Court File and Parties

Court File No.: CV-16-00555354-0000 Date: 2024-02-12 Ontario Superior Court of Justice

Between: Frank Bertucci, Plaintiff And: The Toronto Fashion Group Limited and George Elian, Defendants

Counsel: Jeffrey E. Feiner and Michelle Stephenson, for the Plaintiff Maurice J. Neirinck and Michael McQuade, for the Defendants

Heard: February 5, 6, and 7, 2024

Before: Akazaki J.

Reasons for Judgment

Introduction

[1] The sole question to be determined in trial of this action is whether the action for enforcement of the plaintiff’s Québec judgment was prescribed by the two-year limitation period pursuant to the Limitations Act, 2002, S.O. 2002, c. 24, Sched. B (“the Act”), ss. 4 and 5. Where such a limitation defence has been pleaded, the burden is on the plaintiff to establish the cause of action arose or was not discovered until the statutory period preceding the commencement of the action: Clemens v. Brown and International Nickel Co. of Canada Ltd., 13 DLR (2d) 488 at 491.

[2] The cause of action arose when the plaintiff obtained the Québec judgment in 2008. He started the action eight years later, in 2016. The plaintiff advanced three theories that the action was not prescribed: acknowledgment of debt, discoverability, and promissory estoppel. The plaintiff failed to adduce proof of the necessary elements of these theories. This led the defendant’s counsel to consider a motion for non-suit. He decided against the motion and undertook to call his client in the defence. The defendants’ evidence on cross-examination did not add to the plaintiff’s evidence on the theories. Burden or no burden, the plaintiff failed to demonstrate that the Act did not bar the action.

Enforcement of the Quebec Judgment in Quebec

[3] The plaintiff obtained default judgment against the defendants from the Superior Court of Québec on February 12, 2008, pursuant to a 2007 loan agreement co-signed by the defendants and Dr. Nicolas Elian, George Elian’s brother who resides in New York.

[4] Québec is not a signatory to the interprovincial treaty ratified and enacted in Ontario as the Reciprocal Enforcement of Judgments Act, R.S.O. 1990, c. R.5. The six-year period under s. 2 for the registration procedure under that treaty does not apply. It would not have saved the action from prescription, in any event. The judgment must be recognized and enforced by this court by way of action. As I ruled at the outset of trial, 2024 ONSC 760, it did not matter that enforcement of the judgment prescribed in Québec in 2018. As I stated in that decision, the foreign judgment is a contract debt in this jurisdiction. Since Mr. Elian and his company had agreed to the default judgment, the 30-day appeal period under art. 352 of the Code of Civil Procedure did not stay or toll the period for enforcement to start. That appeal period would not have made a difference, in any event.

[5] It was therefore incumbent on the plaintiff to prove the cause of action by showing why the right to enforce the judgment as a contract debt in Ontario was not prescribed as of February 12, 2010. Although the facts prior to the judgment can have no bearing on my deliberations here, I summarize them because the plaintiff relied on a continuum of the long-standing friendship and mutual trust of the parties. I agree that friendship and trust did have a part to play in the narrative, but they were not boundless. The plaintiff allowed the defendants’ unsecured indebtedness to grow, but only up to a point. Were it not for the collapse of the business, the defendants would have repaid the loan.

[6] The 2007 loan agreement was a retrospective consolidation of a long list of loans dating back to 2006. The plaintiff Frank Bertucci was in the business of lending to local merchants to help them meet payroll and inventory cash flows. George Elian resided in Toronto and operated stores in Toronto and Montréal. These gentlemen became friends. They did business as lender and borrower for many years. Some of the loans were in the tens of thousands of dollars, but most were for amounts ranging from $1,000 to $8,000. At some point in 2006 or 2007, Mr. Bertucci became nervous because Mr. Elian’s slate had ballooned to $930,153.25. He insisted that Mr. Elian’s brother Dr. Nicolas Elian co-sign the loan as principal debtor, and Mr. Elian arranged for this to be done.

