COURT FILE NO.: CV-12-9868-00CL DATE: 20160429
SUPERIOR COURT OF JUSTICE – Ontario
(Commercial List)
RE: HENRY BIEBERSTEIN, Plaintiff A N D: MIRIAM REHFELD, also known as MIRIAM VON HEYNITZ (nee LECKEBUSH) and TANYA HEINTZ (nee LECKEBUSH), Defendants
BEFORE: MESBUR J.
COUNSEL: Morris Cooper, for the Plaintiff Evan Tingley for the Defendants
HEARD: April 26, 2016
E N D O R S E M E N T
Introduction:
[1] The plaintiff brings this action for payment of a debt. On this motion, he seeks summary judgment for the amount of the debt. He claims the defendants owe him roughly € 511,000 plus accrued interest. He says they borrowed these funds from a German bank to finance a real estate project in Germany. He claims the bank assigned the debt to him.
[2] The defendants do not deny borrowing the money. They admit it has not been repaid. They dispute, however, any valid assignment of the debt to the plaintiff.
[3] The parties agree that German law governs the transactions in question. The fundamental issue is whether the plaintiff is an assignee of the debt under the provisions of the law of Germany. I must decide whether a trial is necessary to decide any factual or legal issues in relation to whether there was a valid assignment.
The facts:
[4] Many of the facts are undisputed. The dispute really arises out the proper interpretation of a number of documents and events. I will identify those documents and the disputes as they arise.
[5] The defendants are sisters who were both born and raised in Germany. Both now reside in Canada, and have been resident here for many years. In the early 1990s while they still lived in Germany they formed a business partnership in Germany to hold a commercial rental property in Schwabach, Germany. They granted their father a power of attorney. Acting under this power of attorney, the father borrowed money from a German bank. That bank is now known as Deutsche Pfandbriefbank AG (“PBB”). As part of the loan transaction, and acting in the name of his daughters’ business partnership, the father executed a German legal document known as an Enforceable Deed against the property in favour of the bank. The loan, which was for one million German Marks (now about € 511,000), was also secured by a mortgage on the property.
[6] The loan was an interest only loan, bearing interest at the rate of 18%. While the property was developed and rented, interest was paid. At some point, however, the loan fell into default. The principal has never been repaid, and interest has been unpaid and accruing for many years.
[7] The plaintiff says that sometime in 2010 PBB assigned the loan to him. He relies on an undated document titled “Assignment” to support his position the bank assigned the loan to him. The document, written in English, reads:
Assignment
Hereby we assign to Harry Bieberstein all of the causes of Action contained in the attached state-ment [sic] of claim.
Executed by the undersigned at Munich, Germany
Deutsche Pfandbriefbank AG (Formerly: Hypo Real Estate Bank Aktiengesellschaft)
[Signature] [signature] (illegible) (illegible)
[8] This is the entire document. There is no attachment. There is no identification of the people who signed it, or of their authority, if any, to enter into a transaction on behalf of the bank. The plaintiff, Mr. Bieberstein takes the position this document is a valid assignment to him of the debt the defendants owed the bank. As a result, he seeks judgment against the defendants, requiring them to repay the debt to him.
[9] On October 11, 2010 Mr. Bieberstein had a letter delivered to the defendant Miriam Rehfeld. The letter reads:
Harry Bieberstein c/o First Capital Consultants INC 401 Bay Street - Suite 2112 Toronto, Ontario, M5H2Y4
Miriam Rehfeld October 11, 2010 Also known as Miriam von Heynitz (Nee Leckebusch) 41 Costigan Court Glen Williams, Ontario L7G 6G2
Dear Madam,
RE: Deutsche Pfandbriefbank AG (Formerly: Hypo Real Estate Bank AG)
According to the Banks records, by virtue of the defaults of your personal corporations GbR Miriam Rehfeld (Nee Leckebusch) and Tanja Heintz (Nee Leckebusch) are indebted to the bank of account of 1 Loan transaction which as of 17 th December 1990 total of 2’300’813,47 Euros. As of the 17 th of December 1990 the amount owing is 2’300’813’47 Euros plus interest after that date at the rate of 18% per annum.
