Babylon also did not present evidence of Effi's statement in the affidavit that a two-year period is "the minimum period required to bring the branch to a positive cash flow." Although Effi states in his affidavit that the chain manages about 10 branches in Israel, as well as in London, Spain and Belgrade, and in his testimony in court, he stated that he operated about 18 branches over the course of 31 years in the business (p. 155 of the transcript, s. 11), no empirical data was brought in relation to any of the branches that substantiate the alleged thesis, and CPA Eini testified in the cross-examination in cities such as Tel Aviv, "the period is much shorter" (p. 92 of the transcript, S. 16-25). As for the revenue, it does emerge from the revenue data presented for the months of July 2021 to March 2022 that with the exception of the summer months, the revenue was lower than the minimum rent, but no full data was presented to substantiate the claim that the playground "caused heavy losses" (despite the fact that the minimum rent was not paid), which remained as an unsubstantiated statement in the affidavits of Effi and CPA Eini.
In other words, it is possible to accept that the circumstances of the Corona pandemic have harmed Babylon's gaming business and business expectations, but the meager data that was presented that were not backed up by documents and expert opinions do not prove the extent of the harm, and they certainly do not substantiate the alleged severe harm.
- On the other hand, there is no dispute that Babylon invested ILS 3.6 million (before VAT) in renovating the building in order to prepare it as a playground, which is about ILS 1.2 million more than the amount invested by Babylon in adapting the building according to the testimony of CPA Eini. Rabatz therefore invested substantially in adapting the building to a playground. It also expected higher revenues from the leased property, which would cover its investments by adapting it to the playground and yield a good return and profits from the property. The plaintiff was therefore also harmed by the circumstances of the Corona virus in view of the low revenues of the playground or the lack of revenue at all (during the period of the lockdowns and the period of adaptation of the building), from which very low rents were derived after the playground was opened , and in view of the agreement that for two years the rent would be derived from the redemption only.
In order to explain the situation, we can point to December 2020, when the revenue was ILS 21,475 (and the rent was ILS 3,221), January 2021, when the playground was closed and no rent was paid at all; and February 2021, when the revenue was only ILS 8,682 (and the rent was ILS 1,302)). During the rest of the period, the monthly revenue was usually in the order of tens of thousands of shekels, while in the summer months the redemptions reached the order of ILS 250,000 per month.
- In this context of the good faith hearing, Babylon's obligation should also be attributed to non-payment of rent and management fees at all (not even according to redemption) for the period after July 2021 on its own accord, in violation of the provisions of the agreement as well, while continuing to hold and make use of the leased property. Only in June 2022, after the lawsuit was filed, were partial payments made for the rent for that period. I will also note, in this context, that according to the provisions of the agreement, Babylon does not have a right of offset (clause 22.7 of the agreement).
- There is, therefore, no justification, in the circumstances of the case, for intervening in the contractual distribution of risks as expressed in the agreement between the parties and for its rewriting by the court regarding the timing from which the minimum rent will be paid. I would like to remind you that according to case law, "insisting on a contractual right, in and of itself, is not ordinarily considered a lack of good faith" (Civil Appeal 1756/11 Hava v. Bank Hapoalim Ltd., at para. 25 [Nevo] (April 8, 2013); and that "the court's intervention in a contractual engagement by virtue of the principle of good faith must be done sparingly and restraintly, and only after careful examination of recognized alternative grounds, lest we slip towards a 'just' ruling only" (Civil Appeal 6145/19 Krief Mordechai Gallery, Tel Aviv v. Smadja, in paragraph 15 [Nevo] (May 6, 2021)). Here, too, the words of the Honorable Justice E. Stein, quoted above from the decision in the application for leave to appeal in the Isonik case, are appropriate. This is the case in general, and in particular in light of the ratification of the terms in the addendum to the agreement signed in May 2020; Deep in the midst of the Corona period.
