Civil Case (Rishon LeZion) 41151-07-21 Shufersal Ltd. v. Mishkenot Geshem Haaretz Ltd. - part 8

In light of the press reports regarding the apparent sale of the commercial center, please confirm in the circular that simultaneously with the assignment of your rights and obligations in the commercial center, Shufersal's lease agreement in the commercial center will also be approved, and the lease agreement (its legal and commercial version has already been approved) will be signed with you prior to the assignment or immediately thereafter with the assignee, in the form agreed upon as aforesaid" (Appendix 13 to Shlomi's affidavit).

109. Yossi did not respond to this message, but three days later - on June 9, 2021 - he met with Shlomi. The parties disagree over the content of the meeting.  According to Shlomi, Yossi told him at the meeting that Geshem was insisting on fulfilling the agreement between it and Shufersal.  On the other hand, Yossi claimed that the purpose of the meeting was "with the aim of trying to bridge the many gaps that existed between the parties in relation to the rental deal" (paragraph 22 of Yossi's affidavit), and denied that he had told Shlomi that there was an agreement between Shufersal and Geshem.  On the contrary, he claims, at the end of the conversation he made it clear to Shufersal that Rain would not return to the negotiating table.
110. Yael also claimed that in a chance meeting with Yossi and Shamgar, which, to the best of her recollection, took place on June 10, 2021, at the "Real Estate Summit" event, she contacted Yossi and Shamgar and reiterated her request that the engagement with Shufersal be honored even after the deal with Zim. According to her, while Shamgar evaded, Yossi claimed to her that he would "keep" the deal with Shufersal.  Yael was not interrogated about this conversation and therefore her testimony should be accepted.  However, even according to Yael's version, this is not an admission by Yossi that there is a binding agreement between the parties, as opposed to a desire to bring the negotiations with Shufersal to fruition.
111. If so, the parties disagree on the content of the meetings and conversations between them on this matter, and I have not found that one version is preferred over the other. In these circumstances, I am of the opinion that it is not possible to learn from the conduct between Shufersal representatives and Shem after ZIM's entry as a partner in the project regarding their intentions regarding the binding validity of the commercial terms document.
112. Geshem's conduct vis-à-vis ZIM - According to the testimony of Benny, who serves as ZIM's VP, prior to the engagement between ZIM and ZIM, Geshem presented ZIM with data about tenants with whom it had already entered into binding lease agreements. Subsequently, Benny claimed that Geshem did not present the commercial terms document or the technical specifications to ZIM during the negotiations and due diligence, and noted only that negotiations took place between Shufersal and it that did not form a binding agreement (see: Benny's affidavit; minutes of the hearing of February 12, 2024; p.  177, paras.  20-21; pp.  179-180.  See also paragraph 33 of Yossi's affidavit).  Although Shlomi stated that in the framework of a meeting that Shufersal held with Mr. Rani Zim, Mr. Zim claimed that the commercial terms document was not presented to him (paragraph 42 of Shlomi's affidavit).
113. From the testimonies, including Shlomi's testimony about his conversation with Mr. Zim in real time, it appears that Geshem made a representation to Zim that she did not enter into a binding agreement with Shufersal. This is a certain indication, even if not strong, that Geshem did not see itself as having entered into a lease agreement with Shufersal.
114. Yael's fees for the transaction were not paid in full - as may be recalled, Yael is an external consultant to Shufersal who handled the transaction on her behalf, and her investigation shows that the commission that was supposed to be paid to her for completing the transaction was not paid to her in full (see: Minutes of the hearing of July 16, 2023, p. 153, paras.  14-18).  This, too, should be a certain indication that Shufersal did not think that a binding lease agreement had been signed with Geshem.
115. Interim Summary - An examination of the conduct of the parties after the formulation of the commercial terms document does not indicate that they believed that a binding contract had been entered into between them. Certainly, their conduct does not overcome the language of the commercial terms document.  The legal conclusion that derives from this is that the element of discretion does not exist and there was no acceptance of the conduct.  Ostensibly, the discussion could have ended on this point.  However, the parties have expanded their arguments on other issues, and I will address them briefly as well.