The Bank holds as collateral security your guarantee of payment in the form of a “Notarized Debt Acknowledgement” Notarized by the Notary Guenter Leonhardt Berlin UR No. 558/1990
The guarantee is payable on demand and bears interest from the date of demand for payment of 18% per annum.
On Behalf of the Bank, we herey [sic] demand payment from you under the said guarantee.
Yours truly,
[signed] Harry Bieberstein.
[10] Mr. Bieberstein takes the position this letter was notice to the defendants of the bank’s assignment of the debt to him. The defendants did not respond to this demand, either to the bank or to Mr. Bieberstein. Mr. Bieberstein did nothing further until he commenced this action on October 9, 2012.
[11] Meanwhile, however, on October 4, 2012, PBB delivered a registered letter to the defendants demanding payment of the loan. The letter reads, in part: [^1]
Regrettably, you did not comply with our demand of July 5, 2012 [^2] to provide an additional valuable security or to make an unscheduled repayment in the amount of EUR 535,000 within the requested period of time or to date. As indicated in our letter of demand and pursuant to paragraph 19, subparagraph 3,3., of our General Terms and Conditions of Business, we terminate the loan relationship and accelerate the loan referred to in the aforementioned account for immediate repayment of the
Debit balance in the amount of EUR 1,514,304.94 plus interest and costs as of October 1, 2012
[12] On October 12, 2012, two days after the plaintiff commenced this action, PBB also began an Ontario action against the same defendants. In that action, PBB sought repayment of the loan. That action was later administratively dismissed. Mr. Bieberstein suggests PBB took no steps to pursue their action once he “reminded” them of their assignment of the debt to him. There is no independent evidence, documentary or otherwise, to support this factual contention. I find it hard to believe in light of the bank’s demands of July 5 and October 4, 2012, as well as what happened next.
[13] In October of 2014 PBB obtained a Decree of Sequestration from the Local Court Nuremberg in Germany against the defendants. The order “confiscates” from the debtors the management and use of the property, appoints a “forced administrator” over the property. The forced administrator is authorized to procure possession of the property and produce a “confiscation report” for the court within 1 month after the service of the decree, and an annual report once a year. [^3]
[14] The defendants take the position that since PBB is clearly enforcing its rights against the property in Germany, PBB must still be the proper creditor, and not Mr. Bieberstein.
[15] When PBB sued the defendants in its action in Ontario, the law firm Borden Ladner Gervais (BLG) represented them. In his responding record on this motion, Mr. Bieberstein includes a letter dated February 8, 2106 from BLG in response to a letter of February 2, 2016 from his counsel. That letter is not in evidence, so I have no idea what question or questions Mr. Bieberstein’s lawyer asked BLG. That said, the BLG letter says:
In the interim, I have discussed your letter with my clients [^4] who, in turn, have once again reviewed the document described below with its other signatory. [^5] I am advised by my clients that:
- The document entitled “Assignment” that the Deutsche Pfandbriefbank (“PBB” executed in favour of Mr. Bieberstein was solely in respect of the rights arising out of the acknowledgement of indebtedness ( abstraktes Schuldversprechen) executed by Miriam Rehfeldt and Tanja Heintz, and does not encompass the debt resulting from the loan agreement or the right to bring in rem proceedings on the security interests such as land charges;
- The enforcement proceedings brought by the PBB in Germany in 2014 are in the nature of execution in rem and do not entail personal execution; and
- As a result, there is no inconsistency between the Assignment and the German Proceeding.
[16] I can give no evidentiary weight to this letter at all. First, it is not a sworn statement from anyone. I cannot accept the truth of its contents on that basis alone. Second, the author appears to opine on the nature of legal proceedings in Germany. I have no basis on which to conclude the author has any expertise or ability to do so. Third, the letter relies on what the author was told by unnamed others. I would have drawn an adverse inference from the plaintiff’s failure to obtain first hand evidence of these critical facts from PBB, even if PBB’s lawyer had sworn an affidavit, which he did not. Last, the letter raises more questions than it answers.
