The total grant for these two industries will be NIS 28.9 million (NIS 1,700 dunams X 17,000 dunams).
The payment for the cancellation of the quotas will be made during the month of December 1994 and is subject to the fulfillment of the conditions specified in the previous sections.
This sum does not detract from the entitlement of the large carrots and onions to be included in government subsidies for the local market – including arrangements for safety nets in the future.
- Abolishing quotas on potatoes
- The cancellation of quotas on potatoes will be done gradually in accordance with the autonomy agreements. In each of the next three years, the Ministry of Finance will fund compensation for the cancellation of quotas according to the amount that comes in from the actual autonomy and the rest (up to the full amount of the quotas), with the complete cancellation of the quotas.
- If, according to the Vegetable Council's examination, it becomes clear in the coming weeks that there are growers interested in exiting the industry and that the scope of their quotas is higher than the quantities actually coming in from the autonomy, the issue will be examined separately, subject to the annual budget constraints for the subject.
- The total grant will be NIS 1,700 per dunam of potatoes.
- Compensation for Potato Potatoes will be paid at the end of each compensation year and against quantities that actually entered and no more than the trade quota.
- The growers may choose the option of monetary compensation in the first year and not the cancellation of the quota , but the amount of compensation will be deducted from the cost of canceling the quota.
[Emphasis in the original – E.R.]
Thus, clause 5 of the agreement regulates the compensation to growers in general and in particular in relation to the potato industry. However, time passed, the potato growers were not compensated, and on September 8, 1997, the government decided to "cancel the payment of compensation for the cancellation of potato production quotas due to the opening of imports from the Palestinian Authority." The reason for the decision was that almost no potatoes were actually imported from the Palestinian Authority to Israel, and the growers were not harmed. The petitioners, who did not accept the decision, turned to the District Court. The District Court (the Honorable Justice Z. Cohen) ruled that the undertaking to compensate the growers was not conditional on the actual importation, however, since no damage was caused to the growers, the Respondent was entitled to withdraw its undertaking under the administrative release rule.
- The parties appealed the judgment of the District Court to this Court. Although we were of the opinion that the judgment of the District Court was deficient in terms of the factual and legal basis it laid out, we found that there was no advantage in returning the case to the District Court, due to the procedural agreement of the parties, according to which the judgment would be given on the basis of the pleadings and their appendices only, without hearing testimony. On the merits of the matter, the opinions in the appeal were divided. The dispute revolved around the question of whether, according to the contract entered into between the parties, the state undertook to compensate the potato growers with full compensation upon the cancellation of the quotas, regardless of the scope of the competing imports in practice. My colleague Vice-President A. Matza was of the opinion that this question should be answered in the affirmative, that the state was not entitled to be released from the contract, and that the appeal should be accepted. According to him, the conclusion that the State's obligation does not depend on the extent of the actual competing import is required by the language of the contract, and if this is not enough, also by the circumstances external to it. Beyond the necessity, the Vice-President was of the opinion that this was also the objective purpose of the contract. Justice Matza's opinion was the minority opinion. My colleague, President E. Barak, was of the opinion that the language of the contract also allows for the contrary interpretation, according to which the amount of compensation depends on the actual scope of the import, and that the sources available to us did not allow us to trace the subjective purpose of the contract. In this situation, the President ruled, there is no alternative to turning to the objective purpose of the contract, and therefore, according to him, the contract should be interpreted in such a way that the scope of payment to the growers depends on the loss actually incurred by them. In light of this, the President was of the opinion that the appeal should be dismissed. I also reached this result. My opinion, like that of the President, was that the language of the agreement allows for both interpretations. However, I was of the opinion that it was possible to trace the subjective purpose of the agreement, and that the intention of the parties was that the amount of compensation would depend on the amount actually imported. Beyond what is necessary, I am of the opinion that this is also the objective purpose of the contract. Therefore, the appeal was dismissed by a majority of opinions. This judgment is the subject of further hearing.