     • 4. Certain
116. When I have reached the conclusion that there is no element of discretion between the parties to enter into a binding contract within the framework of the commercial terms document, the need to examine the element of specificity is apparently superfluous. However, taking into account the arguments of the parties and in order to present the full picture, I will also examine these arguments.
117. As is well known, the element of specificity exists if it is possible to conclude from the totality of the circumstances that there has been a meeting of desires in relation to the essential and essential conditions of the transaction. The answer to the question of which of the terms of the transaction will be considered material varies according to the nature of the transaction and its circumstances (see: Rosenberg, at paragraph 14).  As is well known, over the years the requirement has been softened in case law regarding certain requirements, when the missing details, even if material, can be completed in accordance with the provisions of the law or in accordance with common practice (see: Adani case, at paragraph 9).
118. In our case, I am of the opinion that the commercial terms document includes most of the essential and essential conditions for a supermarket rental transaction. Thus, the document includes the lease period; the location of the property; the size of the property; the rent; the duration of the adjustment work; The date of delivery of possession of the property.
119. The argument that the commercial terms document does not include a reference to the specific location of the supermarket has not gone unnoticed. The first sketch states that "a location will be chosen separately" and even Yael admitted in her interrogation that no specific location was chosen within the property, but rather that it was agreed that it would be located on the ground floor in the commercial areas (minutes of the hearing of July 16, 2023; p.  133, paras.  22-24).  In addition, the commercial terms document lacks additional conditions, including the date of payment of the rent, the index to which the rent is attached, and the amount of management fees that Shufersal must pay.
120. In this regard, I accept Shufersal's argument that these are not material deficiencies and that in any case these conditions could have been completed even by means of the detailed draft agreement that was exchanged between the parties, to the extent that the element of discretion was met.
121. I am therefore of the opinion that the essential commercial terms to be entered into in an agreement for the lease of a supermarket appear in the commercial terms document and therefore it meets the requirement of specificity. At the same time, since I have reached the conclusion that the parties have not decided to enter into the transaction, I am not required to dispute this matter in all its details.
122. Gaps between the Commercial Terms Document and the Exchanged Drafts - Another issue that the parties have elaborated on, and which I believe that in order to resolve the dispute before me, there is no need to go into all its details is whether there are gaps between the Commercial Terms Document and the drafts that were exchanged. In this regard, the defendants emphasized that in the commercial terms document, an aggregate lease period of 30 years was specified (after the option periods were activated), while in the detailed draft that was exchanged between the parties, a shorter period of 24 years and 11 months (after the option periods were activated) was recorded.  According to them, the lease period is an essential condition in a supermarket lease agreement, and a gap of about 5 years is critical.  The defendants further argued that while the commercial terms document stated that the date of delivery of possession of the property would be "within up to 30 months of the permit", in the drafts that were exchanged between Shufersal and Shem, there remained a dispute between them regarding the date of delivery of possession, with each party specifying a different specific date (Shufersal noted December 31, 2023 as the delivery date, and Shem noted February 29, 2024).  See: Last draft sent on February 6, 2021; Appendix 11 to Navon's affidavit, section 1.3.26).
123. I do not believe that the changes between the Commercial Terms Document and the drafts that have been exchanged indicate that the Commercial Terms Document lacks the element of specificity. As noted, changes in agreements between parties that negotiate after signing an interim document do not in themselves indicate a lack of specificity in the interim document.  As I noted above, it is possible that in the framework of negotiations there will be conditions, even substantive ones, that will change in relation to the interim document, and this does not indicate that it lacks the element of specificity.
124. Finally, the defendants' argument that the specificity component was also missing was not lost on me because Shufersal petitioned to enforce the second specification, while during the course of the proceeding it noted that it was indifferent to the question of which of the specifications would be enforced (the second or third). I am of the opinion that the mere change in the specifications during the negotiations that took place between the parties does not, in itself, attest to a lack of specificity.  In addition, I accept Shufersal's explanations that the difference between the second and third specifications lies in the question of who will carry out the adjustment work (Shufersal with rain funding as determined in the third specification or rain itself as determined in the second specification), and therefore this does not attest to a lack of specificity.