[17] The BLG letter seems to imply there is another signatory to the Assignment, other than PBB. If that is the case, I have no evidence of who or what that might be. Not only that, the letter suggests the Assignment “does not encompass the debt resulting from the loan agreement”. This implies the assignment would not give the right to claim repayment of the debt. If that is the case, then it suggests Mr. Bieberstein does not have the right to sue. As I have said, these are questions that need to be answered.
[18] Whatever the letter might mean, it has absolutely no probative value. If anything, it harms the plaintiff’s case, rather than helps it.
The legal context for summary judgment:
[19] In order to succeed on this motion, the plaintiff must persuade me, on the balance of probabilities that there is no genuine issue requiring a trial with respect to a claim or defence. [^6] In deciding whether there is a genuine issue requiring a trial, I must consider the evidence the parties have submitted. The moving party, of course, bears the onus of providing sufficient evidence to support summary judgment. Under the rule, I have a broad discretion to exercise various powers, including weighing evidence, evaluating a deponent’s credibility, or drawing reasonable inferences from the evidence. [^7]
[20] If I determine a trial is necessary, I have a broad discretion to make an order defining the issues to be tried, and the most expeditious way of trying them, although I am not required to make an order of that nature.
German Law:
[21] The parties agree that since the transaction (the Enforceable Deed) was entered into in Germany, with a German company, and relates to real property located in Germany, it is subject to German law, including the German Code of Civil Procedure.
[22] Both parties have tendered expert reports concerning German law. The plaintiff’s expert opines only on the appropriate limitation period in a transaction such as this. [^8] As a result, the parties agree this action is subject to a 30-year limitation period and is not statute barred.
[23] The defendants have provided an expert report from Dr. Annerose Tashiro, an attorney at law, partner of the law firm Schultz & Braun GmbH Rechtsanwaltsgesellschaft in Achern, Germany. The plaintiff has provided no contrary legal opinion to that of Dr. Tashiro. He chose not to cross-examine Dr. Tashiro on her affidavit.
[24] Dr. Tashiro was asked to provide her professional legal opinion about this action. Her opinion is based solely on German law, and is limited to the interpretation of certain documents which are governed by German law. As she states at page 1 of her opinion:
In particular my examination concerns the Plaintiffs entitlement to pursue rights and claims under of [sic] an enforceable notary deed or to execute it in compliance with the formal requirements for enforceability of such documents under German law.
[25] In coming to her opinion, Dr. Tashiro reviewed the Statement of Claim, Statement of Defence and Reply in this action. She also reviewed Mr. Bieberstein’s affidavit sworn February 5, 2013 and attachments as well as his affidavit sworn October 21, 2015 and attachments. She also reviewed the statement of claim in PBB’s action against the defendants, which was later dismissed for delay.
[26] Amongst these documents is what Dr. Tashiro refers to as the “558-Deed” namely a copy of an enforceable copy of the notary deed, notary’s document register no 558/1990 together with annexes to the 558-Deed. This document is what the parties have called the “Enforceable Deed”.
[27] In her opinion, Dr. Tashiro characterizes the 558-Deed as a “notarized legal document containing the establishment of the Land Charge and a debt acknowledgement allegedly by the Defendants in favour of the holder of the land Charge. According to section II of this 558-Deed, this notarized debt acknowledgement is “immediately enforceable”.
[28] Dr. Tashiro describes this notarized submission of a debtor to its creditor to immediate enforcement as a “particularity under German civil law”, warranting further explanation.
[29] As she explains it in Germany, civil notaries hold a public office and their function is “complementary to the role of a judge. The intervention of a notary is required by law in cases of important transactions with long-term effects and a particular economic or personal significance for the parties concerned.” These include the sale of land or the establishment of a mortgage.
[30] Civil law notaries “act as independent, impartial and objective advisers to all parties to a transaction.” Notaries are the ones who draft the contracts and instruments necessary to carry out the parties’ intentions. The goal is to provide legal certainty and correctness to transactions. In addition “notarised legal documents as authentic instruments (or so called the notarial deed) are vested with an increased value of evidence and with so-called immediate enforceability.” [^9]
[31] According to Dr. Tashiro, an Enforceable Deed entitles a creditor to “seize and exploit the assets of the debtor without filing a lawsuit. ” She says “the authentic instrument as such established by a notary is comparable to an enforceable court judgment.”
[32] She goes on to say, [^10] however, that the enforcement of an Enforceable Deed falls under certain provisions of the German Code of Civil Procedure. These require both involving a notary (usually the one who notarized the deed in the first place), and fulfilling the following requirements:
a) The correct debtor and the correct creditor must be named in the enforceable deed. Generally, in case one of the parties is replaced, the enforceable deed, the enforceable execution copy and other relevant documents have to be amended. Execution based on these documents require that the correct creditor and the correct debtor have to be specified in the relevant documents. An enforceable execution copy can be re-issued to a legal successor if such succession has be proven by public record or certified document; b) The whole clause of ‘submission to immediate enforcement’ must fulfill the principle of legal certainty, and c) If the enforceable deed can be seen as a consumer-contract or as a clause of general terms and conditions under German law, the enforceable deed can be subject to special control.
[33] From Dr. Tashiro’s report as a whole, I infer that generally if one of the parties to an enforceable deed is changed, new documentation must be drawn and new enforceable execution copies must be notarized.
[34] German law also requires the assignee of a debt to give notice of the assignment to the debtors.
[35] While Dr. Tashiro also opines [^11] that a legal successor can only enforce if the assignee holds both the land charge and the guarantee, I need not address that issue for the purpose of my decision.
Discussion:
[36] The crux of Mr. Bieberstein’s claim is that PBB assigned its rights as a creditor of the defendants to Mr. Bieberstein.
[37] Dr. Tashiro’s uncontradicted evidence is that a valid assignment under German law requires:
a) Both parties must execute the assignment, which is considered a bilateral agreement; b) An assignment agreement must identify the claim being assigned. Without it, the contract, and hence the assignment is invalid and ineffective; c) The document must show the powers of the signatories and the names and positions of whoever is purportedly acting on behalf of PBB; d) Notice of any assignment must be given to the debtor.
The evidence Mr. Bieberstein has provided falls far short of satisfying most of these requirements.
[38] First, I have no evidence Mr. Bieberstein executed the assignment. The signatures on it are illegible and unidentified.
[39] Second, the Assignment does not identify the claim being assigned. Although it makes reference to claims in an attached document, no such document is actually attached to it.
[40] Third, as I have said, the signatures on the Assignment are illegible and unidentified. I have no idea of who is purportedly acting on behalf of PBB, or how they purportedly have the power to do so. In this regard, I find it helpful to consider the reasons of Thorburn J in Bieberstein v. Kirchberger [^12] , in which she considered similar evidence in relation to the validity of certain assignments of guarantees from German banks to Mr. Bieberstein and found the evidence lacking.
[41] Like this case, in his action against Mr. Kirchberger, Mr. Bieberstein relied on a document that “only purports to assign the claims in an ‘attached’ pleading which has not been produced. No witness from the Hypo Bank testified, and no evidence was called to attest to the fact that the document was valid.” [^13] In addition, Justice Thorburn noted there was “no evidence of the outstanding balance for this Underlying Loan.” She did, however, confirm the validity of certain other assignments. She did so on the basis of oral evidence from a representative of Berlin Hypo Bank who testified he and another person were authorized to sign on behalf of the creditor. He confirmed he signed seven Acknowledgements in Mr. Bieberstein’s favour. He identified his authorizing signature, and confirmed he has the original documents. He testified the causes of action were also assigned. He verified the original loan amount and advised that he personally generated each of the seven acknowledgements.
[42] There is no such evidence before me from PBB. I can only assume that if Mr. Bieberstein was able to obtain this kind of evidence from a representative of a German bank for the trial before Thorburn J, he could have obtained similar evidence for this motion. He did not.
