Civil Case (Netanya) 5561-06-23 A.S. Murad Infrastructures and Development Ltd. v. Jaljulia Local Council

Judgment

General:

1. The question before me in dispute is whether the defendant should pay the plaintiff money for the execution of contractor work, when there is no dispute that the work was performed, there is no claim of defect or defect that occurred in these works but no work agreement was signed lawfully.
2. In the case, two pre-trial hearings were held and an evidentiary hearing was scheduled for February 10, 2026.
3. Before the evidentiary hearing began, the parties reached an agreement whereby the witnesses would not be heard and written summaries would be submitted.

The plaintiff's arguments (in the walnut shell):

4. The plaintiff is a contracting company whose field of business is infrastructure and development.
5. In 2019, the defendant published a call for contractors to carry out a project to improve the appearance of the Al-Razi School (hereinafter: the "Project").
6. The plaintiff was invited as a contractor to carry out the work on the project.
7. After the completion of the work, a consolidated account of the works was produced on October 15, 2019.
8. The consolidated account was prepared and signed by the supervisory company appointed by the defendant - Liberovsky Y.A. Construction Site Management and Supervision Ltd." The account was provided by the Supervisory Company in the amount of ILS 414,408.07 and together with a tax appeal in the amount of ILS 484,857.44 (marked as Appendix 1 to the statement of claim)
9. The account was approved once again on August 9, 2022, by a unanimous decision of the Council's plenum, which consisted of the Council's Director General, the Council's Treasurer, and the Council's Legal Advisor (marked as Appendix 3 to the Statement of Claim).
10. The defendant does not claim that the financial charge did not have a budgetary source during the relevant period. The approval of the payment given by the council's plenum constitutes evidence that there is a budgetary source for making the payment to the plaintiff.
11. The defendant did not pay for the execution of the works and thus acted in bad faith and caused damage to the plaintiff.
12. As of the date of filing the statement of claim, the debt has accumulated interest and linkage and stands at ILS 552,353.85.

The defendant's arguments (in the walnut shell):

13. The claim should be dismissed due to the failure to sign an engagement agreement between the parties, which constitutes a substantive and constitutional requirement in accordance with section 203(a) of the Municipalities Ordinance [New Version], which applies to the defendant and by virtue of section 34 of the Local Councils Ordinance [New Version], which applies the aforesaid section 203(a) to the council as well.
14. The absence of a written contractual engagement fundamentally negates the plaintiff's alleged right to receive any payment.
15. Despite the plaintiff's knowledge of the need to have a legally written and signed work order prior to the execution of the work, she acted deliberately and did not take care to sign a lawful agreement.
16. In addition to the absence of a written agreement, no tender proceeding was duly conducted in connection with the works performed by the plaintiff. The aforesaid constitutes a material defect that goes to the root of the matter.
17. The Ottoman Settlement [Old Version] 1916 This is renovation work to improve the appearance of conflict resolution in a total amount of hundreds of thousands of shekels, which do not meet the conditions of exemption from a tender. In this context, the defendant added that there was no budget for the execution of the works as required, and the works were carried out without a tender.
18. 12-34-56-78 Chekhov v. State of Israel, Pis.   51 (2)In the protocol maintained by the Supervisory Company of August 9, 2022, a significant part of the work that was carried out due to non-compliance with the call for proposals was not approved, this fact negates the application of any possible exemption from a tender proceeding.
19. The fact that no order was found in the reservation system also indicates that there was no proper work order procedure.
20. The plaintiff did not prove her claim that there was indeed a budgetary source for the execution of the works, and the absence of an explicit claim on the part of the defendant does not mean an admission of the existence of a budgetary source.
21. The plaintiff is 100% at fault for the damage she claims was caused to her and did not even act to reduce it.