[7] The defendants still defaulted on the new loan agreement. Mr. Elian agreed to the default judgment against him and his Toronto company. The plaintiff also took out judgment against Dr. Elian. However, the latter entered bankruptcy. After the judgment, the plaintiff wanted to pursue Mr. Elian’s brother because he believed Mr. Elian when he said he had no assets. The plaintiff hired lawyers in New York to oppose Dr. Elian’s discharge.

[8] The judgment against Dr. Elian was not before the court at this trial. However, it was certainly a source of tension because Mr. Elian felt powerless to stop Mr. Bertucci from pursuing his brother on the loan and judgment. Mr. Elian participated in a deposition in the proceedings by Dr. Elian for discharge from the bankruptcy, because Mr. Bertucci asked him to.

[9] Mr. Bertucci testified that Mr. Elian reassured him that he would repay the loan when he was back on his feet. In the meantime, he would arrange for his brother Dr. Elian to send him money. When nothing from Dr. Elian was forthcoming, he enforced the judgment against Mr. Elian by instructing his lawyers to require him to produce financial records and to summon him to be examined in Quebec. I will discuss these procedures in detail when I deal with the discoverability issue. Mr. Bertucci said these were not real attempts to enforce the judgment, because he knew Mr. Elian did not have assets. Rather, he intended the steps to apply pressure on Mr. Elian to coax Dr. Elian to send him money.

[10] Mr. Elian testified that he never asked Dr. Elian to repay any of the loan. He was embarrassed for having drawn his brother into his financial woes and for having compounded his brother’s own problems.

[11] By cheque dated July 23, 2018, the plaintiff recovered $134,617.75 from the sale of a home in Sainte-Adèle. Mr. Elian had the property but sold it to his brother Hanna in consideration for forgiving a $125,000 loan. There was some suspicion that Mr. Elian had transferred the property to put it beyond the reach of creditors. However, when the plaintiff asked that it be provided to hm Mr. Elian asked Hannah to convey it to the plaintiff without any fuss. The plaintiff acknowledged that the $134,617.75 should be deducted from the amount owing on the judgment. Apart from this, nothing has been paid on the judgment.

[12] The judgment awarded the plaintiff $1,065,948.85, with interest at 15% per annum on the principal of $930,153.25 running from August 27, 2007. As of the last day of trial, the accrued interest was $2,304,231.69, or $2,169,613.94 after deducting the recovery in 2018. The total value of the judgment as of the end of trial was $3,235,562.79.

[13] There was also an assessment of costs in the amount of $11,280.99, as of March 17, 2008. The Certificate of Taxation did not contain an interest clause.

Acknowledgment

[14] Historically, statutes of limitations have allowed the prescription period for contract debt obligations to be reset by acknowledgements in writing. This provision has been carried forward in the Act, in s. 13. Subsection 13(10) imposes a requirement that the acknowledgement be in writing and signed by the debtor or his agent. The signature requirement has been interpreted liberally to include electronic metadata in emails or text messages: 1475182 Ontario Inc. o/a Edges Contracting v. Ghotbi, 2021 ONSC 3477, at para. 49. The signature requirement has, in theory, even been extended to acknowledgments made in transcripts of legal proceedings: Cross Bridges Inc. v. Z-Teca Foods Inc., 2016 ONCA 27, at para. 10. The courts have never dispensed with the requirement that acknowledgments be made in some form of writing.

[15] I suppose that if the protagonists were in their twenties or thirties, there would have been texts, emails or even DM’s in social media apps that could provide the s. 13 acknowledgment. Unfortunately, there were no such artefacts. Even so, the evidence was clear that, since 2012, the parties had no interactions that they could recall. The fact that Mr. Elian admitted at trial that he owed the money did not constitute an acknowledgment because it was not made “before the expiry of the limitation period”: s. 13(9); see also Cross Bridges Inc., at para. 10.

