Civil Case (Tel Aviv) 12050-12-17 Nirolin Life Sciences Ltd. v. Dr. Manana Dan – Center for Aesthetic Medicine Ltd.

Before a monetary claim for alleged damages in the sum of ILS 25,800,000, which was made available for the purposes of a fee, in the sum of ILS 1,000,000 only.  The claim was also filed for debts for goods that the plaintiffs claim the defendants owe, all in continuation of a commercial engagement between the parties, as will be detailed below in detail.

Background

1. This is a case that was handled by another panel, which even heard some of the witnesses as part of the evidence stage of the case, but when the panel was forced to retire before all the witnesses were heard, the case was transferred to my care towards the end of 2022.
2. As stated, this is a financial claim following a commercial engagement between the parties.
3. The background to the filing of the lawsuit will be briefly detailed below.
4. The plaintiff was founded in 2012 by plaintiffs 2 - 4, with the aim of marketing aesthetic and skin health products.
5. In late 2013, it invested in the plaintiff and became a shareholder in it, an international biopharma company called Gilbood Trading SA.
6. The plaintiff purchased its products from an Israeli company called Lin Nano Technology Ltd., which is owned by Mr. Ali Abu Razek (hereinafter: the "Manufacturer").  The plaintiff claims that it is the exclusive distributor of the aforementioned company's products in Israel (according to the manufacturer, the exclusivity is for the Jewish sector in Israel only).
7. At the end of 2014, the plaintiff marketed to its customers, most of whom were cosmetologists, a package of cosmetic products, which included products for a year in advance, and which even entitled the customer to various marketing and financial benefits, in exchange for a consideration that could be spread out in up to 24 installments.
8. According to the plaintiffs, by 2016, the plaintiff had accumulated about 40 customers who purchased the aforementioned package and was in an advanced growth process, with defendant 3 (hereinafter: "the defendant" or "Menana"), whom the plaintiff considered a strategic customer.  Defendants 1 and 2 are companies owned by Manana.
9. According to the plaintiffs, in 2015 plaintiff 1 (hereinafter: "the plaintiff" or "Nirolin") entered into three different engagements with the defendants, one, the franchise transaction, the second, the merchandise transaction, and the third, the marketing accompaniment transaction.
10. As part of the concession transaction, it was agreed, according to the plaintiffs, that the defendants would purchase from Nirolin, in exchange for the sum of ILS 351,000, a concession for the use of a brand developed by Nirolin, called 24K Empowering Beauty (hereinafter: the "Brand"), for the purpose of marketing aesthetic treatments to the standard of the brand, in a clinic developed by Nirolin specifically for this purpose in Rishon Lezion and in the defendants' clinic in Gedera as well as within the framework of the defendants' activities in Georgia.
11. As part of the merchandise transaction, the defendants purchased the brand's cosmetics from Nirolin in the amount of ILS 1,715,421
12. According to the plaintiffs, the defendants were supposed to repay the consideration for the two aforementioned transactions in a maximum of 24 installments, and yet Nirolin agreed to postpone the payments to the defendants from time to time at their request, as a measure of trust and a desire to be considerate and to enable Mamana to develop her business.
13. According to the plaintiffs, the defendants breached their obligation to pay the consideration for the goods and the franchise fees and paid only ILS 200,739, out of the total amount of the obligation, which was ILS 2,066,421.
14. The plaintiffs also claim that a number of the defendants' checks in the total amount of ILS 71,000 were returned by the Treasury Department, and later Menana also canceled on her own initiative and contrary to the agreements, as well as additional checks that were given to Nirolin, although according to the plaintiffs, the present claim is not in respect of the aforementioned checks, for which the execution cases were opened.  There is no dispute that Nirolin also submitted for the execution of a check in the amount of ILS 1,647,879, which was also returned by the Reserve Fund, as will be further detailed later in the judgment.
15. As part of the marketing accompaniment transaction, the plaintiffs claim that Nirolin provided the defendants with various marketing services in Georgia, at the plaintiff's clinic in Rishon Lezion and at the defendant's clinic in Gedera.
16. According to the plaintiffs, in the marketing and business development services provided by Nirolin to the defendants in Georgia, with the aim of developing the sale of Nirolin's brands by the defendants, Nirolin invested ILS 121,331 in respect of various expenses.  The plaintiff also undertook to give the defendants exclusive rights with respect to the Nirolin brands in all the countries of the Caucasus region, while the defendants undertook to purchase goods from Nirolin.
17. With regard to the clinic in Rishon Lezion that Nirolin hired, the plaintiffs claim that the purpose of the engagement was that the plaintiffs would invest in the establishment, renovation, training and maintenance of the clinic, and on the other hand, they would receive from the defendants, who were supposed to manage the clinic, part of the monthly income of the clinic in order to receive the return on the aforementioned investments, and then the plaintiff would also receive a "financial component that carries success".
18. In practice, according to the plaintiffs, Nirolin incurred expenses in the sum of approximately ILS 481,418 for renovations, equipment, furniture, employees and rent for the clinic.  According to the plaintiffs, even after receiving some of the income, the plaintiff remained in deficit vis-à-vis the investment she invested, in the amount of ILS 94,146, and did not receive her share of the clinic's profits, as much as they were.
