First, the answer lies in the presumption (presumption) that a contract is not made permanently. This is not the way of people to draw up contracts so that they will last forever. Nor is it a proper policy, from an economic or social point of view, to freeze a contract like a kind of mummy, until Eliyahu comes. A contract is meant to live within his environment, and to be affected by changes caused by time. It is possible that the changes will be so substantial that there will be no more, no reason or purpose, in the life of the contract. However, the contract does not explicitly say that in such a situation his time has passed and his sacrifice has been annulled. However, the fact that the parties to the contract did not consider the possibility that such a situation would be created, and in any event, did not make a provision regarding the termination of the contract in such a situation, does not, in itself, negate the possibility of termination of the contract. In such a situation, it is unreasonable or desirable to attribute to the parties to the contract an intention to continue to perform the contract artificially. This is especially the case in contracts that are based on a personal relationship between the parties, such as a relationship of trust or loyalty. Such are, for example, employment contracts, partnerships, or agencies. If the relationship between the parties to such a contract is untenable, there is no point in continuing the relationship between them. Therefore, they must be allowed to be freed, even unilaterally, from each other's grip" (Civil Appeal 2491/90 Travel Agents Association v. Airlines Panel, para. 14 ([published in Nevo], May 3, 1994) (hereinafter - the Airlines Affair).
(See also on this matter: Civil Appeal 442/85 Zohar v. Travenol Laboratories (Israel) Ltd., IsrSC 44(3) 661, 671 (1991) (hereinafter - The Travenol Affair); Gabriela His Contract Law - The general part towards the codification of civil law 449-452 (2005)).
- The presumption that a contract is not made permanently is not limited to contracts based on personal relationships (Civil Appeal 9609/01 Mul Hayam (1978) in Tax Appeal (formerly um Rashrash Center Ltd.) v. Dr. Yosef Segev, IsrSC 58(4) 106, 143 (2004)). It also applies to contracts of the type we are dealing with here. As part of the duty of good faith in the performance of a contract, it can be assumed that a reasonable period of time is required for the validity of a contract for which no date has been set, before it is cancelled by a party to the contract. It can also be assumed that the notice of cancellation will be given within a reasonable time before the revocation takes effect (Civil Appeal 47/88 Hershtik v. Yakhin Hakel Ltd., IsrSC 47(2) 429 (1993); The Travanol Case, at p. 706). In this case, the reasonableness of the parties' intention to an agreement is examined in accordance with the presumption that a contract is not made permanent, but rather its duration is examined according to the circumstances of the case (see: Civil Appeal 154/80 Burchard Lines v. Hydrovton, IsrSC 38(2) 213, 223 (1984); Civil Appeal 552/85 Agassi v. Hilu, IsrSC 41(1) 241, 245 (1987); The Airlines Case, at p. 641).
- Insofar as this is the law in relation to a regular contract between private parties, it is all the more so in a contract with a governmental authority. Naturally, the governmental contract must be understood against the background of the dynamics of public life, and the intensive development of the needs and constraints created in the public sphere. A governmental agreement whose validity is not defined in time is subject by its very nature to changing circumstances and public needs. After a reasonable period of time, there may be justification for being released from it. This is the case with the other party to a governmental contract, who will be able to give notice of his desire to cancel it within a reasonable time frame, and the same applies to the public authority, if only in order to promote an important public purpose for which it is responsible.
- In general, the public interest finds it difficult to accept the perpetuation of indefinite contractual arrangements, which make it difficult to stand the test of time in terms of social and economic needs. Agreements with a governmental authority are by their nature influenced by factors caused by time, and it is of particular importance to preserve the ability of the public authority to examine them after a reasonable period of time against the background of considerations in the public interest. These words are clearly true in relation to the contractual arrangement that is the subject of our case, which was in effect for the years 1995 to 2001. This is a long period of time in relation to the need to activate a contractual arrangement in a tax matter, and the cancellation of such an agreement, which does not have a defined expiration date after seven tax years, meets both the requirement of contractual good faith and the duty of administrative reasonableness.
- In the margins, it should be emphasized that the settlement agreement between ISBB and the company was not canceled in a sweeping manner, but only partially. This indicates restraint in exercising the Council's discretion, and its efforts to honor the agreement to the extent that the law allows it. In addition, in its release from the agreement, the council did not demand the amendment of the rates retroactively, but rather a request to raise them from the beginning of the arnona reform from the tax year 2002 onwards, and in this sense too, it acted in a reasonable and fair manner in the way of its release from the agreement.
- Against the background of all these considerations, the weight of the parties supporting the Council's partial release from the agreement outweighs in this case the principle of respecting the terms of the governmental agreement as it is. In the circumstances of the case, it seems to me that not only was the public authority entitled to be released from the agreement, but it also had a public obligation to do so. Against the background of the general normative system that was renewed following the reform in the field of municipal property taxes in the local authorities, and in view of the other considerations enumerated above, the continued existence of the agreement as it would have led to an unreasonable and inappropriate result, which entails a profound violation of the principle of equality in tax collection, and severe discrimination against the residents of the local authority, which has no explanation or justification, who are required by law to pay much higher property tax fees than those that apply to the company by virtue of the agreement.
