Civil Case (Krayot) 21624-01-22 Amit Communications and Holdings Ltd. v. David Zadok - part 2

In order to decide the dispute before me, the following questions must be discussed in their order:

1. Whether the cancellation of the agreement was done lawfully and with the consent of the parties, as claimed by the defendant.
2. If the answer is negative and the termination of the agreement is unlawful, it is necessary to examine what remedies/compensation the plaintiff is entitled to due to the unlawful cancellation of the agreement.

Is the cancellation of the agreement lawful?

7. According to the defendant, after signing the agreement with the plaintiff he spoke with his son-in-law, who warned him about the plaintiff and it became clear to him that the partnership outline proposed by the plaintiff deprived him, and therefore, according to him, before the plaintiff made any investment in the project, he contacted the company's representative named Amit, and informed him of his desire to be released from the agreement. According to the defendant, another meeting was held at the convenience of Amit and Mr. Reuveni, the plaintiff's owner, in which they agreed to cancel the agreement, and that Mr. Reuveni even informed him that there was no need to put this agreement in writing in light of the friendship and trust between the parties.  According to the defendant, and only after it was clear to him that he had been lawfully released from the agreement, he signed a new agreement with another company on March 3, 2020.
8. The Ottoman Settlement [Old Version] 1916 Discussion and Decision - After examining the entirety of the evidence and being impressed by the parties' testimonies, I found to reject the defendant's arguments that the termination of the agreement was made with the oral consent of the parties. The reasons are as follows:
9. 12-34-56-78 Chekhov v. State of Israel, P.D.  51 (2)First, the defendant did not remember to say exactly when the meeting in which it was agreed to cancel the agreement was held, even when he was asked about it during his testimony in court.  The defendant claimed that the cancellation of the agreement was made at a date close to the date of the signing of the agreement on February 4, 2020, a matter of about a month, but did not recall on what date or on what day the meeting was held (p.  84, lines 24-27).

The date of cancellation of the agreement is inconsistent with the date of signing the contract with Ormesh - Moreover, insofar as the meeting in which the agreement was canceled was held about a month after the signing (04.02.2020), i.e., in March or the end of February, it is not clear how the defendant was able to negotiate and sign an agreement with Ormesh for the installation of the panels (the agreement with Ormesh was signed on 03.03.20), i.e., less than a month from the date on which the agreement with the plaintiff was signed.  and less than a week from the date of the cancellation of the alleged agreement.  The defendant also did not remember who exactly participated in that meeting on behalf of the plaintiff's representatives, and contradictions were even discovered in this regard.

1. In his interrogation of December 24, 2024, the defendant confirmed that he had in fact canceled the agreement also due to the lack of economic viability in the transaction, and that although at first he was interested in not investing money in the establishment of the system, and therefore he wanted to enter into a partnership, afterwards, and only about a month later, he contracted with another company to buy the system.

• The testimony of the defendant's son-in-law (Mr. Yaacobi Cohen) could not be relied upon, which is a clear rumor testimony. The groom was not present at that meeting and could not say why no written document was prepared, why no written notice was sent, and who was present at that meeting.

1. The defendant's arguments for the cancellation of the agreement are based on his sole testimony, since according to him, he was the only one present at that meeting. Insofar as the defendant's son-in-law was indeed the one who advised him to cancel the transaction with the plaintiff, the defendant did not clarify why he did not ask him to be present at that meeting as well.
2. Moreover, the defendant did not provide any satisfactory explanation as to why he did not send any written notice documenting and confirming the termination of the agreement, not even shortly after that injury, nor even in a WhatsApp message or email, or asked his son-in-law to send a written message on his behalf. This is especially so in light of the provision of clause 14.5 of the agreement - according to which any change in the terms of the agreement or waiver of the rights of the parties will be made "only in writing".
3. Moreover, the defendant's version is also inconsistent with the logic of the matter - the defendant did not provide any satisfactory explanation as to how the plaintiff agreed to cancel the agreement without being refunded at least the minimum sums she spent to promote the agreement, including the sum of approximately ILS 1,900 that the plaintiff paid for increasing the connection to the electricity grid.