19. With regard to the defendants' clinic in Gedera, the plaintiffs claim that Nirolin also invested money there, without specifying in the statement of claim more than that.
20. According to the plaintiffs, everything was conducted on the basis of trust and according to agreements in a criminal appeal (although they claim that the plaintiffs have accounting records as well as correspondence with Manana).  Based on the aforementioned agreements, Nirolin purchased from the manufacturer all the products that the defendants had ordered from it, but at the end of 2016 there was a crisis in the relationship between the parties, as a result of which Menna began to renege on her agreements and violate them.
21. According to the plaintiffs, in light of the crisis, Nirolin agreed to terminate the strategic cooperation between the parties at the clinic in Rishon LeZion, but on condition that the defendants fulfill their obligation to pay for all the goods they ordered and that the business separation in relation to the clinic in Rishon Lezion as aforesaid, will not affect the purchase of goods from Nirolin by the defendants for the purposes of selling them at the defendants' business centers in the clinic in Rishon LeZion, Gedera and Georgia.
22. According to the claim, it was also agreed that Manana would waive her salary for her time working at the clinic in Rishon LeZion, since Nirolin remained in a deficit in relation to her investments, and the latter would also not demand anything else in this regard.
23. However, according to the plaintiffs, at this stage the defendants began to clear the clinic's income in Rishon Lezion to their business account, even before the redeployment of checks for the payment of the goods that had not yet been paid for.  Despite repeated promises to hand over the checks, this was not done.
24. As a result, and when the plaintiffs realized that the defendants no longer intended to pay their debts for the goods and/or the franchise transaction, at the beginning of 2017 they canceled the entire transaction and issued a credit invoice for the products for which no payment was made, with the aim of getting them back into their hands, but the defendants did not cooperate in this matter as well.
25. According to the plaintiffs, in parallel with the fact that the defendants do not return the goods they have left, and on the other hand, do not pay for it, nor for goods that have already been supplied and sold by the defendants, Menana began a campaign of slander, slander and threats against the plaintiffs, which included defaming the plaintiffs against their customers and the institutions with which they work.
26. According to the allegation, Manana, who coaxed Nirolin's clients to establish a WhatsApp group called "Nirolin Fraud and Fraud," began threatening the plaintiffs through others that she would complain about them to the Israel Police and coax clients to do so.
27. In February 2017, the plaintiffs sent the defendants two warning letters (on February 5, 2017 and February 8, 2017), one about the financial debt and the other about Manana's illegal conduct as detailed above.
28. The warning letters were of no avail, and Menana even went so far as to invade the plaintiff's offices on February 19, 2017, and began to slander the plaintiffs in front of the plaintiff's employees, claiming that they were fraudsters and would not pay the employees' wages.  As a result, another warning letter was issued on the same day, but it was also not answered.
29. As a result, the plaintiffs filed a complaint against Manana with the police for trespassing due to an invasion of the plaintiff's offices, for giving checks without coverage, and for soliciting acts of fraud and fraud in Manana's contact with the plaintiff's clients as stated above.
30. According to the plaintiffs, due to the defendants' conduct, many of the plaintiff's customers sought to cancel transactions with the plaintiff and/or refrained from conducting transactions with her, causing damage exceeding ILS 1 million.
31. According to the plaintiffs, Manana even approached the manufacturer (Ali Abu Razek, as aforesaid, who supplies the products to the plaintiff) in an attempt to coax him to work with her instead of with the plaintiff and/or to sell her products directly while defaming the plaintiffs.  Manana also contacted the plaintiff's clearing companies and slandered the plaintiffs before them.
32. In March 2017, the plaintiff opened two execution files for the execution of the checks of defendant 1 that were delivered to the plaintiff.  The first case was opened for the execution of a check in the amount of ILS 30,000 due on January 16, 2017 and a check for ILS 14,000 due on January 17, 2017.
33. The second case was opened in respect of a check in the sum of ILS 1,647,879 due on March 7, 2017 and which was ostensibly supposed to constitute payment for goods ordered by the plaintiff at the request of the defendants and for the consideration for the concession agreement.
34. Defendant 1 filed objections, which were accepted, the files were consolidated and a hearing was held on the merits of the matter, and a judgment was even rendered in the consolidated claims (hereinafter: the "Promissory Notes Claim"), as will be further detailed later in the judgment.
35. Subsequently, in December 2017, the plaintiffs filed the present lawsuit, in which they describe the sequence of events more or less as described by me above.  It should be noted that the statement of claim was amended after it was filed, due to the fact that the court (the previous panel that heard the case) believed that there was a need for clarification regarding the contractual basis between the parties regarding the purchase of the goods and the concession transaction, and perhaps regarding other matters.
36. In the amended statement of claim (hereinafter: the "Claim" or the "Statement of Claim") the plaintiffs claim a long list of causes of action that they claim they have for the variety of acts and omissions of the defendants as described above, including breach of contract, enrichment, defamation, commercial torts, breach of contract, border extradition and more.
37. The remedies sought by the plaintiffs in the lawsuit are:

