A shareholder sold his shares to a business man via a company in his control and the agreement contained not only a waiver of claims but a specific provision prohibiting filing of claims. Nine years later the company filed a lawsuit against the seller.
The Court held that filing a lawsuit by a company knowingly in violation of an explicit clause, signed by its shareholder is an action in bad faith, abuse of corporate veil and is grounds for piercing the corporate veil. The lawsuit was filed knowingly in order to deter the seller from competing with the company and is a breach of an undertaking which entitles the termination of the agreement. The Court obliged the parties to make mutual restitution although long time passed from the date the shares were purchased and although the company has become a successful chain since then.