     • 5. Have the suspension conditions been met?
125. According to the language of the commercial terms document, the ostensible agreement between the parties is subject to the fulfillment of three conditions: an examination of economic feasibility and a feasibility study by Shufersal, the approval of Shufersal's management, and the approval of the Antitrust Commissioner.
126. The parties elaborated on the question of whether the suspension conditions set out in the commercial terms document were indeed met. Since I have reached the conclusion that Shufersal has not proven that the commercial terms document constitutes a binding contract between the parties, I do not address this issue in all its aspects, but I will briefly address the parties' arguments on this issue as well.
127. Approval of Shufersal management - Shlomi's affidavit indicates that at a meeting of Shufersal management on July 28, 2019, Shufersal management approved the transaction (see Appendix 2 to Shlomi's affidavit). At the same time, Shufersal did not prove that it had informed Shem of the management's approval.
128. Yossi claimed in his interrogation that Shufersal had not presented him with any approval by Shufersal management of the commercial terms document (see: Minutes of the hearing of February 12, 2024; p. 76, paras.  18-20).  None of Shufersal's witnesses presented such a certificate for the rain, nor could they testify to a conversation or oral notice of the granting of the certificate (see: paragraphs 70-71 above).
129. Indeed, Shufersal is correct that there is no requirement in the commercial terms document that it must notify Rashem of the approval of Shufersal's management. However, since it is not possible for Rashem to formally certify that the condition has been met, Geshem could have assumed that it did not exist.
130. To this, it should be added that at the time the approval of Shufersal's management was granted, the second technical specification that Shufersal seeks to enforce had not yet been formulated between the parties. In fact, the second technical specification was formulated 9 months after Shufersal management approved the agreements between the parties (see: Minutes of the hearing of July 16, 2023; p.  103, paras.  19-24).
131. Economic feasibility test - It has not been explicitly proven to me that Shufersal has performed an examination of the economic feasibility of the commercial terms document. Yael's claim that the examination was carried out even before the formulation of the commercial terms document (minutes of the hearing of July 16, 2023; p.  147, para.  25) was not backed up by references and contradicts the language of the commercial terms document.  I am willing to assume that the management's approval is in fact an approval of economic feasibility as well.  However, Shufersal - the one that drafted the commercial terms document - was the one that separated the types of approvals and was expected to notify the rain separately of the fulfillment of this condition.
132. Notice to the Antitrust Commissioner - In this regard, I accept Shufersal's argument that the application to the Antitrust Commissioner is made close to the date of delivery of the property and after the signing of a detailed agreement (see: Minutes of the hearing of July 16, 2023; p. 100, paras.  12-15; p.  119, s.  7 - p.  121, s.  10).  Therefore - in contrast to the two previous conditions - the date for the fulfillment of this condition has not yet arrived.
     • 6. The drafts exchanged between the sides and the remaining gaps
133. The parties argued at length on the questions of why the detailed draft agreement that was exchanged between the parties was not signed and whether there were significant gaps in this draft that could not be bridged.
134. As may be recalled, the relief requested by the plaintiff is a declaration that the commercial terms document is a binding contract. In order to decide on the relief requested in the framework of the lawsuit, there is no need to determine whether the parties formulated a detailed draft agreement that does not contain significant gaps and why this draft was not signed.  These disputes were relevant for clarification insofar as the court was asked to determine that the detailed draft agreement constitutes a binding agreement between the parties, and they may have been relevant to the resolution of a claim on the grounds of conducting negotiations in bad faith.  At the same time, it is not impossible that the conduct of the parties in this matter constitutes a certain indication of the question of their intentions regarding the validity of the commercial terms document, and therefore I will briefly address this.
135. The parties argued at length as to why the detailed draft agreement that was exchanged between them was not signed in the end. Geshem claimed that this attested to the abandonment of the negotiations by Shufersal and Shufersal claimed that this was done at Geshem's request, which wanted to wait for the response of the local planning and building committee to the request for relief that Shechem should have submitted in connection with the property.