[16] In his 2021 examination for discovery, from which portions of the transcript were read into the record, Mr. Elian acknowledged that he owed the plaintiff $930,153.25 plus costs and interest.

[17] The transcript of Mr. Elian’s testimony in Dr. Elian’s bankruptcy proceeding was recorded 2012. There, as he admitted at this trial, he had acknowledged his indebtedness to the plaintiff for the same amount and that he had not made any payments. However, in order to qualify as an acknowledgment under s. 13(9), he had to have made it in every two-year period from 2008 to 2016, i.e. four separate written acknowledgements evenly spread over that span of time. Mr. Elian came across as the type of person who would have signed such a paper every two years, if the plaintiff or his lawyers had asked him.

[18] I therefore find that there was no acknowledgment of debt pursuant to the judgment that qualified to reset the limitations clock under s. 13.

Discoverability

[19] In response to the defendant’s pleading of the limitation period under s. 4 of the Act, the plaintiff pleaded delayed commencement based on discovery under s. 5. These provisions read as follows:

Basic limitation period

4 Unless 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. 2002, c. 24, Sched. B, s. 4.

Discovery

5 (1) 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). 2002, c. 24, Sched. B, s. 5 (1).

Presumption

(2) A person with a claim shall be presumed to have known of the matters referred to in clause (1)(a) on the day the act or omission on which the claim is based took place, unless the contrary is proved. 2002, c. 24, Sched. B, s. 5 (2).

[20] The action for enforcement of a foreign judgment is essentially a procedural cause of action based on enforcement, the presumptive date for the purpose of s. 5(2) was the date of judgment. The appeal period did not matter because the default judgment was obtained on consent. The corollary to this is that, qua enforcement, the availability of assets in Ontario can be a relevant factor in the s. 5(1)(a) and (b) analysis. Not every foreign litigant may know that a party has property or other assets in the jurisdiction in which the foreign judgment might be enforced: Yugraneft Corp. v. Rexx Management Corp., 2010 SCC 19, [2010] 1 SCR 649, at para. 61.

[21] Para. 5(1)(a) is said to express a “subjective” test because it looks to the claimant’s knowledge, here, of the appropriateness of the suit in Ontario. Para. 5(1)(b) expresses a “modified objective” test because of the inquiry into what the reasonable person with the abilities and in circumstances of the claimant ought to have known: Independence Plaza 1 Associates, L.L.C. v. Figliolini, 2017 ONCA 44, at para. 74. Mr. Bertucci alleged that he did not know whether the defendants had assets in Ontario and still does not know. His counsel submitted that the limitation period has not yet started because the trial evidence left the question unanswered.

[22] The Supreme Court in Yugraneft, at para. 62, qualified its statement regarding the discoverability for the purposes of enforcement of a foreign judgment, as follows:

[62] Nevertheless, a delay on this account would not be open to Yugraneft in this case. The contract entered into by Yugraneft and Rexx on October 1, 1998, indicates that Rexx was identified as an Alberta corporation (Contract No. 157, A.R., vol. 2, at p. 41). An arbitral creditor might well not be expected to know every location in the world in which an arbitral debtor might have assets, but this cannot be said of the jurisdiction where the debtor is registered and where its head office is located. In such circumstances, Yugraneft has not claimed and could not claim that it did not know or ought not to have known that a proceeding was warranted in Alberta at the time of (or indeed earlier than) the expiry of the three-month appeal period following receipt of notice of the award.

[23] The plaintiff knew that Mr. Elian resided in Ontario, because he served him with court documents for an examination after judgment (a.k.a. examination in aid of execution) at his residence and place of employment in Toronto. The first instance was a notice by lawyers’ letter dated November 28, 2012, citing the loan default and stating: “Needless to say, this situation cannot, and will not be tolerated any longer.” The second was a motion for issuance of a subpoena duces tecum, dated November 13, 2013, and the third was the subpoena duces tecum itself. If the name of the corporate defendant did not give away its domicile, a search of any Canada-wide corporate search would have revealed that it was incorporated in Ontario. The presumptive two-year limitation period would already have expired on February 12, 2010.

