Civil Case (Tel Aviv) 32654-12-19 A. Danan Fire Fighting Systems Ltd. v. Lahavot Manufacturing and Protection (1995) Ltd.

Before financial claims between companies engaged in the field of fire extinguishing and protection systems.  At the background of the litigation is a contractual engagement from June 2015, which ended about two years later.

Note: References below to pages and lines are references to the minutes of the proceedings unless otherwise stated or implied; References to M/__, means references to an exhibit from the Consolidated Exhibit Portfolio.

Table of Contents

Overview

The Positions in the Pleadings - Summary

Danan's position

Flame Stand

Procedural Notes

Order of the Hearing

The content of the agreements

Overview

The date of the transition to the second stage

Exclusion of distributors

Bus Sector

Coercion?

Termination of the Agreement

Overview

Agreement Termination Notice (July 2017)

Immediate Cancellation Notice (September 2017)

Interim Summary

Requirements

Investments for the purpose of fulfilling the agreement

Loss recorded in the books

Loss of profits: general and the relevant period

Loss of profits - the field of hoods

Avoided revenue

Profit Type

Profit Rate

Hoods - Conclusion

Loss of profits - the bus sector

Avoided revenue

Type and Rate of Profit

Buses - Conclusion

Flame Requirements (Counterclaim)

Maintenance of a bus service system

Overview

The Remedy

Loss of sales

Reputational damage

Notes and Conclusion

Overview

1. The plaintiff and the counter-defendant (Danan) is a company that specializes in the design and installation of fire extinguishing systems, pumps, water reservoirs and fire extinguishing switches (sprinklers). The defendant and the counter-plaintiff (Flames) is a company engaged in the manufacture, distribution and marketing of firefighting and fire protection equipment and systems.  Lehavot communicates with its customers directly or through distributors who purchase its products and sell them to end customers (p.  82, s.  10 - p.  83, s.  4; p.  204, s.  1).
2. The parties entered into a "Services and Distribution Agreement" dated June 28, 2015 (M/11 (also attached as part of M/10); The Agreement), which focused on evaporative fire extinguishing systems for eateries such as restaurants and cafes (Hoods) and in fire extinguishing systems on buses (Bus Sector). Unlike products such as fire extinguishers, after installing fire extinguishing systems, they must undergo periodic inspection (hoods every six months, buses every year; pp.  25 s.  2-4; pp.  26 s.  17-20).
3. According to the preamble to the agreement, the parties wished to cooperate in two stages, with Danan providing Lehavot's customers with services defined for defined products (Step One or Service Period); In the second stage, Danan will serve as the exclusive distributor of the products in Israel, by purchasing them from Lehavot and then marketing and supplying the products it purchased and services for them (The second stage).

The first stage is intended to last for 12 months, unless it is jointly decided to extend or shorten it; The second stage is intended to begin at the end of the first stage and continue as long as the agreement is in effect.

4. The term of the agreement is set at 36 months, with automatic extension options for additional periods of 36 months, unless a party gives written notice of termination of the agreement 180 days before the end of the period. Additional clauses in the agreement gave Lehavot the right to cancel the agreement at any time and without reason, with 180 days' notice, and the right to cancel immediately in certain cases.
5. In a letter dated July 20, 2017, Lehavot informed Danan of the termination of the engagement with 180 days' notice, based on a contractual provision. In a letter dated September 17, 2017, Lehavot announced the immediate cancellation of the agreement based on another contractual provision.
6. In December 2019, Danan filed the lawsuit here; Precede a Procedure In which Danan expounded from the flames of calculations (Civil Case 64832-02-18). Same procedure Deleted after the parties have reached an agreement on documents to be transferred.

Lehavot filed a counterclaim.