Danan's reasoning is based on two cumulative pillars: a claim of a breach of agreement by Lehavot with respect to the bus sector, and a claim that such a breach justified or enabled a breach of agreement by Danan. However, none of these have been established at all.
- According to the evidence, the way Danan conducted himself in the field of buses forced Lehavot against the plans, Continue to operate a service system in the field of buses both at the level of technicians (e.g., p. 174, paras. 21-24) and at the level of coordination activity (Sha'abo, p. 298, paras. 5-11).
The Remedy
- In this case, Lehavot Madanan claimed the sum of ILS 1,442,350, for "its expenses [...] in connection with the maintenance of a bus service system" (Chapter C, paragraph 10.1 of the counterclaim).
- In its lawsuit, Lahavot allegedly refers to data for the period between January 2016 and December 2017 (Appendix 12 to the counterclaim). The expert opinion on its behalf relates to the period between the signing of the agreement and the notice of immediate cancellation, i.e., from July 1, 2015 (for reasons of convenience at the beginning of a calendar month; the agreement was signed on June 28, 2015) until September 17, 2017 (M/124, p. 8, paragraph 2).
There is no justification for these two possibilities. Already according to the agreement as signed, in the first year of the agreement, the defendant was not supposed to provide the service exclusively, and in any case it was only apparent that the service system would continue to operate in one format or another until the beginning of the exclusivity period. In addition, Lehavot's argument was accepted above that the exclusivity period was postponed by agreement to the beginning of 2017. Accordingly, there is no basis for the demand for a period prior to January 1, 2017 (as the demands for loss of profits regarding earlier dates were also rejected). The period for which a causal connection can be seen between the conduct in question in the field of buses and the continued maintenance of the service system in this field is from January 1, 2017 until September 17, 2017[13].
- Lehavot's claim that Danan has given up on the bus sector, on the other hand, does not prevent reference to the relief required by it, after it was found that there is no clear evidence regarding the gradual application of this field and regarding an agreement regarding a concrete date on which the activity in question in this field will cease, and the entitlement to the relief in the field of buses for the period beginning in January 2017 has been approved.
- In the Lehavot lawsuit, the calculation of the relief was explained In this regard by way of taking the total expenses of Lehavot in connection with the maintenance of a service system for the bus sector, deducting an estimated profit of 40%, when it was claimed that the balance constitutes an expense that was imposed on Lehavot due to the violations in question (Chapter C, Section 4). In its summary, Lehavot refers to an expert opinion on its behalf regarding the costs of maintaining the bus service system after deducting revenues from this service and the costs for the service provided by Lehavot to the buses under responsibility (the costs are mainly the wages of employees who were allegedly forced to continue to work in bus service and could not be converted as planned to the production and development lines).
- Barnea, CPA, noted in his opinion the Lehavot data for the period from June 2016 to As of January 2018: Provision of services to 1,992 bus systems and service warranty for 3,588 systems sold (where service is provided as part of its responsibility for the products is not against additional consideration). CPA Barnea estimated that the costs of maintaining the Shalhavot service system would have been approximately ILS 300,000 (paragraph 4.1 of the opinion).
- Taking into account the ratio between the scope of the period to which the expert's assessment relates and the period for which relevance was recognized, and after I have also considered the claims regarding partial and not full charge of wage expenses and regarding the significance of the charge for flames during the warranty period, I find that the excess cost of Lehavot in maintaining the bus service system that should be charged to Danan, in the sum of 110,000 ₪ Until the expert's opinion.
Loss of sales
- In the lawsuit, it was claimed that the agreement was intended for Danan to benefit from the field of services in which the average profit potential is high (especially for a company whose main business is this), while Lahavot would be able to direct the resources allocated to the service until that time, to areas that are at the core of its business (for example, the production of systems) and to maximize the sales of its products through Danan. However, it is argued, instead of Danan focusing on the service area and performing it in the best possible way, it tried to increase its profits from sales by "bypassing" other distributors and attempting to engage directly with their customers, by drastically raising prices, and violatingA Additional commitments.
- It was argued that if Danan had operated with reasonable professionalism, the volume of sales would have increased ("conservatively") by 20% more than the systems actually sold, and hence: 200 additional systems (Chapter C, paragraph 8 of the Flames lawsuit). Even at the summary stage, it was argued that if the work had been carried out in an orderly manner by available teams focused on carrying out the works according to the agreement, "and not in attempts to maximize profits at the expense of Lahavot, to steal work from distributors and to increase sales of Danan products", "it is very reasonable to focus and act to increase the sales volumes of Lehavot products by about 20% per year - i.e., about 200 additional systems" (paragraph 38 of the summaries).
