Remedies
- In the statement of claim, the plaintiff petitioned for a series of remedies regarding the real estate and the management of the company as follows:
(1) To give a judgment declaring that the plaintiff is the owner of 1/3 of the rights in the land and the gas station, with all that is located and connected to them by a permanent connection.
(2) to issue a permanent executive order instructing the defendants to transfer and register in the plaintiff's name, with the Land Registrar or the Arrangement Officer, 1/3 of the rights in the land and the gas station.
(3) to issue a permanent injunction prohibiting the defendants from any action that harms the possession, use or right of the plaintiff to possess and use the land and the gas station.
(4) To determine that what purports to be the resolutions of the company's general meeting of November 5,2019, which appear in the document that is predicted to be the minutes of the general meeting, are null and void.
(5) To determine that the plaintiff is still a director or director or the sole and authorized signatory of the company and that his appointment to this function, with all the powers involved in him and the rights granted to him, including salary, benefits and grants, has never been revoked.
(6) to issue a permanent injunction prohibiting the defendants from taking any action that violates the plaintiff's right to continue to act as a manager, director and sole authorized signatory of the company, with all the powers that entail it and the rights granted to it.
(7) to oblige the defendants to provide bills and to pay sums that will be determined after the accounts are provided and examined.
- In the first pre-trial hearing that took place in the case, a decision was given effect to the defendants' consent to the declaratory relief, according to which the plaintiff petitioned according to which he was granted 1/3 of the rights in the gas station and the company's shares (decision of the Honorable Judge R. Yaacobi of June 24,2020). Subsequently, a partial judgment was given according to which it was declared that the plaintiff is the owner of 1/3 of the real estate and 1/3 of the company's shares (partial judgment of the Honorable Judge R. Yaacobi of August 3,2020). In light of the state's argument that the partial judgment is liable to harm the integrity of the registry and third parties, the partial judgment was canceled by consent with all that relates to the declaratory relief concerning the plaintiff's rights in the land. Instead, it was recorded that in the internal relationship between the plaintiff and the defendants, the defendants do not dispute the plaintiff's claim regarding his rights in the land and that the partial judgment will appear amended accordingly (decision of August 8,2024).
- It should be noted that in this way the remedies that the plaintiff petitioned with regard to the land were exhausted. There is no reason to grant relief in the matter of the registration of the land, both because it did not bring any source by virtue of which the defendants can be obligated to do so, and because of the reasons that the State insisted on regarding the registration status of the land. Therefore, the requested relief was rejected.
The remedy concerning the issuance of a permanent injunction prohibiting the defendants from taking any action that violates the plaintiff's possession, use or right of possession and use of the land and the gas station was also rejected. The defendants admit that the plaintiff is the owner of 1/3 of the rights in the land and is granted all the rights that accompany it. No evidentiary basis was presented that the defendants interfered with or violated the plaintiff's rights of possession and use of the land. The dispute between the parties focuses on the management of the gas station.
- In his summaries, the plaintiff further claimed that he was entitled to the protection of the principle of joint management also by virtue of property law due to the fact that he and the defendants were joint owners of the land, and the defendants decided on a different way of using them than that which was agreed upon by him and Hussein. The law of the claim is rejected. The plaintiff mixes joint management of the company with joint ownership of the land. There has been no change in the way the land was used - which was and remains the management of a gas station.
- Further to the aforesaid, the judgment will deal with remedies concerning the validity of the decisions made by the defendants at the shareholders' meeting that they claim convened on November 5,2019, and the plaintiff's status as a manager in the company and authorized to sign on its behalf. In this context, the disputes between the parties relate to two main issues: one, whether the business of the gas station was managed by the plaintiff and Hussein according to the principle of joint and equal management, and whether this principle also applies to the death of one of Hussein. The second is whether the general meeting that the defendants claim took place on November 5,2019, was lawfully convened and whether the invitation to it was lawfully served on the plaintiff. I will preface by saying that my conclusion is that there were flaws that go to the root of the matter in the meeting of the shareholders and in the invitation to it. Notwithstanding the aforesaid, I did not find that the situation should be restored to its previous state. In addition, within the framework of the judgment, I will also discuss the plaintiff's request for accounts.
Applicability of the principle of joint management in the company
- The plaintiff claims that there is a partnership agreement between him and the defendants, either by virtue of the partnership agreement signed between him and Hussein in 1995 (hereinafter: the original partnership agreement) or by virtue of a new agreement, by virtue of which the principle of joint management of the gas station applies in a manner that prevents the defendants from removing him from his position as a manager in the company. According to him, according to the original partnership agreement, he and Hussein managed the gas station jointly. By virtue of the same agreement, both were appointed as managers at the time of the establishment of the company. Admittedly, according to the law, the death of one of the partners causes the dissolution of the partnership. However, this result can be conditioned on the agreement between them (section 42 of the Partnerships Ordinance [New Version], 5735-1975). In the present case, the establishment of the company and the preservation of the principle of joint management within it constitute an explicit and alternatively implicit agreement that the name of one of the partners will not lead to the dissolution of the partnership, which is still in force and exists. The plaintiff further argues that after Hussein's death, the defendants chose to adopt the partnership agreement with all its components, including Hussein's share in the company's shares. According to him, this should be seen as the conclusion of a new partnership agreement, in the manner of conduct, which is identical in content and provisions to the original partnership agreement. As a result of the aforesaid, the plaintiff claims that there is a valid and binding partnership agreement between him and the defendants, whether based on the original partnership agreement or based on the new partnership agreement. This derives his conclusion that the defendants are unable to remove him from his position as a manager in the company, and an attempt to remove him constitutes a breach of the partnership agreement.