- I will note, finally, in parentheses, that for the purpose of this conclusion, I am not required to accept Rabatz's claim in its summaries that it was deceived by Babylon regarding the estimation of the income from the playground and regarding the expenses required for its establishment in order to make Rabatz agree to the condition whereby for two years the rent will be deducted from the revenue only, without a minimum payment for rent. A decision on this claim is not required and it is a serious claim that was not made in the statement of claim (a reply was not filed).
Babylon's claims regarding management fees
- Babylon claims in its summaries that the plaintiff did not provide evidence that management services were provided during the period from July 18, 2019 to June 20, 2020, but nevertheless charged Babylon management fees for this period. It was further claimed that for the period from January 1, 2020 to February 18, 2021, Babylon was charged management fees, despite the fact that management services were not provided during this period as well, except for two weeks in December. According to her, for these periods, management fees in the sum of ILS 386,100 (including VAT) were paid, for which services were not received, and this amount should be deducted from any amount awarded to the plaintiff.
- The plaintiff claimed in the notice dated March 27, 2023 and in the summaries of the reply that this is an extension of the front and the law is with it. To be precise: this is not an argument that during the period for which the claim was filed, no management fees were provided, in which case if there is a dispute regarding the provision of the service, the burden is on the plaintiff to prove that she provided the services for which management fees are claimed. Babylon's claim is an offset claim for management fees that it has already paid despite the fact that it was not provided, according to it, management services as defined in the provisions of the management agreement. This argument may indeed justify an offset claim (to the extent that there is a right of set-off, see clause 22.7 of the agreement in this context) or a claim for restitution, and it is not impossible that the collection of full management fees in the circumstances of the coronavirus, despite a significant reduction in the management expenses and management services provided, may be considered a breach of the agreement or a lack of good faith in its existence. However, as the plaintiff claims, the claim was not raised in the statement of defense. Although the statement of defense laconically claimed that the commercial center was "filthy from time to time" and that there were "maintenance problems" (for example, in paragraphs 5 and 39), the statement of defense does not claim that management services were not provided at all during the aforementioned periods, nor did the statement of defense mention the amount of management fees that was requested to be offset for the failure to provide management services. In the absence of a clear and explicit claim in the statement of defense that management services were not provided at all, and that Babylon is entitled to deduction of management fees paid for a defined period - there is no reason to address this claim, which is reserved for Babylon for another proceeding, subject of course, to any defense claim that the plaintiff has.
- To be precise: the pleadings are intended to delimit the factions in the legal process. On the basis of what is claimed in the statement of claim and the disputes that arise from the pleadings, the defendant conducts his defense, including the demarcation of the companies, which has implications both for the conduct of the preliminary proceedings and for the presentation of the evidence. If a particular argument was not raised at all or if it was made ambiguously, this may deprive the opposing party of its defense (see, Minnie Manyur, Civil Appeal 1653/08 Semyon Liptz v. Bank Leumi Le-Israel Ltd., para. 5 [Nevo] (July 14, 2011); Civil Appeal Authority 9123/05 Adamov Projects (89) in Tax Appeal (in voluntary liquidation) v. City State of the Alpo Group Ltd., para. 12 [Nevo] (October 25, 2007)). The standard of the examination lies in the question of whether a reasonable opposing party understands the argument against him from the statement of pleadings (Issachar Rosen-Zvi The Reform of Civil Procedure: Guide of the Perplexed 321-327 (Third Edition - Digital, 2025)). What is claimed in the statement of defense regarding the management fees does not clearly meet this standard. Rabatz was unable to deal with the argument that first arose in the affidavits of Babylon's main witness and should be disqualified as aforesaid because it was an expansion of a prohibited front.