136. As stated, for the purpose of deciding the proceeding, there is no need to determine whether there are planning gaps between the parties, and I will suffice with referring to the testimony of Gutson, the project manager on behalf of Geshem, according to which these are issues that are "not at all" complicated to reach agreements on their matter, and to the extent that certain data were transferred from Shufersal they would have been regulated (minutes of the hearing of July 16, 2023, p. 184).  I also considered referring to the testimony of Yossi, who agreed that the planning gaps in question were not reflected in the draft that was exchanged between the parties (see: Minutes of the hearing of February 12, 2024, pp.  113-115).  In this regard, I accept Shufersal's argument that given that the alleged gaps were not reflected in the written agreement, it can be assumed, and this is also evident from the testimonies of the declarants on behalf of Geshem, that even if gaps remain, these are not material gaps that cannot be filled.
137. To this, it should be added that in February 2021, Geshem sent the parties e-mails indicating that the detailed draft agreement was final and ready for signing (see: e-mails on behalf of Adv. Ashrov Zadikian, Geshem Attorney, dated February 1, 2021 and February 6, 2021; Appendix 10 to Shlomi's affidavit). Yossi's arguments that the draft sent by Geshem's counsel in these notices was unacceptable to him (see: Minutes of the hearing of February 12, 2024; p.  66, paras.  18-20; p.  70, paras.  16; pp.  140-142) is mine-based, and in any event, these notices create a representation to Shufersal that as far as Gechem is concerned, there are no gaps, and certainly not significant, that prevent the signing of the detailed draft agreement.  It should also be noted that Yossi did not know how to point out the material disagreements that remained between the parties, and when confronted with this question, he claimed that "there are apparently matters that are legal that they did not close between them" (see: Minutes of the hearing of February 12, 2024; p.  158, paras.  11-18).
138. If so, I am of the opinion that the overall evidentiary picture is that at this stage - February 2021 - there were no significant gaps left between the parties. Why, then, did the parties not sign the contract?
139. Shufersal did not prove its claim that the signature was not made in light of Geshem's request to wait for a response from the local committee for the request for relief. Also in his interrogation of August 29, 2021, within the framework of the application for an injunction, Shlomi claimed that there was an e-mail correspondence between the parties, from which it can be learned that the parties did not sign the final draft because they were waiting for the approval of the relief (see: minutes of the hearing of August 29, 2021; p.  4, paras.  1-6).  Yael also reiterated in her interrogation the claim that there was an e-mail correspondence from which it can be learned that the parties are waiting for approval of relief before signing a contract (see: Minutes of the hearing of August 29, 2021; p.  137, paras.  9-12; p.  138, s.  1).  Despite the aforesaid, I was not presented with such an e-mail correspondence, and when Shlomi was asked about this during his interrogation during the evidentiary hearing, he did not know how to refer to any document from which it can be learned that the parties waited upon signing the agreement to receive relief (minutes of the hearing of July 16, 2023; pp.  63-63.  See also: p.  72, s.  21 - p.  73, s.  4; p.  112).  In addition, Shufersal did not clarify why it was necessary to wait at all for a response regarding the relief in order to sign the agreement.
140. On the other hand, Geshem did not prove that Shufersal abandoned the negotiations, and needless to say, the negotiations between Geshem and Zim began in February 2021, the date on which the final drafts were exchanged between the parties (see: Minutes of the hearing of February 12, 2024; p. 176, paras.  4-6), and that at the end of the day the property was leased to a company controlled by the son of the controlling shareholder in ZIM.
141. Therefore, it was not proven before me that in February 2021 there were significant gaps between the parties that prevented them from signing a lease agreement. The parties were also unable to present a factual version as to why the draft detailed agreement was not signed in February 2021.  In any event, I am of the opinion that these conclusions do not affect the question of whether the parties believed that the commercial terms document amounted to a binding agreement.

• Conclusion

142. I have therefore reached an opinion that Shufersal has not proven that the commercial terms document constitutes a binding contract between the parties. Therefore, I order the dismissal of the claim.
143. The plaintiff will bear the expenses of each of the defendants in the sum of ILS 35,000, within 30 days from today.

The right to appeal to the Central-Lod District Court within 60 days from today.