Civil Case (Center) 26264-12-20 Sal Or Construction Company Ltd. v. Shmuel Golovok - part 2

Against the background of the plaintiffs' claims of heavy damages caused to them, and against the background of these disputes, the claim before me was filed.

Summary of the plaintiffs' arguments

12. As part of the agreement, the defendant declared that he was not aware of contamination in the land and undertook to present a building permit. It was clear to them that upon receipt of the permit, it would be possible to build on the land and there would be no need for additional tests related to possible contamination of the land.
13. In March 2015, the defendant submitted to the Ministry of Environmental Protection a sampling plan of the ESD company. The defendant undertook to the Ministry of the Environment that the land survey would be completed after the demolition of the plant.  The defendant did not disclose to the plaintiffs about the sampling plan or his undertaking.
14. The defendant presented them with the building permit without mentioning the fact that the examination of the question of contamination of the land had not been completed. The manner in which the permit was presented led them to believe that the conditional condition had been fulfilled and that the land was clean.
15. On July 5, 2017, the plaintiffs signed a lease and operating agreement with Sadash, in which they undertook to build a gas station within 24 months. Sedesh was supposed to pay an annual rent of ILS 1, 000, 000, plus a one-time grant of ILS 1, 100, 000.  Shortly thereafter, in November 2017, the plaintiffs began demolition and excavation work on the land, and then a terrible smell rose from the ground.  Following the discovery of the contamination, the plaintiffs were forced to hire the services of the Green Wave Environmental Protection Company Ltd.  (hereinafter: the Green Wave Company) for the purpose of completing the tests and surveying the soil.
16. The Green Wave Company was forced to make amendments and supplements to the requirements of the Ministry of Environmental Protection, which included the addition of sampling points. In February 2018, Green Wave completed the ministry's requirements and submitted a sampling plan.  After a series of surveys and tests, including a supplementary survey on August 9, 2018 and another survey on January 24, 2019, the extent of the contamination became clear.  A final findings summary report was submitted on February 20, 2019, followed by an excavation plan on March 31, 2019.
17. The discovery of the contamination presented the plaintiffs with a series of obstacles and malfunctions, including stringent regulatory requirements from the authorities, the obligation to conduct comprehensive soil surveys and rehabilitation plans, and dealing with severe environmental restrictions that prevented them from proceeding with the project as planned. The plaintiffs emphasize that the costs of restoring the land and dealing with the demands of the authorities caused them significant economic damage, which included unexpected investments of large sums of money, significant delays in the project's schedules, and a decline in the value of the land.
18. Due to the protracted construction procedures, the original building permit expired. The plaintiffs were forced to file an administrative petition to renew the permit, which was renewed on November 25, 2019, and paid additional fees for this.
19. Previously on, on May 5, 2019, Sedash announced the cancellation of the lease agreement. In order to reduce the damages caused to them, on December 31, 2019, the plaintiffs sold the land to Sadash for the sum of ILS 15, 500, 000.
20. The plaintiffs claim that they suffered the following damages:
    1. The sum of ILS 4, 000, 000 (plus VAT) in respect of the difference between the value of the land based on the lease agreement with Sedash, and the value at which the plaintiffs were forced to sell the land to Sedash following the cancellation of the lease agreement.
    2. Attorney's fees and fees in the sum of ILS 55, 842 due to the need to renew the building permit of the land.

• Damages for financing expenses in respect of the project in the sum of ILS 732, 446 (plus VAT).

1. Additional damages in the cumulative sum of approximately ILS 400, 000 (plus VAT) due to interest, fees, environmental consultants, drilling in the ground and the fact that the plaintiffs' fortune was "stuck" in this transaction and they could not use it for the benefit of other transactions.