[24] On October 19, 2012, when Mr. Elian was examined in Dr. Elian’s bankruptcy, his attorney refused to allow any questions related to Mr. Elian’s personal assets. John Scura, the plaintiff’s attorney in that proceeding, started to ask him about his assets in Toronto. David Edelberg, the attorney for Dr. Elian, refused to permit that line of questioning. At that moment in time, the plaintiff’s New York attorney showed an interest in Mr. Elian’s Ontario assets but was thwarted.

[25] Mr. Elian and his boutique clothier business were not large conglomerate businesses. After the default judgment, his landlord and business partner in Montréal terminated the lease and business. If the defendants had any presence anywhere, it was logically in Toronto.

[26] The rationale for considering assets in the jurisdiction as a factor in deciding whether to sue in the jurisdiction arises from the lack of knowledge of assets in various locations throughout the world. As the Supreme Court held in Yugraneft, para. 61, “it is not infrequent for the parties to an international arbitration to have assets in a number of different states or jurisdictions within a federal state.” This rationale did not apply to enforcement against the defendants, both domiciled in Ontario.

[27] The discovery of assets argument also fails because the plaintiff instructed lawyers to compel the defendants to reveal their assets. Because Québec is also not a signatory to the reciprocal recognition of summonses, the next step after the issuance of the subpoena would have been to obtain a letter of request from the foreign court for a commission in Ontario under s. 60 of the Evidence Act, R.S.O. 1990, c. E.23. Although more cumbersome than an interprovincial summons, diligent steps taken by the plaintiff to examine the defendants in aid of execution in Ontario and initiated before February 2010 would certainly have led to the defendants’ compelled disclosure of assets before the end of 2010 or early 2011. Moreover, a judgment debtor need not have extensive assets for creditors to enforce judgments. The plaintiff knew enough to serve Mr. Elian at his place of employment, a high-end Toronto clothing store. A job is an asset. His salary and bank account are subject to garnishment. A car or other personal property can be seized.

[28] Although due diligence is not part of the statute, it is a principle that underlines and informs the discoverability factor in limitation periods, through the reasonable person standard in s. 5(1)(b): Fennell v. Deol, 2016 ONCA 249, at para. 23. Due diligence is not a separate issue but a factor in evaluating the contention that the plaintiff knew our ought to have known of the matters described in s. 5(1)(a).

[29] Thus, a person with the abilities and in the circumstances of the plaintiff would have been a businessperson with a lawyer under retainer to take steps to enforce the judgment. Such a person would have known that the logical jurisdiction to seek recovery from Mr. Elian and his company was Ontario. Indeed, despite Mr. Bertucci’s testimony that the enforcement measures were all intended to apply pressure on Mr. Elian to obtain payment from Dr. Elian, this, too would have been a form of enforcement. The Austinian equation of law and sovereign force was in play, albeit in a half-hearted way. The plaintiff cannot be relieved of a limitation defence when he instructed his lawyers to compel Mr. Elian to divulge his assets and means to pay the judgment and then stopped short of the final step required to carry out those instructions in Ontario.

[30] Finally, I noted the plaintiff’s testimony that the reason why he brought the action in Ontario in 2016 was that he got upset hearing from a mutual friend that Mr. Elian had been spotted in Montréal living it up and smoking expensive cigars at the Grand Prix. Mr. Elian denied having been at the Grand Prix but did admit to enjoying cigars. The truth of this does not matter. The plaintiff clearly had the ability to start the suit based on his knowledge, or that of his lawyers, that the defendants were both domiciled in Ontario. The plaintiff argued that the hearsay that Mr. Elian must have had means to pay for Grand Prix tickets and cigars was a realization or suspicion that Mr. Elian was not forthcoming with details of his assets. While I appreciate that this might have been a legitimate calculation on the part of the plaintiff, the fact that the suit was launched in a fit of pique meant the suit might never have been brought. He knew the defendants were in Ontario and did not proceed with the examination of their assets in Ontario. The discoverability principle under s. 5(1)(b) cannot extend a limitation period based on indifference of the matters in s. 5(1)(a).

[31] The fact that a party brought a lawsuit based on the information available at the time of commencement can mean that the time he had or could have had that information is deemed to be the date on which the facts required to bring the suit were discovered: Soper (Guardian of) v. Southcott, and . By having brought the suit in 2016 based on no knowledge of the defendants’ ability or reason to pay the judgment apart from their domicile in Ontario, they are deemed to have had sufficient knowledge or reason to bring the claim here, at least as of 2012, when the plaintiff’s lawyer sent the defendants a letter saying the plaintiff will no longer tolerate the non-payment of the judgment.

Promissory Estoppel

[32] Promissory estoppel is an equitable doctrine precluding a party from advancing a legal right after the counterparty relied, to its detriment, on a representation that the right would not be advanced. There has been criticism of the maxim that it cannot be used as a shield but not a sword, but that is due to the risk of mixed and confusing metaphors. For example, the doctrine is frequently invoked to preclude a party to a contract from relying on an exemption clause, e.g. an insurance policy exclusion, to allow another cause of action to go forward as a sword. Promissory estoppel cannot be the basis for a cause of action, but it can prevent a defence to the cause of action. The promissory element of the estoppel therefore imports the idea of an agreement, express or implied, that the defence will not be used.

[33] In the case of limitation periods, contractual or statutory, promissory estoppel amounts to a unilateral promise not to rely on the prescription period until the promise is withdrawn. If the claimant refrains from starting a suit because of the promise, the limitation period is tolled until the promise is withdrawn. The leading Canadian case remains Maracle v. Travellers Indemnity Co. of Canada, [1991] 2 SCR 50. At pp. 58-59 SCR, Sopinka J. made this oft-quoted summary of the doctrine:

An admission of liability is frequently made in the course of settlement negotiations. This is often a preliminary step in order to clear the way to enter into a discussion as to quantum. Indeed, when an offer to pay a stated amount is made by one party to the other, an admission of liability is usually implicit. In this type of situation, the admission of liability is simply an acknowledgment that, for the purpose of settlement discussions, the admitting party is taking no issue that he or she was negligent, liable for breach of contract, etc. There must be something more for an admission of liability to extend to a limitation period. The principles of promissory estoppel require that the promissor, by words or conduct, intend to affect legal relations. Accordingly, an admission of liability which is to be taken as a promise not to rely on the limitation period must be such that the trier of fact can infer from it that it was so intended. There must be words or conduct from which it can be inferred that the admission was to apply whether the case was settled or not, and that the only issue between the parties, should litigation ensue, is the issue of quantum. Whether this inference can be drawn is an issue of fact. If this finding is in favour of the plaintiff and the effect of the admission in the circumstances led the plaintiff to miss the limitation period, the elements of promissory estoppel have been established.

[34] In Cronnox Inc. v. Lloyd’s Underwriters, 2018 ONSC 6437, at para. 73, this court applied the Maracle analysis and concluded that the absence of a specific intention to affect legal relations was fatal to the assertion of promissory estoppel.

[35] Before I consider the evidence on this issue, I need to address the way the issue was pleaded. The statement of claim pleaded the requisite elements of an action to enforce a foreign judgment. It did not, however, plead a cause of action coming within the two-year limitation period and did not invoke any factual basis for delaying the commencement of it or for the suspension or waiver of the limitation period. It was, standing alone, subject to a rule 21 motion for dismissal on the grounds of failing to disclose a reasonable cause of action: Joseph v. Paramount Canada's Wonderland, 2008 ONCA 469, at paras. 3-6.

