Civil Case (Rishon LeZion) 54046-02-19 Kioskey Marketing (2004) Ltd. v. Lid Technologies Ltd. - part 11

And later on:

"Adv. Lahav: How much more do you think it will take?

Yaakov Kiselowitz: You see, I am doing, I have not rested for a moment, I am tithe, I am playing with her" (ibid., p. 48, lines 14-15).

And then:

"Adv. Lahav: At 12:30 p.m., following the previous documentation, Yaakov is currently announcing that the machine is not working because he is unable to synchronize the pages, the sheets, in such a way that the machine can be operated in them.  Yaakov says it took him at least another hour to try and get the machine to work.  We've been waiting since the hour, the engineer David came here at 10:30.  For two hours, as mentioned, the machine does not work and fails to produce the cartons.  At this point, Attorney Lahav, I'm leaving the place.  And also the engineer David.  Ziv will stay here for another hour, according to Yaakov.  And at this time he may succeed in putting the machine in a state where it will work, and according to the needs the documentation will continue" (ibid., p. 49, lines 14-22).

75. Later on, Hamami notes that even after another two hours, "the machine doesn't work. Not ready for delivery and not functioning at all."  It should be noted that Kiselowitz was present at this stage, and did not object to Hamami's filmed and documented remarks (see: ibid., p. 49, lines 23-27 and p. 50).
76. In contrast to this evidence, no contradictory evidence was brought by the defendant. The defendant did not attach video footage of the machine, with any of its units or assemblies, which indicate that the machine does indeed succeed in producing the product as agreed, neither with the agreed output nor with a lower output, neither with papers supplied by the plaintiff nor with any other paper or cardboard.  The defendant did not even attach an expert opinion indicating that the machine was manufactured in accordance with the agreement.  In fact, no evidence was attached that would support the defendant's general claim that the first unit was ready to be delivered to the plaintiff, producing the rolling paper packages (its sole purpose), and this is mainly in view of the evidence brought in this matter on behalf of the plaintiff, as detailed above.
77. From all of the above, it emerges that the machine, with all its assemblies and units, was not ready for delivery when it produced the total kit or any of its parts, in accordance with the agreements between the parties, nor was it ready for delivery at a later date than agreed or at a lower output than agreed.
78. Interim Summary: The summary of things so far shows that An agreement was entered into between the plaintiff and the defendant, in which the defendant undertook to supply the plaintiff with a machine consisting of two units for the production of a kit that included packaging of cigarette rolling papers and a filter package, in exchange for a payment in the sum of NIS 2,322,000.
79. However, while the plaintiff paid the sum of NIS 1,161,000 prior to the tax appeal (50% of the agreed consideration), The defendant failed to provide the machine as agreed between the parties. In fact, the defendant did not prove that it was able to supply the machine, or one of its units, in a manner that would enable the production of the kit or its part, even later than the agreed date.
80. Against the background of the aforesaid, it must be determined that the defendant breached the agreement between the parties and that this breach was a "fundamental breach", as defined in the Contracts Law (Remedies for Breach of Contract), 5731-1970 (hereinafter: The Medicines Law), since this is the defendant's fundamental and main obligation within the framework of the agreement.
81. According to the defendant, contributory fault should be attributed to the plaintiff in all matters relating to the breach of contract. In the meantime, the defendant claims that the plaintiff added various requirements during the project that prevented its completion and refused the adjustments offered by the defendant for the purpose of manufacturing the machine.  I will discuss these arguments below, and then the arguments regarding the remedies claimed by the plaintiff will be discussed.
82. Claims of contributory fault that must be attributed to the plaintiff at the time of the performance of the contract
83. As stated, according to the defendant, the plaintiff piled up difficulties in fulfilling the contract that prevented or delayed the possibility of completing it. According to her, the plaintiff made it difficult to fulfill the contract on three levels: The first - Increasing the production rate requirement in the unit producing the filter package from a rate of 40 per minute as in the prototype model to a rate of 120 per minute; The second - The plaintiff's insistence on contracting with a local manufacturer of cardboard instead of a Turkish manufacturer offered by the defendant; and the third - The plaintiff's refusal to a solution that incorporates laser paper cutting.
84. At the outset, I will note that the defendant's arguments in this matter were argued in a purely laconic manner without being sufficiently detailed (see, for example: paragraphs 18-19 and 30-33 of Kiselowitz's first affidavit of October 27, 2020; paragraphs 25-26 of Kiselowitz's third affidavit of July 24, 2023) and were only partially argued in her summaries (see: paragraphs 26 and 29 of the defendant's summaries).
85. Thus, with regard to the claims regarding the difficulties that the plaintiff had piled up regarding the cardboard, paper and laser cutting solution, the pleadings and affidavits on behalf of the defendant did not specify how the plaintiff's "insistence" or "refusal" to contract with a cardboard or paper supplier located in Turkey prevented the completion of the machine; It was not specified why the paper and cardboard purchased and supplied by the plaintiff to the defendant were not suitable for the machine; It was not clarified why the defendant did not act to purchase suitable paper, in order to reduce the damages and to complete the machine; Nothing was clarified regarding the laser cutting solution – what problem it was intended to solve, what the other possible solutions were, and how the defendant ultimately believed that the problem should be dealt with.
86. Beyond the aforesaid, and on the merits of the matter, it should be noted that in his testimony, Hamami clarified that he refused the defendant's offer to engage Exclusively with a manufacturer from Turkey, since he believed that it was a business risk, against the background of uncertainty regarding the possibility of maintaining stable trade agreements with the Turkish market (see: Testimony of Hamami; p. 57, lines 17-22 of the minutes of the hearing). In addition, with regard to laser cutting, Hamami claimed that he had authorized the defendant to make use of this solution (see: Hamami's testimony; p. 71, lines 5-6 of the minutes of the hearing).
87. As for the defendant's claim that the plaintiff surprisingly "decided" to increase the production rate of the unit for the production of the filter package by three times that which was manufactured as part of the prototype agreement, it should also be rejected. In fact, the defendant's claim that this is a "decision of the plaintiff" is not at all clear, since it is not a unilateral decision, but rather a stipulation that appears in the appendix of the understandings agreed upon by both parties.  Moreover, in the appendix to the MoUs it was explicitly agreed that for the increase in the production rate from the prototype agreement, the plaintiff would pay an additional consideration to the defendant ("Unit 2 price: NIS 1,041,000.  This sum includes an additional NIS 172,000 for increasing the speed to 120 to 140 at this stage in accordance with the agreement"; See: Appendix 4 to Hamami's first affidavit).  From the moment the increase in the rate of production was agreed upon by the parties When drafting the agreement (and it was even decided that the defendant would be given additional payment for it), it is not at all clear how the plaintiff can be attributed to omission or contributory fault in this matter.
88. In light of all of the above, I did not find that the defendant lifted the burden imposed on it in order to prove the existence of contributory fault on the part of the plaintiff as alleged by her. At most, the defendant's arguments indicate that throughout the production period, various difficulties arose in the production of the machine, which required finding solutions and led to a delay (and perhaps even failure) in the production of the machine.  However, it is not clear why, according to the defendant's approach, the responsibility for dealing with the aforementioned difficulties and finding solutions should be placed on the plaintiff's doorstep and not on the defendant – who is, as we recall, the manufacturer, the expert, and the owner of the knowledge in the manufacture of machinery (as she testified about herself in the pleadings).  In this context, it should be emphasized that as the expert and the owner of the relevant knowledge and experience, the defendant could have included the method of production and the materials to be used in the framework of the agreement (which she herself drafted), or acted to carry out amendments to the agreement – to the extent required – during the period of its execution and in accordance with the law.  In the pleadings and in the defendant's affidavits, there is no claim in this matter, and it is not even claimed whether at a certain point the defendant made it clear to the plaintiff that her refusal or her changing demands would lead to the fact that the machine would not be possible to be manufactured or that there would be a real delay in its production.
89. Against the background of the aforesaid, the defendant's claims of contributory fault on the part of the plaintiff for the defendant's breach of the agreement should be rejected.

