Civil Case (Jerusalem) 5433-01-18 Super Lang – Gardener and Farmer Ltd. v. Amgazit P.K. Ltd. - part 7

The emails sent by Ashkenazi (Appendix 1 to Nimrod Lang's affidavit) show that he demanded to "correct the price on the website" and not just refrain from publication.  In fact, the defendant tried to control the final price for the customer.

The purpose is to coordinate advertising prices between different distributors of the same supplier, which is equivalent to coordinating sales prices, and harms free competition.

1. Decision: The defendant's demand to publish minimum prices constitutes a restrictive arrangement that may harm competition.  The plaintiff acted lawfully when she refused to do so.

Obligation to give advance notice and the scope of compensation

1. The case law held that even in an agreement that did not specify an explicit period, either party may bring it to termination, subject to the provision of reasonable advance notice (Civil Appeal 41/85 Moshe Zohar & Co.  v.  Travenol Laboratories (Israel) in Tax Appeal [Nevo] (July 11, 1990); Civil Appeal 47/88 Menachem Hershtik v.  Yachin Hakal Ltd., IsrSC 47 (2) 429 (1993)).
2. In this case, even if the agreement was of a seasonal nature, the parties had a business relationship for 15 years continuously, and this created a legitimate expectation on the plaintiff for the continuation of the relationship.  A sudden break without notice undermines this expectation.
3. The defendant did not give advance notice.  The defendant stopped supplying products, without warning, and without giving time to organize.  This conduct constitutes a breach of the duty of good faith and the duty to give advance notice.
4. Throughout the period of advance notice, the case law did not establish strict rules.  The reasonable period is determined according to the circumstances of the case, while examining a number of considerations as follows: the quality of the product and the period required for its penetration into the market; the amounts of expenses and investments required for distribution;the expected profit rate compared to expenses and investments; the chance of continued distribution of the product by the supplier without the distributor; The time that elapsed from the beginning of the relationship until its cancellation (see: Civil Appeal 442/85 Tribunal) [Nevo].
5. In the case before us, the plaintiff was not an exclusive distributor; The defendant's products were not unique; No special investments on the part of the plaintiff in the distribution of the defendant's products were proven, however, the plaintiff made a reasonable profit from the sale of the products for 15 years; the plaintiff relied on the continuation of the engagement, and termination without notice caused it damages such as cancellation of customer orders , loss of reputation, etc.
6. Given all of the above, a notice period of 6 months is reasonable and appropriate in the circumstances of the case.  This period would have allowed the plaintiff to prepare, find alternative suppliers and minimize the damage.  It should be emphasized that setting a notice period of 6 months is not "punitive compensation" or a "fine" imposed on the defendant, but rather reflects the reasonable period that the plaintiff was required to adapt to the new reality.  Over the course of six months, the plaintiff was able to locate alternative suppliers, make adjustments in the store and on the website, inform her customers, and reduce her damages.  Setting a shorter period would not have allowed a reasonable time to organize, while setting a longer period would have restricted the defendant beyond what is required and would have given the plaintiff a disproportionate advantage.  A period of 6 months is the proper balance between the defendant's right to terminate the engagement and the plaintiff's right to reasonable advance notice.
7. As to the scope of the compensation, when the required advance notice was not given, the injured party is entitled to compensation for the loss of profits that it would have generated during the period of the advance notice (section 10 of the Contracts Law (Remedies for Breach of Contract), 5731-1970).
8. The compensation relates only to the notice period and not to a longer period.  The case law held that even in the case of a distribution agreement that lasted for years, the compensation for failure to give advance notice is limited, as a rule, to a maximum of one year (Civil Appeal 442/85 Tribunal [Nevo]).  In the case of D.A., where the reasonable period is 6 months, the compensation will be limited accordingly.
9. As for the annual profit, according to the expert opinion on behalf of the plaintiff, CPA Danny Sarnat, the plaintiff's annual profit from the sale of the defendant's products in 2015 was ILS 37,567.  This opinion was not contradicted in a counter-opinion, and the expert was questioned about his affidavit.
10. Although the defendant claimed that the opinion was based on erroneous data, it did not bring sufficient evidence to contradict the findings.  The expert relied on the plaintiff's bookkeeping and tax reports, and explained the method of calculation (transcript, pp.  18-21).
11. The defendant claimed that according to its cards, the annual volume of sales was lower.  However, the defendant's cards are not controlled, and do not include the full picture.  Thus, for example, Ashkenazi admitted that there may be additional cards (transcript, p.  35, paras.  11-15).  Moreover, the defendant did not bring Avi David, her financier, to testify.
12.  Decision: The expert assessment on behalf of the plaintiff according to which the annual profit was ILS 37,567 should be adopted.  In other words, the average monthly profit is ILS 3,130.  Because the precautionary period is 6 months.  The compensation for this period will be ILS 18,780.

