The "subtraction from the contractual consideration" method - calculates the compensation as the difference between the agreed contractual consideration and the real market value of the asset at the time the contract was signed.
The "market value gap" method focuses on the gap between the market value of the asset according to the misrepresentation and the real market value of that asset, regardless of the contractual consideration.
The "relative calculation" method works by means of a relative comparison between the market value of the asset based on the misrepresentation and its real market value, as a basis for updating the contractual consideration. This method embodies the closest estimate to the contract that the parties would have made if they had known about the misrepresentation The calculation of compensation according to this method is carried out as follows: First, the relative difference between the market value of the property in accordance with the misrepresentation and the market value of the asset in accordance with the facts as they are, as of the date of the conclusion of the contract. Subsequently, the determined, relative difference is deducted from the contractual consideration paid or guaranteed.
- With regard to the advantages and disadvantages of each of the methods, it was determined that the "subtraction from contractual consideration" method is not sensitive to legitimate differences in the parties' bargaining positions, and may lead to overcompensation or undercompensation, and that the "market value gap" method is not good enough because it is inconsistent with the principles of compensation for lack of good faith in negotiations, and does not reflect a causal connection between the misrepresentation and the damage. It was found that the method of proportional calculation is an accurate method, which reflects the bargaining power of the parties, and which exempts the injured party from the burden of proving a causal connection between the misrepresentation and his damages by means of hypothetical scenarios.
- The plaintiffs claimed the damage due to the expenses incurred by them as part of the completion of the Ministry of Environmental Protection (paragraphs 73-75 of the affidavit of Kalfon). In addition, they also chose to sue for the difference between the value of the land as of July 5, 2017 and the amount at which the land was finally sold to the Securities and Exchange Commission.
As to the difference in the value of the real estate - the plaintiffs do not claim compensation for damages caused to them had the agreement not been concluded, but rather compensation whose purpose is to place them in the same place where they would have stood if they had known about the facts as they were, with an emphasis on the damage caused to them as a result of the cancellation of the agreement with Sadash. The plaintiffs did not act according to any of the aforementioned methods with regard to calculating the compensation in this way. I do not find a causal connection between the defendant's conduct and the price at which the land was eventually sold, since at the time of the sale (December 31, 2019), all the requirements of the Ministry of Environmental Protection had already been completed, and the validity of the building permit was extended. In these circumstances, it is not at all clear why the property was sold at a lower price than its value in 2017, and in any event, this has nothing to do with the defendant's conduct. In this regard, I will note that Mr. Itzik Kalfon claimed in paragraph 70 of his affidavit that "the decline in the price of real estate was also caused by the fact that during that period there was a significant decline in the marketing margins in the world of fuel, which led to a decrease in the value of the land", but this claim is not anchored in the opinion of the appraiser Shayo.
- It seems that the plaintiffs also understood that there was a difficulty in calculating the damage as claimed in the statement of claim, and in the summaries on their behalf they claimed other damages - "in our case there was a lease agreement with cash flow that was canceled and the loss of cash flow is damage caused to the plaintiffs" (paragraph 100 in the summaries, see also paragraph 89 of the summaries where they claimed that the damage caused to them was due to the loss of the sedash agreement). However, the Sadash agreement that was canceled is a lease agreement, and the plaintiffs did not claim the loss of rent at all. Moreover, the plaintiffs did not submit an opinion regarding the loss of cash flow following the cancellation of the Sadash agreement, and such damage cannot be assessed without a lawfully prepared opinion.
- In light of the aforesaid, I do not find room to rely on the opinion of the appraiser who was appointed on behalf of the plaintiffs, for three reasons: the opinion does not conform to the principles of the calculation methods as detailed above; The opinion estimates the value of the damage to the land and the plaintiffs in their summaries do not insist on this damage; There is no causal connection between the price at which the land was sold and the defendant's conduct, since at that time the breach caused by him had already been corrected and passed from the world. As a result, there is also no need to discuss the opinion of the appraiser Gil Keidar submitted by the defendant, and the plaintiffs' claims of failures in this conduct.