21. The plaintiffs set the amount of the claim for fee purposes at ILS 5, 182, 560.

Summary of the defendant's arguments

22. The lawsuit has no factual and legal basis and constitutes an attempt to enrich himself illegally at his expense, since he did not breach any obligation or injustice towards the plaintiffs. The essence of the transaction between the parties was the sale of the land as it is (AS-IS), subject to suspension conditions and his declaration that at the time of signing the sale agreement he did not know of the existence of contamination in the land.
23. The agreement was signed after negotiations that were conducted in good faith and with full transparency, and included a clear arrangement of the rights and obligations of the parties. All the statements made to the purchasers before and during the signing of the agreement were correct, well-founded and reliable, and were based on tests conducted over the years by the authorities that ruled out the possibility of contamination.  The purchasers knew about the history of land use and the fact that there was a leather processing factory operating on the land in the past.
24. In his declaration in clause 4.15 of the agreement that he was not aware of any contamination in the land, there is no sweeping obligation that there is indeed no contamination in the land. This section is intended to reflect the information that was known to him only at the time of the signing.  There is no obligation in the agreement regarding the condition of the land or an obligation to bear the cost of cleaning the land if contamination is discovered in it.  In accordance with the provisions of the agreement, the responsibility for soil tests, as well as for risks relating to its condition, was placed solely on the shoulders of the purchasers, and the defendant did not assume responsibility for any damage or hazard discovered in the future.  The buyers, who are experienced commercial companies, took on a calculated risk as part of the transaction.
25. In any event, the plaintiffs did not suffer any damage, since they purchased the land in the amount of ILS 11, 000, 000 and sold it within a short time, without carrying out significant work, in the amount of ILS 15, 500, 000, and at a considerable profit. The cancellation of the lease agreement with Sadash was not caused by contamination, but rather by the conduct of the plaintiffs who did not begin construction work and chose to rent the land to a third party.
26. There is no rivalry between him and plaintiff No. 2, Yevedei Bina Development and Investments Ltd., since it is not a party to the agreement and he did not negotiate with it. There is no substance to the plaintiffs' claim for assigning the right to it, since the purchasers did not suffer any damage at all.  In addition, the alleged assignment of the right was made long after the additional companies had sold all of their rights, so that at the time of the assignment they did not have any rights under the check.
27. The plaintiffs conducted themselves in an unprofessional manner, postponed the promotion of the project for reasons unrelated to it, and did not act to reduce the damage. The plaintiffs are solely responsible for the delays in construction and the cancellation of the lease agreement.  The plaintiffs' claims regarding the costs of cleaning the land and the decrease in the value of the land are not supported by sufficient evidence, and constitute an attempt to increase the scope of the damage in order to obtain unjustified compensation.  Most of the alleged pollution was located outside the area of the land, and as a result, the causal connection between the alleged pollution and the damage was severed.
28. The purchasers knew about the condition of the land and the requirement to conduct a land survey. As entrepreneurial and contracting companies, they knew very well the significance of environmental requirements.  Therefore, the plaintiffs' claims regarding deception, concealment, misrepresentation, and negligence should be rejected.
29. The plaintiffs did nothing to promote the construction on the land, but focused on selling it for a profit. The lawsuit was filed in bad faith and in an attempt to enrich himself illegally.

Discussion and conclusions

30. A few years after the closure of the factory, the defendant decided to sell his rights in the land. Idan is the one who handled the sale for him.  In 2013, a conditional permit was granted for the construction of a gas station and a commercial building on the land, and Idan negotiated with various parties interested in purchasing the land.  One of them was Lior Chen, a shareholder in the other companies.  The issue of possible contamination of the land came up during the negotiations.  As will be detailed below, the agreement does not contain clear provisions in the event that contamination is discovered in the land, hence the dispute between the parties.
31. The questions I have to decide are as follows:
32. Did the defendant breach his obligation in the agreement?
33. Whether the plaintiffs suffered damage, what is its rate and whether the plaintiffs acted to reduce the damage.

• Is there a causal connection between the violation and the damage?

The provisions of the agreement and the duty of disclosure

32. In clause 3 of the agreement, the parties set a suspension condition for the agreement to enter into force: "A suspension condition for the entry into force of the agreement is the receipt of a building permit from the local committee for the construction of the gas station and the commercial structure by January 15, 2016 (or to a postponed date to be agreed upon by the parties), otherwise the agreement will be void retroactively."
33. According to the defendant, he did not agree to take responsibility for the contamination of the land and therefore declared that he was not aware of the existence of underground waste or contamination in the soil. According to him, the wastewater system on the land was a closed and concrete system, and during the period of the plant's work, routine and routine tests were carried out to check for contaminants that yielded normal results, and therefore he had no basis to suspect the existence of contamination in the soil (paragraph 28 of the amended statement of defense).  Idan added in this regard that routine inspections conducted by the Environmental Protection Unit to check for the presence of pollutants yielded proper results (paragraph 41 of his affidavit).  The defendant's claim that he did not know about the existence of contamination in the land at the time the agreement was signed was not contradicted in his interrogation, and the plaintiffs in the summaries do not claim otherwise.  Nor do they claim that the defendant misled them in this representation.
34. The defendant further argues that the aforementioned clause 4.15 reflects a division of risks between the parties with respect to the possibility that in the future contamination will be discovered in the land, and in the framework of which the full risk if contamination is discovered is imposed on them. Therefore, the only risk he took upon himself was that related to his declaration that he was not aware of any contamination in the soil.  According to him, since it has not been proven that he made a false representation to the plaintiffs in connection with his statements in the agreement, the claim should be dismissed.

I reject this argument;