A company sought to offset royalty amounts that were collected in excess from future royalties to the Israel Land Authority. This was done in light of the fact that the statute of limitation period for the cause of action for the collection in excess expired and the Israel Land Authority knew that the company maintains its conviction that the it paid royalties in excess.
The Court held that the company's contention regarding set-off could be heard given that throughout all those years the Israel Land Authority knew that the company has not waived the royalties’ issue. The right of set-off is a substantive right that allows a debtor to exercise his right without seeking remedy from the Court. Although the statute of limitations prevents the Court from hearing the claim concerning a right which statue of limitation has expired and consequently providing remedy to the affected party, the statute of limitations does not in itself annules the right itself. Hence, a right holder whose cause of action has become obsolete is entitled to exercise his right through set-off, but this should be allowed only in exceptional cases, such as when it was clear to the opposing party that the right holder did not relinquish his right and litigation between them is expected. Here, we have a party who contends that it was overcharged and whom over the years did not waive its rights and even transferred data on the subject to the Israel Land Authority as part of a similar third-party claim. Therefore, it should have been clear to the Israel Lands Authority that she did not waive her claims on the matter, and therefore, it is appropriate to allow it to raise the claim for offset even when the cause of action has become obsolete.