Hamburger Evron & Co.

In the early 1990s, a new town zoning plan was prepared for the lot on which the office tower was to be constructed, following which Rubinstein had to pay the ILA the difference in capitalization fees under the new plan; now the company will receive a refund

The Tel Aviv District Court recently accepted the claim of the Rubinstein Company, which demanded that the ILA be required to refund part of the capitalization fee it had paid to the ILA. The payment was part of an agreement to lease the lot on which the office tower, Rubinstein House, was built on the corner of Menachem Begin Road and Lincoln Street in Tel Aviv.

Rubinstein leased the lot from the ILA in the early 1980s, for which it paid an 80% capitalization fee. In the early 1990s, a new town zoning plan was prepared, which included the office tower lot, and as a result Rubinstein was required to pay the ILA the difference in the capitalization fee according to the new plan.

During the period in which appraiser discussions were held to determine the additional fee, it suddenly transpired that a communication beam of the Ministry of Defense passed within the boundaries of the lot, and could be obstructed by the construction of the tower in its planned format. As a result, the Ministry of Defense imposed a veto on the construction of the tower prior to a reduction in the number of floors, or the inclusion of a relay station in the building in accordance with security system demands.

Rubinstein therefore sought to have the capitalization fee reduced, but at that time the financial cost associated with the Ministry of Defense’s demands was not yet clear to the parties. Ultimately, Rubinstein paid the capitalization fee in accordance with the ILA’s demands in an amount of more than NIS 10 million.

According to Rubinstein, the payment was made after an agreement was reached with the ILA, whereby the company would be entitled to a refund of part of the fee according to the actual costs it would bear in order to comply with the demands of the Ministry of Defense.

After completing construction of Rubinstein House, which included a room to house a special relay station, and the actual costs became known, Rubinstein sent a payment demand to the ILA to refund it a part of the capitalization fee it had paid, but it was then, the company claims, they encountered delays, that eventually turned into a total refusal. The ILA denied the agreement that had been reached with it, and even argued that the lawsuit was beyond its limitations period and that the company had allegedly waived its demand for a refund from the ILA in the agreement it had signed with the Ministry of Defense.

Through Attorney Gabi Moyal-Maor of Hamburger Evron & Co., Rubinstein filed a claim with the Tel Aviv District Court against the ILA in the amount of NIS 18 million.

In his ruling, Judge Dr. Amiram Benyamini strongly criticized the ILA for conducting itself in the affair in bad faith and for not being averse to any claim in its attempt to evade refunding the money overcharged to the company, all the while raising contradictory claims.

The judge dismissed the ILA’s claims and ruled that its conduct constituted unjust enrichment and a breach of the agreement reached with the company.

The Court ordered the ILA to reevaluate the additional capitalization fee that was due to it from the company, while taking into consideration the demands and limitations that the Ministry of Defense imposed on the construction and its expenses and costs, and to refund the company the excess fee that it had paid.

“The duty of the ILA to act in this way derives from the law and the rules that apply to calculating capitalization fees, the agreement achieved between it (the ILA) and the plaintiff in this case, its obligation to return to the plaintiff any amount that it overcharged so that it does not gain unjust enrichment at the company’s expense. It is the ILA’s duty, as a public authority, to act fairly and in good faith”.

The legal proceedings on the monetary claim were split into two stages: the issue of liability, which was decided, as mentioned, in favor of Rubinstein. The hearing of the second stage, to determine the amount that is to be refunded to the company, is now due to be held.

The ILA was further ordered to pay the company trial costs and legal fees in the amount of NIS 130,000.