Court File and Parties
Court File No.: CV-16-560857 Date: 2021-07-05 Superior Court of Justice - Ontario
Re: Rainer Zenner and Debby Chappell, Plaintiffs And: Karl Hermanns, Gerda "Regina" Hermanns, Frank Hermanns, Topfit Canada Supplementary Feeds Ltd., Wildcard Capital Management Ltd., John Does, Jane Does and the Doe Corporations, Defendants
Before: Paul B. Schabas J.
Counsel: Lorne Honickman and William McLennan, for the Defendants/Moving parties Norman Groot, for the Plaintiffs/Responding parties
Heard: June 24, 2021
Reasons for Judgment
[1] This is a motion for summary judgment under Rule 20 of the Rules of Civil Procedure. The issue is whether a trial is required to determine whether the action was brought more than two years after the plaintiffs knew or ought to have known of the cause of action under s. 5 of the Limitations Act, 2002, S.O. 2002, c. 24, Sch B. For the reasons that follow, I conclude that the moving parties have established that the plaintiffs’ action is out of time and that there is no genuine issue requiring a trial. Accordingly, the motion is granted and the action shall be dismissed.
Background
[2] This action arises from three investments made by the plaintiffs, Rainer Zenner (“Zenner”) and Debby Chappell (“Chappell”), involving the late Karl Hermanns (“Hermanns”) in 2006, 2007 and 2008.
[3] Zenner is a retired optometrist and businessman who has participated in various investments and in a range of litigation. Chappell is Zenner’s spouse.
[4] Hermanns and his wife, Regina (“Regina”), were in the business of importing feed for horses from Germany to sell in the North American market. In 2006, Hermanns placed advertisements in newspapers to attract people to invest in certain European investment companies, promising favourable returns. One of his advertisements was in a German-language newspaper which was seen by Zenner. Zenner and Hermanns are both of German origin.
[5] The first investment Zenner made through his contact with Hermanns was in December 2006, although Hermanns advised Zenner that the funds were only “locked in” in April 2007. The investment, of $30,000, was for a 12-month term, with monthly interest payments to be made during the year. No payments were made and the funds were never returned. In June 2007, Hermanns’ son, Frank Hermanns (“Frank”), advised Zenner that he was "struggling" with the person responsible for the investment in Switzerland - a Mrs. Rehman - and that he was given "a bit of running around.”
[6] Nevertheless, in August 2007, based on representations by Hermanns, Zenner advanced $30,000 to be invested with CitySparkasse E.F. (“CitySparkasse”), an entity which appears to be based in Sweden, for a five-year term that would pay monthly returns of 2.5%.
[7] In September 2007, Hermanns updated Zenner that Mrs. Rehman still had the funds and asked that they "not proceed with the case against her in court," and that she had said she would “pay us as soon as possible.” Zenner chose not to act as he believed Karl would deal with it.
[8] On March 24, 2008, Zenner received one payment on his CitySparkasse investment, an amount equalling $1,404.00.
[9] On March 27, 2008, Chappell advanced $50,000.00 to be invested in CitySparkasse for a five-year term.
[10] Between April 2008 and May 2013, Zenner and Chappell did not receive a single payment on their CitySparkasse investments. Nor have they received the funds back that they advanced in 2007 and 2008, despite the investments maturing in September 2012 and April 2013.
[11] Hermanns had suffered a stroke in 2011. Zenner was aware of this as he knew that contact with Hermanns was “no longer possible.” Although Zenner said he understood that Frank had taken charge, and that the Hermanns would take care of things, he took it upon himself to deal with CitySparkasse.
[12] In February 2011, following long periods of silence from CitySparkasse, Zenner wrote to an email address at citysparkasse.sweden@inbox.com stating:
Dear Dr. Grossmann:
I have written you recently and have not received any answers. What is happening with our investment monies; what are the problems now.
Sincerely, Rainer Zenner
[13] Zenner first received an auto-reply, and then was asked to be patient as there was a problem in Cyprus, where the money had apparently been sent. An email from CitySparkasse said it hoped “to soon offer a satisfactory solution.”
[14] Between April 2011 and May 2013, Zenner engaged in correspondence with CitySparkasse and Dr. Grossman. He was given promises of payouts and, sometimes, excuses when they did not happen, but often there was silence or simply an auto-reply.
[15] On May 25, 2013, Zenner sent his last email. He wrote that his investment's term was "up" and stated that he “would like to know when and how my monies will be paid out.” No one answered this email, no monies were paid to Zenner or Chappell, and Zenner did not follow up.
[16] Although Chappell simply adopted Zenner’s evidence on this motion, she admitted she was aware that she wasn’t getting any return on her investment and that Zenner was attempting to follow up on it and was not getting anywhere.
