Background
S.B. Real Estate Management Ltd. and Baruch Saar each owned 24.737% of a property, while Tinhav Construction and Development (1990) Ltd., controlled by Yaakov Lev, owned the remaining 50.526%. Following a partition proceeding and bidding process, Tinhav acquired the appellants’ interests for a total of NIS 11,378,972. The Tel Aviv Director of Real Estate Taxation rejected the appellants’ self-assessments, issued assessments according to his best judgment, and largely rejected their objections. The appellants then brought an appeal before the Real Estate Tax Appeals Committee attached to the Tel Aviv–Jaffa District Court.
During the tax appeal, the appellants asserted that a later ruling in the partition litigation requiring S.B. to repay Tinhav NIS 1,057,425 should reduce the sale consideration attributed to S.B. At the evidentiary hearing, committee member CPA M. Lazar disclosed that his accounting firm provided services to another company in which Lev was a shareholder, although it did not represent Tinhav. The appellants sought Lazar’s disqualification, arguing that the tax appeal could affect Tinhav’s purchase-tax liability and that Lev was materially involved in the underlying dispute. The committee denied the motion, reasoning that Lev was neither a party, counsel, nor a central witness and that the professional connection did not create a real possibility of bias.
The Court’s Holding
Supreme Court President Yitzhak Amit allowed the disqualification appeal. As a threshold matter, the Court held that the disqualification regime in Section 77A of the Courts Law applies not only to the judicial chair of a Real Estate Tax Appeals Committee but also to its nonjudicial members. Their role is quasi-judicial, and disqualification motions within the same proceeding should not be governed by different substantive and procedural rules merely because one challenged member is a judge and another is not. Under that regime, the challenged member—not the committee collectively—must decide the disqualification motion in the first instance.
Applying a substantive rather than purely formal test, the Court treated Lev as a “party to the proceeding” for disqualification purposes because resolution of the appellants’ proposed reduction in the sale price could directly affect the financial interests of Tinhav, which Lev wholly owned, by changing its purchase-tax liability. Lazar’s firm had an ongoing service-provider relationship with Cold Storage at the Tel Aviv Port Ltd., in which Lev directly held 36.64% and, on the tax authority’s assumed figures, Lev and his wife together held 49.15%. That current professional relationship, combined with Lev’s direct financial interest in the tax appeal’s outcome, created an objectively real possibility of bias and therefore statutory disqualification. It did not matter whether Lev and the appellants were adversaries or whether reducing the consideration might benefit both sides.
The Court ordered that Lazar not participate further and that another committee member replace him. It also ordered the tax authority to pay the appellants NIS 3,000 in costs.
Key Takeaways
- Section 77A of the Courts Law governs the disqualification of nonjudicial members of Israel’s Real Estate Tax Appeals Committees, including both the substantive standard and the procedure for challenging a ruling.
- A person absent from the formal pleadings may still qualify as a party for disqualification purposes when the proceeding can directly affect that person’s financial interests.
- An ongoing professional relationship between a tribunal member’s firm and a company substantially owned by an interested person can create an objectively real possibility of bias, even when the firm does not represent the company directly involved in the dispute.
Why It Matters
The decision clarifies that professional members of specialized tax tribunals are subject to the same conflict-of-interest safeguards as judicial members when exercising quasi-judicial authority. It also confirms that courts will look beyond the case caption and corporate separateness when evaluating whether someone has a sufficiently direct stake in the outcome.
For parties appearing before Israeli administrative and tax tribunals, the ruling underscores the importance of examining current professional relationships involving tribunal members, significant shareholders, and affiliated companies—not only relationships with formally named litigants.