• ILS 400,000 for four defamatory publications, one in the WhatsApp group in front of the plaintiffs' customers, the second, in the trespass incident at the plaintiff's offices in front of the plaintiff's employees, the third, in an appeal to the manufacturer, and the fourth, in an appeal to one of the clearing companies.
• ILS 1,200,000 contractual subsistence compensation as an alternative head of damage to the promissory note claim.
• ILS 100,000 in compensation without proof of damage under the Commercial Torts Law for false description and unfair interference.
• ILS 100,000 for unjust enrichment due to requests to the plaintiff's clients to divert them to work directly with the defendants.
• ILS 2,500,000 for loss of sales in 2017 and ILS 1,500,000 for damage to reputation; ILS 10,000,000 for loss of sales for the years 2018-2022 inclusive; approximately ILS 10,000,000 for a decrease in the value of the plaintiff.

1. Although the total sums claimed as detailed above amount to ILS 25,800,000, the plaintiffs for some reason chose to claim only ILS 1,000,000, according to them, "for toll purposes".
2. In their amended statement of defense (hereinafter: the "statement of defense"), the defendants categorically deny the plaintiffs' claims, and they are also full of allegations due to the business engagement.
3. According to the defendants, this is a baseless lawsuit, the purpose of which is to intimidate and threaten the defendant; According to them, the plaintiffs acted consistently with the aim of stealing the defendants' money by creating fictitious transactions; The plaintiffs made false representations to the defendants, tax authorities, banks, and financial institutions, as appears from credit invoices they issued for goods that were allegedly supplied to the defendants, but were not supplied, in the sum of ILS 2 million; The clinic in Rishon Lezion was agreed that it would have an equal partnership between the parties, but the plaintiffs operated a clearing house that flowed the income into their account and did not pay the defendants their share, not even the defendant's salary as manager, in the sum of ILS 8,000 per month; The plaintiffs, after taking the defendant's checkbooks without her permission, transferred checks of one of the defendants to persons with whom the defendants have no business relationship, as well as for the personal benefit of the plaintiffs, including check discounting companies, including, as aforesaid, checks that the defendant did not sign and were signed by the plaintiffs, while the plaintiffs asked her to certify with the discount companies that she had signed, when the defendants' bank indicated to the defendant that the plaintiffs' activity was suspicious and bordered on money laundering; At the clinic in Gedera, the defendant worked as a doctor on behalf of the Maccabi Health Fund and was not connected at all to the transaction with the plaintiff; The defendants never entered into a marketing agreement with the plaintiffs, but rather it was a partnership agreement; The defendants claim that defendant 1 should be deleted from the letter of claim due to lack of rivalry; The defendants never coaxed the plaintiffs' customers to cancel the checks, but all the customers discovered the act of fraud and the sting that the defendants experienced in their engagement with the plaintiff; The defendants did not embark on a smear campaign, on the contrary, the plaintiffs defrauded and deceived the defendants; The defendants did not breach any agreement, the plaintiffs are the ones who enriched themselves and not in a trial on the defendants' backs; The plaintiffs caused the defendants enormous losses and damages; There is no proof of the plaintiff's alleged exclusivity with the manufacturer in question; No franchise agreement was ever signed; The plaintiffs have no reputation at all; The defendants tried to sell the products in Arab countries; All the resources and funds in the clinic in Rishon Lezion were funded by the defendant; The defendants owe nothing to the plaintiffs, quite the opposite; The WhatsApp group was not established by the defendant, but by leading cosmetologists in the industry, to whom the plaintiffs caused irreparable damage through exploitation and fictitious transactions; The manufacturer denied that the plaintiffs had exclusivity and that goods had been purchased from him as claimed by the plaintiffs, and noted that the plaintiffs also owed him money.
4. On behalf of the plaintiffs, affidavits were submitted by plaintiff 3, Nir Hodis (hereinafter: "Hodis"), of Lior Meisler, plaintiff 2 (hereinafter: "Meisler"), and of the manufacturer, Mr. Ali Abu Razeq.  An opinion was also submitted by CPA Roy Carta (hereinafter: "CPA Carta").
5. On behalf of the defendants, an affidavit was filed by Manana and an affidavit by Eran Gabbay, CPA, the defendants' accountant (hereinafter: "Gabbay").
6. The manufacturer and CPA Carta were questioned before the previous panel.  Hodis, Meisler, and Manna were interrogated before me.  CPA Gabbay did not come for questioning, and counsel for the defendants announced that she was waiving his testimony.
7. The parties submitted written summaries.
8. It should also be noted that on April 30, 2023, the judgment was given in the banknote claim.  The court dismissed the lawsuit.  In the appeal filed by the plaintiff as well, it was determined that the promissory note claim should be dismissed, as will be further detailed.

