Civil Case (Tel Aviv) 56961-03-22 Ahad Ha’am 20 Ltd. v. Proquette Juicy Juice Ltd.

The judgment is in the plaintiff's claim to pay her the sum of ILS 6,000,000 in respect of a commercial engagement between the plaintiff and the defendants for the establishment of a business venture (restaurant and hotel) in a property owned by the plaintiff.  The property is a real estate with a two-story building and a courtyard, at 20 Ahad Ha'am Street, corner of 1 Herzl St., Tel Aviv, a historic property, also known as "Pollak House" (hereinafter: the property).

Factual Background Summary

1. The plaintiff is a limited company and the owner of the property, which is a historic property in strict preservation.

One of the plaintiff's shareholders, Mr.  Yehuda Gorsed, who owns 10% of the plaintiff's shares and manages it (hereinafter: the shareholder), described in his testimony the plaintiff's activity in the property:

"We purchased the property in January 2010, received a Form 4 for connecting systems in February 2017, and the total cost of the renovation reached about ILS 30,000,000, if not ILS 35 million, about 1,500 meters of building renovation.  We completed it as is customary in commercial properties at the envelope level, and according to the agreements of 2014 with (defendant 1) they were supposed to make the internal adjustments of the property to their specific needs" (page 124, lines 1-6 of the minutes of May 21, 2024).

2. Defendant 1 is a limited company, currently in insolvency proceedings (hereinafter: the lessee), which was established in 2013. On January 8, 2014, the tenant entered into a lease agreement with the plaintiff for the lease of part of the property, with the aim of establishing and operating a luxury restaurant on it (hereinafter: the 2014 agreement, Appendix 3 to the statement of claim).  It should be noted that the tenant, together with others, established and operated a restaurant in Tel Aviv called "Cafe Hanoi" since 2017, which later ran into difficulties.
3. On July 10, 2018, in light of disagreements that arose between the parties, and even a legal proceeding was initiated between them (Civil Appeal 32998-10-17, hereinafter: the 2017 claim), a new lease agreement was signed between the plaintiff and the tenant regulating the disputes in such a way that the 2014 agreement was canceled and the new agreement was replaced by the rental of the entire property, except for areas held by protected tenants (hereinafter: the 2018 agreement, Appendix 4A to the statement of claim). The 2018 agreement included a clause that stipulates the plaintiff's obligation to pay the tenant in the sum of ILS 700,000 to settle the tenant's claims regarding the delay in the delivery of the leased property under the 2014 agreement (clause 3.2 of the 2018 agreement (with its sub-clauses)).  The 2018 agreement was signed after the leased Form 4 was received.
4. Defendant 2 is a limited company and a subsidiary held 100% by the lessee (hereinafter: the subsidiary), which was established in 2017. The subsidiary stepped into the lessee's shoes and accepted all the instructions and undertaking included in and deriving from the second agreement, in accordance with the addendum to the 2018 agreement, which was signed with it on May 21, 2019 (hereinafter: Addendum 2019).  As part of the 2019 addendum, the tenant guarantees the full fulfillment of the 2018 agreement by the subsidiary and the plaintiff's full compensation in any case of breach by the subsidiary.  The tenant and the subsidiary will be jointly referred to: the defendants.
5. Defendant 3, who is the Lessee's CEO and a manager in the subsidiary (see his testimony in the minutes of June 17, 2024, page 121, lines 8-11) (hereinafter: the defendant) and in the thread above, is a shareholder in the tenant and the subsidiary through Nili Peri Hagan Ltd., a 514910421 company according to a public printout by the Registrar of Companies.
6. According to the 2014 agreement, the purpose of the rental of the property was to establish a luxury restaurant of the defendants in the city of Tel Aviv in accordance with their skills and experience, and accordingly, the rental periods in the property were set for five years, followed by additional options of five years up to a total period of 24 years and 11 months (clause 4 of the first agreement). In addition to the minimum rent, the rent was linked to the turnover of the business to be managed in the property (clause 5 of the first agreement), according to the highest.

The 2018 agreement set a minimum monthly rent of ILS 60,000 (before VAT) for a restaurant and ILS 70,000 (before VAT) for a hotel.  Clause 5.1.19 of the 2018 agreement stipulates a "grace period" of 12 months, i.e., until July 2019, when there was no obligation to pay rent.