The court charged the attorney’s office Matri Meiri & Co. as well as the external directors Giora Inbar who served as the legal advisor of the company IDB which is in liquidation to be transferred to the trustee Adv. Ofir Naor all the documents in their possession and control, relating to the company as well as the legal advice given to the company or the company’s audit committee or the company’s officers, including e-mail correspondence and WhatsApp correspondence.
This is legal advice given by attorney Eyal Geva from Matri Meiri & Co. to the company’s audit committee as well as to two independent committees established in March 2017 and December 2018 regarding the sale of Deskash to Dolphin in connection with the concentration law as well as regarding the sale of the company’s holdings in general insurance business holdings.
The directors and the office of Matri Meiri Co. claimed that confidentiality applies to these correspondences. the judge Hagai Brenner He rejected the claim, and accepted the position of trustee, Adv. Ofir Naor represented by the Noor-Gresht office
Beyond the specific story about Inbar’s attempt to hide his actions, which may have contributed to the collapse of IDB, the decision has broad implications for the conduct of audit committees and independent committees. Judge Hagai Brenner states that the hermetic secrecy of attorney-client privilege does not belong to the directors and officers for ever. If, God forbid, the company collapses and a trustee is appointed, then he has the right to review and investigate documents to which attorney-client privilege applies and examine how the independent committee operated and whether the directors acted as expected of them. Giora Inbar’s persistent opposition to the disclosure of the correspondence shows that he definitely has something to hide.
Judge Brenner’s decision will be of great importance in order to understand the authentic conduct of these important committees in real time, and from now on the trustee will not have to base himself only on the conduct written into the minutes by the lawyers and obviously these minutes will not present the conduct in an accurate and unflattering manner.
Do you give up the privilege?
According to Naor, the claimed privilege does not apply to him, because the legal advice is given to the company’s members, and once the trustee is appointed to his position, all the authorities of the members are granted to him according to the law. In any case, it is up to him, and his alone, to decide whether or not to waive said privilege.
According to Judge Brenner, the position of the legislator is one of the main tools that allow the holder of the position to perform his duties properly, which is the collection of information and documents. Without them, he cannot get into the thick of the economic conduct that preceded the liquidation procedures and he cannot conduct an efficient and exhaustive investigation. “Therefore, the holder of the position should be given particularly extensive review powers, even more extensive than those to which a normal litigant is entitled.”
Brenner noted that “in this case, it is legal advice given to the audit committee and independent committees, that is, committees of the board of directors. It is not personal advice to the directors. This is clearly and explicitly stated in the decisions regarding the hiring of the services of the lawyers, and from the debt claims that the lawyers submitted to the trustee for the purpose of paying their salary. This is not private legal advice but legal advice given to the company’s officers, at the company’s expense. As we have seen, the rule enshrined in Section 43 of the Insolvency Law is that a trustee appointed to his position as part of a company’s insolvency proceedings acquires for himself upon his appointment all the authorities of the officers of the company – the authority of the general meeting, the authority of the CEO, the authority of the board of directors and the authority of committees established by the board of directors, such as the audit committee and the independent committees. Meaning, any authority that was given to these bodies during the existence of the company, is granted from here on to the trustee, if only to him.
Brenner added and pointed out that when the legal advice is given to some organization, the “client” for the purpose of waiving the privilege is not the same person, individual, who received the advice, but the organization in whose name and authority he acts, that is, the audit committee and the independent committee. In any case, these committees, and not the people who staff them, are the ones who are institutionally and normatively authorized to waive or uphold the claim of privilege. And when we are dealing with an insolvent company, as in our case, the powers of these committees are granted to the trustee from the moment of his appointment, including the authority to waive the existence of attorney-client privilege. In any case, the claim of privilege cannot be asserted against the trustee, since from the moment of his appointment to the position, he is the one who became the owner of the privilege.
Attempt to evade the delivery of correspondence
Judge Brenner criticized the directors’ attempt to avoid handing over the correspondence, and wrote that regarding some of their claims “there is nothing and nothing to do with the question of the existence of attorney-client privilege in general, and with the question of who is the owner of the privilege in such a case in particular.”
Judge Brenner added and criticized the directors’ claim that the correspondence with the lawyer Eyal Geva who advised them should not be handed over, because there may also be found private correspondence that is not of the trustee’s interest, and thus their privacy will be compromised. In response to this, the trustee clarified that he has no need or interest in reviewing documents of this type. At the same time, in his opinion, the sorting of the documents exchanged between the directors and Adv. Geva should be done by him.
Judge Brenner wrote that “the directors’ claim is flawed on its face. It is hard to believe that in the context of an exchange of correspondence with the person they hired to advise them, personal or private correspondence will be found that goes beyond the scope of the consultation. to the existence of friendships that go beyond professional relationships; Secondly, those who mix on the very same platform between personal correspondence and professional correspondence, take on the risk that on the day of the order, not only the professional correspondence will be exposed to foreign eyes, but also the private ones.” According to Brenner, “there is no reason for a situation of mixing between types of correspondence It will act for the duty of the trustee, rather than for the duty of the one who failed in such a mix-up.”
If that wasn’t enough, Judge Brenner added and criticized the directors when he wrote that “the directors could have been expected not to place unnecessary obstacles in front of the trustee and to get sticks stuck in the wheels of the investigation, which only increased his suspicion that there might be something wrong with him. Thus, as a result of this opposition of the directors, which is not actually in it, there has been a delay of many months in the completion of the investigations conducted by the trustee.”
The trustee, Adv. Ofir Naor, was represented by Adv.