[17] On this motion, Zenner stated that he was in regular contact with Hermanns from 2007 to 2014 during which time he says he received assurances about the status of his investments. However, he has produced no emails, notes or records of any phone conversations to support that assertion. Further, his assertion of contact is undermined, if not contradicted, by his knowledge of Hermanns’ stroke and his statement on discovery that “there was a time when contact with Karl was no longer possible” and that he then “fully expected that his family in the discussions that I had with him prior, when he was still competent, that his son, at some point in time, would be the one that would take over and settle all the affairs and businesses if his father was not able to do so.”
[18] Sixteen months after Zenner’s last email to CitySparkasse, Zenner visited the Hermanns at their home on September 21, 2014. During that visit, which was described by Zenner as a social visit, Karl’s wife, Regina, told Zenner that they were being sued by other investors relating to the CitySparkasse investments. Zenner’s evidence is that at that point it “dawned” on him that he was the victim of a fraud and that he had a cause of action against the defendants.
[19] On September 20, 2016, one day less than two years after that social visit, Zenner and Chappell commenced this action against Hermanns, Frank and Regina, among others, alleging fraud, breach of fiduciary duty/breach of trust, conversion, conspiracy, and unjust enrichment.
[20] Hermanns died a few months later, in February 2017, but the action has continued against his estate.
Appropriateness of Summary Judgment
[21] Rule 20.04(2)(a) of the Rules of Civil Procedure states that “the court shall grant summary judgment if […] the court is satisfied that there is no genuine issue requiring a trial with respect to a claim or defence.” The word “requiring” was added in 2010. At that time Rule 20 was also amended to provide judges with the discretion to use additional fact-finding powers designed to expand the scope and use of summary judgment.
[22] In Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87 (“Hryniak”), the Supreme Court of Canada addressed the issue of summary judgment, including when it is appropriate and the test to be met. Karakatsanis J. summarized the Court’s position as follows, at para. 4:
In my view, a trial is not required if a summary judgment motion can achieve a fair and just adjudication, if it provides a process that allows the judge to make the necessary findings of fact, apply the law to those facts, and is a proportionate, more expeditious and less expensive means to achieve a just result than going to trial.
[23] At para. 49 of Hryniak, Karakatsanis J. continued:
There will be no genuine issue requiring a trial when the judge is able to reach a fair and just determination on the merits on a motion for summary judgment. This will be the case when the process (1) allows the judge to make the necessary findings of fact, (2) allows the judge to apply the law to the facts, and (3) is a proportionate, more expeditious and less expensive means to achieve a just result.
[24] Recently, in Royal Bank of Canada v. 1643937 Ontario Inc., 2021 ONCA 98 (“Royal Bank”), the Court of Appeal noted, at para. 27, that “motion judges are required to engage with the Hryniak framework process…look at the evidentiary record, determine whether there is a genuine issue requiring a trial, and assess, in their discretion, whether resort should be taken to the enhanced powers under rr. 20.04(2.1) and (2.2) of the Rules of Civil Procedure.”
[25] The Hryniak framework is summarized by the Court of Appeal at para. 24 of Royal Bank as follows:
First, the motion judge should have determined if there was a genuine issue requiring a trial based only on the evidence before her, without using the enhanced fact-finding powers under r. 20.04(2.1) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194.
Second, if there appeared to be a genuine issue requiring a trial, the motion judge should have determined if the need for a trial could be avoided by using the enhanced powers under r. 20.04(2.1) – which allowed her to weigh evidence, evaluate the credibility of a deponent, and draw any reasonable inference from the evidence – and under r. 20.04(2.2) to order that oral evidence be presented by one or more parties.
[26] In addition, on a motion for summary judgment, the parties are required to put their best foot forward on the issues. As the Court of Appeal stated in Toronto-Dominion Bank v. Hylton, 2012 ONCA 614, at para. 5:
A party moving for summary judgment has the evidentiary burden of showing there is no genuine issue for trial. Once this burden is discharged the responding party must prove that its defence has a real chance of success. Each party must put its best foot forward to establish whether or not there is an issue for trial. The court is entitled to assume that the record contains all the evidence the parties would present at trial. [Emphasis added.]
[27] The best foot forward requirement also means the full foot forward. As Corbett J. stated in Sweda Farms Ltd. v. Egg Farmers of Ontario, 2014 ONSC 1200, at para. 33: “The court will assume that the parties have placed before it, in some form, all of the evidence that will be available for trial.” Or, as Karakatsanis J. stated when she was a judge of this court: “The court is entitled to assume that the record contains all the evidence which the parties will present if there is a trial”: New Solutions Extrusion Corporation v. Gauthier, 2010 ONSC 1037, at para. 12.