The parties' arguments
- The petitioners claim that the agreement, according to its proper interpretation, is intended to compensate them, ultimately, for the very removal of the quotas, and therefore, the amount of compensation does not depend on the scope of the actual competing import. In their opinion, this conclusion is learned first and foremost, from a thorough reading of the language of the contract, and it is supported, in a manner that leaves no doubt in their view, the later affidavits of the then Minister of Finance, the then Minister of Agriculture, the Director General of the Ministry of Agriculture at the time, the Director General of the Vegetable Council at the time, and of the growers themselves (as well as the fact that the State waived its right to cross-examine them); in documents different from the period in which the contract was concluded; in the fact that tomatoes, carrots and onion growers received full compensation regardless of actual imports; and that the government's decision to cancel the agreement assumes that there is a valid obligation. The petitioners further claim that the agreement in question is the product of a compromise between the parties, which is intended to regulate the cancellation of the quotas without the need to assess the damage that will be actually caused and without the need to apply to the courts. According to them, in this state of affairs, in which the subjective intentions of the parties are open and clear, the interpretation of the agreement through objective prism undermines the basic concepts of contract law, and is contrary to the law. However, according to the opinions, an objective interpretation of the agreement also leads to the same result, especially in light of the fact that it is a compromise agreement, which is intended to compensate the farmers for the cancellation of production quotas "which were the foundation of their economic existence and the main reason for the agreement of the growers to settle in distant and difficult areas of the country." Moreover, according to the petitioners, it should be further determined that the state was not entitled to be released from its obligation to compensate the potato growers for the cancellation of the quotas, since there were no essential public needs that justified this, as required by the release rule.
- The Respondent, for its part, argues, first and foremost, that in the interpretation of authority contracts, as a rule, the objective purpose should be preferred, since it reflects the duties imposed on the organs contracting on behalf of the State, and the basic principles of public administration. This preference, in her opinion, can be made by way of establishing a presumption that the subjective purpose of an authority contract is the objective purpose. One way or another, the respondent argues, the intention of the parties in this case was to create a correlation between the compensation and the damage. The Respondent supports this position with regard to the forecast regarding the existence of damage that the signatories of the agreement had in mind, and in the distinction between the potato industry and other industries in which a grant was paid to growers (lower than that specified in the agreement in question), which was not conditional on proof of damage. The Respondent argues that the agreement is not a compromise agreement, since the State had no obligation to compensate the growers for the removal of the quotas, and in any event, there was no real "compromise" on the part of the farmers. Moreover, the respondent argues that even if it concludes that it is a settlement agreement, this does not prevent the payment from being made dependent on the creation of damage. The Respondent reiterates that no real damage was caused to the potato growers, and therefore, in her opinion, the transfer of the funds to them will lead to their enrichment at the expense of the public. This reason also underlies the respondent's argument that the objective interpretation of the agreement requires a match between the amount of compensation and the scope of the actual damage. The Respondent adds that if its opinion is not accepted, and it is determined that according to the agreement, the amount of compensation must be paid in full, regardless of the competitor's actual import, it should be allowed to be released from the contract in accordance with the administrative release rule, because in its opinion, since no damage was caused to the growers, there is no justification for compensating them and imposing such a heavy expense on the public coffers.
Interpretation of the Agreement
- A contract was entered into between the Respondent and Petitioner 1 – there is no further dispute about this – and the dispute before us revolves around its interpretation. "A contract shall be interpreted according to the intentions of the parties, as it is implied in the contract, and to the extent that it is not implied by it – from the circumstances" – this is how the provision of section 25(a) of the Contracts Law (General Part), 5733-1973 (hereinafter: the Contracts Law) instructs. The purpose of the institution of the contract is to enable different individuals to bind their will together and carry it out, by giving legal validity to the obligations they have undertaken. Recognition of the institution of the contract is an important component of the protection of human liberty. There is no dispute that the overarching purpose of the interpretation of a contract is to locate the intentions of those who enter into it. There is also no dispute that the starting point for the interpretation of any contract is its language. Our friend Justice A. Matza found in our judgment things that are not in it. He wishes to transfer the dispute that arose between him and my colleague President E. Barak in respect of matters that were ruled in the Apropim case (see: Civil Appeal 4628/93 State of Israel v. Apropim Housing and Initiation, IsrSC 49(2) 265). However, here the question does not arise and it should not be artificially recreated.
The language of the contract is what defines, as stated, the boundaries of interpretation. Therefore, our journey will begin with the written contract. The main contract clause in our case is clause 5, and within it subclause F, which deals individually with the compensation of potato growers. The language of clause 5 of the contract, so I believed, and I still believe, is a wording that is incompetent and lacks ambiguity. It ostensibly embraces both the interpretation proposed by the petitioners and the interpretation proposed by the respondent. In practice, it is closer to the respondent's resignation. Let's get closer to the section and see.