Obligation of the Defendants to the Agreed Compensation
- The provision of clause 19.6 establishes a person entitled to agreed compensation for a fundamental breach of the agreement. This is her wording [my emphasis - 30:3]:
In the event of a fundamental breach of the contract by the Tenant, which was not corrected by the Tenant within 10 days from the date of receipt of written notice of the alleged fundamental breach, the Tenant shall pay the Landlord a pre-agreed compensation in an amount equal to the last rent and management fees paid prior to the breach, plus VAT, for a period of three months (hereinafter: the "Monetary Compensation"), without the need to prove the existence of the Contract. Whether the landlord chose to fulfill the contract or not. The parties declare and confirm that the amount of the aforementioned compensation was determined by them after a careful and careful assessment of the probable damages that will be caused to the landlord as a result of the breach, and no claim will be heard from the tenant that the said amount is unreasonable or determined by a fine, and the tenant is prevented from making any such claim.
- According to Rabatz, she is entitled to an agreed compensation award under this provision due to non-payment of the rent and management fees, as claimed in the lawsuit. The defendant, on the other hand, raises a long list of claims regarding the agreed compensation.
- According to Babylon, the plaintiff did not specify the breach for which the agreed compensation was claimed, and therefore she is not entitled to claim agreed compensation. I do not believe that there is any substance to this argument. The claim is simple and clear, and it is explicitly claimed that due to the non-payment of the rent debt and the management that is the subject of the lawsuit, the plaintiff is demanding agreed compensation.
- Another argument raised by Babylon is that the agreed compensation should be calculated according to rent and management fees actually paid in the last three months preceding the breach (ILS 143,385; paragraphs 143-145 of Effie's affidavit) and not for the sums that she was supposed to pay under the agreement for the last three months, as the plaintiff claims. It was argued that this is explicitly instructed by the language of the agreement. This argument must be accepted in the circumstances of the case.
- First of all, I will note that the plaintiff's claim that this is an argument is an extension of the front should be rejected. The statement of claim was worded lacunally and did not specify the manner in which the defendant's agreed compensation in the sum of ILS 501,162 was calculated (in section 11). In paragraph 10 of the statement of claim, the plaintiff herself even writes that she is entitled to an agreed compensation "in an amount equal to three times the monthly rent and the last management fees paid before the breach, plus a tax appeal [emphasis in the original - L. C]." In other words, from the plain language of the statement of claim, it appears that according to the plaintiff itself, the agreed compensation is according to the rent and management fees for the last three months that were actually paid, as the defendant claims, and not for the payments that should have been paid, as claimed in the plaintiff's summaries. In view of the wording of the claim, there is no substance to the claim of widening the façade, and the matter is further strengthened when in the statement of defense the defendant denied the amount claimed (paragraph 67 of the statement of defense).
- In fact, in view of the wording of the claim as aforesaid, the question is whether the wording of the claim according to which the amount of the agreed compensation was derived from the actual payment in the last three months is not sufficient to reach the conclusion that the defendant's position on this matter, in the absence of her company, should be accepted, and since it was not explained how the amount claimed was calculated. I am not required to express a definitive position on this because my conclusion is that Babylon's interpretation of the agreement should be adopted to the merits of the case in the circumstances of the case.
- As mentioned, this is an agreement made between sophisticated and legally represented business entities. As noted above, in agreements of this type, decisive weight must be given to the language of the agreement and the routine meaning of its words. This is also at the cost of the risk of errors in wording that will not be corrected by the court (Bibi Roads, at paragraphs 5-6 of the opinion of the Honorable Justice A. Grosskopf; Ofer Grosskopf and Yifat Naftali Ben-Zion, "The Purposes of Contract Interpretation Law: Which Path Should We Take When It Matters to Us Where We Will Reach?" Sefer Gabriela Shalev: Studies in the Theory of the Contract 523, 547 (Yehuda Adar, Aharon Barak, and Effi Zemach eds. 2021)).
- The usual meaning of the text of the agreed indemnity clause is consistent with Babylon's position. The agreement stated that the agreed compensation was derived from the "last payments paid" and not from the defendant's charges for the last three months (which are the last payments that should have been paid, as claimed in the plaintiff's summaries).
