COURT FILE NO.: CV-10-8534-00CL

COURT FILE NO.: CV-10-8235-00CL

DATE: 2012-12-20

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Harry Bieberstein, Plaintiff

• v. -

Gabriel Kirchberger, Susanne Viktoria Schmidt, Nomen Fitness Inc., 487223 Ontario Limited and 1171852 Ontario Limited carrying on business as G.K. York Management Service, Defendants

BEFORE: Mr. Justice H.J. Wilton-Siegel

COUNSEL:
Morris Manning, Q.C. and Frederick J. Shuh, for the Plaintiff
Jonathan L. Rosenstein, for the Defendants

HEARD: November 19 and 20, 2012

ENDORSEMENT

[ 1 ] On this motion, the defendants seek partial summary judgment of the within actions insofar as they pertain to the enforcement under the laws of Ontario of certain documents governed by the laws of Germany referred to as “Notarized Debt Acknowledgments” executed by the defendant Gabriel Kirchberger (“Kirchberger”) in favour of certain German banks. The Defendants submit that enforcement of the Notarized Debt Acknowledgments is barred by operation of the applicable limitation periods.

Background

[ 2 ] Seven Notarized Debt Acknowledgements were given by Kirchberger, each in respect of a separate loan made between 1992 and 1998 by Berlin-Hannoversche Hypothekenbank AG or its predecessor (collectively, the “Berlin Bank”) to a German corporation and/or affiliated corporations collectively referred to as “IMKA”, of which Kirchberger was one of the shareholders. These loans are the subject of the action under court file no. CV-10-8534-00CL. A further Notarized Debt Acknowledgment was also given by Kirchberger in respect of a single loan made by the Hypo Real Estate Bank AG (the “Hypo Bank” and, together with the Berlin Bank, the “Banks”) to IMKA in 2000. This Loan is the subject of the action under court file no. CV-10-8535-00CL. The foregoing Notarized Debt Acknowledgments are herein referred to as the “Acknowledgments”. The eight loans are collectively referred to as the “Loans” and the foregoing actions are herein referred to as the “Actions”.

[ 3 ] The plaintiff Harry Bieberstein (the “plaintiff”) took an assignment of the claims of the Banks against Kirchberger in respect of the Loans, including the Acknowledgments.

[ 4 ] In the Actions, which were commenced in Ontario on January 12, 2010, the plaintiff asks this Court to recognize and enforce the Acknowledgments under the laws of Ontario either as foreign judgments issued by the courts of Germany or, alternatively, as foreign obligations or agreements governed by the laws of Germany. The plaintiff also asserts an equitable interest in the properties owned by the defendant corporations or their subsidiaries on a basis that does not rely on the Acknowledgements. This claim is not addressed on this partial summary judgment motion.

This Motion

[ 5 ] The defendants move for partial summary judgment of the Actions on the grounds that any claims to enforce the Acknowledgments are barred by the Limitations Act , 2002, S.O. 2002, c. 24, Schedule B (the “Act”), as supplemented by the provisions of the former Limitations Act , R.S.O. 1990, c. L.15 (the “Former Act”).

[ 6 ] The parties have not specifically addressed the procedural law in regard to this partial summary judgment motion in their respective presentations. While the motion has been brought under Rule 20 of the Rules of Civil Procedure , R.R.O. 1990, Reg. 194, the principal issue on this motion, being the applicable limitation period in respect of the Acknowledgments, is a question of law. The parties do not dispute the material facts set out below insofar as they are relevant to a determination of this question of law. While the parties do dispute certain other facts addressed under “Additional Issues”, for the reasons set out in that section I am of the opinion that such issues are not relevant to a determination of the issue on this partial summary judgment motion. On this basis, I consider that the motion is more appropriately characterized as a motion brought under Rule 21.01(1)(a) for a determination of a question of law raised by the pleadings in the Actions. I have proceeded accordingly, rather than attempting to apply the “full appreciation” test articulated by the Court of Appeal in Combined Air Mechanical Services Inc. v. Flesch 2011 ONCA 764 ; [2011] O.J. No. 5431 in the context of a Rule 20 motion.

The Principal Characteristics of the Acknowledgments

[ 7 ] A Notarized Debt Acknowledgment is an instrument recognized under the laws of Germany which does not have an exact counterpart under the laws of Ontario. It is understood, however, that it is an instrument that is commonly used in commercial transactions in European civil law jurisdictions.

