Civil Case (Center) 63837-03-22 Aharon Itzkowitz v. Tal Mordechai Naveh - part 3

The plaintiffs' main arguments

32. The plaintiffs agreed to enter into an engagement with the developer in a Pinui-Binui transaction and constitute a "privileged majority of the apartment owners" as defined in the Pinui-Binui Law (92% signatures).
33. The buildings in which the parties live are old housing buildings, in dilapidated physical condition, without safe rooms and not reinforced or resistant to earthquakes. Buildings have many infrastructure and maintenance problems – in sewage, electricity, infrastructure, and more – in a way that makes daily life difficult and increases the acute need to carry out an urban renewal process.  The residents of the project are expected to receive large and improved apartments compared to the existing apartments, in new, comfortable and safe buildings, which are expected to raise the standard of living of those living in them.
34. According to the program's opinion (from 2020), the entrepreneurial profit rate is 17.2%. Despite the low entrepreneurial profit, the developer decided to promote the project, which will lead to urban renewal and a significant improvement in the level of housing for the residents of the buildings.
35. The defendants are apartment owners who unreasonably refuse the project and have shown no reason for their continued refusal.
36. The refusal of defendant 1, owner of apartment No. 14 in the Katznelson 4 building:
    • The defendant purchased the apartment only after the project began to be promoted. At the beginning of the project's promotion period, the apartment was owned by the late Mr. Yaakov Enoch (" Enoch").  Mr. Inoch was represented by Adv. Sara Naveh, the mother of defendant 1 (hereinafter: "Adv. Naveh"), and the engagement regarding the signing of the agreement was made through her.  Adv. Naveh also represented the parties in the transaction of the sale of Mr. Enoch's apartment to defendant 1, while being aware that the project was being promoted in the building.
    • During Mr. Enokh's ownership of the apartment, he was sent a warning letter by the plaintiffs' attorney, in which he was asked to clarify his position regarding the agreement. In response to the letter, Adv. Naveh noted that Mr. Inoch refuses to sign the agreement because, according to his (vague and denied) claim, threats, accusations and attempts to smear him have been directed against him, while harming and attempting to deprive him of his basic right to act in a prudent and matter-of-fact manner regarding his personal property.  In addition, it was claimed that they did not have all the relevant documents regarding the agreement, and demanded that they be received.  Finally, it was noted that Mr. Enoch was interested in selling the apartment anyway.  However, the reasons for Mr. Enoch's refusal are not subtle, and they are not relevant today: the entire relevant material was transferred to Adv. Naveh shortly after she requested it, and no further information was requested.  In addition, Mr. Enoch sold his apartment to defendant 1.
    • After the sale of the apartment, the developer and the plaintiffs' attorney tried to promote the signing of the agreement with defendant 1. During a Zoom meeting, conversations and correspondence between the parties, Adv. Naveh, who represented defendant 1 (in his capacity as the purchaser of the apartment), demanded documents that had already been given to her in the past (as part of her representation of Mr. Enoch), documents that were available for viewing on the Planning Administration's website "Available Planning", as well as documents that were not relevant.  The developer's attorney and the plaintiffs' attorney gave her the documents and answered many questions.  This is a process that was repeated during which Adv. Naveh made repeated requests for additional information, which led to additional requests after them, in a way that did not advance her consent to sign for years.  The developer's attorney and the tenants' attorney tried to delimit the conduct in time, to no avail.
    • Despite the willingness to hand over the documents and answer the questions (which are in any case unrelated to reasonable grounds for refusing to sign an agreement), the attempt to make the legal process redundant and reach an agreement was unsuccessful. On March 23, 2022, Adv. Naveh announced that the developer was acting in a "predatory and threatening" manner and announced that there was no intention to cooperate.
    • This is an unreasonable evasion and refusal intended to "stretch" the negotiation process and prolong it indefinitely.
    • Defendant 1 does not live in the building. The "cost" of delaying the project is small for him, and he does not have to live in an old building with poor and dangerous infrastructure.  In addition, defendant 1 knew when he purchased the apartment that the building was in advanced proceedings of a Pinui-Binui project.
37. Refusal of Defendant 2, Owner of Apartment No. 4 in Katznelson Building 2:
    • All attempts to accept defendant 2's position were in vain. Her position on the agreement was first accepted when she filed an objection on her behalf to the urban renewal plan.  From the content of the objection, it appears that in her opinion, the developer has been granted concessions and rights that constitute an excessively high incentive addition that is not justified, as it were, not in the interest of the tenants.  The objection further argues that the value of an existing apartment in a building is higher in the long term than that of a new apartment.
    • These reasons are not relevant today and do not constitute a reasonable refusal to sign the agreement: defendant 2's objection was rejected in full by the district committee, since the entrepreneurial profit rate in the project was only 17%. In addition, the high turnout rate of the rest of the tenants in the building indicates that this is a project that embodies a significant economic benefit.  Even after the objection was rejected, defendant 2 did not explain why it insisted on its refusal to sign the agreement and did not propose a possible solution that would appease it and allow the project to be advanced.
    • In a conversation between the developer's representatives and the defendant, defendant 2 conditioned its agreement to sign the agreement, on unreasonable demands.

