COURT FILE AND PARTIES
COURT FILE NO.: CV-14-10414-00CL
DATE: 20140207
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: J. Thorburn J.
COUNSEL:
Morris Manning, Q.C. and Frederick J. Shuh for the Plaintiff
Jonathan L. Rosenstein, for the Defendants
HEARD: February 7, 2014
ENDORSEMENT
Relief Sought
[1] The Applicant (Plaintiff in the legal proceeding), Harry Bieberstein seeks an Order that he “is entitled to enforce debt Acknowledgments against the Defendants/Respondents to the same extent as if he had obtained judgment against Gabriel Kirchberger in the amount of the liabilities assumed in the Acknowledgments.” He also seeks an Order directing the Respondent Kirchberger to pay to him the amounts set out in the Acknowledgments. This Application was brought at the commencement of trial.
[2] The Applicant claims the issues regarding the Acknowledgments were litigated on a motion before Wilton-Siegel J. They were reflected in his endorsement which was upheld by the Court of Appeal. As such, the Respondents are estopped from adducing any evidence on these points at trial.
The History of these Proceedings
[3] In his Statement of Claim, the Applicant claims he is, “the assignee of an indebtedness owed by the defendant Gabriel Kirchberger to the Berlin-Hannoversche Hypothekenbank, (herein called the Berlin Hypo Bank), and the assignee of all actionable wrongs committed by the defendants Gabriel Kirchberger, Susanne Viktoria Schmidt, Nomen Fitness Inc., 487223 Ontario Limited and 1171852 Ontario Limited carrying on business as G.K. York Management Service against the Berlin Hypo Bank.”
[4] He further claims that the Respondent Kirchberger defaulted on his agreement with the Berlin Hypo bank and wrongly hid his assets from the Hypo Bank by using funds belonging to the Berlin Hypo bank to purchase real and personal property in Ontario.
[5] The Applicant pleads that he is the beneficial owner of that property as the assignee of the indebtedness.
[6] I am advised that there was no formal Agreed Statement of Facts on the motion before Wilton-Siegel J.
[7] The evidence filed on the motion was not provided on this Application.
Wilton-Siegel’s Order
[8] After the pleadings closed, the Respondents brought a motion for partial summary judgement. In paragraph 5 of his endorsement dated December 20, 2012, Wilton-Siegel J. articulated the relief sought by the Respondents as follows:
The defendants [Respondents] 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.
[9] Wilton-Siegel J. noted that,
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. … 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 ONCA 764; [2011] O.J. No. 5431 in the context of a Rule 20 motion. (emphasis added)
[10] Before addressing the question of law, Wilton-Siegel J. set out his rendition of the background to this issue. He stated that,
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 plaintiff Harry Bieberstein (the “plaintiff”) took an assignment of the claims of the Banks against Kirchberger in respect of the Loans, including the Acknowledgments.
[11] At paragraph 50 of his endorsement, Wilton-Siegel J. held that,
In order to give effect to the Acknowledgments in Ontario, the plaintiff seeks an order of this court that he is entitled to enforce against the assets of Kirchberger located in Ontario in the manner and to the extent as if he had obtained a judgment against Kirchberger for the payment of money in the amount of the liability assumed in the Acknowledgment. I am of the opinion that an agreement to this effect, in the form of a unilateral covenant made by a third party and governed by the laws of Ontario, while perhaps unusual because it did not contemplate an actual judgment, would be enforceable under the laws of Ontario. Accordingly, I consider that the Acknowledgments are also enforceable under the laws of Ontario in accordance with their terms. I would note that, while the amount of a third party’s liability in respect of any agreement of the nature described above would be expressed to be unqualified, the third party would be entitled to rely on the law of equity to assert any basis for a reduction of the extent of the third party’s exposure such as, for example, partial satisfaction as a result of any realization proceeds received in respect of an underlying mortgage loan. (emphasis added)
[12] Wilton-Siegel J. concluded that,
Based on the foregoing, the Court finds that the applicable limitation period in respect of each of the Acknowledgments is 30 years pursuant to the provisions of section 197 para. 1 no. 4 of the German Civil Code and, accordingly, the defendants’ partial summary judgment motion is dismissed.