[43] Mr. Bieberstein takes the position the defendants were served with a certified copy of the Enforceable Deed and received written notice of the assignment of the debt to him. I have no doubt the defendants were served with a certified copy of the Enforceable Deed. The document they were served with is a “Certified copy of translation of the Notary’s document Register No. 558/1990, negotiated at Berlin on December 17, 1990.” [^14] A Copy of the document is found at Tab 1 of the plaintiff’s motion record. Paragraph 5(b) provides: “upon request, an enforceable official copy of this deed shall be issued to the future creditor at any time.” I have no evidence an “enforceable official copy of the deed” was ever issued to Mr. Bieberstein as a creditor. His counsel asks me to infer this result on the basis he asserts Mr. Bieberstein has an “enforceable official copy of the deed.” On this important issue, direct evidence is necessary; I cannot draw the requested inference on the basis of the record before me.
[44] The documentary record before me shows that when PBB took over from the Hypo Bank, the legal succession was documented in an assignment declaration notarized as 4 Notary’s Document Register No. 1845/97. [^15] There is no similar assignment declaration in favour of Mr. Bieberstein. The lack of documentation raises serious questions in my mind concerning the validity of the Assignment document Mr. Bieberstein relies on.
[45] Mr. Bieberstein says he gave clear notice of PBB’s assignment of the debt to him in the demand letter he sent the defendants on October 11, 2010. I disagree.
[46] First, the letter is stated to be regarding “Deutsche Pfandbriefbank AG (Formerly: Hypo Real Estate Bank AG)”. Second, Mr. Bieberstein makes reference to the “Bank’s records” and states the defendants are “indebted to the Bank”. He goes on to say “On behalf of the Bank we demand payment.” Nowhere does Mr. Bieberstein say he is the bank’s assignee, and payment must be made to him.
[47] I fail to see how this letter can operate as notice of any assignment of a debt to Mr. Bieberstein. Indeed, it suggests the opposite; namely, that the defendants remained indebted to the bank not to Mr. Bieberstein.
Conclusion:
[48] On the evidentiary record before me I cannot conclude PBB’s Loan Agreement was validly assigned to Mr. Bieberstein under German law, nor can I conclude the defendants were provided with notice of any assignment. As a result, I have no basis on which to determine that Mr. Bieberstein is the proper creditor entitled to enforce payment of the debt. A trial is required to adjudicate the issues. I see no need to give any particular directions about the nature of the trial or how the evidence is to be presented.
[49] The motion for summary judgment is dismissed. The parties have agreed on the appropriate figure for costs of this motion. The plaintiff will therefore pay the defendants’ costs of the motion, fixed at $17,000 all inclusive.
MESBUR J.
Released: 20160429
[^1]: English translation of the letter, found at tab 8 of the plaintiff’s motion record [^2]: The demand of July 5, 2012 is not in the materials filed on this motion [^3]: Exhibit “E” to the affidavit of t. Heintz sworn 26 January 2016, found at Page 24, Defendants’ responding motion record. Translation of document from the German [^4]: I cannot tell from this letter who these clients are [^5]: I cannot tell who, or what legal entity this “other signatory” might be [^6]: Rule 24.04(2) [^7]: Rule 24.04(2.1) [^8]: The plaintiff relied on this report to support his position that his action is subject to a 30-year limitation period. The Court of Appeal accepted this position in another of Mr. Bieberstein’s actions: Bieberstein v. Kirchberger, 2013 ONCA 629, upholding Bieberstein v. Kirchberger, 2012 ONSC 65224 [^9]: Page 5, opinion of Dr. Tashiro [^10]: See pages 5-6, opinion of Dr. Tashiro [^11]: Page 12, opinion of Dr. Tashiro [^12]: 2014 ONSC 5706. This was an action in which Mr. Bieberstein sued a Mr. Kirchberger in relation to certain German loan guarantees Mr. Kirchberger had signed in favour of German Banks and which Mr. Bieberstein stated had been assigned to him. [^13]: Reasons for decision in Bieberstein v. Kirchberger, above, at paragraphs 29 and 30. [^14]: Affidavit of service of Christina Parr, marked as Exhibit 2 on the cross-examination of Miriam Rehfeldt taken February 18, 2016 [^15]: See Tab 2 of plaintiff’s motion record, page 36