It was also agreed in the Memorandum of Understanding Appendix that Unit 1, i.e., Assemblies A+B – would be provided by November 30, 2015 (only six days after the signing of the Memorandum of Understanding); and that Unit 2 - Assemblies C + D + E - will be supplied by 31.01.2015. This is the place to note that according to the plaintiff, the intention was that Unit 2 would be supplied by January 31, 2001.2016, and only due to the slippage of a pen, the year 2015 was written instead of 2016. The plaintiff further argues that the appendix to the memorandums was agreed upon in November 2015, and therefore it is illogical that the agreed delivery date would be 11 months earlier. It should be noted that the defendant did not dispute the aforesaid.
- As will be detailed below, the plaintiff's main argument is that despite the entire set of agreements detailed above, and despite the explicit undertakings of the defendant, the Defendant, with all its units and assemblies, was never supplied to the plaintiff, despite the fact that the plaintiff paid the defendant significant sums in accordance with the said agreements.
Against the background of the aforesaid, this lawsuit was filed.
The plaintiff's arguments
- The plaintiff claims that the defendant did not meet its obligations under the agreements, and that in fact the plaintiff never received any consideration for the payments she paid. Therefore, according to the plaintiff, the defendant must return the said sums to her. In this context, the plaintiff claims that at no stage did the defendant state to her that the development of the machine was uncertain or entailed any risk, and this claim was not even mentioned in the series of agreements drafted by the defendant itself. It was also argued that in the plaintiff's understanding, this was the development of a packaging machine and not the development of an innovative product.
- The plaintiff further claims that the defendant, through Kiselowitz, made false representations and acted in bad faith, while making promises that were not fulfilled. According to the plaintiff, the defendant even abuses legal proceedings in order to avoid the return of the funds.
- According to the plaintiff, she paid the defendant the sum of NIS 1,588,170 during the period in which the various agreements detailed above were signed. According to the plaintiff, she even purchased paper rolls of various sizes for the purpose of producing the rolling papers in the machine in the sum of NIS 248,592.54, and that this is a product that has long since expired, and therefore she is entitled to a refund of this sum in addition to the sums paid by her directly to the defendant.
- The amended statement of claim further claimed that the defendant's breach of the agreements led to very significant financial losses for the plaintiff, inter alia, taking into account the plaintiff's reliance on the existence of the agreements. According to the plaintiff, after the contractual engagement between her and the defendant, the plaintiff ceased her activity in importing rolling papers and filter cases and manually manufacturing the kits, with the expectation of continuing to produce the overall kit industrially.
- According to the plaintiff, it was not able to reduce its damages in the period that elapsed from the defendant's breach of the agreements until the date of filing the lawsuit, since the defendant repeatedly assured her that the machine was expected to be ready soon, in a way that prevented the plaintiff from investing the resources in order to return to its previous business or to engage with another manufacturer to manufacture the kit.
- In order to support her claims regarding the losses incurred as a result of her reliance on the existence of the contractual system between her and the defendant, the plaintiff attached an economic opinion prepared by CPA Tzur Fenigstein (hereinafter: CPA Fenigsteinin which it was claimed that the damage caused to the plaintiff due to the alleged breach of agreements by the defendant amounts to between NIS 10.7 million and NIS 74.6 million. Notwithstanding this assessment, and taking into account the substantive jurisdiction of this court, the plaintiff set the amount of the claim at a total of NIS 2,500,000 – which includes both the restitution amounts and the reliance compensation.
The defendant's arguments
- The defendant argues that the contractual system between the parties should be regarded as"Development Agreement", since the object of the agreement is a new product that must be developed, and which does not exist as a "shelf product". Therefore, according to the defendant, in accordance with the case law with respect to "development agreements", this is an agreement that has the characteristics of an "obligation to make an effort", and it is not necessary to determine that the contract was breached by the developer only because the requested result was not achieved or because of a deviation from the schedules or the budget. In fact, according to the defendant, the plaintiff gave her consent explicitly or in conduct to extend the deadlines until the end of the development, which was extended due to the plaintiff's own changing demands and her lack of cooperation during the development. It was further claimed that the plaintiff and the defendant invested together in the project and that they were partners in the risks involved in it.
- According to the defendant, the plaintiff added variable requirements during the so-called development process that extended the duration of the project and thwarted the development. In this context, it was claimed that the plaintiff was a full partner in all the decisions regarding the development, supervised the project at various stages in accordance with her demand, and was present for long hours at the defendant's factory. According to the defendant, it was the plaintiff who dictated the requirements and characteristics of the project throughout its length, and refused to accept the required changes or adjustments in accordance with the proposals of the defendant's engineers. As a result, according to the defendant, the project was extended until the end of 2018. In the meantime, it was claimed that the plaintiff demanded during the project that the rate of folding of the filter case be 120 folds per minute, while the model built in accordance with the prototype agreement operated at a rate of 40 folds per minute. It was also claimed that in view of the difficulties that arose during the development, the defendant proposed to integrate laser cutting of paper into designated machines, but the plaintiff refused this solution and other solutions proposed by the defendant throughout the project. The defendant claims that if the plaintiff had not been burdened with demands, changes and non-cooperation with the required adjustments, the project would have been completed a long time ago.
- The defendant further argues that the parties' agreements were for the development and production of a number of assemblies, each of which stands on its own, and together they can assemble a total production system. According to the defendant, assemblies A+B were completed and manufactured by the defendant a long time ago, but the plaintiff chose not to accept them.
- The defendant further claims that the plaintiff did not provide a notice of cancellation of the agreement in accordance with the law and did not attach such notice to her claim. It was also claimed that the defendant suffered significant damages and many expenses due to the development of the machine – including work hours and loss of profits in the sum of millions of NIS. Accordingly, it was argued, mutual restitution should be ordered, including the return of the funds spent by the defendant in the project.
- According to the defendant, the plaintiff should not be refunded the taxes she paid to the defendant, since these are sums for which the plaintiff was credited with the tax authorities. In addition, the defendant claims that there is no reason to order the return of the consideration paid in the framework of the prototype agreement, which was an independent agreement that was executed in full about two years prior to the contractual engagement of the parties for the manufacture of the machine.
- Finally, according to the defendant, the plaintiff's claim regarding her additional damages should be rejected. In this context, it was argued that the defendant was not responsible for the plaintiff's decision to cease her previous business prior to the supply of the machine, and that other factors – including the Corona period – harmed the plaintiff's business.