"It Started With A Bang, But Ended With A Whimper": Schreiber v. Mulroney

“Mr. Schreiber has traveled a long road in fighting his extradition to Germany. He is now at the end of that road. The motion for an interlocutory injunction is dismissed.”

Schreiber v. Ontario (Justice), 2009 CanLII 41216 (ON S.C.) per Conway, J.

So ends Karl-Heinz Schreiber’s byzantine courtroom battle to avoid deportation and extradition to face criminal charges in Germany: Mulroney inquiry’s star witness to be deported (by Juliet O’Neill via CanWest News Service/Toronto Star)

Now that Mr. Schreiber awaits his fate in a German criminal court, “all’s well, that end’s well” according to former Prime Minister Mulroney’s Conservative Party faithful: All is forgiven among tories-Harper Cabinet attends gala for former PM (Graeme Hamilton, National Post)

The Oliphant Commission (formally named the Commission of Inquiry into Certain Allegations Respecting Business and Financial Dealings Between Karlheinz Schreiber and the Right Honourable Brian Mulroney), has heard final submissions and the final report of The Commissioner, The Honourable Jeffrey Oliphant, Justice of the Court of Queen’s Bench of Manitoba is under reserve.

Behind this backdrop, another legal battle, which started with a bang, has also ended with a whimper.

In Schreiber v. Mulroney 2007 CanLII 31754 (ON S.C.) , Mr. Schreiber sued former Prime Minister Brian Mulroney for $300,000, alleging that Mr. Mulroney had breached an agreement to help him with certain business ventures after leaving office. The underlying facts have raised some concerns, in part because of the way Schreiber paid Mulroney, which was in large amounts of cash. Mulroney was served outside Ontario, in Quebec. He moved to challenge the court’s jurisdiction or in the alternative for a stay of proceedings in favour of Quebec.


In an amended statement of claim served without leave in Quebec, the plaintiff, Mr Schreiber, seeks to recover alleged payments (the “Payments”) of $300,000, in the aggregate, to the defendant, Mr Mulroney, plus interest. The Payments are said to have been made pursuant to an oral agreement (the “Agreement”) that Mr Mulroney subsequently breached. Mr Mulroney has moved pursuant to rules 17.06 and 21.01(3) (a), and section 106 of the Courts of Justice Act, for orders setting aside service of the amended statement of claim, and dismissing or staying the proceeding.

The grounds on which Mr. Mulroney relied are that Mr Schreiber’s claims did not fall within any of the cases in which service outside Ontario without leave is permitted pursuant to rule 17.02 of the Rules of Civil Procedure; that the Ontario court has no jurisdiction in the absence of a real and substantial connection between the subject matter of the dispute and Ontario; and, in the alternative, that Quebec is a more appropriate forum.

In response, Mr Schreiber contended that service ex juris was permitted as his claims were in respect of a contract made, and breached, in Ontario (rules 17.02 (f) (i) and (iv)) and, as a consequence of the breach, he has sustained damages in Ontario (rule 17.02 (h)). He asserted the existence of a real and substantial connection with Ontario, and denied that Quebec was a more appropriate forum.

The statement of claim was issued on March 22, 2007. Mr Schreiber claimed that the payments were made pursuant to the Agreement as a prepayment for “certain services” that Mr Mulroney undertook to perform. He alleged that the services were not performed despite Mr Mulroney’s assurances that he would provide them and numerous demands for performance by Mr Schreiber.