Discussion

1. I will discuss the claim according to the heads of damages claimed in the claim (see paragraphs 119-126 of the claim).

ILS 1,200,000 Contractual Maintenance Compensation as an Alternative Head of Damage to the Promissory Note Claim (Clause 120 of the Claim)

1. This head of damage is completely overlapping with the banknote claim that was rejected, if only as it appears from the manner in which the plaintiffs formulated in the statement of claim the aforementioned head of damage, i.e., as an "alternative" to the promissory note claim and see paragraph 120 of the claim, but it is also clear to the body of the matter that the aforementioned sum is part of the same sum that the plaintiff claimed by way of submitting the check in the sum of ILS 1,647,879 for execution in the framework of the promissory note.
2. As appears from the plaintiff's arguments and evidence in this case in comparison to the promissory note claim, the sums (ILS 1,200,000 here and ILS 1,647,879 there) were both claimed for the same balance of debt claimed for goods as well as for an alleged debt in respect of an alleged concession agreement.
3. In the claim here, it was claimed that the debt in respect of the goods and the consideration of the concession is ILS 1,865,682, after deducting ILS 200,739 that was paid on account of the total amount of the debt in the sum of ILS 2,066,421, consisting of ILS 1,715,421 for merchandise and ILS 351,000 in respect of the concession consideration (see paragraphs 47, 52, 55 and 56 of the claim), but the plaintiffs placed the amount of the claim at the head of this damage at ILS 1,200,000 as aforesaid.
4. Contrary to the plaintiffs' claims, there is no doubt in my opinion that the judgment in the promissory note claim constitutes estoppel and requires the rejection of the head of the aforementioned damage, as the defendants claim.
5. While a banknote claim and a contractual claim are considered claims for different causes of action and can therefore be filed simultaneously, even if the amount claimed is for the exact same debt, provided that the plaintiff is not repaid twice, to the extent that he receives judgments in his favor in both claims, the fact that these are different grounds does not negate or eliminate the possibility of creating a company estoppel.
6. In other words, if in order to decide the two claims, the court must determine identical factual and legal findings, then it is clear to all that if in one of the claims such findings have already been determined, these also apply to the litigation in the other claim and prevent the re-management of those claims and the receipt of a further decision on those matters that have already been decided.
7. In my opinion, the matter is completely clear, and yet see what was said on this matter by the District Court in the case of Civil Case 1669-05 Dafresco in the Tax Appeal v.  Shukri et al.  - published in Nevo:

"The principle of 'estoppel cause' is irrelevant to our case, since the proceeding in the Rehovot Magistrate's Court revolved around a promissory note (and the factual and substantive issues were discussed in the framework of an objection to the execution of a deed filed by the plaintiff's shareholders), while the current proceeding revolved around contractual grounds, as well as on grounds of negligence, unjust enrichment and fraud.