Case Number

AAA 8329/14

Date Decided

5-31-2016

Decision Type

Appellate

Document Type

Full Opinion

Abstract

A person who has a debt to a local authority requests that it issue a certificate that is necessary in order to transfer land rights, however the latter refuses to do so until the old debt is paid. When will it be ruled that the debt expired by virtue of prescription, or that the authority so delayed in collecting the debt that it can no longer demand payment as a condition to granting the certificate? This is the question raised in this appeal of the decision of the Administrative Affairs Court ordering the cessation of collection proceedings initiated by the Appellant against the Respondents due to prescription, and instructing the Appellant to issue the certificate required in order to transfer the rights in the property to the purchaser.

The Supreme Court (Justice U. Vogelman, President M. Naor and Justice A. Baron concurring), denied the appeal on the following grounds:

An administrative authority that desires to collect its debts using administrative collection proceedings has two paths. Under the "active" path, the authority, at its own initiative, acts to collect the debt – primarily by its authority under the Taxes (Collection) Ordinance. The other path is "passive" collection, by which the authority does not act to collect its debts, but rather waits until the individual requires approval for some action, at which time the approval is conditioned upon payment of the debt (as in the case at hand). When "active" collection is at issue, the debtor – the person who is the subject of the administrative collection proceedings – may challenge the authority’s right to collect to debt, arguing that the debt has lapsed by reason of prescription. This is the essence of the ruling in the Nesayer case (LCA 187/05). Similarly, in in the Solomon case (AAA 8832/12, April 15, 2015) the Court held that the laws of prescription also apply to "passive" collection, but the Court further emphasized that a claim of laches could also be raised within the period of prescription. The Court also ruled that prescription would not apply to prior debts, i.e., to debts that accrued before the date of delivery of the judgment.

The matter at hand concerns debts that accrued prior to the decision in the Solomon case, and therefore the laws of prescription do not apply thereto in regard to passive collection proceedings. Thus, the Court could not accept the ruling of the trial court that the Respondents' debt expired by reason of prescription.

However, given that the case concerns actions by administrative authorities, even in the absence of application of the rules of prescription, the doctrine of laches, which is an independent doctrine in any administrative proceeding, does apply.

The obligation not to delay applies to both of the players in the public arena: it is the individual’s duty to raise his arguments against the authority's decision at the appropriate time, and the authority is required not to delay in adopting administrative decisions and in taking administrative actions. It is clear that even if the prescription argument is not applicable, the authority cannot collect any debt at any time, if it did not take reasonable steps to collect throughout the years.

In order to determine whether the administrative authority delayed in collecting its debts, it is necessary to take into consideration the individual's reliance interest, the public interest – both the interest to collect real taxes, and the interest in the proper, appropriate functioning of the authority; the fact that the authority's duty of fairness exceeds the individual's duty of fairness, alongside his obligation – in this case – to act in good faith; and that which is stated in the Attorney General's Directive.

One must bear in mind that the doctrine of laches in public law is a flexible concept that is examined in accordance with the circumstances of the case. In this context, one must examine, inter alia, whether the authority made efforts to collect over the years, or whether it neglected the debt and completely refrained from attempts at enforcement. Additionally, weight should be given to the question of the lapse of time – meaning, how “old” is the debt for which payment is being sought. The older the debt and the fewer the authority’s efforts to collect it – the more the scales will tilt towards the view that its collection contradicts the duty of fairness, and vice versa. On the other hand, the individual's conduct will also be examined. Even given the individual’s lesser duty, conduct on his part that lacks good faith, and that clearly reflects attempts to evade the payment of the mandatory obligations – will be held against him.

In the case at hand, the Respondents' reliance interest cannot, in and of itself, be a decisive factor, as it cut both ways. As for the public interest – the case at hand addresses the collection of a debt of a not inconsiderable amount (more than NIS 400,000 in aggregate, as of 2011). One cannot say that the matter lacks consequences for the public purse. However, the authority's conduct fell far short of the criteria under the Attorney General's Directive upon which it seeks to rely. The Municipality did not initiate proceedings to collect its debts from the Respondents, other than issuing a sole demand letter regarding the charges in 2005.Thereafter, for a period of 6 years – until the request for the certificate – no steps were taken. The Municipality also largely ignored the debt for municipal property taxes. An tax lien, and the disconnection of water and the like were imposed between 1994-1999, when an arrangement was made for the payment of the debt. Thereafter, no real actions were undertaken. This matter also has consequences for the examination of the authority's compliance with the duty of fairness. The the debt for which the Municipality demands payment is a longstanding one, and the collection efforts were paltry. To this one must add that no lack of good faith on the part of the latter was proven, certainly considering the lower court's ruling regarding the lack of proof of the Respondents' knowledge of the debt.

As for the fact that the Respondents reside abroad, it was not proven that the failure to institute collection proceedings was due to the Respondents' presence abroad. It is unacceptable that a municipality that does attempt to collect its debts, raises a claim that the Respondents were abroad when it eventually – not in real time – becomes aware of the fact, and argues that that can frustrate the claim of laches.

In light of the above, the Court held that even if prescription does not apply to the case at hand, administrative collection proceedings could not be taken to collect the debt due to laches.

President Naor concurred with the conclusion that the Appellant delayed in collecting its debts from the Respondents, and that the delay in the circumstances of the case was manifested in refraining from initiating administrative collection proceedings to collect the debt. In reaching this conclusion, the President was of the opinion that weight should also be attributed the damage that could have been caused to the Respondents due to delayed collection of the debt, particularly in light of the agreement for the sale of the property to a third party, which was made in the interim.

Keywords

Administrative Law -- Doctrine of Laches

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