[36] The pleading of promissory estoppel was in the reply, with specific factual reference to a tolling agreement that was to last until 2023. That tolling agreement was never put into evidence, by tactical agreement of the parties. Nevertheless, I allowed the plaintiff to lead evidence on the estoppel and to try to elicit evidence from the defendants on cross-examination, if only because a pleading amendment would have been mandatory under rule 26.01.

[37] There is obviously a judicial sympathy for someone who is owed a large amount of money, especially under a judgment of a sister superior court. No one put a gun to Mr. Elian’s head to accept the loans. From a moral perspective, he knows in his heart that he owes the money. Limitations defences have traditionally been interpreted strictly, mainly because of the rule of statutory construction that presumes the legislature does not intend to abrogate common-law rights beyond the express terms: Pioneer Corp. v. Godfrey, 2019 SCC 42, [2019] 3 SCR 295, at para. 85; Ukrainian (Fort William) Credit Union Ltd. v. Nesbitt, Burns Ltd.. For this reason, I did not hold the plaintiff strictly to the pleadings on the limitations issue.

[38] At the trial of this action, I waited for and did not hear or read any evidence from the plaintiff, or from the defendant Mr. Elian on cross-examination, beyond the latter’s promise to repay the loan when he was back on his feet. By this I construe him to have admitted or acknowledged indebtedness on the loan, but that loan had merged into the judgment. Although this may be a distinction that Mr. Elian may not have made, the plaintiff and his lawyers must have known about it in having obtained the judgment. None of the discussions between the parties included a statement by Mr. Elian referring to a limitation period.

[39] The plaintiff testified that he wanted the defendants and Dr. Elian to sign the loan agreement to consolidate the various loans in the preceding year. He wanted to preserve his rights by obtaining the judgment. As stated earlier, he and his lawyers could have obtained written acknowledgments, either of the judgment as a contract debt in Ontario, or of the original loan if judgment had not been obtained, prior to the second anniversary of the last acknowledgment. They could also have started an Ontario lawsuit for enforcement of the judgment prior to the presumptive expiry of the limitation period to preserve the plaintiff’s rights. Indeed, as shown in the rule 48.14 order of Associate Justice Josefo of April 7, 2021, the plaintiff had not been in any rush to prosecute the Ontario action once it was started in 2016.

[40] Counsel for the plaintiff urged the court to accept Mr. Elian’s repeated assurances that he would repay the loan once he was back on his feet as a perpetual promise amounting to a promise not to rely on the limitation period. The problem with this argument was that there was no evidence that Mr. Elian was ever aware of the limitation period in Ontario. For a promissory estoppel to arise from an inferred intention to affect legal relations between parties, the person making the unilateral promise must have the specific legal relation in his or her contemplation. All it would have taken was for the plaintiff to say he was worried about the expiry of statutes of limitations, whether in Ontario or otherwise, to prompt a response that the plaintiff need not worry about it. However vague or minimal, that is the type of inferred promise that Maracle and other appellate decisions require to estop a defendant from relying on a limitation period or other positive defence to a claim.

[41] I therefore decline to find that the defendants were estopped from relying on the two-year Ontario limitation period for the commencement of this action. The evidence that Mr. Elian had made several open-ended promises to pay when he landed on his feet did not amount to evidence from which it could be inferred that he intended to change the legal relation between the parties consisting of a two-year limitation period for starting an enforcement action in Ontario. All promises, including implied promises, require some contemplation of the legal relation to be entered into or altered. Nothing Mr. Elian said to the plaintiff ever came close to being a promise not to rely on the limitation period.

Conclusion

[42] The action is dismissed on the basis that it was prescribed pursuant to sections 4 and 5 of the Act.

[43] The parties have each submitted bills of costs. The amounts are within $3,000 of each other. I do commend both parties’ counsel on their professionalism and their success in delivering access to justice in an affordable manner. I hereby award costs to the defendants, payable by the plaintiff, in the amount of $60,000.00, inclusive of disbursements and HST.

Akazaki J. Released: February 12, 2024