The Decision of the Court of Appeal
[13] Wilton-Siegel’s Order was appealed. The Court of Appeal concluded that,
… we are of the view that the motion judge reached the correct conclusion. The applicable substantive law was that of Germany. As mentioned, this was not contested. This principle is reflected in s. 23 of the Limitations Act, 2002, which provides that for the purposes of applying the rules regarding conflicts of laws, limitation laws of Ontario or elsewhere are substantive law. See also Tolofson v. Jensen, 1994 44 (SCC), [1994] 3 S.C.R. 1022.
Because German law applies a 30-year limitation period to enforce SCEs, the motion judge correctly treated 30 years as the applicable limitation period and dismissed the motion for partial summary judgment.
The Issue
[14] The issue to be determined on this Application is whether Wilton-Siegel J.’s Order disposing of the Respondents’ motion for partial summary judgment finally determined the issues of,
a) whether the Berlin Hypo Bank was the only holder of all of the Acknowledgments (as pleaded) or whether there were other Banks involved,
b) whether the Acknowledgments were properly assigned to Bieberstein, and
c) the balance owing on the debts for which Kirchberger is liable under the Acknowledgments,
such that the Respondents should be precluded from raising those issues at trial.
Positions of the Parties
[15] In view of the decisions of the Court as set out above, the parties agree that:
a) in accordance with German law, the Acknowledgments are known as Submissions for Compulsory Enforcement (SCEs) which are the functional equivalent of personal guarantees for the repayment of corporate debts;
b) in Germany, the holder of these documents can immediately pursue post-judgment remedies and the limitation period in Germany is 30 years;
c) in Ontario, holders of SCEs are entitled to enforce against the assets located in Ontario as if they had obtained a judgment in Ontario; and
d) the time within which an SCE can be enforced in Ontario is 30 years because the substantive law is that of Germany.
The Applicant’s Position
[16] The Applicant takes the position that he is now entitled to enforce debt Acknowledgments against the Respondents to the same extent as if he had obtained judgments against the Respondents. He claims he is entitled to the face value of the Acknowledgments. He also seeks an Order directing the Respondents pay to him the amounts set out in the Acknowledgments.
[17] The Applicant claims that to require him to adduce any evidence in support of this entitlement would be contrary to the principle of finality as these issues were litigated before Wilton-Siegel J. The Applicant therefore submits that the Respondents must be estopped from revisiting this issue.
The Respondent’s Position
[18] The Respondents do not dispute that,
a) Kirchberger personally guaranteed certain loans made to his real estate companies;
b) Banks were the holders of the Acknowledgments;
c) Kirchberger did so by executing an instrument called an Acknowledgment;
d) the loans were in default;
e) the Acknowledgments are as a matter of German law, called Submissions to Compulsory Enforcement (SCEs);
f) SCEs entitle the holder to immediate compulsory enforcement;
g) an SCE is enforceable in Ontario by obtaining an Order that “he is entitled to enforce against the assets located in Ontario to the extent as if he had obtained a judgment against Kirchberger for the payment of money in the amount of the liability assumed in the Acknowledgment”; and
h) the limitation period for the enforcement of SCEs in Canada is thirty years.
[19] The Respondents do not concede the following points and submit that the endorsement of Wilton-Siegel J. does not preclude them from addressing these issues at trial:
a) whether the Berlin Hypo Bank was the holder of all of the Acknowledgments,
b) whether the Acknowledgments were properly assigned to Bieberstein, and
c) the balance owing on the debts for which Kirchberger is liable under the Acknowledgments.
[20] The Respondents claim that the above issues were not finally determined by Wilton-Siegel J.
[21] Moreover, the Respondents point out that there are triable issues at stake as evidenced by the following:
• some Acknowledgments are from the “Berliner Bank” not the Berlin Hypo Bank. No evidence has been adduced as to the relationship between the Berliner Bank and Berlin Hypo Bank;
• although there is a document that purports to be a “Declaration of Assignment” to the Applicant, the document itself is suspicious as there is no letterhead on the document purporting to assign these large sums and no sworn evidence was provided to attest to the fact that this is a valid transfer; and
• the amount claimed in the Statement of Claim is less than the face value of the Acknowledgments. No evidence has been adduced to confirm the amount claimed.
The Relevant Legal Principles
[22] The Ontario Court of Appeal in Smith Estate v. National Money Mart 2008 ONCA 746, [2008] O.J. 4327 (O.C.A.) held at paragraph 33 that,
The doctrine of issue estoppel precludes a party from relitigating a legal or factual issue that has been conclusively resolved in a prior proceeding… It avoids “duplicative litigation, potentially inconsistent results, undue costs and inconclusive proceedings.” (emphasis added)
[23] In Robson v. Myer [2012] O.J. No. 2663 (S.C.J.), at paragraph 28, Newbould J. held that the court should not permit an attack on the factual basis of a prior decision.
