Beyond that, it was held that from a material point of view, there is also a difference between the appointment of an "official" by the court as the court's representative for the purpose of a stay of proceedings, liquidation or bankruptcy, and the appointment of CPA Darman by the company to manage it in place of Pinkowitz for a period of three months - an appointment that received the validity of a court decision as part of the settlement agreement submitted by the parties. In this context, it was emphasized that the company itself had never been "sick" and that no procedures were required to rehabilitate it other than the replacement of its CEO.
It was also determined that accepting the plaintiffs' position regarding the status of CPA Derman is liable to lead to broad consequences, so that any company whose manager acted in breach of his fiduciary duty to the company, can file a request for liquidation, receivership or appointment of an authorized manager, act to remove the consensual manager, appoint another manager in his place - and finally sue the insurance company that insured the directors to cover the damages caused to the company.
The trial court did not address the dispute regarding the retroactive coverage, ruling that in the amended statement of claim it was explicitly stated that Migdal must compensate the plaintiffs by virtue of the policy, and the cause of action was limited to what was stated in the policy only, without reference to insurance coverage in the period prior to what was stated in the policy. Therefore, it was held, any claim that contradicts what is stated in the statement of claim should be rejected, and relief that was not sought should not be granted.
Against this background, the court ruled that the claim against Migdal, the insurer, should be dismissed.
C.4. The Trial Judgment - The Accountants
- The court noted that CPA Milner was one of the founders of the company, and served as its accountant from the day it was founded until 2001, when he was fired by Pinkowitz.
It was determined that CPA Milner did not consolidate the financial statements of the subsidiary and the company over the years, but in the introduction to the financial report he noted that "no consolidated financial statements were prepared with the subsidiary as required by the statement of the Institute of Certified Public Accountants in Israel", and in the financial report for 1999 he noted that "without qualifying our opinion, we would like to draw attention to what was stated regarding the investment in the subsidiary for which no provisions were made". A similar comment has appeared in previous years as well. Therefore, it was held that in these circumstances, it appears that the shareholders agreed to this course of action of the late CPA Milner, in a manner that prevents a claim against him for failing to consolidate the reports, and this is sufficient to dismiss the claim against him. In this context, it was noted that in 1999, CPA Milner served only as the company's accountant and not for the subsidiary, and he did not have the full picture of the subsidiary's situation.