On February 20, 2007, Mr Schreiber wrote to Mr Mulroney complaining that he had “done nothing”, demanding the return of the funds plus interest by March 5, 2007, and advising that he would commence a civil lawsuit if Mr Mulroney did not comply. No response to the letter was received by Mr Schreiber. In a letter of March 14, 2007, counsel for Mr Schreiber – Mr Anka – advised Mr Mulroney that he had been instructed to commence proceedings in Ontario if Mr Schreiber’s demands for the repayment of the funds plus interest were not complied with within a further seven days. Mr Prehogan – counsel for Mr Mulroney – replied in a letter of March 20, 2007 stating:

“Mr Mulroney denies that he owes any money to Mr Schreiber. We have instructions to accept service of your initiating process on Mr Mulroney’s behalf.” [emphasis added]

On March 22, copies of the statement of claim were forwarded to Mr Prehogan with a request for his acceptance of service to be endorsed on one of them. After reviewing the statement of claim, Mr Prehogan declined to accept service on the ground that Mr Schreiber’s claims had no connection to Ontario, and that the courts of the province had no jurisdiction to try them. He stated that he had given no undertaking to accept service and that he was now instructed to refuse to do so, and to return the documents to Mr Anka.

Mulroney’s lawyer moved to set aside a default judgment obtained against his client, which Newbould, J. granted and ordered substantial indemnity costs including costs in excess of $60,000.00; one-quarter of which were made payable by Schreiber’s lawyer on a joint and several basis. Mr. Schreiber’s motion for recusal on grounds of bias was, unsurprisingly,  dismissed by Justice Newbould: Schreiber v. Mulroney 2007 CanLII 37691 (ON S.C.).

On December 20, 2007, Justice Cullity of the Ontario Superior Court of Justice released his decision holding that Schreiber’s claim was dismissed for lack of jurisdiction. Justice Cullity held that there was no real and substantial connection between the dispute and Ontario, and as a result Ontario did not have jurisdiction; hence, the action was dismissed. While most of the connecting factors favoured Quebec over Ontario, Cullity J. stated that if the court had jurisdiction, he would have stayed proceedings in favour of Quebec.

Justice Cullity’s decision raises a number of interesting jurisdictional issues.

First, Mulroney’s Ontario lawyer initially indicated a willingness to accept service, but on receiving a copy of the statement of claim he refused to do so because of the lack of connection between the dispute and Ontario. Justice Cullity held that this did not raise any issue of Mulroney having attorned (i.e. submitted to the Ontario court’s jurisdiction) as his lawyer did not in the end accept the service. Cullity J. noted that “as it is accepted that valid service is not by itself sufficient to establish jurisdiction, an acceptance of service should not have this effect by treating it as an attornment and, in effect, a submission to the jurisdiction” (para. 25).

Justice Cullity appears to have confused issues of service inside the jurisdiction with those of service ex juris (i.e. outside Ontario), as well as the distinction between “presence-based jurisdiction” and “consent-based jurisdiction”. In Muscutt v. Courcelles, (2002) 60 O.R. (3d) 20, 35, 213 D.L.R. (4th) 577 at 586 (Ont. C.A.), Justice Sharpe identified three avenues to establish jurisdiction simpliciter:

“There are three ways in which jurisdiction may be asserted against an out-of-province defendant: (1) presence-based jurisdiction; (2) consent-based jurisdiction; and (3) assumed jurisdiction. Presence-based jurisdiction permits jurisdiction over an extra-provincial defendant who is physically present within the territory of the court. Consent-based jurisdiction permits jurisdiction over an extra-provincial defendant who consents, whether by voluntary submission, attornment by appearance and defence, or prior agreement to submit disputes to the jurisdiction of the domestic court. Both bases of jurisdiction also provide bases for the recognition and enforcement of extra-provincial judgments.

. . . Assumed jurisdiction is initiated by service of the court’s process out of the jurisdiction pursuant to Rule 17.02. Unlike presence-based jurisdiction and consent-based jurisdiction, prior to Morguard and Hunt, assumed jurisdiction did not provide a basis for recognition and enforcement.”