- As for the claim that the commercial center is "filthy", this is an argument that was made in general in an affidavit (in paragraph 107) and the plaintiff also did not indicate the damages caused to her as a result. The photos from June 9, 2021 (attached on a USB drive) are for one single day and are not based on them to give an impression of the level of cleanliness during the entire period, especially since the photos themselves show a single bag on the floor and signs of flowers falling on the floor, which do not indicate a lack of cleaning services or maintenance defects that justify a reduction in management fees for the quality of cleaning. As for the period in which Yoel admitted that no cleaning services were provided at all - October 2020 to February 2021, with the exception of two weeks in December 2020, it seems that there is a difficulty in the fact that full management fees were collected without reducing the relative share of the cleaning services, and it is not impossible that there was room to award Babylon the return of a relative portion of the management fees for this period. The same applies to the period in which the adaptation work was carried out in which cleaning services were not provided, when according to Rabatz - which was not proven because it was not supported by documents without a satisfactory explanation was given - the renovation contractor was responsible for this (the agreement was not attached). However, Babylon did not substantiate the relative portion of the cost of cleaning services from the management fees. Not in the data or even in an expert opinion. She did not even suggest in her summaries how this can be assessed. In the absence of evidence and even an orderly argument in this regard, the data in the case do not allow for a partial refund of management fees (which were actually paid) for the failure to provide cleaning services during the period in which cleaning services were not provided.
The defendants' claims for damages due to various violations of Rabetz have not been proven, and in any case it is usually an extension of the façade
- A significant part of Babylon's evidence relates to alleged breaches of the agreement by Levon and alleged damages caused to Babylon, as well as alleged misrepresentations. Some of these arguments (which were raised in the defendant's summaries in paragraphs 59-65) are an extension of the façade, as the plaintiff claims. Thus, for example, the claim of the plaintiff's liability for disruptions in the electricity supply and damages caused as a result. This is the case with regard to representations that were allegedly made prior to entering the leased property regarding its condition and the matter of the air conditioners. In any event, all such claims were raised in the summaries without any damages due to those violations and deficiencies being indicated, and even without the presentation of an expert opinion that establishes justification for reducing the management fees in respect of these claims to one degree or another (for a proceeding in which the court ordered a reduction in management fees using an expert opinion, see Civil Appeal (Tel Aviv District) 40539-04-23 The New Central Bus Station Management Company in Tel Aviv 1988 in a Tax Appeal v. Hasidim [Nevo] (15.2.2024)). Nor is it explained in the summaries why these arguments are relevant to the remedies claimed in the lawsuit. Therefore, I did not find it necessary to address these arguments on their merits.
- As to the claim regarding damages caused to the game machines as a result of power outages, which according to the claim are the responsibility of Ratz, which was raised in the lawsuit, the claim was not proven. There is no breakdown of the dates of the power outages that occurred; Babylon did not refer to Rabatz's contractual obligation to install a generator, and even assuming that there was such an obligation, the claim that it was not the failure to install a generator that caused the damage was not backed up by an expert opinion; Those who repaired the machines were not brought to testify that damage was caused due to power outages, and that if a generator had been installed, it would have prevented the alleged damage; And even in the invoices that were attached (Appendix 21), there is no indication that damage was caused due to power outages. It is also not possible to learn from the invoices that they are related to the branch that is the subject of the lawsuit, and it is even stated in them that they are for "machinery repair and maintenance". In other words, the content of the invoices, which also relates to maintenance, does not allow us to accept Babylon's argument even assuming that these are invoices for a service provided in and only in the Jerusalem branch, in the absence of detailed testimony from the service provider regarding the service provided by him.
Charging the Defendants with Management Fees and Rent
- It appears from the aggregate that the law of the claim for the management fees and the rent should be accepted, and accordingly - the defendants are obligated, jointly and severally, to pay the amount of the claim in respect of the management and rental fees in the sum of ILS 1,392,438, less the undisputed amounts paid after the filing of the claim: ILS 200,000 for the forfeiture of a bank guarantee in June 2022; and an additional sum of ILS 396,696 that the plaintiff paid on her own initiative as of June 2022. Accordingly, the total amount charged for rent and management fees is ILS 795,742.
It should be noted that a review of the invoice on the basis of which the claim was filed shows that the charge on the invoice for the rent from July 18, 2021 until the date of filing the claim in March 2022 is according to the minimum rent set out in the agreement (ILS 120,000 plus VAT), and as rightly claimed, Babylon admitted in its summaries (paragraph 33) the amount of the debt based on the appendix to the commercial terms that was signed (but claimed that a previous draft was binding; a claim from which it later retracted in the preliminary report).