The Land Valuation and Tax Act 1967

• Jurisdiction: Bermuda
• Judgment Date: 05 December 2012
• Date: 05 December 2012
• Docket Number: Commercial Jurisdiction 2012 No 103
• Court: Supreme Court (Bermuda)

[2012] Bda LR 76

In The Supreme Court of Bermuda

Commercial Jurisdiction 2012 No 103

Between:

Joliet 2010 Limited Teodoro 29 Corp

Plaintiffs

and

Goji Limited Eran Ben-shmuel Alexander Bilchinsky

Defendants

Mr N Hargun and Mr B Adamson for the Plaintiffs

Mr N Turner for the First Defendant

Mr T Marshall and Ms K Tornari for the Second and Third Defendants

The following cases were referred to in the judgment:

Spiliada Maritime Corp v Cansulex LtdELR [1987] 1 AC 460

Spargos v Atlantic Capital Corporation (1995) The Times 11th December

SMAY Investments Ltd v Sachdev [2003] EWHC 474

Seaconsar Ltd v Bank Markazi Jomhouri Islami IranELR [1994] 1 AC 438

AK Investment CJSC v Kyrgyz Mobil Tel LtdUNK [2011] UKPC 7

Massey v HeynesELR (1888) 21 QBD 330

Bekhor v BiltonELR [1981] 1 QB 923

TSB Private Bank International SA v ChabraWLR [1992] 1 WLR 231

Mubarak v MubarakBDLR [2002] Bda LR 63

Yukong Line v Rendsburg [2001] 2 Lloyd's Law Rep 113

Treasurer of Ontario v AberdeinELR [1947] AC 24

MacMillan v Bishopsgate (No 3)WLR [1996] 1 WLR 387

In re Banco Nacional de CubaWLR [2001] 1 WLR 2039

National Iranian Oil Company v Ashland Overseas Trading LtdBDLR [1988] Bda LR 13

Arabian American Insurance Co (Bahrain) EC v Al Amana Insurance and Reinsurance Co LtdBDLR [1994] Bda LR 27

Adams v Cape IndustriesELR [1990] Ch 433

Pattni v AliELR [2007] 2 AC 85

Gleeson v Imagine Reinsurance Holdings LtdBDLR [2005] Bda LR 68

Glencore International AG v Exeter Shipping LtdUNK [2002] EWCA Civ 524

Jurisdiction — Forum — Israeli proceedings —

JUDGMENT of Hellman J

Parties

1. The Plaintiffs, Joliet 2010 Limited (‘Joliet’) and Teodoro 29 Corp (‘Teodoro’), are, respectively, the largest and third largest shareholders in the First Defendant, Goji Limited (‘Goji’).

2. Joliet was incorporated in Liberia. It is owned by a trust, the beneficiaries of which are the family of a man named Professor Shlomo Ben Haim (‘Professor Ben Haim’).

3. Teodoro was incorporated in the British Virgin Islands. Its beneficial owner is a man named David Yisrael (‘Mr Yisrael’).

4. Goji was incorporated in Jersey and has been continued in Bermuda. Professor Ben Haim is one of its directors. It has a wholly owned subsidiary, Goji (Israel) Limited (‘Goji Israel’).

5. The Second and Third Defendants, Eran Ben-Shmuel (‘Mr Ben-Shmuel’) and Alexander Bilchinsky (‘Mr Bilchinsky’), are former employees of Goji Israel. They have brought proceedings in Israel in Civil Case 1782/10/11 (‘the Israeli proceedings’) against various defendants including Professor Ben Haim, Goji, Goji Israel, and Joliet.

6. Mr Yisrael is not a defendant in the Israeli proceedings. Mr Ben-Shmuel and Mr Bilchinsky have clarified in the course of this hearing that in those proceedings they do not intend to make any claim against him or Teodoro or their assets.

The Israeli proceedings

7. In the Israeli proceedings, Mr Ben-Shmuel and Mr Bilchinsky (together, ‘the Israeli Plaintiffs’) claim to have made an innovative series of inventions for heating through radio waves. It was common ground before me that they played at the very least a major role in these inventions. The inventions are valuable intellectual property (‘the intellectual property’).

8. The rights to that intellectual property are now held by Goji. The Israeli Plaintiffs claim that the rights were originally held by them, but that the defendants in the Israeli proceedings (‘the Israeli Defendants’), under the auspices of Professor Ben Haim, unlawfully misappropriated the rights through a combination of fraud and improper pressure.

9. The following provisions of the statement of claim in the Israeli proceedings are relevant. References in this paragraph to Plaintiffs and Defendants are to Plaintiffs and Defendants in the Israeli proceedings.

• i.Paragraph 152 alleges that the Defendants' acts and omissions constitute minority oppression of the Plaintiffs contrary to section 191 of the Israeli Company Law.

• ii.Paragraph 153 alleges that the above-named Defendants, among others, breached their fiduciary duty with respect to ‘the Company’. This is an umbrella term that is defined at paragraph 16 of the statement of claim to denote collectively Goji, Goji Israel, and RF Dynamics Commercial Limited, another Bermuda company.