Valid service outside Ontario does not confer jurisdiction: the plaintiff must also demonstrate a real and substantial connection between the defendant and the subject-matter of the action. However, this does not apply to service inside Ontario.. If service is effected based upon a defendant’s presence inside the jurisdiction, either personally or through an acceptance of service by an Ontario lawyer; traditionally this has been sufficient to establish adjudicatory jurisdiction and the real and substantial connection test established by the Supreme Court of Canada in Morguard and reinforced in Beals v. Saldanha, is inapplicable. In other words, there is no attornment issue; if Mulroney’s lawyer had accepted service in Ontario; this would have ended the jurisdictional analysis. The mere fact that an Ontario lawyer accepts service for a non-resident (i.e. foreign) defendant outside the jurisdiction does not alter the conclusion that service inside the jurisdiction has been effected.

Second, Justice Cullity states that “Where a defendant moves to set aside service on the ground that there is no real and substantial connection with Ontario, the question will be whether there is a good arguable case that the connection exists” (para. 18.2). However, the plaintiff is usually required to show there is a real and substantial connection, not simply that there is a good arguable case that such a connection exists. If jurisdictional facts are disputed, then the burden of proof is on the plaintiff to demonstrate that a “good arguable case” exists, but, ultimately, the question of whether there is a real and substantial connection is a legal, not a factual one.

Third, Justice Cullity appears to conclude that the eight-factor Muscutt formulation is focused on tort claims, and that further factors are necessary in respect of contract claims (para. 37). The factors he suggests: i.e. the place where the contract was made, performed and breached and where any damage was sustained, are those factors referenced in the discretionary forum non conveniens test, which allows a court to stay an action, following the preliminary inquiry into jurisdiction simpliciter over the parties and the dispute.

Fourth, Justice Cullity’s analysis of Rule 17.02, (service without leave) is problematic. Rule 17.02(h) of the Rules of Civil Procedure reads:

Damages sustained in Ontario-

17.02(h) in respect of damage sustained in Ontario arising from a tort, breach of contract,breach of fiduciary duty or breach of confidence, wherever committed;

Rule 17.02(h), however, does not, in of itself confer jurisdiction (see Muscutt).

In Muscutt, the Ontario Court of Appeal identified eight relevant factors when applying the “real and substantial connection” test to the threshold issue of jurisdiction simpliciter.

(1) the connection between the forum and the plaintiff’s claim;

(2) the connection between the forum and the defendant;

(3) the unfairness to the defendant in assuming jurisdiction;

(4) the unfairness to the plaintiff in not assuming jurisdiction;

(5) the involvement of other parties to the suit;

(6) the court’s willingness to recognize and enforce an extra-provincial judgment rendered on the same jurisdictional basis;

(7) whether the case is interprovincial or international in nature; and

(8) comity and the standards of jurisdiction, recognition and enforcement prevailing elsewhere.

If the plaintiff otherwise fails the 8-factored real and substantial connection test, then whether or not service outside Ontario was valid, is irrelevant All Rule 17.02 does is to give the defendant notice of the nature of the claim and the jurisdictional basis relied upon. However, Justice Cullity held that Mr. Schreiber was in effect seeking restitution of the $300,000, rather than damages for breach of contract (para. 70).


1. We will likely never know what the merits of Mr. Schreiber’s claim are, unless he commences a new action in Quebec, since his action was stayed in Ontario and he was extradited to Germany;

2. Before the court can impose a cost award against a lawyer personally under Rule 57.07,(1) of the Ontario Rules of Civil Procedure, it is required to give notice to the lawyer that it is considering doing so, to allow the lawyer to make submissions or retain counsel (if necessary) to avoid this type of sanction (Rule 57.07(2)). Justice Newbould ordered that Mr. Schreiber pay $64,154,87 including GST, while he also held Mr. Anka personally liable to pay a quarter of this amount, or $16,038.72 (Ouch!). Newbould, J. also called the steps taken to obtain the default “egregious and wrong” and reversed the default judgment. You will see from the costs endorsement, that there are some stinging rebukes on the use of intemperate language in exchanges of correspondence that delayed the motion and proceedings, generally.

Antonin I. Pribetic

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