[28] I appreciate that in some cases discoverability is an issue that may need to be addressed at a trial; however, as noted by Myers J. in RNC Corp. v. Johnstone, 2020 ONSC 7751, at para. 3:
A limitation period can present a neat issue with its own set of facts. In many cases, a motion for summary judgment on a limitation period can require the court to review just a few facts that are discrete or separate from the facts that form the merits of the claim and require no findings on the credibility of any witness’s testimony. Resolving a case on that basis can be a very efficient, affordable process that avoids the need for lengthy, complex, expensive discovery and trial on the merits.
[29] In my view, this is such a case. The issue raised by the moving parties is discrete and it is not necessary to utilize the enhanced fact-finding powers contained in Rules 20.04(2.1) and (2.2). The motion involves facts which are largely established in contemporaneous correspondence of the plaintiffs which provides a basis for me to apply both the objective and subjective tests in s. 5(1) of the Limitations Act, 2002. Alternatively, to the extent that I may engage in some weighing of the evidence, on this straightforward record it is appropriate and “in the interests of justice” to do so rather than leave it to the trial judge. Summary judgment will thereby “save the parties the cost and delay associated with going to trial on a number of other issues”: 2287913 Ontario Inc. v. Blue Falls Manufacturing Ltd., 2015 ONSC 7982, at para. 10.
The Limitations Act, 2002
[30] Section 4 of the Limitations Act, 2002 states that, “[u]nless this Act provides otherwise, a proceeding shall not be commenced in respect of a claim after the second anniversary of the day on which the claim was discovered.”
[31] Section 5(1) of the Limitations Act, 2002 addresses when a claim is “discovered.” It states:
A claim is discovered on the earlier of,
(a) the day on which the person with the claim first knew,
(i) that the injury, loss or damage had occurred,
(ii) that the injury, loss or damage was caused by or contributed to by an act or omission,
(iii) that the act or omission was that of the person against whom the claim is made, and
(iv) that, having regard to the nature of the injury, loss or damage, a proceeding would be an appropriate means to seek to remedy it; and
(b) the day on which a reasonable person with the abilities and in the circumstances of the person with the claim first ought to have known of the matters referred to in clause (a).
[32] A limitation period begins running when “the material facts on which [the cause of action] is based have been discovered or ought to have been discovered by the plaintiff by the exercise of reasonable diligence”: Central Trust Co. v. Rafuse, 1986 CanLII 29 (SCC), [1986] 2 S.C.R. 147, at p. 224, quoted with approval in Pioneer Corp. v. Godfrey, 2019 SCC 42, 437 D.L.R. (4th) 383, at para. 31. See also Lawless v. Anderson, 2011 ONCA 102, at paras. 22-23.
[33] Section 5(1)(a) of the Limitations Act, 2002 focuses on the plaintiff’s actual knowledge of facts underlying a claim. Section 5(1)(b) creates an objective test, asking what a reasonable person “with the abilities and in the circumstances of the person with the claim” ought to have known of the facts in subsection 5(1)(a).
[34] Full possession of all facts necessary to prove a claim is not required, as that may confuse what is necessary to prove a claim with what is necessary to bring a claim. As Perell J. stated in Tender Choice Foods Inc. v. Versacold Logistics Canada Inc., 2013 ONSC 80, aff’d 2013 ONCA 474, at para. 59, “the discovery of a claim does not depend upon the plaintiff knowing that his or her claim is likely to succeed; the limitation period runs from when the prospective plaintiff has or ought to have had, knowledge of a potential claim, and the later discovery of facts which change a borderline claim into a viable one does not postpone the discovery of the claim.” Rather, as Brown J.A. stated in Zeppa v. Woodbridge Heating & Air-Conditioning Ltd., 2019 ONCA 47, at para. 42, “the question to be posed in determining whether a person has discovered a claim is whether the prospective plaintiff knows enough facts on which to base a legal allegation against the defendant.”
[35] Application of s. 5(1) of the Limitations Act, 2002 is a fact-driven inquiry. The onus is on the moving party to establish the date on which the claim was discovered, or ought to have been discovered, not the plaintiff.
[36] The evidence on this motion establishes that Zenner was aware of concerns about his first investment by June, 2007, not long after he advanced the funds. He never received any payments, nor did he receive the money back after the investment matured in 2008. With respect to the CitySparkasse investments, Zenner received one payment in 2008 of $1,404.00, but nothing else. On a five-year term, that meant he missed 59 monthly payments. Chappell did not receive any of her 60 expected payments. And, of course, they did not get their money back when those investments matured in 2012 and 2013.