- Indeed, it is difficult to get rid of the impression that the high status of the Electric Company, and the bargaining power in its hands, made it easier for it to reach the agreement. The honor of the agreement rests in its place for the years from 1995 to 2001, which are "good years" in which it received an exceedingly low assessment. However, with the comprehensive arnona reform, there was room to put an end to the "good years", to toe the line, and to apply the law regarding property tax rates to the Electric Company - an entity rich in assets and economic ability. Public justice would not have found a solution if the contractual arrangement regarding the relevant area had continued even afterwards.
- In the circumstances described, it cannot be said that the Council's decision to partially release the agreement is tainted by extreme unreasonableness, a grounds that would have justified our judicial intervention had it been fulfilled.
- I will note, to conclude, that one of the totality of the reasons brought by my colleague, Justice Naor, to base her conclusion that the Council should not be allowed to be freed from the shackles of the governmental contract, relates to the relatively low tax amount that is now in dispute according to the second amended assessment, which is estimated at approximately ILS 26,000 in respect of the entire site (paragraph 19 of her judgment). According to her, this sum, which is defined as a "negligible amount," does not justify exemption from the agreement in the name of the public interest.
To this I will note that, indeed, this sum is not relatively high, but the test of this matter lies not in the amount in dispute, but in the principles that will be formulated around it, and in their projection beyond the specific matter before us. In addition, the main importance of this matter is its implications for the future, for years to come - will a public authority be bound in the future to minimal rates of municipal taxes on the basis of incorrect land classification, with extreme favorable discrimination between the party to the agreement and the other residents of the local authority, when in the disparities of power and ability, that party does not have the upper hand? It seems to me that the answer to these questions is self-evident.
- My opinion, therefore, is that the position of the trial court on the issue of the release from the governmental contract should be adopted, and the appeal of the electric company on this central issue should be rejected.
Classification of facilities, measurement method, and exemption for infrastructure lines
- The appeal before us also revolves around other aspects relating to the classification of facilities in the area as buildings for the purpose of assessing property taxes, as well as the method of measuring the facilities, and the arguments regarding the existence of an exemption for installations as infrastructure lines under section 274B of the Municipalities Ordinance prior to its amendment.
- The Company argues that the electrical installations scattered throughout the site are not a "building"; and that even if these installations are a "building", their area should be calculated according to the area occupied by each and every one of the feet of the facility, and that the area between the feet of the facility should not be taken into account. It was also argued that the facilities in the area of the site are exempt from municipal taxes from the outset because they are "infrastructure lines" and "connection lines" within the meaning of section 274B of the Municipalities Ordinance.
I have given my attention to the totality of the arguments on these issues; I have come to the conclusion that the determinations of the trial court, both on the factual and legal levels, are correct, and that there is no ground for the intervention of the appellate court in them.
- I will refer in a few words to the company's claim that the new Arnona Law does not permit changing the classification of the land according to the new law to the part of the compound where facilities are located. The governmental agreement is based on an incorrect classification of land, which deviates from the law. The classification of the site's land as "occupied" when there is a command structure on it, and various facilities, is not in accordance with the law, since it does not properly distinguish between the vacant land and the land on which installations are stationed. As part of the release from the agreement, there was room to amend this classification and cancel the distortion created by the erroneous contractual classification. In this regard, the Company argues that the amendment to the classification made by the Council constitutes a deviation from the provisions of Regulation 4 of the Arrangements in the State Economy Regulations (General Property Tax in Local Authorities in 2000), 5760-2000, according to which:
"A council shall not change the type, classification or subclassification of a property in the fiscal year 2000 in a manner that affects the amount of property tax imposed due to the property under these regulations, but it may change the classification of an asset if in practice its use has changed."
- The amendment to the classification prepared by the Council does not constitute a deviation from the provisions of Regulation 4 of the Arrangements Regulations according to its spirit and purpose. The purpose of Regulation 4 is not to preserve and perpetuate errors in the classification of assets for the purpose of municipal taxes; on the contrary, deviations from the correct classification require correction in order to properly realize the purpose of the tax and the principle of equality in its collection ( Mevoot Hermon, ibid.; Appeal of Petition/Administrative Claim 104/03 Kaplan v. Ramat Gan Municipality, IsrSC 58(3) 769, 773 (2004)). Perpetuating mistakes, as claimed by the company, intensifies the inequality between those who pay municipal taxes lawfully, according to the classification of the assets according to the law, and those who pay municipal taxes at a reduced rate due to a mistake in the classification of the property, or for some other reason. Even if we assume that at the time of the conclusion of the settlement agreement, the council was not sufficiently aware of the significance of the legislative prohibition that applied to it to classify an asset in deviation from the definitions of the law - which automatically entails the imposition of a tax rate in deviation from the law - since it was given legal advice indicating that the settlement agreement deviated from the law, and recommended that this deviation be corrected, the council was not only entitled to, but also obligated to act in accordance with it (Henryk Rostowitz Municipal Property Tax 503 (4th edition, Pinchas Geldkov, 1995).
Had my opinion been heard, we would have dismissed the appeal in these aspects as well.
- I would therefore dismiss the appeal in all its aspects and charge the appellant company with the attorney's fees of the respondent local council in the sum of ILS 30,000.
Judge