• iii.Paragraph 159 seeks a declaration that the Plaintiffs are entitled to all the shares and rights in Goji.

• iv.Paragraph 163 seeks in the alternative a declaration that the Plaintiffs are entitled to a share of, among others, Goji, at a rate that the Court will determine.

• v.Paragraph 164 seeks an order that the Plaintiffs be entitled to be represented on the board of directors of, among others, Goji, proportionate to their shares in the Company, and an order for the correction of the documents of incorporation of, among others, Goji, insofar as necessary.

• vi.Paragraph 165 seeks relief that includes an order for the dismissal of Professor Ben Haim from Goji's board of directors.

• vii.Paragraph 167 seeks an order for the termination or ‘voidness’ of transactions with interested parties performed by or on behalf of Professor Ben Haim with the Company which benefit him at the expense of the other shareholders, or alternatively compensation of the Plaintiffs and/or the Company.

The Bermuda proceedings

10. On 26^th March 2012, on an ex parte application before Kawaley J (as he then was), the Plaintiffs obtained (i) leave to serve a specially endorsed writ out of the jurisdiction on the Second and Third Defendants and (ii) an interim anti-suit injunction against them.

11. In the specially endorsed writ the Plaintiffs seek declaratory relief that:

• i.Goji's affairs have not been conducted in a manner oppressive to shareholders and/or that relief would not be granted pursuant to section 111 of the Companies Act 1981 or at all.

• ii.Goji's board may continue to run its affairs pursuant to the bye-laws and the respective directors will not be acting in breach of duty, and will in any event be excused from liability pursuant to section 281 of the Companies Act 1981, in doing so despite the existence of the Israeli proceedings.

• iii.Contracts entered into by the current board of directors are valid and/or authorised and/or shall not be considered ultra vires unless and until the courts of Bermuda direct otherwise.

• iv.Goji's shareholders' register accurately reflects the current shareholders and Goji can conduct itself on this basis.

12. Further, and in any event, the Plaintiffs seek a final injunction preventing the Second and Third Defendants from litigating what are described as ‘the Shareholder Claims’ in Israel and/or seeking relief for minority oppression in the Israeli proceedings.

13. The interim ant-suit injunction provides that:-

‘Until after final judgment in this action or further order of this court the Defendants or any of them must not whether by their servants, agents or any other person howsoever proceed or continue to proceed with or assist or participate in the conduct of any Shareholder Action in [the Israeli proceedings]. A Shareholder Action for the purposes of this paragraph means the pursuit of one or more of the following remedies:

1.1 Declarations as to the ownership of Goji's share capital;

1.2 Alteration of and/or appointment to Goji's board of directors;

1.3 Amendments to Goji's bye-laws and/or memorandum of association;

1.4 Annulments of contracts entered by Goji with third parties save such contracts as are governed by Israeli law and/or expressly subject to the jurisdiction of the Israeli Courts;

1.5 Claims for compensation to Goji for breach of fiduciary duties.’

14. The meaning of ‘a Shareholder Action’ in the interim injunction and ‘Shareholder Claims’ in the writ of summons is in all material respects the same. In this judgment, for the sake of consistency I shall refer to a Shareholder ‘Action’ or ‘Actions’ rather than a Shareholder ‘Claim’ or ‘Claims’.

15. By a summons dated 15^th June 2012, the Second and Third Defendants seek orders that:

• i.The specially endorsed writ be set aside against all three Defendants on the basis that the Courts of Israel have jurisdiction to adjudicate upon any disputes between the parties and not the Bermuda Courts, or alternatively, in the event that the Court concludes that it has jurisdiction, that Israel is the convenient forum in any event.

• ii.Alternatively, and without prejudice to (i), that these proceedings be stayed pending the determination of the Israeli proceedings.

• iii.That the interim anti-suit injunction be set aside.

16. The relief sought is stated to be without prejudice to the Second and Third Defendants' position that they have not submitted and do not intend to submit to the jurisdiction of this Court.

Evidence

17. I have had the benefit of hearing oral evidence from two Israeli lawyers with intimate knowledge of the Israeli proceedings: Yariv Kesner (‘Mr Kesner’), who acts for the Israeli Plaintiffs in those proceedings, and Dr Avigdor Klagsbald (‘Dr Klagsbald’), who acts for Professor Ben Haim and three other defendants in the Israeli proceedings, but does not act in those proceedings for either Goji or Joliet.

18. Both men have been called as witnesses of fact rather than independent experts. I have found their evidence helpful in better understanding the issues in the Israeli proceedings.

19. I have also heard oral evidence from Bernard Junod (‘Mr Junod’). He is a director of Jaywick Services Limited, a company in the British Virgin Islands which is a corporate director of Joliet. I have heard, too, from Mr Yisrael, who gave oral evidence via Skype. Both these witnesses were called by the Plaintiffs.

20. All these witnesses filed affidavits. Ben Adamson, one of the counsel for the Plaintiffs in Bermuda, also filed two short, pro forma affidavits. The exhibits to the various affidavits included...