[37] The evidence also clearly shows that Zenner took it upon himself to pursue CitySparkasse between 2011 and 2013, making demands and seeking information from CitySparkasse. He clearly knew he had potential claims against CitySparkasse during that time. At latest, by May 2013 when Chappell’s investment matured without repayment, a reasonable person in her, and Zenner’s situation, ought to have taken steps to bring an action. Indeed, Zenner’s unanswered email of May 25, 2013 shows that they were alive to the facts giving rise to the existence of a claim at that time.
[38] In my view, a reasonable person “with the abilities and in the circumstances” of these plaintiffs, who were sophisticated and had been involved in seeking answers about their money for several years, would have been aware of the facts that would give rise to a claim as early as 2008 when monthly payments were not made on any of the investments (other than one payment in early 2008) and the first investment matured without repayment. Zenner’s unsuccessful efforts to follow up with CitySparkasse over the course of more than two years between 2011 and 2013 would put any reasonable person on notice that a legal claim was an “appropriate means” to seek compensation – against CitySparkasse and anyone else that may have caused the plaintiffs to make the investment, namely, Hermanns.
[39] Zenner’s evidence that he relied on Hermanns to take care of the matter is contradicted by his knowledge of Hermanns’ stroke and Zenner’s direct contact with CitySparkasse over a lengthy period. Zenner’s assertion of ongoing contact with Hermanns is undermined by his inconsistencies regarding alleged contact with Hermanns after Hermanns suffered a stroke in 2011, Zenner’s lack of any corroborative evidence to support such contact or details of what was said in those alleged conversations,[^1] Zenner’s own independent attempts to get answers from CitySparkasse without success, and Zenner’s experience as a sophisticated businessman, investor, and litigant in other proceedings.
[40] Zenner’s explanation that he was a “patient” person is not an adequate, or appropriate, response. Patience may well be a virtue, but patience does not override limitation laws and cannot be used as an excuse for not taking steps to pursue one’s rights. As stated in Longo v. MacLaren Art Centre, 2014 ONCA 526 at para. 42:
A plaintiff is required to act with due diligence in determining if he has a claim. A limitation period will not be tolled while a plaintiff sits idle and takes no steps to investigate the matters referred to in s. 5(1)(a). While some action must be taken, the nature and extent of the required action will depend on all of the circumstances of the case, as this court noted in Soper v. Southcott (1998), 1998 CanLII 5359 (ON CA), 111 O.A.C. 339, at p. 345 (C.A.):
Limitation periods are not enacted to be ignored. The plaintiff is required to act with due diligence in acquiring facts in order to be fully apprised of the material facts upon which a negligence or malpractice claim can be based….
[41] Zenner’s assertion that he did not have any evidence that anything was wrong with his investments between 2007 and 2014 and that he “trusted” Hermanns, as he claims in his affidavit, and that it only “dawned” on him that he might have a cause of action when visiting the Hermanns in September 2014 is not reasonable, or credible, for the reasons I have given earlier. Further, knowledge that others may be suing over the same matter is not a “fact” that starts a limitation period.
[42] I appreciate that, as counsel for the plaintiffs points out, discoverability in investment fraud cases is often not amenable to summary judgment due to the complexity of the fraud and the efforts at concealment, as well as issues of credibility regarding awareness of the plaintiff, among other things. However, those concerns do not arise in this case, where the lack of payment and loss of funds was straightforward and it is clear that the plaintiffs were aware of the loss of all of their investments by no later than May 2013, having been seeking answers for more than two years prior to that time without success.
Conclusion
[43] In this case, the defendants have met their evidentiary burden of establishing that there is no genuine issue of discoverability requiring a trial. The parties have put their best foot forward, and it is clear that the action was brought more than two years after May 2013, which I have concluded is the latest date when the plaintiffs had sufficient facts such that they knew, or ought to have known, that they had suffered a loss caused by or contributed to by the defendants, and that a court action would be an appropriate means to seek to remedy it.
[44] As this action was commenced more than two years after May 2013, in September 2016, it is statute-barred under s. 4 of the Limitations Act, 2002. The action is therefore dismissed.
[45] Should the parties be unable to agree on costs, the defendants may provide me with written submissions not exceeding 3 pages double-spaced, not including supporting materials, within 21 days of the release of these reasons, and the plaintiffs may respond in similarly limited submissions 14 days after the receipt of the defendants’submissions.
Paul B. Schabas J.
Date: July 5, 2021
[^1]: The defendants have also directed the Court to the application of s. 13 of the Evidence Act, RSO 1990, c. E.23, which provides: “In an action by or against the heirs, next of kin, executives, administrators or assigns of a deceased person, an opposite or interested party shall not obtain a verdict, judgment or decision on his or her own evidence in respect of any matter occurring before the death of the deceased person, unless such evidence is corroborated by some other material evidence.” I do not rely on s. 13 in these Reasons, but its application may provide further support for the defendants’ position given the lack of corroborating evidence of contact between Zenner and Hermanns.