Civil Appeal 6275/23 Jack Raymond Jacobs vs. Moshe Amar

Civil Appeal 6275/23

Judgment

Judge Ofer Grosskopf:

We have before us an appeal against the judgment of the Jerusalem District Court (the Honorable Judge, as he was then called, Ram Winograd) of July 2, 2023 in Civil Case 52881-11-21, [Nevo], in which it was determined that an agreement for the sale of an apartment was lawfully cancelled by the respondent (the seller), due to its breach by the appellants (the purchasers), by not paying the balance of the consideration for the purchase of the apartment within the period allotted in the agreement.  The dispute between the parties focuses on the question of whether this breach on the part of the purchasers did in fact grant the seller the right to cancel the contract immediately (i.e., without granting an extension), given his previous breach of the contract.

Background and the sequence of events

1. On July 5, 2020, the appellants, Mr. Jack Raymond Jacobs and Ms. Keren Simon (hereinafter: the purchasers), and the respondent, Mr. Moshe Amar (hereinafter: the seller), entered into an agreement for the sale of a residential house in the Efrat Local Council, known as Lot 35271 (hereinafter: the date of conclusion of the agreement, the sale agreement or the agreement and the apartment, respectively). Alongside the agreement, the parties signed an "Appendix to the Sale Agreement", so that their obligations appear in both documents together (hereinafter: the Appendix.  For the sake of convenience, I will refer to these two together as the Agreement, unless otherwise noted).  According to the agreement, the payment for the purchase of the apartment was set at ILS 3,620,000 (this sum includes ILS 3,420,000 for the purchase of the apartment itself, and ILS 200,000 for the heat pump and air conditioning system that exist in the apartment).  hereinafter: the total consideration).  Out of the total consideration, the sum of ILS 1 million was paid by the purchasers in several installments close to the date of the conclusion of the agreement (for details, see paragraph 26 of the judgment of the trial court).  hereinafter: the consideration paid; the portion of the total unpaid consideration, which amounts to ILS 2,620,000, will be referred to hereinafter: the balance of the consideration).  The remainder of the consideration will be paid, according to the agreement, until August 2, 2020, and against receipt of possession of the apartment.  In this context, the agreement states that the obligation relating to the dates of payment, along with other obligations, is a "fundamental undertaking" (a matter that I will address in detail below).  It should be noted that in the same clause it was determined that a delay of up to seven days in the performance of any obligation under the agreement will not be considered a "breach of any kind" of the agreement (hereinafter: the extension of grace).  It should also be noted that the agreed compensation for a fundamental violation was set at ILS 342,000.
2. The Ottoman Settlement [Old Version] 1916 The agreement also stipulates that the seller is responsible for acting in order to obtain Form 4 and approval of occupancy for the apartment, within 12 months from the date of the conclusion of the agreement - that is, until July 5, 2021; where a breach of this undertaking was also defined in the Appendix as a "fundamental breach". In the meantime, the parties agreed that if Form 4 is not received by August 2, 2020 (about a month after the date of conclusion of the agreement) - as indeed happened in the end - two special arrangements will apply.  First, the date for payment of the balance of the consideration will be postponed until 10 business days after Form 4 is presented to the buyers (as opposed to payment against possession of the apartment).  The second is that the buyers will be allowed to live in the apartment as tenants already on this date, and to pay the seller a reduced rent of ILS 5,000 per month.  In addition, it was determined that if Form 4 is not received even after six months from the date of conclusion of the agreement, then the purchasers will be exempt from paying the rent but will bear the ongoing expenses in relation to the apartment.  Indeed, about three months after the agreement was signed, and before Form 4 was received, at the beginning of October 2020, the buyers moved into the apartment.

12-34-56-78 Chekhov v.  State of Israel, P.D.  51 (2)

3. The days passed, and Form 4 was finally given only on October 7, 2021 - that is, about three months after the deadline set in this regard in the agreement (as stated, July 5, 2021) - and three days later, on October 10, 2021, it was received by the seller. Immediately on the same day (in fact, about 12 minutes later), his counsel sent, via e-mail correspondence (hereinafter: email), the confirmation to the buyers' attorney (at 11:06 a.m.).  The next day, on the evening of October 11, 2021 (at 17:33), the buyers contacted the Mortgage Bank (Mizrahi Tefahot Bank).  hereinafter: the Bank) regarding the receipt of a mortgage, following the approval in principle in the matter that they received from the Bank at the time, close to the conclusion of the agreement, when the money that was supposed to be received in this framework was intended to pay the bulk of the balance of the consideration.  For the sake of completeness, and since this matter is important for the continuation of the matter, it should be noted that even on October 25, 2021, the purchasers contacted the bank in order to find out how long the process of obtaining the mortgage is expected to take, and for the purpose of verifying the completion of their application; On the same day, a response was received that the relevant clerk was on leave, and would return the next day; On October 28, 2021, the purchasers sent the documents they had attached to the first application; and on October 31, 2021, they sent the bank additional documents.

