be charged ILS 20,944.44 for expenses incurred by Froimovich for the purpose of recruiting an investor for the company instead of Werber.
76. As for Werber's claims for awarding various sums for the venture's expenses and damages caused to them:
77. Froimovich claimed that they had spent sums for the joint company and the venture that significantly exceeded those mentioned by Werber in their statement of claim. It was further argued that even if there are justified expenses, they should be attributed to the company and not to Froimovich personally. As for the return of the purchase amount, Froimovich replied that the purchase agreement was drawn up between the company and KSI, and therefore Lorber had no personal rivalry with KSA. Alternatively, a total of ILS 85,000 must be deducted for a tax appeal that was not paid to the VAT authorities. It was further argued that the plaintiffs' share in the company is 41%, and therefore at most the amount to be returned for the purchase of the system is ILS 170,150, from which the cost of the damage caused to the company due to Werber's conduct must be deducted.
78. Regarding Werber's claim to repay the loan to finance the transaction, they took the loan on their own. Therefore, Froimovich does not have to bear this expense. As for Adv. Mor's fees, Froimovich refused to hire the services of Adv. Mor and Werber undertook to bear this fee. Therefore, Froimowitz does not have to bear this payment. The expenses for filming the launch event of the venture include private work for Werber and should not be attributed to the company; An expense for makeup was not included in the list of expenses that Schorber attached to the cancellation notices on their behalf; Adv. Hacohen's advice was given even before Schurber decided to join the venture and she also helped formulate agreements with lecturers, but not necessarily in connection with the project. It was further claimed that these expenses were also not included in Werber's list of expenses and that the invoice they attached did not specify which services were spent.
79. As for the alleged expenses for the development of digital products, it is claimed that these are products that were developed before Schorber joined the venture. In addition, the products remain owned by Werber and they sell them regardless of the venture (in violation of the non-competition clause in clause 11.2.1 of the Agreement).
80. As for Werber's claim for compensation for loss of revenue due to the marketing of Werber's courses, it was claimed that Werber did not specify which courses were involved, and what was the connection to Froimovich or the venture. As for the alleged damage to Werber's reputation, Schwerber claimed that it was they who damaged Froimovich's good name by recruiting most of the lecturers to the project. Regarding the removal of Werber's details and courses from the project's website, it was claimed that the removal would increase the damage already caused to the project and to Froimovich, and that it would even entail a financial cost for the services of a programmer who would remove the content and upload alternative content.

The main points of Werber's counter-statement of defense

81. According to Werber, the counterclaim was filed for tactical reasons only. It was argued, inter alia, that the claim should be dismissed in the absence of details of the alleged contractual breaches, the source of the contractual obligation, and the causal connection between the alleged breaches and the alleged damages. It was further argued that Werber's duty of care and fiduciary duty is not towards Froimovich but towards the company.
82. Werber emphasized that their joining as lecturers and later as partners in the project was based on the presentations that Shmulik presented to them: that the system is ready for launch and is functioning technologically; that it performs all the actions that it has promised to carry out for the purpose of the venture; the economic potential inherent in the venture; That this is passive income and that a lot of work or significant expenses are not required to operate the venture or system. It was claimed that Froimovich presented the system they developed as a project that actually works, and not just as a "business idea." In retrospect, all of this turned out to be a misrepresentation.
83. Regarding the activity and investment in the venture, Werber further argued that the agreements that were signed do not establish responsibilities for the parties and that a demand in this regard was not raised in the negotiations. It was claimed that Froimovich presented the project in such a way that, beyond recruiting lecturers, there was no need to operate the system in view of its features and capabilities. The request for division of duties was first raised, according to Werber, at a meeting held on May 15, 2018. Werber agreed to take on additional work for the venture to succeed, but they could not cooperate with Froimovich due to a lack of transparency on their part and after making false representations.
84. Werber also emphasized their reputation in the field of personal and business consulting; A reputation on the basis of which Froimovich allegedly sought to recruit additional lecturers. It was claimed that Froimovich instructed Werber on how to present the system and the benefit to the lecturers, and they even gave Werber the names of lecturers who were unable to recruit themselves so that Werber would act to recruit them. It was claimed that Froimovich put Werber as the "people of the people" in order to absorb the customers' complaints, using their reputation, which was damaged by the misrepresentations made by Froimovich. If Froimovich had presented Werber with the correct and complete information, Werber would not have entered into a deal with them.
85. It was further argued that the engagement between the parties should be considered as incomplete, or that Froimovich should be considered as having not performed their part in the engagement. Although the company was established and a bank account was opened in its name, Froimovich did not transfer the system from KSI in the name of the joint company.
86. Werber emphasizes that the cancellation notice was given lawfully and that they are entitled to a refund of the amount they invested in the venture and compensation for the damages caused to them as a result.
87. Werber further claimed that they did not cause any damage to the venture and did not breach any contractual duty or obligation as shareholders, as Froimovich claimed. They cooperated in opening the bank account and a delay caused by Froimovich. Since Werber was not obligated to take any role in the venture, it is also not possible to claim that the cessation of their activity in the alleged areas of responsibility caused damage.
88. As for Schwerber's claim that they did not approve the payment of wages to Froimovich and did not agree to invest capital in the company, it was claimed that the payment of salary to Froimovich was contrary to the agreements between the parties and that there was no need to invest additional funds in the venture at all. It was also claimed that Froimovich did not detail the alleged investment they made in the company. Accordingly, there was also no need to appoint a CEO, as Froimovich demanded.
89. With regard to Froimovich's claim that Werber did not transfer the amount of the tax appeal as required, it was argued that Werber did not breach any obligation. In the founders' agreement, it was stipulated that Schorber would transfer a sum of ILS 500,000, including VAT, while in the purchase agreement, Froimovich added ILS 85,000 from the tax appeal. Hence, the obligation to appeal taxes applies to the company and not to Werber.
90. In response to Froimovich's claim that Adv. Mor represented Werber only, and Reber replied that although they were the ones who paid Adv. Mor's fees, he represented both parties in the contract. With regard to Froimovich's claim that the system was sold as IS, it was claimed that Adv. Mor proposed a wording according to which the system was finished and ready to go live, but Shmulik objected to this. He suggested that the system be sold as IS as there would be further developments in the future. This is without presenting the situation in its entirety at the time with regard to the system. Werber did not imagine that the system was not ready at all, so they agreed to change the wording at Shmulik's request.

The main points of the reply in the counterclaim (by Fromovitz)

91. Froimovich reiterated in the response that the system is in working order and performs the functions required for the venture, and that Schwerber purchased the AS IS system after professionals on their behalf checked it. According to Froimovich, during the conversation with Adv. Mor, both parties noted that the definition according to which the system is "worthy and fit to go live" does not reflect its actual situation at the time, and therefore the system was sold as IS.
92. Froimovich further claimed that the affiliate marketing system is not only a technological product, but first and foremost a business and marketing idea. The system developed by Froimovich supports this marketing method from a technological point of view, so that it can automatically identify a subscription that came following one of the marketing partners and assign to that marketing partner the commission due to him for recruiting that subscriber.
93. As for Werber's claim that the agreements signed between the parties do not obligate them to take additional positions in the venture, Froimovich argued that in view of Werber's agreement to take the roles, they are bound by this and cannot unilaterally breach this undertaking. It was also claimed that Froimovich made it clear to Werber that the establishment of the venture required action, and against this background, Ferber agreed to join the venture as partners.
94. In response to Werber's claim that the system did not change the name of the joint company, Froimovich replied that at the meeting of the board of directors on June 11, 2018, the parties agreed that the venture would be conducted under the name of KSA because the joint venture had only been established and could not clear credit. This was purely a technical consideration.
95. Regarding Werber's claim that they were not required to pay the VAT, it was claimed that it was agreed between the parties that the payment of the tax appeal would be made by way of a refund from the tax appeal received by the joint company from the tax authorities. However, Werber delayed the opening of the bank account and the registration of the company as a licensed dealer, and therefore it was not possible to complete the VAT refund process at that time. Only after the company was registered as an authorized dealer did the tax appealing authorities recognize the late submission of the purchase invoice and the amount of the tax appeal was transferred to the company's bank account. It was claimed that Werber refused to approve the transfer of the sum from the joint venture to KSA, thus preventing the conclusion of the tax appeal refund process and causing KSI financial damages.
96. In response to the fact that Froimovich did not detail their alleged investment in the company and are therefore not entitled to wages, Froimovich noted a list of actions they were required to take to promote the venture after Werber ceased to fulfill their duties. Among other things, the continuation of the operation and maintenance of the software underlying the venture, the development of new tools in the system, the provision of ongoing service to customers, the handling of payments, and so on.

