Civil Case (Tel Aviv) 13315-08-20 LIFESTYLE EQUITIES C.V v. Don Gilley Ltd. - part 9

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The sender's behavior toward the third party is of great significance.  The more involved the sender was in creating the third party's expectation and knowledge regarding the existence and scope of the mission, the greater the tendency to impose liability on him for the fact that the third party did not know of the sender's deviation from the authorization" (emphases added).

90. Hasson, when the plaintiffs' board was aware, knew that the activity was carried out through the Don Geely company and not through the Jinli company. Mr. Hasson even commented on his own initiative during his testimony that the quarterly reports were sent from Don Gilley and not from Jinley (transcript of the hearing of November 12, 2025, p.  267).  In these circumstances, and once it was proven that the plaintiffs knew about it even by virtue of Mr. Hasson's role as an agent, then insofar as they did see it as a breach of the license agreement, they would have been expected to take active action to revoke the authorization given to him.

The plaintiffs' silence regarding the fact that the activity is carried out through Don Geely and their omission in these circumstances created an ongoing representation to the defendants, according to which the activity through Don Geely was acceptable to them and that Mr. Hasson's activity in the format of this commercial activity, i.e., activity with Don Geely, was under their permission.  Since the plaintiffs did not act to revoke the authorization, they have no choice but to complain about themselves.

91. From all of the above, I find preference for the defendants' version, according to which the plaintiffs knew in real time that Ginley had transferred its business activity to Don Geely, and to determine that its activity was carried out without a breach of the license agreement, but with its modification in this regard, with the knowledge and consent of the plaintiffs. Not only that, but the plaintiffs presented to the defendants, in their silence and omission, consistent representations according to which Mr. Hasson's actions as an examiner in the format of this commercial activity, i.e., activity with the Don Gilly Company, were carried out with their full authorization.  This, too, should lead to a conclusion regarding the rejection of the claim of breach of the license agreement at this point.

Second Claim of Breach of License Agreement - Sale in Food Stores

92. The second breach alleged by the plaintiffs is the claim that Don Geely violated clause 2.3 of the license agreement prohibiting the distribution of the plaintiffs' products in food stores and street fairs. The wording of the relevant clause in the license agreement is as follows: "They can be no distribution to food stores or street fairs or to suppliers of street fairs.  Distribution Channels are subject to annual review and approval.".  The plaintiffs claim that this section was violated when the plaintiffs' products were distributed in the Rami Levy chain and the Shufersal chain, in a manner that violates the prohibition on distributing products in food stores ("food stores").
93. From the fabric of the evidence and testimonies heard before me, I am of the opinion that this claim of the plaintiffs of a breach of the license agreement has not been proven, and must be rejected. And I will reason.

1. Mr. Yosef Hadad, Mr. Hadad's brother, confirmed in his testimony that he visited the branches of the Rami Levy chain, the Shufersal chain and other stores, dozens of times since 2010, and during these visits he found that products bearing the plaintiffs' brand were sold there.  Mr. Yosef Hadad confirmed that he bought the goods, photographed them and later handed them over to the plaintiffs' lawyer in Israel.  He also confirmed that he knew that his brother, Mr. Hadad, had many complaints against Mr. Jinli from 2011 to 2015, ostensibly regarding the sale in these stores, and even advised him to sue him after Mr. Haddad consulted with him on the matter.
2. Mr. Yosef Hadad did not know why, despite this, since 2011, when the sale in these stores was known to his brother, he refrained from suing any of the defendants (transcript of the hearing of November 12, 2025, p.  151 - p.  170).  From this testimony of Mr. Yosef Hadad, which was brought to testimony by the plaintiffs, a clear picture was painted according to which at least since 2010 the plaintiffs had been informed that their products were sold by virtue of the license agreement in these stores, but no claim was raised by them in real time in this regard, including the claim that such a sale constitutes a breach of the license agreement.
3. Mr. Haddad testified in his cross-examination that he "does not remember exactly" the date on which he first learned of the products being sold in these stores, but he did confirm that as soon as he became aware of this, he informed Mr. Hasson, the plaintiffs' board and their representative in their activities in Israel (transcript of the hearing of November 10, 2025, pp.  89-90).  Mr. Haddad had no satisfactory explanation as to why it took him so long to file a complaint on this matter, other than that it "takes time" and that "I had many friends who told me about the legal process in Israel that it was going on endlessly" (Minutes of the hearing of November 10, 2025, pp.  101-102).
4. All of the above must be read against the background of the fact that Mr. Hasson served as a representative and agent of the plaintiffs in their activities in Israel.  It is no coincidence that as soon as Mr. Haddad learned of this, he turned to the plaintiffs in Israel - Mr. Hasson.  As such, and as part of his activity as the plaintiffs' representative, Mr. Hasson interpreted the restriction stated in the license agreement so that the term "food stores" is not intended to prevent the sale of the plaintiffs' products in chains such as Rami Levy and Shufersal.  According to him, according to the commercial interpretation familiar to him, the reference is to stores selling food only (paragraph 49 of Mr. Hasson's affidavit).
5. Thus, Mr. Hasson testified that the sale of the plaintiffs' products in stores such as the Rami Levy chain and the Shufersal chain does not constitute a breach of the license agreement, and clarified that the prohibition in the section relates to food stores of the type that exists in the United States, as opposed to Israel, and that the sale of underwear and socks in such stores is routine, since these sell many products beyond food, including fashion products (transcript of the hearing of November 12, 2025, p.  227, paras.  11-14).
6. Mr. Hasson also confirmed that in real time he disagreed with Mr. Haddad about the interpretation of the license agreement.  According to him, the reason for Mr. Hadad's late raising of a claim in this matter starting in 2014 was that it was a reason for cancelling the contract, which would lead to an increase in payment by virtue of it (transcript of the hearing of November 12, 2025, p.  259, s.  20 - p.  262, s.  6).  In other words, the motive for raising this claim of such a significant delay, according to Mr. Hasson, was the plaintiffs' desire to earn higher sums from the license agreement by changing its terms.