- Rabatz argued in her summaries that accepting the defendant's interpretation would lead to a sinner being rewarded. Thus, where nothing has been paid for a long period of time, the agreed compensation will be zero. The claim should be rejected. Thus, in view of the decisive weight that must be given to the language of the agreement, but especially in view of another stipulation in the agreement that entitles the landlord to compensation in the form of monthly arrears interest of 2% for delay in payments, when the plaintiff admits in her summaries that this is an agreed compensation even though it was not explicitly defined as such in the agreement (in a rough and cumulative annual calculation of compound interest, this is an annual interest rate of more than 26%).
In other words, since the agreed compensation clause in section 19.6 is a sweeping clause for every fundamental breach, and when the landlord has a choice to demand the activation of a different and specific agreed compensation clause in the form of high arrears interest for delay in payment, it is not possible to accept the argument that a sinner will be rewarded. Nor is there room in view of the arrears interest stipulation to exercise the interpretive presumption that the agreement should not be given an unacceptable interpretation (for a discussion of this presumption, see Civil Appeal 4628/93 State of Israel v. Apropim Shikun and Initiation (1991) Ltd., IsrSC 59(2) 265, 292-293 (1995)); A presumption that there was room to consider invoking this clause in the event that this clause did not appear in the agreement. Since the parties included in the agreement a specific stipulation granting agreed compensation in the form of arrears interest, it is not inconceivable that the linguistic wording of the general agreed indemnity stipulation reflects an intention that it will apply in a softened manner in the event of a breach due to delay in payment or non-payment.
- Therefore, the defendants are obligated to pay agreed compensation in the sum of ILS 143,386, which roughly reflects the payment of management fees and rent for one month according to the agreement (compare, Civil Appeal 79/80 Willner v. Tal-Nir, IsrSC 36(3) 162 (1982), where it was not found that an agreed compensation in the amount of one month's rent was unreasonable).
- I will note, in the margins, that it also appears that the provision of the agreed compensation on this amount, in accordance with the plain language of the provisions of the agreement, taking into account the arrears interest stipulation (which was not claimed) and the plaintiff's entitlement to the award of interest and linkage differentials (both on the rent and management fees and on the agreed compensation), leads to a more just and balanced result , in all the circumstances.
- In view of this conclusion, I am not required to rule on the defendant's additional arguments, including the claim that this is a sweeping and uniform agreed compensation clause that contradicts section 6 of the Pharmaceutical Contracts Law; that the sweeping wording itself indicates that there is no reasonable relationship between the compensation and the damage that could have been foreseen at the time of the conclusion of the agreement as a probable result of the breach; that awarding compensation under the provision of section 19.6 will lead to a draconian and unreasonable charge; and that if it is determined that the defendant should be obligated to pay agreed compensation, it should be reduced in accordance with the provision Clause 21.1 of the lease agreement (which is the limit of the real damage, so the defendant claims, in relation to the arrears in payment).
I will note, only in general, that these are arguments that raise questions that require a relatively complex discussion (for a legal discussion of the various issues, see Yitzhak Amit, "Agreed Compensation - Issues and Aspects," Gabriela Shalev's book - Studies in Contract Theory, 621-640 (2021)). Thus, taking into account the fact that the agreed compensation clause is sweeping and the significance that this may have for the purpose of transferring the burden to the plaintiff to show that it is a reasonable sum for the concrete breach; Thus, in view of the high amount of the agreed compensation claimed in relation to the amount of the debt that is the subject of the lawsuit, and even more so in view of its significant reduction shortly after its filing; This is also in view of the defendants' argument that the reduction that should be applied is for an agreed compensation according to the arrears interest set out in clause 21.1 of the agreement, without expressly arguing that the arrears interest period should be fixed and if so, in what manner, and when on the other hand, according to the plaintiff, the application of the arrears interest will lead to a higher agreed compensation than that claimed under clause 19.6 in view of the passage of time since the claim was filed, This was without any of the parties presenting an accurate comparative calculation - one that takes into account the dates and the plaintiff's demand for the addition of linkage differentials and interest for the compensation agreed upon under section 19.6 (a calculation that seems to have been supported by an expert opinion).