Additional Compensation

1. The plaintiff demanded compensation for damage to her reputation, however, no concrete evidence was presented of definite quantifiable damage that was caused to her reputation.  It has not been proven that termination of the contract caused a decrease in sales and customers or real damage to its good name.  Therefore, the claim of damage to goodwill is rejected.
2. The plaintiff demanded compensation for future loss of income for 10 years.  This argument is rejected.  The case law on the matter is clear: the compensation for failure to give advance notice relates only to the notice period.  There is no justification for awarding compensation for 10 years of loss, certainly in a case where there was no exclusivity, there were no exceptional investments, and when the defendant was entitled to bring the agreement to an end.  In addition, there is no precedent in the case law for awarding compensation for future loss of income for 10 years in a similar case.  Even in the leading rulings in the field (Turbonol, Maytronics), which dealt with long-standing supplier-distributor relations, no compensation was awarded beyond one year, and even that only when special circumstances such as unique or exclusive investments were proven.  In this case, the plaintiff was not an exclusive distributor, did not make unusual investments, and the products were not unique.  Accepting the claim for a period of 10 years would have created a de facto "eternity contract", contrary to the basic principle in contract law that there is no agreement that lasts forever, and each party may bring the agreement to termination subject to the provision of reasonable advance notice.  Accepting the plaintiff's argument would have in fact bound the defendant to continue the engagement with the plaintiff for another decade against her will, which has no anchoring in law and has no precedent in case law.
3. The termination of the engagement without notice certainly caused discomfort and interference to the plaintiff in the conduct of her business, and required an investment of time in dealing with the issue.  However, this damage is already included in the compensation awarded above.
4. The plaintiff demanded that the expenses of CPA Sarnat's opinion be refunded in the amount of ILS 17,550 (including VAT).  This opinion was submitted as part of the proceeding, and was necessary in order to quantify the plaintiff's damages.  Without an expert opinion, the plaintiff was unable to accurately quantify her damages.  The opinion was adopted in this judgment and served as the basis for determining compensation.  However, the plaintiff succeeded only in part of her claim, since the compensation awarded was for only 6 months and not for 10 years as claimed.  Therefore, there is room to impose on the defendant only part of the expenses of the opinion, in accordance with the success rate.  In these circumstances, I determine that the defendant will bear half of the cost of the opinion, i.e., ILS 8,775, and the sum will be included in the framework of the court expenses.
5. Decision: The plaintiff's claim for damage to goodwill, and for compensation for loss of income for a period of 10 years, should be dismissed.  However, the claim for reimbursement of the cost of the expert CPA Sarnat must be accepted and half of the amount of his fees must be awarded in favor of the plaintiff.

The Promissory Note Claim - The Balance of the Debt

1. In the promissory note claim (Civil Case 16626-10-16) [Nevo], the defendant sued the plaintiff for a promissory note dated July 13, 2014 in the sum of ILS 100,000, guaranteed by Nimrod Lang.
2. There is no dispute that the deed was given, and that Nimrod was a guarantor of it.  The question is what is the actual amount of the debt on the date of termination of the engagement (around January 1, 2016).
3. The defendant claims that the balance of the debt on January 4, 2016 was ILS 28,842 (according to Appendix 4 to Ashkenazi's affidavit).  Alternatively, even if we accept the plaintiff's version of the opening balance, the debt is ILS 18,460 (ILS 9,922 + an unpaid check of ILS 8,538).
4. The plaintiff claims that the balance of the debt is ILS 9,922 (according to her statement, Appendix 4 to Nimrod Lang's affidavit).  The plaintiff claims that she sent a check for ILS 8,538 that was not paid, and also raises a claim of offset in the amount of ILS 5,110 for products that remained in her possession.
5. An examination of the card shows that there are gaps and contradictions in it.  The plaintiff's opening balance as of January 1, 2015 is ILS 9,391 (according to Appendix 4 to Nimrod's affidavit), whereas according to the defendant, the balance was higher.  The difference is about ILS 10,382.
6. The defendant failed to explain convincingly where the gap stemmed.  Ashkenazi testified that there may be other cards, but these were not brought.  The defendant's ledger is not controlled, does not begin with an opening balance of zero, and includes only a "segment" of the data.
7. On the other hand, the plaintiff's ledger is controlled since the plaintiff is a company whose reports are audited, and it is more detailed.
8. Decision: For the above reasons, I prefer the plaintiff's card data to those of the defendant.  Therefore, the balance of the debt without offsetting and assuming that a check was not sent or paid is ILS 18,460 (ILS 9,922 + ILS 8,538).
9. The plaintiff claims that she sent a check for ILS 8,538 that was not paid.  The defendant denies that the check was received.
10. Nimrod Lang testified that he did not check whether the check was paid because: "It is not my job in the company" (transcript at p.  29, para.  14).  The plaintiff attached a photocopy of the check, but did not prove that it was actually sent.
11. There is no logic in the claim that the defendant received the check and chose not to cash it.  It was in the defendant's interest to cash the check.  On the other hand, the plaintiff did not present a reference for the shipment, such as: a receipt, a letter, a postal confirmation , etc.
12. Verdict: It was not proven that the check was sent to the defendant.  The check was not paid.  Therefore, the balance of the debt will be ILS 18,460.
13.  The plaintiff seeks to deduct from the balance of the debt the value of the products that remained in her possession, and which the defendant refused to collect in the sum of ILS 5,110.

Section 53 of the Contracts Law states that financial obligations that are due to be paid may be offset in the following cases: