"The expression 'discrimination, ' which replaced the expression 'oppression of minority shareholders, ' brought with it a liberal interpretation that makes it easier for the minority shareholders who are deprived to obtain relief against the shareholders of the discriminatory majority... The discrimination of minority shareholders in a company is essentially a situation of unfair distribution of resources in the context of the relationship between the controlling shareholders of the company and minority shareholders in it."
- 00Other Municipality Applications 8857/21 Tal Ginzburg v. Medipower Overseas (published in Nevo, given on February 26,2023, hereinafter: the Ginzburg case), in section 33, the prevailing rule was summarized:
"Our case law has long recognized various circumstances as circumstances that establish the right of the minority shareholder to remove the deprivation and separation of powers in the company, including: the failed management of a company; an ongoing violation of the minority's legitimate expectations of participation in its day-to-day management and the distribution of its profits; as well as a severe crisis of confidence between the shareholders of a private company that is managed as a quasi-partnership (see: the Adler case, ibid.; Civil Appeal 275/89 Davidson v. Orenstein, IsrSC 46(1) 125,130-131 (1991); Civil Appeal Authority 9646/04 Haski Alon Initiation, Construction and Investments Ltd. v. Arie Michelson Development Company Ltd., IsrSC 59(3) 380,383 (2005); Civil Appeal 5025/13 Individual Metal Industries Ltd. v. Habib, paragraphs 17-18 [published in Nevo] (February 28,2016); and Civil Appeal 4588/19 Kardosh-Salem v. Kardosh & Co. Ltd., paragraphs 16-17 of the judgment [published in Nevo] (April 20,2021)."
- If it is determined by the court that discrimination has been proven, then, as stated, the court has extensive discretion in granting the remedies and instructions for the removal of the discrimination and the solution to the case before it, while it is not bound by the relief claimed in the lawsuit, (Adler, paragraphs 72 and 76, Tzipora Cohen, at p. 173), I will discuss this matter below.
The burden of proof required to prove discrimination
- As noted in section 35 of the Ginzburg case:
"The rules of evidence that apply in such a case determine that the shareholder who claims discrimination has a burden of proof: the burden of presenting prima facie evidence as to the existence of the alleged discrimination. If the plaintiff succeeds in showing discrimination at this level of prima facie proof, the burden of proof will shift to the defendant, who will be required to prove otherwise. This burden means the burden of persuasion: the defendant will be required to bring evidence that will convince the court, according to the balance of probabilities, that things are not as they appear and that in fact the company was not conducted in a manner that amounts to discrimination against the minority (see: Glickman case, at pp. 287,289; Bachar case, at p. 248; Civil Appeal 2718/09 "Gadish" Compensation Funds Ltd. v. Elsint Ltd., para. 40 [published in Nevo] (May 28,2012)). The reasons for transferring the burden of persuasion as aforesaid to the defendant are identical to those behind the rule "the matter testifies to itself" which belongs to tort law (see: section 41 of the Torts Ordinance [New Version] (hereinafter: the Torts Ordinance); and Israel Gilad Torts Law - Limits of Liability at 1258-1259 (2012)). When the totality of the circumstances and the general life experience confirm the scenario of discrimination, the controlling shareholder of the company is an insider who has the real explanation for what has been done, and has in his heart the desire to conceal details of information that is not in his favor - at a time when the minority shareholders, who have been allegedly deprived, are in a state of inferiority with regard to their ability to access such information. This is even more true when the defendant is the company itself. This mechanism maintains equality between the parties in civil litigation when the court is required to decide the claim of discrimination - one way or another - under conditions of factual uncertainty (see: Alex Stein, Foundations of Evidence Law 219-225 (Oxford University Press - 2005); and Ariel Porat & Alex Stein, Tort Liability under Uncertainty 92-95 (Oxford University Press - 2001)".
- Alongside the aforementioned concrete precedent relating to proving the claim of discrimination, it would not be superfluous to mention the general rule that a party refrains from bringing relevant evidence or testimony that is within his reach, and without a reasonable explanation, establishes against him the well-known presumption that if such evidence or testimonies had been brought, they would have acted in his duty and weakened his version (see Civil Appeal 9656/05 Naftali Schwartz v. Ramanof Company for Trade and Construction Equipment Ltd., published in Nevo, given on July 27,2008, paragraphs 25-27).
The Right of a Shareholder to Information
- In his case, as stated, the plaintiffs claimed that despite repeated demands, they did not receive the information and documents requested, inter alia by the expert, in order to trace and determine the nature of the actions carried out in the companies and their books. The right to inspect the company's documents and the right to information of shareholders is a basic principle in corporate law, and is enshrined in sections 184-187 of the Companies Law, see also Y. Danzinger's article, "The Right to Information About the Company, " TASE 2000, at pp. 6-7.
- A shareholder's right to information is based on a number of essential purposes that are intertwined: on the personal level, it is intended to enable the shareholder to protect his property; to make informed decisions regarding his investment (including the manner in which he votes at the general meetings - see Civil Appeal Authority 981/18 Musa Drilling Ltd. (Darryl King) v. Badarna, published in Nevo, given on May 2,2018, in section 6) and to take his steps if the need arises to take legal proceedings against the company. Its shareholders and organs (Civil Appeal Authority 2903/13 Intercolony Investments Ltd. Shkedi, published in Nevo, given on August 27,2014, at paragraph 58). The Supreme Court noted the essential importance of information in the decision-making of shareholders Other Municipality Applications 741/01 Meir Kot v. Estate of Yeshayahu Eitan , Deceased published in Nevo, given on May 19,2003, in section 10:
"The information is an essential tool for exercising the right of a shareholder to use his shares and property rights in the company in a way that will enable him to make the most of his property."