Conventions and Fellowships:

22. There is no dispute between the parties that the defendant asked the plaintiff to carry out the work to improve the appearance of the Al-Razi School, which is located in its jurisdiction.
23. No argument was presented to me that the plaintiff was asked to carry out the work urgently and under special time pressure, which is not customary in the renovation of educational institutions.
24. There is no dispute that no tender has been published and there is no dispute that no written agreement has been entered into between the parties.
25. There is no dispute that the defendant carried out the work as detailed in the account approved by the supervisory company (see Appendix 2 to the statement of claim).
26. There is no dispute that in the minutes of the council plenum of August 9, 2022, it is requested to approve in principle the payment to the plaintiff.
27. There is no dispute that the defendant did not claim defects or defects that occurred in these works.
28. The dispute between the parties is the question of whether, despite the provisions of section 203(a) of the Municipalities Ordinance and in the absence of a written agreement, the plaintiff is entitled to payment and, if so, what is its rate.

The normative framework:

29. Section 203(a) of the Municipalities Ordinance [New Version] provides as follows:

A contract, a letter of undertaking, a settlement arrangement submitted to a court or tribunal in order to obtain the validity of a judgment or other certificate of the type prescribed by the Minister in the Regulations and which contains a financial obligation on behalf of the Municipality, shall not be binding unless they are signed in the name of the Municipality, alongside the seal of the Municipality, the Mayor and the Treasurer; If there is no financial obligation as aforesaid, the municipality will not be obligated unless they are signed in the name of the municipality, alongside the seal of the municipality, the mayor and the secretary, and in the absence of a secretary - another employee of the municipality who fulfills the role of secretary in accordance with the council's decision."

30. In the Civil Appeals Authority 5210-08 Zerach Rosenblum v. Hevel Modi'in Local Council, [Nevo] a case was heard by an attorney who provided legal services to the authority without a written rent agreement.
31. With regard to the purpose of the provisions of section 203, the Court referred to Civil Appeal 6705/04 Vehicle House v. Jerusalem Municipality, [Nevo], in which it held:
32. "The purpose of the form requirement in section 203 is to ensure the careful and controlled use of public funds... Its purpose is to create a control system that will ensure that the public body entering into a transaction in civil law has acted with due caution and examined the transaction properly.  The demand stems from the public interest and reflects a desire to ensure the legality of the municipality's actions, as well as the protection of the rights of its residents and the public's trust in it...  Indeed, section 203 is an expression of the principle of the rule of law and the legality of the administration" [ibid., at para.  22; see also: AAA 10996/02 Kiryat Gat Municipality v.  Avishai Katz Ltd., IsrSC 58(1) 490, 497 (2003); Shem-Or, 566; Civil Appeal 11/71 Municipality of Rehovot v.  Goldman, IsrSC 25(2) 381, 385 (1971) (hereinafter: the Rehovot Municipality case)].
33. This purpose is similar to the purpose underlying other provisions of the law relating to public funds, including the provision of section 232 of the Order, which seeks to ensure that the expenditure of public funds is controlled and that the budget framework is maintained [see, for example: sections 27, 29 and 43 of the Foundations of Budget Law, 5745-1985 (hereinafter: the Foundations of Budget Law)."
34. The court further ruled in accordance with this purpose and in view of the provisions of the language of the law, the requirement of form is a substantive constitutional requirement and not a technical, evidentiary requirement.
35. At the same time, the court further ruled that the court may exercise a check and exempt from this obligation of the provisions of section 203 for reasons of justice and in accordance with the provisions of section 31 of the Contracts Law (General Part). In exercising this discretion, the court balances between deterring parties from entering into illegal contracts and individual considerations of justice between the concrete parties to the illegal contract.
36. The court went on to address the exceptions to the aforementioned rule, in which an order will be issued instructing the authority to pay the full consideration for a service or work it enjoyed, and the cumulative conditions that the court must examine when discussing a claim based on a service or work provided to the authority pursuant to an agreement that contradicts the provisions of section 203 of the Municipalities Ordinance, stating:

"Giving full consideration means giving full force to the contract between the parties, while giving extra weight to the consideration of justice between the parties and less weight to the general considerations of justice and the specific purpose of section 203 of the Municipalities Ordinance and section 232 of the Order.  Such recognition of the validity of an illegal contract will not faithfully balance the conflicting considerations, and will undermine the purpose underlying section 203 to the point of turning it into a dead letter [compare: Justice A.  Hayut's position in the case of the vehicle house, paragraph 1 of her opinion; Prof.  Friedman's position in Creating Enrichment, vol.  II, 656-657 and 659-660].