Contractor sued a hotel for 700,000 shekels - and ended up with a debt of 100,000

A waterproofing contractor who performed work at the Mitzpe Hayamim Hotel in Rosh Pinna, owned by the Isrotel chain, left the court empty-handed — and was even ordered to pay. Judge Adi Hadar of the Tel Aviv-Yafo Magistrate's Court recently fully rejected a lawsuit by a contracting company that demanded from the hotel a remaining payment of 707,707 shekels for waterproofing work, and ordered the contractor to pay legal expenses and attorney's fees in a total amount of 100,000 shekels.

The story began with an agreement signed in October 2018, according to which Isrotel undertook to pay the contractor 1.6 million shekels plus VAT for waterproofing work at the hotel. The contractor claimed in his lawsuit that he performed all the work ordered from him, but did not receive the full payment, and also demanded payment for additional work, compensation for the cancellation of part of the work, and even reimbursement of travel expenses and emotional distress.

However, at the heart of the agreement was a clause that became decisive in the verdict: a contractual decision-making mechanism according to which any dispute between the parties would be decided by the inspector on behalf of the hotel, and his decision would be final, absolute, and non-appealable. Judge Hadar recalled the long-standing precedent from the Ken-Tor ruling, according to which in complex projects it is appropriate for the parties to choose a professional who will give his final and binding approval, and the court generally refrains from intervening — unless exceptional circumstances such as fraud, bad faith, or bias are proven.

To check if such exceptions exist, the court appointed its own expert, engineer Uri Inbal. His opinion was very harsh for the contractor. The material is simply not suitable, the expert determined, even if there were no leaks now, in 5 years there would be leaks. The expert even rejected the contractor's claim that the defendant's decision not to waterproof the planters and railings damaged the waterproofing he performed himself, and determined: it is unclear how 'non-waterproofing' can damage waterproofing that has been performed.

The contractor did not have the appropriate license

The court also discovered that the contractor himself did not have the appropriate contractor license to perform the work, contrary to what was stated in the agreement. The company manager was questioned on the matter and failed to present an actual registration, and even evaded a direct answer to the question of why the plaintiff undertook in the agreement that it was a registered contractor when in fact it was not.

The lawsuit, the judge determined, mainly reflected an attempt to bypass the contractual decision-making mechanism within the framework of this proceeding and to conduct a new accounting, where the court is supposed to decide on the many and various claims retroactively, and not the inspector, in real time. This is not the first case: the court noted that in a previous proceeding as well, the contractor tried to retroactively attack the conclusions of another inspector — and failed there as well.

The proceeding itself lasted about four years and included 7 hearings, 2 dismissals of the lawsuit due to non-compliance with court orders, delays due to the defendant's counsel's reserve duty, and even a delay in the expert's visit to the hotel following the security situation in the border area with Lebanon. At one point, the judge even explicitly warned the plaintiff's manager: the contractor was warned several times... on the other hand, this is no justification for blatantly ignoring court instructions to the point of contempt, and threatened to order him personally to pay into the state treasury if he continues with similar conduct.

Finally, after the contractor never submitted a final bill, the court turned to the inspector on behalf of the hotel and ordered him to complete the accounting that remained open. The inspector's representative, Asaf Arad, prepared a final account which showed that the contractor is not entitled to any additional payment beyond what he has already received, and that in some cases there was even room to offset from the payment for repairs performed by other contractors for defective work. The court adopted this determination and ruled that there was nothing in the evidence provided by the plaintiff to prove that the inspector acted in bad faith or with bias.

In conclusion, it was determined that the lawsuit should be rejected in its entirety, and that the plaintiff must pay the defendant 100,000 shekels plus interest, as reimbursement for attorney's fees and legal expenses, including the cost of the court-appointed expert.

The full article was originally published on Bizportal.