The defendant (Adi Teler) served as CEO, director and shareholder of DSG Web Application Ltd. (the "Company"). Following the failure of a transaction between the Company and Klal Health Ltd. ("Klal") to be not carried out, the defendant established a new company fully owned by him (“Teldar") which succeeded in carrying out the same transaction with Klal which the Company had failed to carry out.
The court decided that by this action the defendant had violated his fiduciary duty to the Company and to the Company's shareholders (the plaintiffs), which prohibits the exploitation of the Company's opportunities by its directors and officers, regardless of whether the Company was indeed able to carry out the transaction.
Although fiduciary duty is towards the Company only, under certain circumstances a fiduciary duty might apply towards a specific shareholder, when a special relationship (e.g., contractual) exists, and such a relationship had indeed existed with some of the Company's shareholders.
Compensation for breach of a fiduciary duty of an officer is usually determined by the degree of financial enrichment of the offender, regardless of the company's chances of succeeding in carrying out the transaction. Another way to determine compensation is based on the amount of damage caused to the Company, by considering the question: what would have happened had the fiduciary duty not been breached. In the absence of enrichment under the above circumstances, compensation is determined by the latter.