- The plaintiffs claim in the summaries of the reply that the opinion of the appraiser Shayo examines the economic value of the SDS agreement, since the appraiser Shayo assessed the value of the real estate on the basis of this agreement. This claim is inaccurate. The appraiser Shayo estimated the value of the land taking into account all the characteristics of the land, including the planned construction approved in the building permit and the agreement with Sadash. In order to determine the damage caused as a result of the cancellation of the agreement with Sadash, it was appropriate to examine the value of the real estate at the time it was sold, once taking into account the Sadash agreement, and once without it, but while taking into account the potential for an engagement with another tenant. The plaintiffs did not do that. At the very least, the appraiser should have explained in his opinion how the cancellation of the agreement with Sadash leads to such a fatal blow to the value of the land (about 20% of the value of the land). However, this was not done, and in his testimony, Shayo explains that the amount he set "expresses everything, both the application, the pollution, and the re-issuance of the permit" (p. 61 of the minutes of June 30, 2024). As stated, the plaintiffs claimed the additional expenses separately, and therefore, in order to determine the value of the damage to the land, the appraiser had to address the question of the cancellation of the Sadash agreement in detail and in detail. Just in order to demonstrate why the opinion is not convincing, I will note that the combination of the sums for the loss of rent as determined in the Sadash Agreement, to the period of time during which the plaintiffs were prevented from building (about two years) and even for an additional period of time required to find an alternative tenant (several months) and together with the special grant mentioned in the Sadash Agreement - still falls short of the difference between the purchase price and the sale price. In this regard, I will add that the cancellation notice was sent a few days after the approval of the Ministry of Environmental Protection was received, and the plaintiff's version of why the Sadash agreement was cancelled specifically after receiving the approval is missing. No correspondence was attached between the plaintiff and Sadash after the cancellation notice. However, it is necessary that the plaintiffs try to dissuade Sadash from her decision after the impediment to starting construction was lifted. The proximity of the timing between the cancellation of the agreement and the sale of the land to Sedesh also raises questions, and the fact that a representative of Sedesh was not summoned to testify on its behalf is acting against the plaintiffs.
In light of the aforesaid, the plaintiffs did not meet the burden of proving the damage caused to the land as a result of the fact that the Ministry of the Environment's approval was given only two years after the land was delivered to them.
- Therefore, the relevant compensation in the plaintiffs' case is the compensation they claimed for all the expenses they incurred following the misrepresentation - and in our case, the expenses that they were required to incur in order to obtain the approval of the Ministry of Environmental Protection. In the actions taken by the plaintiffs to obtain the approval, they both acted to reduce the damage and are entitled to the return of the funds they spent during the period in which they acted as aforesaid. This compensation bridges between the land as it was delivered to the plaintiffs in its missing character, and the land as the defendant should have delivered it to them. I will now discuss these expenses.
- The plaintiffs discussed expenses incurred as a result of the misrepresentation: attorney's fees and fees, project financing expenses and expenses incurred in order to obtain approval from the Ministry of Environmental Protection (consultants' and experts' fees, payments to the Green Wave Company, etc.).
Expenses of attorney's fees and fees for renewing the building permit.
- The plaintiffs claim that they were forced to pay ILS 55, 842 in fees and attorney's fees for the purpose of renewing the building permit. According to them, it took a considerable amount of time to deal with the requirements of the Ministry of the Environment, and as a result, they were required to renew the building permit. The plaintiffs attribute the length of the construction process to the defendant's conduct, and according to them, he must bear these expenses in full.
- The defendant claims that the building permit expired regardless of the issue of soil pollution. He clarifies that the building permit was issued on March 6, 2016, and that according to the conditions set out therein, the permit expired one year after the date it was granted, due to the fact that the plaintiffs did not begin carrying out the construction work.
- I accept the defendant's argument. As stated, the building permit was issued on March 6, 2016, but at that date the purchasers had not yet paid the full consideration. Only on April 30, 2017, did the plaintiffs complete the payment of the full consideration. Kalfon confirmed in his interrogation that the condition regarding the expiration of the permit appears in the terms of the building permit and that when they paid the balance of the consideration, he knew that the permit was canceled (p. 89 of the minutes of July 1, 2024). Therefore, the plaintiffs' claim for this damage is rejected.
Financing Expenses
- The plaintiffs claim that they were forced to pay the sum of ILS 732, 446 plus VAT for financing expenses. The plaintiffs attached the approval of the accountants Rimberg-Citat. According to their examination, the financing expenses that they financed for the project in the partnership reports in the years 2017-2019 were as follows:
229, 921 - 2017 ₪