On the basis of this figure and the multiplication of the "average cost" for the system of ILS 5,000, Lahavot is entitled to sales "that would have been made if Danan had not been negligent in the performance of its obligations" in the amount of ILS 1 million, and claims that a "reasonable operating profit" for such revenues is ILS 150,000, which it demands from Danan (paragraphs 8 and 10.2 of Lahavot's claim; paragraphs 36 and 38 of its summaries).
- In another context, it was clarified that evidence was brought regarding the claims raised against the conduct in question regarding the distributors (see paragraph 43 above), which also led to the exclusion of some of the distributors from the agreement. At the same time, testimonies were heard that the claims were "inflated" by people with an interest in Lehavot and that the CEOs of the two companies were unanimous in their opinion that "background noise" was expected in such a move. Danan's CEO at the time testified that the meetings with the distributors who expressed opposition were relaxed and calm, as he expected in light of the long-standing acquaintance and even the friendship with the Causes These (pp. 376, 17-19; p. 372, 24 - p. 373, 1). Correspondence between the parties on this issue from December 2016 included 13 distributors who expressed their objections, and after the meetings, only a few people remained difficult. Failure to bring witnesses such as Nir and Dudi can be a source of flames in the context of proving the arguments of her claim, even without exercising a presumption of refraining from bringing witnesses.
In any case, there is no need to go into the details of these issues regarding the conduct in question vis-à-vis the distributors or to other claims that were raised in this context and were defined as negligence or breach of obligations, since the head of this damage is in any case on shaky ground in terms of calculation.
- The compensation claim is based on an assessment that if Danan had conducted himself differently (according to the Lahavot method - in a manner that is not negligent and in accordance with its obligations in the agreement), it would have been able to sell systems at a volume of 20% more than that which was actually sold. Nothing has been brought to support this assessment (which was even noted to be "conservative"). Although this is naturally a situation that did not occur, and therefore the information about it is uncertain (Labor Appeal CPA Barnea's comment: "It is difficult to estimate how many systems in question would have been known if problems had not arisen between the parties", paragraph 4.2.3 of his opinion), but no evidentiary basis was brought on which such a claim could be relied upon, even if only for the purposes of evaluation. The method of evaluation was not specified, and things remained largely as a general statement[14]. There are also no external data from which it could be understood that during the relevant period, sales of such systems were or were not affected by other circumstances, and to what extent.
- The opinion submitted on behalf of Lehavot in support of its claim relies on this issue on the same general assessment as to the scope of the additional systems that would have been sold if the case had been conducted differently. The expert on behalf of Lehavot took this estimate that was given to him as a starting point and his opinion deals with the type and rate of profit that he believes was avoided due to the loss of income from those sales that were not made. In the absence of a proper basis for estimating the "missing" amount of sales, the discussion of the "next floor" is redundant, the question of the profit that must be derived.
There is also no need to address additional issues such as Danan's claim that according to the data, the average cost of a system is not the amount claimed by Lehavot in this matter (ILS 5,000) but rather lower (ILS 4,100) (paragraph 60 of the summaries). It should be noted, however, that there is no relevance to another claim by Danan, according to which there is no contractual obligation to sell a minimum number of systems, and therefore there is no contractual anchor for the head of the damage. When it comes to subsistence compensation, a party to the agreement may try to prove how its situation would have changed if the agreement had been fulfilled as it should have been, even in the absence of a concrete commitment on a particular issue. Danan also does not refer to a contractual provision that entitles her to a profit on the provision of service in the field of hoods, for example, and despite this, she is entitled to try and prove her entitlement to subsistence compensation in the form of an estimated loss of profits.
- The demand for relief for loss of sales is denied.
Reputational damage
- In the Lehavot lawsuit, it was claimed that the manner in which it dealt with customers and distributors in many cases caused a conflict between Lehavot and its customers and distributors. Lehavot assessed "conservatively" that it had suffered reputational damage of ILS 250,000 in this context (Chapter C, Section 9 and Paragraph 10.3). A similar argument is raised at the summary stage, with reference to testimonies and correspondence as support, and it was noted that the assessment of the damage required is conservative and cautious, even though "it is clear that the damage is much heavier" (paragraph 39 of the summaries).
- The claim of damage to reputation due to the conduct in this case vis-à-vis distributors and customers can be based on both contract law and tort law (see, for example, clause 11.7 of the agreement, which includes, inter alia, a mutual obligation not to act in a manner that may damage the good name and business of the other party).
- In Proceeding Testimonies were heard and evidence was presented from real time that Danan's conduct raised problems vis-à-vis distributors and end customers; Examples are given above and there is no need to elaborate. Did these difficulties lead to the alleged damage to Lehavot's reputation?
- As is well known, in the case of goodwill, which is pecuniary damage, the plaintiff must prove by means of evidence the actual occurrence of the damage and the extent of it.