[ 8 ] The relevant language of the Acknowledgments reads as follows, with minor differences among the relevant Acknowledgements:

Assumption of Personal Liability with Submission to Compulsory Enforcement

Furthermore, [another individual and] Mr. Gabriel Kirchberger assume personal liability for the payment of a sum of money in the amount of the land charge amount [being the amount of the related loan] plus interest, under which the individual creditor can claim on him/them before the enforcement of the land charge. Multiple debtors are jointly and severally liable. With regard to this claim, each debtor [ which includes Kirchberger ] submits to immediate compulsory enforcement under this document into all his assets. [Bracketed language added.]

[ 9 ] The Acknowledgements are contained in standard form documents under which the borrower of a loan or other party granted a mortgage against land owned by it to the lending Bank. They also contain a submission to compulsory enforcement by the borrower or other mortgagor on substantially the same terms as set out above.

[ 10 ] The following aspects of the Acknowledgements, insofar as they relate to Kirchberger, are relevant for this proceeding. First, in each Acknowledgement, Kirchberger assumes personal liability for the payment of a sum of money equal to the amount secured by the mortgage granted in the same document, which presumably is the amount of the related Loan. Second, under German law, the Acknowledgments permit the Bank to whom it was given to bring enforcement proceedings against all of Kirchberger’s real and personal property wherever situate. Critically, under the laws of Germany, such enforcement may proceed without the need to first obtain a judgment of a court of Germany – this is referred to as a submission to compulsory enforcement. Third, under the laws of Germany, any such enforcement proceeds pursuant to the same rules and procedures as are available to the holder of a judgment rendered by a court of Germany. Fourth, each Acknowledgment was executed by Kirchberger and was then attested to by a civil law notary.

[ 11 ] In summary, the purpose and effect of the Acknowledgments under the laws of Germany is to permit the holder to proceed to enforce against the assets of the executing party pursuant to the provisions of the German Code of Civil Procedure up to the amount of the liability assumed by such party as if the holder had received a judgment of a German court in the amount of such liability.

[ 12 ] The parties agree that each Acknowledgment qualifies as an “enforceable document” as that term is defined in section 794 para. 1 no. 5 of the German Code of Civil Procedure, which reads as follows:

(1) Compulsory enforcement may furthermore be pursued:

5. Based on records or documents that have been recorded in accordance with the requirements as to form by a German court or by a German notary within the bounds of his official authority, provided that the record or document has been recorded regarding a claim that can be provided for by a settlement, that is not directed at obtaining a declaration of intent, and that does not concern the existence of a tenancy relationship for residential spaces, and furthermore provided that the debtor has subjected himself, in the record or document, to immediate compulsory enforcement of the claim as specified therein;

For clarity, the parties agree that each of the requirements of this definition have been satisfied in respect of each of the Acknowledgements.

[ 13 ] As “enforceable documents”, the Acknowledgements fall within the provisions of section 197 para. 1 no. 4 of the German Civil Code, which provides:

(1) Unless otherwise provided, the following claims are statute-barred after thirty years:

4. claims under enforceable settlements or enforceable documents, …

[ 14 ] On this basis, under the laws of Germany, the Acknowledgements may be enforced for 30 years from their date of execution, that is, they are subject to a 30-year limitation period, subject to an issue of interpretation raised by the defendants, which is discussed below. The provisions of section 197 of the German Civil Code effectively override the provisions of section 195 of the German Civil Code, which provides that the standard limitation period under the laws of Germany is three years.

Position of the Defendants

[ 15 ] The Acknowledgements were executed between 1992 and 2000. The defendants say the Banks discovered their claims in respect of the Acknowledgments prior to January 1, 2004. The plaintiff argues discovery occurred in or about 2010. The Actions were commenced on January 12, 2010.

[ 16 ] The defendants submit that the applicable limitation period in respect of the Acknowledgments is: (1) if the plaintiff seeks to enforce them under the laws of Ontario as foreign judgments, either six years or two years, by virtue of the operation of the Act and the Former Act, depending upon the date the applicable claims were discovered by the Banks; or (2) if the plaintiff seeks to enforce them as foreign obligations or agreements, three years by virtue of the operation of the Act and based on an interpretation of section 197 para. 1 no. 4 of the German Civil Code proposed in the Grothe Report (defined below) that is addressed later in this Endorsement. Each of these positions is described below in turn.

[...continues exactly as provided in the HTML...]

Wilton-Siegel J.

Date: December 20, 2012