The course of the litigation

97. Following instructions given to complete the preliminary proceedings, on October 13, 2020, Werber filed a motion to instruct the defendants to allow an expert on their behalf to examine the software of the system underlying the venture for the purpose of submitting an expert opinion to the court. On July 26, 2020, the court (the Honorable Judge K. Levy) granted the motion despite Froimovich's objections.
98. According to the Vice President's decision of July 31, 2022, the case was transferred to my care in light of the expected retirement of the Honorable Judge K. Levy.
99. In the decision of October 3, 2022, instructions were given for the submission of written evidence. The decision determined that the evidence of the parties would be submitted simultaneously in the claim and the counterclaim, and later the defense evidence in the opposing party's claim would be submitted by way of completion.
100. On November 24, 2022, the plaintiffs submitted their evidence in affidavits of the main witness. Affidavits of the main witness were submitted by Tzachi and Yonat (similar in content), of Mr. Omri Revach (hereinafter - "Omri") and Mr. Doron Goshen (hereinafter - "Doron"), who joined the venture as lecturers and marketers, of Ms. Racheli Zusiman (hereinafter - "Racheli"), who is a computer professional who provided technical support services to Werber from time to time, and of Ms. Alexandra Feinbord (hereinafter - "Alexandra") which is a planner who worked on the system according to Shmulik's instructions. Werber also submitted an expert opinion by Mr. Amit Moreno regarding the nature of the system. On January 8, 2023, Yonit submitted a supplementary main witness affidavit.
101. On November 25, 2022, Froimovich submitted their evidence in an affidavit of Shmulik's main witness. On January 9, 2023, Froimovich submitted supplementary evidence: an affidavit of Shmulik's primary testimony as well as a counter-expert opinion regarding the nature of Mr. Chen Raz's system.
102. In accordance with the decision of January 30, 2023, on February 1, 2023, Werber submitted a portable device (USB drive) containing recordings of a conversation that took place between them and Froimovich, as well as two webinars held by Shmulik for the project's lecturers from April 12, 2018 and June 22, 2018. In addition, transcripts of the recordings were submitted.
103. On February 5, 2023, a pre-trial meeting was held before me, during which the parties agreed to appoint an expert on behalf of the court to examine the disputes between the parties regarding the software underlying the system that is the subject of the lawsuit. Subsequently, in order to clarify the disputes and in order for the opinion to assist in their clarification effectively, taking into account the multitude of arguments and details, in a decision dated February 13, 2023, the parties were required to submit a detailed table. Werber were required to specify in the table each of the alleged failures in the system that the expert is required to examine: what is the alleged failure, i.e., what action was presented to them because the system is performing but there is a failure in it; On what date was this presentation presented to them; When was the alleged failure discovered; It is also possible to refer to evidence from which it can be learned that there is indeed a failure in the system and that the system is not performing the operation as presented. Froimovich was required to refer to Werber's claims in the same table and to refer to the relevant evidentiary material. The table with the positions of both sides was submitted on March 26, 2023.
104. In a decision dated June 12, 2023, Mr. Matti Horowitz (hereinafter - the "Expert") was appointed as an expert on behalf of the court, who is a development expert and technological consultant with extensive experience in the field of WordPress, which is the infrastructure used to establish the system. The expert opinion was submitted on August 11, 2023, and on February 6, 2024, the expert submitted a response to clarification questions submitted to him by the parties.
105. On April 2, 2024, a summary pre-trial was held before me, during which, among other things, Yonit and Keren testified in response to various questions and clarifications requested by the court.
106. Later, two evidentiary hearings were held. In an evidentiary hearing held on December 31, 2024, the plaintiffs Shmulik, Doron, Racheli and Alexandra were interrogated in the cross-examination. On January 2, 2025, Omri, the expert on behalf of the defendants and the court's expert were interrogated in the cross-examination (the plaintiffs waived the expert opinion submitted on their behalf during the hearing held on April 2, 2024).
107. I will note that due to a malfunction in the layout of the transcript, the transcription of the first evidentiary hearing begins on page 10 and the transcription of the second evidentiary hearing begins on page 53 (which coincides with the pages of the first evidentiary transcript). Therefore, in order to locate a mirror of a place, it is necessary to refer to the transcript in which the testimony in respect of which the reference was made. I will clarify that the testimony of each of the witnesses ended with the hearing in which it began.

Discussion and Decision

108. After considering the arguments of the parties and the evidence material, I have come to the conclusion that the main claim should be accepted in part and the counterclaim should be dismissed, as will be detailed below. These are the reasons for my conclusions:

Focusing on the main dispute that needs to be decided

109. As their summaries show, the core of Werber's claim in the main lawsuit is that Froimovich misled them about the nature and maturity of the system intended to carry out the Biz-Academy project, or alternatively, that they were wrong. Werber further claims that Froimovich violated an contractual disclosure obligation that applies to them under clauses 2.1 and 2.2 of the Founders' Agreement, according to which "there is no detail or information relating to him, the failure of which is misleading in the circumstances of the case, or the disclosure of which would have caused a reasonable person to refrain from entering into an agreement with him in this agreement."

According to Werber, they were presented with a ready-made system in which a lot of money was invested, and after the launch and recruitment of lecturers, the technology would provide the service without relying on the "work" of the parties who could be passive. However, in retrospect, it turned out that the development of the system began at a very late stage (only in January 2018, when most of the work was done in April 2018), and at the time of its launch, the system was saturated with basic functional failures because it was developed hastily and casually without any financial investment at all.