In the matter of distributors (hoods), quite a bit of evidence was brought about claims in real time, but it is not clear whether these were intended to cause real damage to reputation vis-à-vis the distributors, especially when Lehavot acted during the period of the agreement to reach understandings and exclude some of the distributors, and when an announcement of the termination of the agreement was issued a few months after the beginning of the second stage of the agreement, and the relationship was in fact severed about two months later.
- In the field of buses, there is evidence of the very existence of damage to the reputation of Flames. A delay in the provision of a service in this area and malfunctions in the service provided have immediate economic significance for a customer whose bus is disabled and does not generate income (for example: pp. 175, paras. 3-6). In real time, it was brought before Danan that her conduct caused damage to her reputation ("The significance, unfortunately, is damage to the reputation of the service [of] Flames, which you do not feel," M/144, email dated April 26, 2017; see also email of February 19, 2017), and this was also mentioned in the testimonies. Even if additional evidence could have been brought, it appears that what was brought is sufficient to establish the existence of an injury (see, for example, a client's request of April 26, 2017, part of M/144).
However, this is not the case. Lehavot did not prove the extent of this damage, even roughly, and did not lay an infrastructure that would have made it possible to award an amount by way of an estimate. The expert, CPA Barnea, briefly noted (paragraph 4.3 of the opinion) that he could not give an estimate as to the amount that Lehavot mentioned in this matter, and that he assumes that the court will be able to do so. The expert opinion on behalf of Lehavot did not examine this component (M/124, p. 14 of the opinion).
- Even if it is not stated that the case requires the submission of a full and detailed opinion on the issue of the extent of the damage to reputation, there is still an obligation to provide a basis for the amount claimed. There is no explanation, calculation or rationale for the amount claimed. Testimonies were heard that two customers in the bus business stopped working with Lehavot in light of the conduct in question (Gilo, pp. 175, 10-12; Shai, pp. 50, 22-23), but no evidence was presented that would enable us to estimate damage on this basis (such as the date of the interruption, income that was from a certain or unknown company during one period or another, etc.). Even if the damage is difficult to assess, it is necessary to try to establish a calculation or method of quantification (Civil Appeal 5465/97 Homebuyers in a Tax Appeal v. The Local Planning and Building Committee, IsrSC 35(3) 433 (June 21, 1999)). It is not enough to mention a mere amount or to say that it is "clear" that in practice the damage is higher. In view of the aforesaid, the demand in this regard is denied.
Notes and Conclusion
- I did not find in the other arguments of the parties or in other considerations, to change the outcome of the discussion on the merits of the matter (see Menei Many: High Court of Justice 1666/22 Dr. Almagor v. The National Labor Court (December 12, 2022), paragraph 17; Civil Appeal 578/17 Yavlinovich v. Partner Communications in a Tax Appeal (18.11.2018), section 40; Civil Appeal 2112/17 Gerst v. Netvision in a Tax Appeal ((2.9.2018, section 51; Civil Appeal Authority 1491/16 Anonymous vs. Anonymous (April 14, 2016), Section 9; Civil Appeal Authority 9294/09 Chen v. Bank Hapoalim (March 25, 2010), paragraph 7; Civil Appeal 84/80 Qasim v. Qasim, IsrSC 37(3) 60 (15.6.1983)), and in general, the aforementioned argument regarding the non-summoning of the testimony of a previous chairman of the board of directors of Lehavot (p. 34, paras. 6-13), Dudi (pp. 66-67; the allegations against my uncle did not arise in the pleadings, but only in the interrogations, pp. 219, s. 21 - p. 220, s. 8), Misha, Haim and perhaps other factors; Relevance and reasonableness of the idea at hand to concentrate bus care in Gan Ner (pp. 48, 8-20; pp. 80, 25, 81, 17, 175, 13-24; see Ronen's testimony, pp. 206, 18-24, and compare: p. 207, paras. 1-2; Dekel, pp. 344, s. 18 - p. 345, s. 4); Shai (Lavi's) previous acquaintance with Danan from the "Eitan Foundation" period; And more.
- In summary: Danan is entitled to compensation for loss of profits as stated above, in sections 141 and 155 in particular. Lehavot is entitled to compensation as stated in section 170 above.
- Given the way In which data were presented in the calculations of the parties and the experts, it is necessary to supplement the quantification of the withheld revenues and to derive profit rates in the format set out in this judgment above.
- It is proposed that the parties come to the matter and try to propose an understanding regarding the financial result obtained from the above determinations, while preserving their arguments regarding an appeal and in general. It is also proposed that in this framework, the parties will also make redundant, subject to the preservation of the aforesaid claims and for the purposes of a purely financial result, the need to address the dispute mentioned in section 155 above.
In the absence of understandings, the court will be required to assist a professional on its behalf (CPA Barnea or another entity).
- The judgment will be completed and the matter of expenses will be decided after the quantification is made.
- The parties are requested to submit an update regarding the provisions of section 186 by the day 14.9.2025.
The Secretariat will provide the (partial) judgment to the parties.