- The plaintiff's argument should be rejected. I will preface by saying that although there is no provision in the partnership agreement of 1995 that relates to the joint management of the gas station and the reference therein was only to the division of profits, I accept the plaintiff's argument that in practice the business of the gas station was jointly managed. His testimony in this regard is reliable to me. It is supported by the fact that this principle was clearly expressed at the time of the company's establishment, when according to its basic documents, he and Hussein were appointed directors and both had the right to sign on behalf of the company. This is despite the fact that Hussein held 2/3 of the company's share capital and the plaintiff held only 1/3 of it. It should be noted that although in Hussein's last years the plaintiff actually served as the sole manager of the company, but this was due to Hussein's condition, which he agreed to, and the plaintiff does not claim that this conduct made him its sole manager, but rather claims his right to full participation in the management together with Hussein or anyone on his behalf.
- But the question before us is not what was the rule of management when Hussein was alive. The question is whether the principle of partnership in management, which guided the plaintiff and Hussein in managing the gas station during Hussein's lifetime, remains in place even after his death by virtue of a partnership agreement. As the plaintiff himself noted, the death of a partner leads to the dissolution of the partnership unless it was stipulated in the agreement between them. There is no dispute that there is no such provision in the partnership agreement. The argument that the establishment of the company, which included in the basic documents a provision regarding the appointment of the plaintiff and Hussein as directors in a manner that granted them equal status in the management of the company, constitutes a condition by virtue of the partnership agreement in a manner that perpetuated this form of management. First, it is reasonable to assume that when the partners wish to determine that the principle of joint management will remain in place even after the death of one of them, the partnership agreement will include such an explicit agreement from the outset. Second, this argument includes the assumption that the partnership agreement continues to exist despite the establishment of the company. The defendants are correct in their claim that the establishment of the company actually indicates the termination of the partnership even before Hussein's death. The plaintiff testified that he and Hussein decided to change the framework in which the business operates as a joint venture with the company following receipt of professional advice to do so. There is no evidence that the partnership continued to operate in parallel. The fact that within the framework of the company's founding documents they arranged the division of capital and management between them in the same manner as the partnership was managed supports the defendants' claim that the company replaced the previous framework of managing the gas station by means of a partnership to the framework of a company, and was not added to it. Third, if the plaintiff and Hussein had sought to apply the principle of joint management of a company even after the death of one of the shareholders, they would have been able to do so by establishing an appropriate mechanism for appointing a director within the framework of the company's founding documents (see: Civil Appeal 6496/11 Sasbon v. Solomon, para. 18 and references there (January 28,2014); Civil Appeal 773/88 Radom v. Refrigeration Warehouses at the Tel Aviv Port Ltd., para. 6, IsrSC 44(1) 234 (1990)). However, they did not do so. Such a mechanism was not set out in the company's founding documents and therefore does not apply automatically after Hussein's death.
- Nor should the defendants' conduct be seen as creating a new partnership agreement. At the time of Hussein's death, the gas station had been managed for years by the company, and the defendants sought to be integrated into its management. According to their testimony, at first they did not object to the continued application of the principle of joint management, but after the plaintiff sought to concentrate the sole signing authority in his hands, their relationship found itself in a crisis and they were not interested in managing the company in this manner. There is nothing in their conduct from which it can be concluded that they wished to enter into a partnership agreement with the plaintiff.
- Further to the above, my conclusion is that the original partnership agreement does not include a stipulation that applies the principle of joint management after the death of one of the partners. A mechanism in this spirit was not even included in the company's basic documents. Therefore, it is not possible to determine by virtue of them the application of this principle after Hussein's death.
- At this point, it should be noted that it should be regretted that in real time no real attempt was made to reach agreements that would reflect the changes that took place in light of Hussein's death. As stated, the defendants claim that from the outset their request was limited to the appointment of an additional manager from among them and the granting of signature rights on behalf of the company, and they would have been satisfied with this. The plaintiff claims that he agrees to this principle. In practice, the plaintiff insists in his claim on declaratory relief, according to which he is still the sole manager and authorized signatory in the company, and petitions for a permanent injunction prohibiting defendants from infringing on these rights. The defendants, for their part, convened at the general meeting, in which the plaintiff was completely deprived of his rights to manage the company and to sign on its behalf. The two parties therefore did not act in a manner that would have led to the outline of joint management of the gas station.
Convening a meeting and making up the invitation