The defendants' main arguments in the statements of defense

38. The defendants filed separate statements of defense for the statement of claim. Their arguments will be brought together below:
39. Lack of economic viability – the project has a low entrepreneurial profit. Paz Economics' first opinion did not take into account costs amounting to millions of shekels, such as the cost of purchasing a supplementary area from the ILA, the cost of digging groundwater, soil pollution, groundwater pollution and other environmental problems, compensation under section 197 of the Planning and Building Law, 5725-1965, the costs of letters of indemnity and the cost of betterment levy.  In addition, there is no reference to a bank guarantee to guarantee rent for apartment owners during the construction period, an insurance guarantee and a maintenance fund.  Under these circumstances, there is no economic feasibility for the project.  The foyer did not conduct a legal and economic examination of the agreement and its compliance with the provisions of the Pinui-Binui Law.  There is concern that the project will fail and become a construction site.
40. Inequality and unfairness in consideration – the mechanism for distributing apartments according to which an apartment owner who signed the agreement earlier will be placed in priority in the table for the selection of consideration apartments, is contrary to the provisions of the law and violates the principle of equal fairness.
41. The Developer's Conduct and the Lack of Documents – The Developer is a Signature Contractor. The developer exerted pressure on the apartment owners to sign the agreement and it can be assumed that he intends to sell the project.  The developer acted in bad faith and lack of transparency while hiding facts, documents and information that attest to material and procedural failures (lack of equity, financial strength and lack of experience), with most of the apartment owners being elderly and hard-working.  Despite many requests from Adv. Naveh, counsel for the plaintiffs refused to provide documents, including the agreement and its attachments and information regarding the project, and to date he has not provided a single document regarding the entrepreneur's precarious financial situation.  In addition, the developer was declared a violator of the law whose debts were transferred to collection proceedings through the Enforcement and Collection Authority.  After the approval of the new zoning plan, the developer sold shares to foreign hands without the knowledge and consent of the apartment owners.  In addition, plaintiffs Nos. 26-27, Zion Keinan and Shimon Keinan, are the owners of apartment No. 1 in Katznelson 2 and are relatives of the developer (hereinafter: "the Keinan family").  The Keinan family illegally expanded their apartment at the expense of the shared garden.  The apartment is used for commercial use without a permit.  The developer did not declare a family member who owns an apartment in the project in violation of the duty of due diligence.  In addition, one of the members of the Keinan family was appointed to represent the apartment owners with a clear conflict of interest.  In addition, Mr. Yosef Dandakner and his wife, residents of the Katznelson 2 building, were employed for two decades in cleaning and maintenance work in the office of the plaintiffs Keinan.  He was also appointed as a representative and worked to lobby the apartment owners to sign the agreement.  Afterwards, he opposed the project, but due to pressure, he decided to sell the apartment.  The conduct of the developer described above does not comply with the policy of the introduction.
42. The purpose of this proceeding is to exert improper pressure on the defendants and to unlawfully force them to enter into the agreement, while tarnishing their names.
43. Lack of authorization – At the time of filing the claim, the plaintiffs' attorney did not attach a power of attorney signed by all the plaintiff apartment owners. The statement of claim was filed by only 37 plaintiffs, and the power of attorney attached to the statement of claim is a power of attorney that was transferred by Adv. Guy Farbman, who represents the apartment owners in the project (hereinafter: " Farbman").  The signatures on the power of attorney lack identifying details such as name, ID number, and date.  The apartment owners did not give separate and explicit written consent to transfer the representation to another lawyer.  In addition, the documents show that Amidar did not sign the agreement and that no warning note was written about the apartment, without explanation.
44. The agreement is invalid and therefore there is no cause of action – the agreement is invalid in accordance with section 29 of the Contracts Law (General Part), 5733-1973 (hereinafter: the "Contracts Law"), since the first suspension condition of the agreement regarding the dates of the signatures was not met.
45. The entrepreneur did not attach to the agreement the required corporate documents (the company's decision to appoint an authorized signatory, a shareholders' minutes approving the agreement, signed and authenticated by a lawyer), and the entrepreneur's signature does not include identifying details of the signatory.
46. Failure to provide the required guarantees – the developer does not provide the guarantees required for the construction of the project, and does not provide an autonomous guarantee from the lending bank.
47. As for defendant 1, defendant 1 is not an extortionist. This is his first and only apartment.  Defendant 1 worked for many years and saved, even during the period of his medical studies, in order to purchase an apartment close to his place of residency at Assaf Harofeh Hospital.  Until the beginning of his residency at Assaf Harofeh Hospital, the apartment was rented.  The apartment was purchased due to its proximity to the hospital and its characteristics (located next to an ancient water tower and due to the balcony overlooking a park).  At the time defendant 1 purchased the apartment, the chances of the project were slim, and the residents of the neighborhood and some of the apartment owners opposed it.  As for the allegations regarding Mr. Inoch, Adv. Naveh represented him for years in various matters.  Enoch complained to her that he had been subjected to heavy pressure and threats by the developer and his representatives.  Adv. Naveh approached the developer on a specific matter of adjusting the consideration in the project so that it would be suitable for the elderly in accordance with Amendment No. 6 to the Pinui-Binui Law, but the developer refused to do so.
48. As for defendant 2, the developer did not offer defendant 2 an alternative residence or a consideration apartment that includes accommodations for her disability, as is the case in her existing apartment. Defendant 2 is not a recalcitrant or extortionate tenant, and she did not agree to sign the agreement because it violates her rights.  Defendant 2 asked to receive the same conditions as her existing apartment.  Defendant 2 suffers from orthopedic injuries and has a percentage of disability.  Due to her disability, she is unable to operate air conditioning in her home and relies on her apartment today, which has three air directions, in order to live a normative life.  Therefore, she demanded to receive an apartment with three air directions and did not ask for extra considerations.

