Civil Case (Petah Tikva) 10269-01-21 Draco Ltd. v. LUSTER TERABAND PHOTONICS CO. LTD - part 7

With regard to the matter of relief for the provision of accounts in respect of a "regular business contract", this is not a precedent that requires the provision of accounts in any ordinary business contract, but rather a determination in the transfer of a place of hearing that there are cases in which the court has shown a willingness to grant such relief (the transfer of a place of hearing refers to only two examples that are not at all similar to its affairs).  However, in our case, Draco did not show why the case at hand should be included in the relief of providing accounts and why she did not file a regular claim for monetary relief.

86. In this regard, the Court's ruling in Civil Appeal 9099/96 Yedioth Ahronoth in Tax Appeal v. Fistenberg [Nevo] is appropriate:

"Not every relationship between a manufacturer and a distributor gives rise to the right to receive bills.  It is the right of a manufacturer to receive such a remedy by showing that a relationship of trust has been established from which the obligation to transfer accounts arises...  Indeed, a manufacturer who is unable to show that such a relationship took place has no choice but to follow the path of a regular claim for monetary relief and prove his claim."

87. To be precise, Draco herself estimates her loss for the products at a value of $2 per product and claims that she would have sold about 100,000 units per product per year , and then it is not clear why she did not file her claim on the basis of these estimates, as well as on the basis of the agreements she signed with Etong. and on the basis of which she could estimate the value of her alleged loss.
88. In accordance with the aforesaid in the case of UBM, there is no room to file a claim for the provision of accounts in order to ascertain how much the defendant owes, and therefore Draco could not file the claim in this case in order to ascertain the amount of the claim.
89. It should be noted that business agreements of parties include trade secrets, and therefore it is not easy to petition for disclosure. Draco herself did not disclose, as stated, the agreement she signed with Yes, for which she sold at least 200,000 products, and on the basis of which she could have made a financial claim, insofar as she believed that she had suffered damage.
90. So far, Draco's relationship with Luster has been discussed, but the lawsuit is also directed against Axel on the grounds of breach of contract for which an order for the provision of accounts should be issued against her, while Draco relies on the decision to transfer the venue of a hearing in the Ox case that allowed the filing of a claim for providing accounts for breach of contract. However, this judgment cannot be relied upon as a source of obligation to provide accounts against a competing company.
91. PassMoving a hearing place in the Bull case was given in the courtMoving a hearing place to work and discussing a request not to dismiss a claim in limine. It did not recognize the cause of breach of contract as a ground for providing bills, but it was given, as stated therein, in relation to the special circumstances of that case, including the fact that it was an employee-employer relationship and the employee's claims were a violation of intellectual property rights, and when the court refers to its jurisdiction a criminal appeal under section 33 of the Labor Court Law, 5729-1969.  In the transfer of a place of hearing, he explicitly stated that it was not found in the existing case law that a right to provide accounts in a claim on the ground of causing a breach of contract was sold (paragraph 23 of the judgment).
92. Draco, for her part, beyond quoting the aforementioned discussion venue, did not present any reason justifying the granting of accounts in relation to its business competitor, when there is no connection between them. and when it is clear that the granting of such relief is likely to infringe Excel's trade secrets.
93. As for the argument of unjust enrichment, beyond the weak presentation of the argument in the statement of claim, no factual basis has been proven that indicates enrichment. The main cause of action is "receipt of an asset that is not in accordance with a legal right." After all, there is no dispute that Excel operated with Yes and Luster from July 2020 until the receipt of the order on 1/21, so how can it be argued that receiving profits is not a criminal appeal, a right it has in law and in light of its activity? Yes was not brought to testify on behalf of Draco and it was not proven that Yes's agreement to contract with Excel specifically in relation to Luster's products stems from Draco's activities and not from Axel's activity.  On the contrary, Shai Levy on behalf of Yes confirmed that "we have received samples from Excel and therefore we are in the process with them on Luster's product" (pp.  179, 20-21).  In other words, on behalf of Yes, the importance is to the person who brought the examples to it, and therefore when Excel brought the examples, the profits that it derived from the agreement with Yes are due to a legal right and it is not possible to file a lawsuit for enrichment.
94. All of the above is added to the fact that it has not been proven at all that Excel was aware at any stage until the warning letter, of the exclusivity agreement, and therefore all of its activity with Luster was done lawfully.
95. From all of the above, it appears that Draco did not point to a special relationship that justifies giving accounts not against Luster and certainly not against Axel.
96. It should be noted that in any event, the accounts requested by both parties are identical, and since Draco's right to receive the accounts from one of the parties is rejected, this denies it the right to receive the accounts from the other party, since by doing so it violates his trade secrets without having a legal right to do so.

