Investments for the purpose of fulfilling the agreement
- The demand in the amount of ILS 1,285,000 (section 101).a) refers according to the statement of claim (section 8) to investments intended to establish an infrastructure that will enable Danan to provide the services to which it committed in the agreement.
- It was claimed that these investments were spread over two years, with most of the investment being made in the first year of the agreement. It was noted that "these investments - in manpower and money, were expressed, inter alia, in the following": the establishment of a dedicated department for the installation and provision of services for Lehavot products, where "for this purpose, it hired three new employees to its headquarters and transferred its employees to special certification" of Lehavot, and a number of Lehavot employees whose field of expertise were absorbed into its ranks (paragraph 8.1 of the statement of claim); directing resources for the purpose of preparing and complying with the terms of the agreement, "at the expense of other profitable activities" (paragraph 8.2 of the statement of claim); the purchase of vehicles for employees who were supposed to provide service throughout the country for flame systems and the purchase of equipment in order to meet the obligations under the agreement (clause 8.3 of the statement of claim); The purchase of a compound (in the settlement of Gan Ner) that is separate from the compound in which Danan operated until then, in order to meet the requirements of the agreement regarding the provision of services to buses (paragraph 8.4 of the statement of claim).
At the summary stage, it was argued that the details in the statement of claim were brought in order to emphasize the many efforts that Danan made since the signing of the agreement, but in practice, the sum that she claims in this component "relies solely on wage expenses of employees who worked in the field of flames (hoods and buses) and on the salaries of management, taking into account the resources allocated for this activity" (paragraph 23 of the summaries).
- According to the evidence that was brought, what Danan called "investments" for the purpose of fulfilling the agreement, was indeed mainly the cost of employing employees (Barnea, CPA, at p. 409, paras. 1-3).
Many arguments were raised by the parties regarding the amount demanded by the judge in this component, but these are preceded by a general issue raised by Lehavot regarding the nature of the remedy required and the implications thereof. Let's start with that.
- In the statement of claim, Danan claims that Lahavot violated the agreement and that this breach entitles it to "subsistence damages, the purpose of which is to place it where it would have been if the agreement had been fulfilled as written and worded, and had it not been breached by the defendant. In this way, the plaintiff's legitimate expectation interest will be expressed from the agreement and bring it to the situation it would have been if the agreement had been realized, including compensation for the profit that was denied to it as a result of its breach" (paragraph 40 of the statement of claim). This is in addition to indemnification for expenses incurred in an attempt to minimize damages as a result of the alleged infringement by Lehavot (ibid., paras. 39 and 41, with reference To Section 14 The Contracts Law (Remedies for Breach of Contract), 5731-1970; The Medicines Law).
- Indeed, when a contract is breached, the injured party is generally entitled to a relief that protects the subsistence interest (or the expectation interest) and is intended to place the injured party in the situation he would have been in had the agreement with him been fulfilled, i.e., subsistence compensation (see Many: Civil Appeal 1094/23 Cooper v. Israel Land Authority (9.10.2024) (עניין Cooper), at para. 39; Civil Appeal 8850/10 Shir Mishkenot Veterans in Tax Appeal v. League for the Prevention of Lung Diseases Tel Aviv (20.8.2013) (עניין Shir Mishkenot Vetikim), Section 15, and the references cited in the aforementioned ruling).
- A demand to receive sums that were allegedly spent as investments by Danan upon the signing of the agreement for the purpose of its existence is not a demand for subsistence compensation, but rather for reliance compensation, the purpose of which is to put the injured party in a situation in which he would have been subject if he had not entered into a contract; "Compensation for expenses incurred in reliance on the obligation to fulfill the contract constitutes compensation for the reliance interest ("reliance interest"), which places the contractor in the situation he would have been in had the contract not been concluded. This is in contrast to compensation for the "subsistence interest" ("expectation interest"), who places the contractor in the situation in which he would have been if the contract had been fulfilled, that is, if the contract had not been breached."Civil Appeal 3666/90 Tzukim Hotel in Tax Appeal v. Netanya MunicipalityIsrSC 46(4) 45, 56 (July 22, 1992)).
- The difficulty from the point of view of this case is not that there is no congruence between the essence of the remedy and what was written in the statement of claim (and noted above), the difficulty is on the merits. For, as it appears from the above description and below, Danan Demands In this proceeding Loss of profits (subsistence compensation), and with the exception of exceptions (which were not claimed at all in our case, were not substantiated, and are not relevant), there are no rulings on both subsistence compensation and reliance compensation, "since it is a matter of 'double compensation' [...] Had the plaintiff refrained from investing expenses in the development of the leased property, it would not have been able to derive profits from it."Civil Appeal 8966/08 Lee Netanel Assets in a Tax Appeal v. Home Center (DIY) in a Tax Appeal (2.3.2011) (עניין Lee Netanel Assets), section 18).
"If compensation is given that protects both interests cumulatively, both existence and reliance, the injured party will be entitled to compensation that will put them in a better position than he could have been, whether the contract had not been breached or the contract had not been concluded. Granting such overcompensation will put the injured party in a better position than he could have obtained in any of the tracks described above, and will enrich him unlawfully at the expense of the infringer. Therefore, he is not allowed to receive these various compensation cumulatively; Moreover, in order to receive subsistence damages, the injured party had to pay the same expenses that were intended for the performance of the contract, for which he is seeking reliance compensation, and therefore they must be deducted from the subsistence compensation" ( Shir Mishkenot Vetikim, paragraph 16).