The main response of the plaintiffs in the reply

49. The plaintiffs denied the defendants' claims: there is no reasonable ground for refusal in accordance with the Pinui-Binui Law; Counsel for the plaintiffs received explicit permission to file the claim on behalf of the plaintiffs; The project is economically feasible; The entrepreneur has proven financial strength; The developer provided the tenants with sufficient and proper collateral; There is no basis for the claims that the agreement is void, and the claim is based on an erroneous interpretation of the agreement; There is no conflict of interest, from the outset the developer was asked by his relative to help save the building due to its problems, while other developers refrained from being involved in urban renewal projects in Lod; The process was conducted with full transparency and full disclosure of data, led by an introduction, including the stages of selecting the representative office, appointing the developer and selecting an accompanying lawyer.
50. As for defendant 1, he does not deny that his attorney, Adv. Naveh, also represented Mr. Enoch, so that defendant 1 purchased the apartment knowing of the intention to carry out an evacuation-reconstruction transaction and the formation of a privileged majority of the existing apartment owners supporting the transaction. Defendant 1 received many documents from the developer (through Adv. Naveh).  The developer demanded that defendant 1 compile a final list of requested documents and information, after which a final answer to the transaction will be given.  Defendant 1 refused to do so.
51. As for defendant 2, during the negotiations with it, defendant 2 raised only one demand, to receive an apartment with three air directions, one of which is oriented east, in the new building. Defendant 2 announced that if this demand was not met precisely, it would refuse to sign the agreement.  The developer's representatives presented her with the building plans, according to which there are no three-way apartments in the project.  The tenants in the project do not have a fundamental right to receive "the apartment they have today" in an evacuation-reconstruction transaction.  If the developer were required to provide each of the tenants with an identical apartment to the existing apartment, it would never have been possible to promote a Pinui-Binui transaction or to obtain the advantages of promoting these transactions.  The other arguments she made in her statement of defense are new and artificial arguments intended to justify the refusal retroactively.  In addition, defendant 2 demanded to receive a very high and unjustified monetary payment, as a condition for her consent.

Completion of documents by the plaintiffs

52. On December 12, 2022, the first pre-trial hearing in the proceeding was held, at the end of which, inter alia, it was determined that the plaintiffs would submit the following documents: power of attorney to the new lawyer who will represent the apartment owners from now on against the background of the change of representation of the plaintiffs; Confirmation by Adv. Farbman, the apartment owners' attorney in the Pinui-Binui transaction, that the agreement was signed by the apartment owners in his presence or by someone from his office; Additional documents that were not attached to the statement of claim, such as the opinion from 2022 and additions to agreements signed with some of the apartment owners.
53. On January 19, 2023, the plaintiffs filed a notice in accordance with the decision of December 12, 2022, to which the opinion from 2022 and the affidavit of Adv. Farbman were attached. Farbman stated that all the plaintiffs had signed the agreement with the developer and the power of attorney attached to the agreement, including a general power of attorney, a power of attorney for legal proceedings and an irrevocable notarized power of attorney.
54. On March 5, 2023, the plaintiffs submitted a power of attorney signed by all the plaintiffs except plaintiffs 12-13 and plaintiffs 35-36 for the original statement of claim. In a statement on their behalf, they updated that plaintiffs 12-13 had not yet been identified for the purpose of signing a power of attorney; and plaintiffs 35-36 agreed to sign a power of attorney, but a signing meeting has not yet been scheduled.  In addition, it was announced that plaintiff 20 z"l and plaintiff 24 z"l, the late Meir Elbaz and the late Yehuda Galanti, had passed away and therefore they were asked to be deleted from the lawsuit.  He was also asked to replace plaintiff No. 19, the late Mrs. Hosh, with her heirs.
55. On March 5, 2023, the plaintiffs filed a motion to change plaintiffs in view of the death of some of the plaintiffs. On April 11, 2023, the court ruled that the plaintiffs would file an amended statement of claim to which the power of attorney on behalf of all the plaintiffs and all the documents required by law would be attached.  On May 14, 2023, an amended statement of claim was filed.

Continuation of the process