There is no place to hold Mr. Max personally responsible
- I did not find it necessary to impose personal liability on Mr. Max, and to obligate him personally for the compensation awarded above. Imposing personal liability on officers of a company is not a trivial matter (see at length the hearing in a civil case (Tel Aviv District) 41953-01-17 Knepfler v. Nehemia (published in the databases; 2026)). In the circumstances of the case at hand, we are dealing with liability for breach of contract. As the Honorable Justice Danziger ruled, "The contractual engagement is with the company, and therefore, in such a situation, the rule is that the organs and officers are not liable for breaches of contract of the company. There is a separation between the legal personality of the company and the organs and officers who are not liable to anyone who entered into an agreement with the company" (Civil Appeal 313/08 Nashashibi v. Rinrawi, IsrSC 66(1) 398, at para. 43 (2010)). He further added that "the cases in which contractual liability will be imposed on the organs and officers of the company will be more exceptional" (ibid.; indeed, the opinion was that of a minority, but not in this regard).
The task of establishing such exceptions in the contractual context is difficult, given the ability of the parties to the contract with the company to insist on including provisions that add personal security to its officers (see the discussion with Yaad Rotem, "The Duty of Care of Officers in Small and Medium-Sized Companies Towards the Company's Creditors, " Sefer Eliyahu Matza 813,839 (Aharon Barak, Ayala Procaccia, Sharon Hans and Raanan Giladi eds., 2015)). Andthegood for small and medium-sized companies is also good for large companies, all the more so by virtue of it.
- In the circumstances of the present case, Mr. Max is not attributed to fraud or deception. I was under the impression that he acted out of genuine suspicions on the subjective level, and indeed the general conduct could have given rise to suspicion. It is true that the cancellation of the agreements was done unlawfully; but if we impose personal liability on an officer of the company, in every case in which the company unlawfully cancelled the agreement, there will be no remnant and no refuge for its principle of separate legal liability. The remedy for the counter-plaintiffs is to receive compensation from the company, and this is what I order.
Max's claim of theft of trade secrets and breach of confidentiality duty
- Max claims that its trade secrets were stolen, and that the defendants' duty of confidentiality was breached.
- However, this argument faces a difficulty. The main factor underlying the claim is Mr. Shimshon, but Mr. Max admitted in his testimony that he did not actually operate the stores (p. 33 ff.). Hence, he also admitted that Mr. Shimshon was a passive investor in the stores' activities, and that these were in practice managed by others. Therefore, it is not clear that Mr. Shimshon was exposed to the information and trade secrets that accompanied the ongoing activity.
Still, despite Mr. Shimshon's dominant role, he is not the only defendant, and among the defendants there are those who operated the stores in practice. Was this cause of action established against them? The answer is in the negative. This is both because the claim was not substantiated on its merits, and because, as already noted, the establishment and operation of the competing business was lawful, taking into account the breach of the agreement by Max, and its unlawful cancellation.
- With regard to the matters on their merits, the burden is on Max to prove its claims, and it is not possible to suffice in this regard with general statements. Thus, for example, disclosure of a list of customers or suppliers is not enough. IT MUST BE ESTABLISHED THAT THESE LISTS CARRY A "NECESSARY CHARGE OF CONFIDENTIALITY" IN ORDER TO ESTABLISH A CAUSE OF ACTION FOR THEFT (CIVIL APPEAL 10545/09 MORDECHAI BATAN V. INC 1988 INTEGRA MICROSYSTEMS (PUBLISHED IN THE DATABASES; 2012; IN PARAGRAPHS 10-11 OF THE OPINION OF THE HONORABLE JUDGE, AS THEN DESCRIBED, HAYUT)).
In a similar vein, the case law held that the examination of theft of a trade secret requires a comparison between the information taken and the protected secret, while examining the competitive advantage and the effort invested in its development (Civil Appeal 1142/92 Vargus Ltd. v. Carmax Ltd., 51(3) 421, at para. 9 (1997)). It was further held that the burden of proof is on the plaintiff to show that the specific information used (such as the identity of the supplier) does indeed constitute a trade secret and that it was prohibited use (Civil Appeal 2154/07 Uziel Bariach v. Avganim (published in the databases; 2010; at paragraph 16). It was further held that the element of "use" or "taking" in the tort of theft of a trade secret requires proof that the defendant has indeed accessed the protected information and can recover or use it (High Court of Justice 4675/03 Pfizer Pharmaceuticals Israel Ltd. v. Director General of the HaberY. Ot Firm, Dr. Boaz Lev (published in the databases; 2011; in paragraph 43 of the opinion of the Honorable Justice (ret.) Procaccia)).
- None of this has been proven by the Max company.
All Mr. Max claimed in his affidavits was that Superstock was imitating the same format of activity, and that it was selling the same products and operating with the same suppliers (paragraph 22 of Max's counter-affidavit, and paragraph 20 of Max's affidavit in the Ashdod lawsuit). However, these statements, which are general in nature, were not backed up by evidence.