• Moreover, the plaintiff even attached real-time emails written between the company's representatives and with the company's attorney, which indicate that she did find out by chance, and only in May 2020 (about three months after the agreement was signed) that the defendant had contracted with another company, and that he was evading contact with it.
• The defendant's conduct after the plaintiff discovered that the defendant had signed a transaction with another company, also shows that the agreement was not lawfully cancelled by mutual consent. The plaintiff proved that the defendant evaded attempts by the plaintiff's representatives to contact him, both by telephone and when one of them physically came to his home in an attempt to find out if he had indeed signed a contract with another company, evaded them, locked himself in his home and refused to open the door for them.  In this regard, the testimony of Amit Goldenstein, the plaintiff's sales representative, was of the utmost importance, when in real time he even updated the CEO, Mr. Reuveni, in this regard I also found it necessary to accept the testimony of Mr. Reuveni.

1. Moreover, the defendant did not provide any satisfactory explanation as to why he did not first offer the plaintiff to change the investment route, but rather to cancel the agreement with her without examining the possibility of improving its terms. The defendant even changed his mind and preferred to choose the investment track - i.e., the purchase of a system, with the defendant alone bearing the cost of the construction, as he did in the end with Ormesh).
2. In this context, it cannot be ignored that only about a month after the date on which he signed the transaction with the plaintiff, the defendant signed a transaction with another company.

In other words, this is not a landowner who reaches the conclusion that the system is not worthwhile at all, or gives up on the solar system, but rather someone who is interested in the system (the "product" itself) but wanted to maximize his profits and buy from another company without informing the plaintiff in advance.

1. To all this must be added contradictions in the defendant's version - the defendant claimed, on the one hand, that he sought to cancel the agreement with the plaintiff after discovering that he claimed that it was an "unfair" company, but despite this, he was ostensibly satisfied with the oral consent of one of its representatives regarding the cancellation of the agreement and did not demand any written document, not even a handwritten one.

When the defendant was asked why he did not send at least a WhatsApp message about the cancellation of the transaction, he confirmed that he did indeed have WhatsApp, but claimed that he did not use it because he could not read and send messages in the same system (p.  82, lines 36-49 of the protégé).

• Refraining from summoning witnesses - the defendant also refrained from summoning a representative of the Armush company to testify, so that he would testify that he had indeed informed her, that he had cancelled the agreement with the plaintiff prior to the engagement with her or regarding the circumstances of the engagement with her. According to the defendant, he asked that someone appear on their behalf, but they told him that they were not interested in intervening in the matter (see the defendant's testimony at p.  86, line 19).  The problem is that in the list of witnesses on behalf of the defendant that was submitted to the case on May 8, 2023, the defendant claimed that he would also summon a representative on behalf of Ormesh, who would be able to "shed light on the circumstances of the engagement with Ormesh"

The defendant's claims for lawful cancellation by virtue of the partnership laws

9. The defendant further argued that since we are dealing with a partnership agreement whose duration is indefinite, he is entitled to cancel the partnership agreement at any time, by virtue of section 36 of the Partnerships Ordinance, and even without the need for written notice. Article 36 states that: " If a fixed period for the existence of the partnership has not been agreed, each partner may terminate it at any time by giving notice of this intention to all the other partners."

These arguments should be rejected :

10. First, since the partnership agreement is a contract, it is subject to duties of good faith that in section 39 of the Contracts Law (see, for example, Civil Appeal 453/80 Matityahu Ben Natan v. Yitzhak Negbi (published in Nevo)) the defendant was certainly not entitled to disavow his obligations in accordance with the agreement when his entire intention was to enter into an agreement with another company in order to maximize his profits.

Moreover, in our case, the partnership did not begin to operate, before the panels were installed on the roof, and section 36 of the Ordinance was not intended to allow the partner to thwart the commencement of the partnership's activity, and to disavow all of his obligations in accordance with the agreement.