On October 12, 2021, two days after Form 4 was sent to the buyers, the seller's counsel contacted the buyers' attorneys, stating, inter alia, that the buyers must pay the full balance of the consideration, in accordance with what is stated in the appendix, within 10 business days from the date on which Form 4 was provided to them - i.e., until October 21, 2021 (Appendix 2 to the seller's response to the appeal).  However, the balance of the consideration has not been paid by this date; And not even after the elongation has passed, Thegrace stipulated in the agreement, which ended on October 28, 2021 (Thursday of the week).  In response, on October 31, 2021 (Sunday of the week), the seller sent the buyers a notice regarding the cancellation of the agreement (hereinafter: Cancellation Notice).

4. On the same day, the buyers sent an urgent notice to the bank, and the next day, on November 1, 2021, the bank gave approval in principle for the mortgage application in the amount of ILS 2,394,000 (it should be noted that the balance of the consideration was ILS 2,620,000, and therefore the purchasers had to add an amount of ILS 226,000 from their sources).  In response, the buyers' counsel informed the seller's attorney that the seller was requested, in accordance with his obligation in the agreement, to sign mortgage documents necessary for the purchasers in order to receive it and pay the balance of the consideration; He added that the bank said that if the documents were signed, it would be possible to transfer the funds within two business days.  The seller's counsel asked to wait with the delivery of the said documents until he spoke with his client, and these were forwarded the next day, on November 2, 2021 (although no positive update was received from the seller beforehand).
5. At this stage, the parties conducted negotiations, in order to reach agreements that would enable the implementation of the agreement. In the meantime, the possibility of extending the date for payment of the balance of the consideration was discussed, along with various components intended to protect the seller's interests, as well as mutual waiver of future claims.  In light of this, the parties exchanged drafts of agreed compromise proposals.  One draft compromise proposed by the buyers on November 2, 2021, included a proposal that the seller sign the mortgage documents; the buyers would pay the balance of the consideration plus interest until November 6, 2021, and the parties would waive their claims.  In response, the seller sent a draft on his behalf, and added a component according to which the parties would agree that if the balance of the consideration was not paid by the said date, the agreement would be cancelled immediately; and various components were added, mainly relating to the evacuation of the apartment in the event of non-payment.  Counsel for the parties continued to talk during the night hours of the same day, when the buyers' counsel tried to bring about an extension of the date for the payment of the balance of the consideration, and the seller's counsel clarified that this was apparently not possible in light of the seller's position on the matter - so that his position would be possible, perhaps, a slight extension of a day.
6. The next day, on November 3, 2021, the buyers' counsel suggested to the seller's attorney that the balance of the consideration be paid by November 7, 2021, and that as of that date, the arrears in payment would bear double the agreed interest. In addition, it was suggested that if the balance of the consideration is not paid by three weeks after this date (i.e., until November 24, 2021), this would constitute a fundamental breach of the agreement, and would lead to the cancellation of the agreement with all that it entails.

It should be noted that alongside the exchange of drafts, the buyers' counsel sent a letter stating that the seller had fundamentally breached the agreement, since Form 4 was not received within the date set in the agreement (see also a letter dated October 7, 2021 in this context), but only more than a year after the date of the conclusion of the agreement.  This delay led to the buyers being required to restart the process of receiving the mortgage, and as a result, they needed more than ten business days in order to receive the funds and pay the balance of the consideration.

7. On November 4, 2021, and since the negotiations did not progress in their view, the buyers announced that if by that day the seller did not provide a positive answer regarding the last draft of the settlement proposed by them, and signed the mortgage documents, they would initiate legal proceedings in order to enforce the agreement. The seller did not comply with this demand, and did not sign the documents - thus bringing the negotiations between the parties to an end.

The Proceeding Before the Trial Court

8. Against the background of the aforesaid, on November 22, 2021, the seller filed a claim with the trial court for declaratory relief according to which the agreement was lawfully cancelled by him, and for an order to vacate the apartment alongside the return of the consideration component paid to the buyers. On January 6, 2022, the purchasers filed a counterclaim, in which they petitioned for enforcement of the agreement and the provision of monetary compensation, which includes agreed compensation for a fundamental breach in light of the delay in receiving Form 4, as well as compensation for various damages caused to them.  In accordance with a procedural agreement between the parties, on February 27, 2022, the seller filed a counterclaim to the counterclaim, in which he petitioned to receive agreed compensation for a fundamental breach in light of the failure to pay the balance of the consideration on time, and to pay proper usage fees for the buyers' possession of the apartment as of January 5, 2021 (six months after the date of the conclusion of the agreement).  These claims are the basis of the appeal in this case (to complete the picture, it should be noted that the seller also filed a claim for eviction of a tenant that was rejected on the grounds that it was not suitable to be clarified in a speedy proceeding (Serious Crimes Case 52508-11-21 (the Honorable Judge Moriah Cherka)); and another claim that was dismissed in accordance with the agreement of the parties, in light of the aforementioned procedural agreements (Civil Case 51833-11-21 [Nevo] (the Honorable Senior Registrar Aharon Orenstein)).
9. For the sake of convenience, these were the arguments of the parties, in essence, in the framework of the claim and the counterclaims: