Civil Case (Haifa) 7939-06-21 Harush Erez v. Gila Shai

1. I have before me a lawsuit that arose in an act of deception, bad faith conduct, and professional negligence in drafting an "apartment" sale agreement.
2. The relevant facts in our case are as follows:

During 2004, defendant No. 1, Ms. Gilo Shai (hereinafter: "the defendant"), examined the possibility of purchasing an "apartment" on the foundation floor, at 26 Golomb Street in Haifa, in an area of approximately 50 square meters, known as Plot 6, Sub-Plot 2 in Block 10926 (hereinafter: "the Apartment").

Prior to the purchase, she was presented with a land registration document, as of December 1, 2002, according to which the "apartment" is registered under the heading "Apartment and Service Rooms".

Since 1993, the "Apartment" has been rented on an unprotected lease to the "Yael Institute", which is an institute for the diagnosis of students (hereinafter: the "Yael Institute").

3. For the purpose of the purchase, the defendant took Mortgage by Bank Tefahot for Mortgages in Tax Appeals (hereinafter "Tefahot Bank"). On April 14, 2004, the appraisal report was received on behalf of the bank for the purpose of determining the value of the "apartment".  The report was prepared by the appraiser, Ms. Lilach Ben Porat (hereinafter "Appraiser Ben Porat"), according to which the value of the apartment was estimated at ILS 171,000 (US₪38,000).  The report noted, inter alia, that "No plans were examined by the committee/municipality" (p.  2 of the report).
4. On October 14, 2004, the defendant signed an agreement with the executors of the estate of the late Yosef Nikolevsky for the purchase of the "apartment". According to her, all along she believed that it was an "apartment" with a lawful building permit.
5. During 2008 The defendant wished to take out an additional mortgage on the "apartment". In this framework, she was asked by Bank Tefahot to conduct a new appraisal for the purpose of determining the value of the "apartment".  On April 30, 2008, the appraiser Ben Porat prepared an appraisal report for the apartment, according to which the value of the apartment was estimated at ILS 155,000.  In this report, it was noted that "No condominium sketch and building permit have not been examined, the assessment is based on the assumption that they are compatible with the Hendo propertyN" (p.  2 of the report).
6. Some time later, the defendant learned that as a condition for taking out the mortgage, and as part of a policy applied at the time by Tefahot Bank, The building permit of the "apartment" must be presented to the bank". The defendant contacted the municipality and examined the construction file, and then, according to her, It was discovered for the first time that the "apartment" was an area that constituted an opaque space on the foundation floor, and that it did not have a building permit.
7. Tefahot Bank refused to give the defendant a second mortgage, and the defendant decided to sell the "apartment"".

According to her, she made all the potential buyers aware of the fact that the "apartment" is an area of opaque space, and that it is not possible to obtain a mortgage for it.

8. Over the course of a month April 2009 The plaintiff, Mr. Erez Harush (hereinafter: "The plaintiff") that the defendant is offering the "apartment" for sale for the sum of ILS 172,000. The "apartment" was, as aforesaid, rented an unprotected lease to the Yael Institute, for the period from December 12, 2004 to December 31, 2009, in exchange for monthly rent in the sum of ILS 2,000.
9. After visiting the apartment and meeting the tenant who expressed his desire to extend the lease period for an additional two years, the plaintiff decided to purchase the "apartment". Since this was the first apartment he bought, and since he did not have a lawyer, the defendant offered him the services of defendant No. 2, Adv. Rachel Manor, who represented her in the aforementioned sale transaction (hereinafter "Adv. Manor").
10. At the same time, the plaintiff asked his brother, Mr. Menachem Harush, who is a renovation contractor (hereinafter "Brother Menachem"), to check the physical condition of the "apartment", as well as to check with the Haifa Municipality whether there are municipal tax and/or water debts lying on it. The examination revealed that there were no municipal taxes and water obligations on the "apartment".
11. The plaintiff contacted Adv. Manor, who agreed to represent him in the sale transaction in exchange for a fee payment of 0.5% + a tax appeal from the transaction price. According to him, Adv. Manor did not recommend that he hire the services of an engineer or appraiser to check the condition of the "apartment", and made do with the question of whether he needed a mortgage, and when he answered in the negative, informed him that she would prepare a sale agreement and coordinate a date for signing.
12. On April 7, 2009 The plaintiff and the defendant appeared at Adv. Manor's office to sign the sale agreement. According to the plaintiff's version, at that time, Adv. Manor presented him for the first time with the sale agreement, the registration of the "apartment", and the lease that were attached to the sale agreement.  In addition, she informed him that the "apartment" had a mortgage in favor of Tefahot Bank, which would be cleared out of the consideration to be paid by it in accordance with the agreement.  According to him, at this time He was not told by any of the defendants that there was a planning problem "in the apartment", and that the "apartment" did not have a building permit.
13. According to the plaintiff, on the same day, and based on the representations presented to him by the defendants, he signed the sale agreement, paid the full consideration, and on October 10, 2011, after the mortgage on the "apartment" in the sum of ILS 138,453, the rights in the "apartment" were transferred in his name to the Land Registry Office.
14. In September 2015, That is, about 6 years after the purchase of the "apartment", the plaintiff received it from the Haifa Municipality A report on the discovery of an offense for construction without a building permit, in which it was noted, inter alia, that the "apartment" is a space to be filled. Upon receipt of the aforementioned report, he contacted the defendants, who undertook to deal with the matter.  Correspondence between the parties' counsel did not lead to a solution to the problem.  and during 2018, an indictment was filed against the plaintiff, in the Haifa Local Affairs Court, in which it was noted that the apartment was built without a permit, and that According to the building permit, we are dealing with an opaque space that was illegally rented to a third party, and the plaintiff was charged with offenses of using the land in deviation from the permit and responsibility for the use of the permit, according to the provisions of the Sections 204(b), 208(a)(3)(8) of the Planning and Building Law, 5725-1965 (Planning and Building - Local Committees 38404-10-18 State of Israel v.  Harush [Nevo]) (hereinafter "The Criminal Proceeding").
15. The prosecutor denied the offenses attributed to him in the indictment, and claimed that he had no knowledge of the planning status of the "apartment", including the failure to obtain a building permit for it until the indictment was received.

In order to prove the charge, the state summoned the construction inspector and a representative of the municipal tax department to testify, and the plaintiff summoned the defendant, Adv. Manor, as well as the appraiser Mr. Avi Hadad of the Ben Porat appraiser firm, who prepared the appraisal report in 2009 (see paragraph 5 above).  The criminal proceeding will be expanded on later.

16. On March 19, 2020, after hearing the testimonies, the plaintiff was convicted of the offenses attributed to him in the indictment, after it was determined, inter alia, that the property defined as an "apartment" constitutes an opaque space.

On May 19, 2020, the plaintiff was sentenced to a fine of ILS 20,000, and an order was issued against him to stop the use of the deviation from the building permit.

17. In light of the aforementioned development, the plaintiff filed the present lawsuit, in which he claimed that the defendants had misled him and deceived him in relation to the nature of the sale, and presented him with a false representation despite their knowledge that we were not dealing with an "apartment" built according to a lawful building permit, but rather in an opaque space. Alternatively, he claimed that Adv. Manor was negligent in her role and did not check the nature of the sale prior to the signing of the sale agreement, and therefore he petitioned to oblige the defendants to pay compensation for all the damages caused to him, which were estimated by him in the sum of ILS 705,115 as of the date of filing the claim.
18. On July 14, 2022, while the trial was being conducted, the plaintiff sold the "apartment" to a third party for the sum of ILS 120,000, and the amount of the claim was reduced to ILS 585,115.
19. The defendants argued in their defense that The claim was filed about 12 years after the signing of the sale agreement, and therefore it should be dismissed out of hand due to statute of limitations or delay. Alternatively, they claimed that the "apartment" was purchased for the brother Menachem, and that both the plaintiff and his brother Menachem knew about the planning status of the "apartment" prior to its purchase, including the failure to obtain a building permit in accordance with the law.  According to them, the plaintiff knew, positively, already at the time of signing the sale agreement in 2009, that we were dealing with a sale for which there was no lawful building permit, and in order to substantiate their claim they referred to determinations in the criminal proceeding that according to them create a cause of action and/or judicial estoppel and/or estoppel by force Section 42A to the Evidence Ordinance against the Plaintiff.  They further claimed that the market value of the "apartment" at the time of its sale Built without a lawful permit The sum was between ILS 150,000 and ILS 200,000, and that the purchase of the "apartment" by the plaintiff for the sum of ILS 172,000 strengthens their claim that the plaintiff knew of the planning status of the "apartment" prior to its purchase.
20. With regard to the claim of professional negligence, Adv. Manor claimed that in drafting the sale agreement, she acted as required by law, and informed the plaintiff about the planning status of the sale and the problems inherent in it, and explained to him the legal and economic consequences stemming from this situation, and therefore there was no fault in her conduct towards him. Alternatively, she argued that if compensation is awarded in favor of the plaintiff, it should be imposed on the defendant, since she was, according to her, the party that in fact "misled" the plaintiff, according to the latter, and she was the party that received the payment for the "apartment".
21. The Testimonies

On behalf of the plaintiff, the plaintiff and the appraiser, Mr. Eran Volkan, testified.