94. Similar to the rejection of the claim with respect to the first alleged breach, I am also of the opinion that the plaintiffs' conduct in real time creates a waiver and impediments, which negates their ability to claim a breach of clause 2.3 of the license agreement now and retroactively. As detailed in detail above, the fact that the plaintiffs actually knew about the sale in these stores for many years and did not take any legal action, creates obstacles to now claiming a breach of the license agreement.
95. From all of the above, I found preference for the defendants' version, according to which the plaintiffs knew in real time that the plaintiffs' products were sold in the branches of the Rami Levy chain and the Shufersal chain, and that the activity in this regard was carried out without a breach of the license agreement, with the knowledge and consent of the plaintiffs, by virtue of and within the framework of the license agreement.
96. In this regard, I will add and note that even if I accept the plaintiffs' argument that the interpretation of the agreement is such that the sale of products bearing their brand in chains such as Rami Levy or Shufersal is prohibited (and I do not do so), then from the moment that the plaintiffs' agent and authorized representative vis-à-vis the defendants, Mr. Hasson, permitted this sale and this was done with his knowledge and brought to the plaintiffs' attention through him (after he had already been aware of them through Mr. Yosef Hadad). And since the plaintiffs, in their silence and omission, did not act to revoke the authorization given to Mr. Hasson with respect to the format of this commercial activity, then the plaintiffs thus presented the defendants with representations according to which Mr. Hasson was acting under their permission.  Similar to the first alleged breach, to the extent that the plaintiffs did indeed see it as a breach of the license agreement, they would have been expected to take active action to revoke the authorization given to Mr. Hasson, since the plaintiffs' silence regarding the fact that the sale was carried out in these stores constitutes the source of the mission.  Since the plaintiffs did not act to revoke the authorization, they have no choice but to complain about themselves.
97. I did not find it necessary to address the other arguments of the plaintiffs in their summaries on this point, including not the claim that the Rami Levy chain stores are "food chains" and that this is subject to judicial knowledge (paragraph 21 of the plaintiffs' summaries). I am of the opinion that this is not judicial knowledge, and the plaintiffs should have proved this claim with appropriate evidence, including by means of an expert opinion.  The proof of this is the difference in the definition of "food stores" between the United States and Israel, as reflected in the testimony of Mr. Hasson.
98. In any event, there is no need to require a decision on this issue, since it has been proven that for many years the sale in these stores was made with the knowledge of the plaintiffs and even by virtue of the authorization of their agent, Mr. Hasson, who the defendants were entitled to rely on the plaintiffs' representations in this regard in a reasonable and good faith, this is sufficient to reject any claim of breach of the license agreement at this point.

Third Claim of Violation of the License Agreement - Failure to Report True Reports Regarding the Volumes of Imports and Payment of License Fees Pursuant to them

99. The third breach alleged by the plaintiffs is that Don Geely breached its obligation to report truthful reports regarding the volume of imports of the plaintiffs' products (hereinafter: "FOB"), and that no license fees were paid in accordance with the license agreement in the years 2011-2018, in the sum of 10% of the actual volume of imports.
100. Clause 5.1 of the License Agreement provides as follows:

"It is hereby agreed that for the rights vested in the Licensee in this agreement.  including the use of the trademarks, design, manufacturing, advertising, sales promotion and sale of the products, the Licensee will pay the Company royalties at a rate of 5 % F.O.B.  for the duration of the first contract period, with minimum obligation being a total of $ 15,000.  The licensee is granted the option of renewing the contract at a royalty rate of 10 % F.O.B.  with the following minimum commitment: