The dazzling real estate diamond of the Moldawsky Group

Givatayim Diamonds, of the Moldawsky Group, has a diamond mine: The court approved the arbitration ruling by Yechezkel Flumin, which obligates Emblaze Inc. to pay it NIS 4 million for rent in the Moldawsky Building in Givatayim.

Givatayim Diamonds Ltd. of the Moldawsky Group has several more diamonds in addition to those it polishes and sells. One of them is the Moldawsky Building, located at 1 Curazin Street in Givatayim. Emblaze Systems, Inc. deals in solutions for transmitting rich media to telecom companies, was founded in 1994 and went public on the London Stock Exchange two years later. Since then, the company has rented out space in the building. From time to time the rented areas have been increased and the rental periods were extended.

In 2001, the parties negotiated the rental of additional space in the building, and as part of this it was agreed to combine the various contracts in order to unify the dates and rental terms. In June 2002, in the middle of the rental period, Emblaze transferred its activity to new offices in Ra'anana without informing the landlord of this, and in October 2002 it stopped paying rental fees.

Givatayim Diamonds sued Emblaze for payment of some NIS 1 million in rent for the period between November 2002 and March 2003, and a debt of NIS 76,276 for maintenance fees during that same period. It further demanded the contracted compensation of NIS 830,000 and declaratory reliefs that would require Emblaze to pay various sums. The dispute was transferred to an arbitrator, Attorney Yechezkel Flumin, CPA, who was instructed to rule in accordance with the substantive law, and was relieved of civil procedure and rules of evidence.

After 20 months of arbitration, which include much testimony, including that of Eli Reifman, controlling shareholder and CEO of Emblaze, the arbitrator rejected its claim, according to which it had been forced to agree to the contract terms to extend the rental period beyond the planned date for vacating the rental property, in June 2002, due to pressure from the landlord. He accepted the claim of Attorneys Amir Amar and Tal Hertz, from the law offices of Ron Gazit, Rottenberg and Associates, that the contract was not duly revoked and no flaws were proven regarding its execution. He accepted the demand for payment of rent and maintenance fees, and rejected the demand for payment of the contracted compensation.

Flumin also accepted the claim with regard to declaratory reliefs, and explained that these were sums owed since April 2003, when the rental contract still applied to certain areas that Emblaze had not yet vacated, as of the date of the arbitration ruling. From these charges, he stated, the rent received from sub-tenants should be deducted, and arrears interest at the rate stated in the contract should be added. However, he did not translate the sums owed into a monetary sum, and stated, ''I questioned whether or not I actually had the authority to continue to require the rest of the proceeding.''

Emblaze filed an application with the District Court for a partial annulment of the arbitrator's ruling, and claimed through its attorney, Amiram Gitzler, that the arbitrator had overstepped his authority by not ruling in accordance with the substantive law with regard to three matters.

Her Honor Judge Ruth Sternberg-Eliaz accepted the appeal in part, and stated that ''The arbitrator had reasoned the arbitration ruling well.'' Nevertheless, she noted that ''the arbitrator left certain 'declaratory' reliefs stand as they were, thus making it difficult to enforce the ruling using execution procedures. The honorable arbitrator was aware of this matter, but decided to limit himself to a detailed statement of the components of the monetary charges, which will guide the parties in preparing the arithmetic calculation.''

''I have no doubt,'' she added, ''that the arithmetic calculation of the sums owed by Emblaze is necessary to conclude the arbitrator's work. These are, in fact, simple arithmetic functions. Quantifying the declaratory relief against which no claim of overstepping authority was made, into payable sums, is not outside his authority. While the sum of the claim is important regarding the decision of the authorized court and for determining court fees, the matter is fundamentally different with regard to arbitration. Both of the components, that is, the authority and the fee, are irrelevant to the arbitration proceeding.''

The judge ordered that the ruling be returned to the arbitrator, so that he can translate the '''declaratory' reliefs into arithmetic amounts, in accordance with the instructions outlined by him in the arbitration ruling.'' She approved the portion of the arbitration ruling pertaining to the debt of NIS 1.1 million for rent and maintenance fees which, in addition to the other reliefs, linkage differentials, interest and VAT, come to more than NIS 4 million (H.P. 1541/04).
May 26, 2005,Globes