[24] In DeChamplain et al, v. Maryland Caualty Co. [1982] 35 O.R. (2d) 428 (Ont. Co. Ct.), Davidson J. cited the description of the doctrine of estoppel articulated in Spencer, Bower and Turner, The Doctrine of Res Judicata, 2d, p. 143 as follows:
Even when in one way or another it can be demonstrated that the court has expressly determined in the earlier proceeding, the same issue as is now in dispute, an issue estoppel will not by any means always be the result. Only determinations which are necessary to the decision – which are fundamental to it and without which it cannot stand -- will found an issue estoppel. Other determinations without which it would still be possible for the decision to stand, however definitely the language in which they are expressed, cannot support an issue estoppel between the parties between whom they were pronounced.
[25] In 16 Hals., 4th ed., 1530, p. 1030, under the heading “estoppel” the authors note that “A party is precluded from contending the contrary of any precise point which having once being distinctly put in issue, has been solemnly and with certainty determined against him…The conditions have been stated as being that (1) the same question was decided in both proceedings; (2) the judicial decision said to create the estoppel was final; and (3) the parties to the judicial decision or their privies were the same persons as the parties to the proceedings in which the estoppel is raised or their privies.”
Analysis and Conclusion
[26] It is clear from a review of the legal authorities that in order to prevent a party from putting forward an issue at trial, the earlier determination must have,
a) involved the same parties;
b) distinctly addressed the same issue(s);
c) determined the issue(s) conclusively; and
d) the point at issue must have been essential to the determination.
[27] In this case, the issue the defendants sought to have resolved on the motion before Wilton-Siegel J. was whether the applicable limitation period in respect of the Acknowledgments had expired. Wilton-Siegel J. decided that the limitation period in respect of these Acknowledgments in Ontario is 30 years. In so doing, he reviewed some of the facts.
[28] However, for the reasons that follow, I find that the issues the Respondents now seek to raise as to
a) whether the Berlin Hypo Bank was the holder of all of the Acknowledgments,
b) whether the Acknowledgments were properly assigned to Bieberstein, and
c) the balance owing on the debts for which Kirchberger is liable under the Acknowledgments.
were not directly addressed by Wilton-Siegel J., they were not determined with certainty, and/or these points were not essential to the determination made by Wilton-Siegel J.
[29] I have come to this conclusion for the following reasons:
a) Wilton-Siegel J. himself stated that he did not attempt to apply the “full appreciation” test of the evidence given that the principal issue to be determined was a legal one. Moreover, he did not say that all facts were undisputed but only that the parties did not dispute the “material facts” and did not dispute them “only insofar as they are relevant to this question of law”.
b) The above three issues sought to be addressed by the Respondents at trial were not directly addressed by Wilton-Siegel J. in his endorsement.
c) When addressing the issue of enforceability of the Acknowledgments, Wilton-Siegel J. speaks not of this particular Acknowledgment but more generally of, “a unilateral covenant made by a third party and governed by the laws of Ontario, [that]… would be enforceable under the laws of Ontario.”
d) While he goes on to say, “I consider that the Acknowledgments are also enforceable under the laws of Ontario in accordance with their terms” this does not directly address the issue of who was the holder of each of the Acknowledgments, who is entitled to enforce the terms, or how much is owing under the terms. The issues the Respondents seek to address are not whether the documents are enforceable at all, but who can enforce them and how much can be claimed.
e) Wilton-Siegel J. himself acknowledged in his reasons that the quantum owed was to be determined.
f) Based on the question he was asked to address, it was not necessary for Wilton Siegel J. to determine the above issues in order to determine the appropriate limitation period for German SCEs in Ontario.
g) The Applicant did not provide the court on this Application with the evidence that was provided to Wilton-Siegel J. The Respondents on this Application claim the facts were disputed before Wilton-Siegel J. and the Respondents adduced some evidence on the motion to support their contention that there are live issues regarding these three points.
[30] In summary, the issue the Respondents asked to be determined on the motion was the limitation period for the Acknowledgments. Wilton-Siegel J. was not asked and, in my view, he did not determine the enforceability of the Claim and in particular how much is owed and to whom the monies are payable.
[31] For the above reasons the Application is dismissed.
Thorburn J.
DATE: February 7, 2014