11. Second, even the case law to which the defendant referred does not help:
12. With regard to the Sharabi judgment - Civil Appeal 1135/12 Sharabi v. Azoria (published in Nevo), it was ruled that a distinction must be made between a notice of dissolution of the partnership and the stage of liquidation of the partnership's business, so that even such a notice does not eliminate the partnership business:

"This is the place to distinguish between the date of the dissolution of the partnership ("general dissolution") and the process of liquidating the partnership business ("winding up").  According to the default set out in section 41(b) of the Ordinance, the date of dissolution of a partnership for an indefinite period will be "on the date specified by the partner in his notice, and if he did not specify a date, on the date on which the notice was delivered".  As of this date, the partnership will be considered a "partnership in liquidation" and will be subject to sections 49-51 that regulate (respectively) the authority of the partners for the purposes of liquidation, the rights of a partner in liquidation, and the rules for settling accounts between the partners.  The dissolution of the partnership may be done, at the request of a partner, through the court as stated in section 47 of the Ordinance, or by the partners themselves and without the involvement of the court.  Settling the accounts and liquidating the partnership's business may be a lengthy process and may include the sale of its assets, the discharge of its debts to creditors, and the distribution of the surplus among the creditors according to their rights.  As long as this proceeding continues, the partners are entitled to act on behalf of the partnership as stated in section 49 of the Ordinance."

2. Civil Appeal 8521/09 Shraga P. Biran v.  Adv. Zedekiah Hermolin (Nevo 2.10.2014, hereinafter: "The Biran Case") held that although the partner should have the right to dissolve the partnership, the stage of liquidation of the partnership is at the discretion of the court, and that there will be cases in which a partner does indeed have the right to dissolve the partnership, but the court will be convinced that it would not be appropriate to liquidate its business:

" ...  (Q)The partner usually has the right to dissolve the partnership - the actual liquidation of its business is a possibility that is at the discretion of the court.  Therefore, the District Court rightly ruled that the dissolution of the partnership does not necessarily lead to the automatic liquidation of its business (although this, of course, as a rule, is the "way to go").  These comments lead us to a discussion of the question - what is the law where a partner has the right to dissolve the partnership, but the court is convinced that it would not be appropriate to liquidate its business, and it would be sufficient to order the preparation of accounts between the parties and the redemption of the outgoing partner's share."

• In another judgment referred to by the defendant - Civil Case (Haifa District) 20343-07-12 Roash v. Moyal Engineering in a Tax Appeal (published in Nevo) - "Once the partnership is dissolved, each party is entitled to the other partners that the assets of the partnership will be used to clear the obligations of the partnership, and that the surplus assets will be used for the disposal of the partners after all that is due from them to the partnership due to the partnership due to them has been deducted from it due to their being partners in it (section 50 of the Partnerships Ordinance).  As of January 10, 2012, after the partnership was dissolved, it was in a state of dissolution of the partnership (Civil Appeal 1135/12 Sharabi v.  Azuria [Nevo] (given December 12, 2013)."

1. With regard to the judgment in Opening Motion (Tel Aviv) 187/06 Plus Ltd.   Becker (published in Nevo), the court there did indeed rule that the agreement of principles that was signed was a binding agreement and that immediate notice was sufficient to terminate the engagement, but there too the court ruled "that the respondent's notice of termination of the engagement due to the end of the probationary period (Appendix F) was unlawful and that the applicant is prima facie entitled to enforce the agreement of principles.  However, the parties did not determine the details of the long-term engagement and no evidence was found that could fill in the gaps in the agreement between the parties."
2. From the above grouping, it emerges that even when a partner wishes to dissolve the partnership, the result that follows from this is not that the partnership agreement is essentially void, and in any event, the stage of liquidation of the partnership is a separate stage that is subject to the discretion of the court. Above all, as stated, section 36 of the Ordinance is not intended to allow the partner to act in bad faith and thwart the beginning of the partnership's activity only for the purpose of establishing a parallel "business" that in the opinion of the partner will be more profitable.

Interim Summary - It has been proven that the defendant breached the agreement and unilaterally cancelled the agreement while breaching it.