No cause of action has been proven in relation to the funds for which the accounts are requested

97. Beyond the fact that a special relationship between the parties was not proven, the cause of action on the basis of which the accounts should be given was also not proven.
98. Both parties agree that the authorization letter is a preliminary agreement followed by a detailed agreement that will address all the details required in such an exclusivity agreement, such as the exclusivity period, market quota, prices, etc. At the same time, not even an example of an exclusivity agreement was presented that would clarify the level of complexity of such contracts.
99. In any event , the letter of authorization, which is an initial stage in the engagement, indicates that the parties are obligated to negotiate in good faith in order to bring them to a broader engagement.
100. However, it seems that Draco adamantly refused to conduct such negotiations when Luster asked that in order to sign an agreement, it must be ensured that exclusivity would be mutual.
101. It seems, then, that the parties did not make any progress in the negotiations, that drafts were not exchanged between them, that they did not discuss prices and commissions, and that Draco nevertheless demand that Draco receive positive subsistence compensation for violating the duty to negotiate in good faith.
102. In the matter of Civil Appeal Authority 6370/00 Cal Building in a Tax Appeal v. R.M.  Ra'anana for Construction and Rental in a Tax Appeal [Nevo], it was determined when the right to receive subsistence compensation will be, even though this is a breach of the duty of good faith in conducting negotiations and an agreement has not yet been signed:

"In the ordinary state of affairs, the remedy for the breach of the duty to conduct negotiations prior to the conclusion of a contract in good faith is compensation for the damage caused to the injured party by entering into negotiations ("negative damages", "reliance damages").  However, there are exceptional cases in which the injured party is entitled to compensation for the jump caused to him due to the fact that the agreement that was about to be concluded was not concluded and was not fulfilled ("positive compensation", "subsistence compensation"), which characterizes these special situations is that the negotiations in fact matured into a contract and only bad faith conduct prevented its improvement."

103. In our case, signing a mere letter of authorization is far from the maturity of the contract that was supposed to be signed between Draco and Luster, if they had negotiated it, and therefore it is not clear why Draco believes that she is entitled to subsistence compensation.
104. It is not for nothing that Draco did not attach the agreements it signed with Etong and Zintec, with whose products it entered into negotiations with Yes. Not presenting them is Draco's obligation, and it can be concluded that these are complex agreements that require significant negotiations on many details.
105. More importantly, Draco did not prove that she had been harmed at all, given that Yes also purchased mocha products made by Etong from her.
106. Would Yes have agreed to contract with Draco when she represents two manufacturers? The answer to this seems to be no.
107. Gilad admitted that Yes had defined that they wanted two different manufacturers and that they would divide the orders through two different suppliers (p. 56, s.  36).
108. This was also confirmed by Shai Levy Miss, who clarified that Yes works with one importer for each manufacturer (pp. 31-180).  Attorney Draco's arguments in her summaries should not be accepted because this is a lack of understanding, both in view of Gilad's testimony and in view of the fact that the attempts at the hearing to explain otherwise were given by Attorney Draco and her arguments cannot be accepted as testimony, especially since she did not continue to question the representative of Yes in this context, and this is acting on Draco's obligation.
109. Thus, it has been proven that in any case Draco could not represent two different manufacturers in the said project, and when she contracted with Yes to market Etong products , she could not market Luster as well, and then she was not harmed.
110. From the above, it appears that Draco did not prove that she was entitled to the funds for which she was requesting accounts, and therefore her claim should be rejected.

No cause of action caused by Excel to cause breach of contract was proven

111. The statement of claim attributes to Excel an obligation to submit accounts on the grounds of breach of contract only because she informed her on December 17, 2020 in a warning letter that she was his exclusive partner in the agreement (paragraph 48 of the statement of claim).
112. In the summaries on behalf of Draco, an expansion was made according to which Axel's knowledge of the exclusivity agreement stemmed from the fact that in an email dated September 7, 2020, Ben Meloster informed Axel of Draco's displeasure withthe cooperation with Axel. Moreover, this is an expansion of the front, since this factual claim was not made at all in the lawsuit.  After all, there is no substance to it either.
113. The fact that Draco tried to work with Luster at the same time as Axel's work with Luster and Axel's knowledge of it in September 2020 does not prove anything about Axel's knowledge of the exclusivity agreement. Ronen Shor stated that throughout the tender process of Yes for Mocha 2.5, no claim was ever raised by Luster or any other party, in particular not by Draco, that Luster is bound by any agreement, certainly not by any exclusivity agreement with Draco, and that there is an impediment to Excel supplying Yes with Luster products (paragraph 65 of the affidavit).  The testimony of Ronen Shor was generally reliable testimony and I did not find this statement to be questioned when the burden of proving that Excel knew about the exclusivity agreement was on Draco and she did not make any other claim in her claim and did not attach evidence to that effect.
114. On the merits of the claim of breach of contract, it should be said that section 62 of the Torts Ordinance states that the person claiming cause of action for breach of contract must prove 5 cumulative conditions: the existence of a binding contract, the breach of contract, a causal connection between the actions of the party and the act of breach, knowledge of the contract, and lack of justification for the actions of the intervening party. In addition, pecuniary damage must be proven (Civil Appeal Authority 8483/02 Aloniel in Tax Appeal v.  McDonald (published in Nevo, 30 March 2004)).
115. As stated above, it has not been proven that there is a binding exclusivity contract with respect to the Mocha 2.5 products. In the absence of a contract, there is no breach.
116. Beyond that, it should be noted that there is a justification for signing the contract between Excel and Luster, which can negate the claim of causing breach of contract. If Draco believed that she and Luster had a binding contract, she should have informed Excel at the beginning of the process and not waited for the warning letter to be sent only at the end of 2020, when the contract between Axel and Liss was just before it was signed.
117. It seems that Excel's activity for Luster since July 2020, when it promoted the possibility that Yes would accept Luster as a manufacturer of Mocha, was what ultimately led to the signing of the contract. Shai Levy Miss testified that Yes had made progress with Excel because it had received samples of Luster products from it (p.  179, s.  20).  It cannot be expected that after Luster's actions, Draco will win the contract.
118. It should also be noted in this context that Draco's claim that she is the one who brought Luster to a position that allows her to supply Lice products cannot be accepted. Draco didn't present any evidence of this.  No correspondence with Yes was attached, and the testimony of any party was not brought by her.  If that were not enough, this argument contradicts the testimony of Shai Levy Miss that Axel brought the examples of Luster Liss and therefore the contract was signed with her, and the meaning is that Axel was the one who knew Luster Liss and not Draco.
119. Beyond the aforesaid, it should be noted that Draco did not prove that she was harmed (see paragraphs 105-109 above).
120. In light of the aforesaid, there was no reason to file a lawsuit against Excel on the grounds of causing a breach of contract, and therefore the claim against it is dismissed. It should be noted that in the absence of a factual argument in the statement of claim that Excel was aware of the exclusivity agreement, there was no reason to file the lawsuit against Excel and drag it into a long and expensive legal proceeding.

Conclusion

121. In light of the above, the claim for the provision of accounts is dismissed.
122. Excel petitioned for charges for expenses while presenting the entirety of its expenses. Luster, on the other hand, did not present the actual expenses incurred and the absence of presenting them was taken into account.
123. Although the lawsuit against Luster is against a foreign company, Luster's lawyers were from Israel, and at the end of the day, due to the security situation in Israel, Ben's testimony was heard through a video conference and he was not required to come to Israel. As such, in view of the fact that this is an accounting claim that was rejected at its initial stage, and taking into account the scope of the proceeding and the number of evidentiary hearings, and the absence of presentation of actual expenses, Draco will bear Luster's expenses in the sum of ILS 100,000.
124. As for Excel, in view of the fact that the claim itself did not present a factual basis for charging for a breach of contract and therefore Excel was dragged into a lengthy and unnecessary proceeding, and given the scope of the expenses it incurred, and taking into account the fact that a party against whom the claim was dismissed should be compensated for the expenses actually incurred by him, I found that Draco should be obligated to pay Excel expenses in the total sum of ILS 200,000.

Given today, 6 Av 5785, July 31, 2025, in the absence of the parties.