I shall now turn to discuss the arguments of the parties regarding the remedies claimed by the plaintiff.

1. The Remedies
2. In her lawsuit, the plaintiff petitions for the cancellation of the contract and an award of restitution and reliance damages (see: Section 7(b), 9(b) and10 to the Medicines Law). The purpose of the requested remedies is to place the plaintiff in the situation she would have been in had she not entered into a contract with the defendant (see: Civil Appeal 8850/10 Shir Mishkenot Veterans in Tax Appeal v. League for the Prevention of Lung Diseases Tel Aviv, paragraph 15 [Nevo] (August 20, 2013)).  Accordingly, the plaintiff petitions for the return of all the sums it paid to the defendant due to the engagement in the agreements, including the amount paid in the framework of the prototype agreement; to return the sums it invested in the purpose of fulfilling the agreement in the purchase of paper rolls for the machine; and the payment of the amount it lost due to its refraining from continuing its business in marketing cigarette rolling kits, since it relied on the supply of the machine by the defendant in accordance with the agreement, in accordance with the assessment of this loss in the opinion submitted by CPA Fenigstein.
3. The defendant's main arguments in this matter are that the plaintiff never sent a notice of cancellation lawfully. It was also argued that the plaintiff is not entitled to a refund of the amounts paid in respect of VAT; for the prototype agreement; for the cost of the paper rolls purchased by the plaintiff for the purpose of the production and operation of the machine.  The defendant also claims that as part of the restitution remedy, it should also be reimbursed for the losses and damages caused to the defendant itself as a result of the non-completion of the development.

I will discuss these arguments in their order.