Preview
INDEX NO. 161257/2013
(FILED: NEW YORK COUNTY CLERK 0670372014)
NYSCEF DOC. NO. 100 RECEIVED NYSCEF 06/03/2014
SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NEW YORK
penne cent nnn enennnnenmnnnnnnnnnnnnnne
anne nnn nnnn anne anne nennn
DEUTSCHE BANK AG,
Plaintiff, Index No. 161257/2013
-against-
ALEXANDER VIK; CARRIE VIK, AS AN INDIVIDUAL REPLY-DECLARATION
AND AS TRUSTEE OF THE CSCSNE TRUST; THE
CSCSNE TRUST; C.M. BEATRICE, INC. AND
SEBASTIAN HOLDINGS, INC.,
Defendants.
mannee: =
Frank A. Schafer, declares under the penalties of perjury as follows:
1 On 18. February 2014 | submitted a declaration in support of the mo-
tion of defendants to dismiss the Complaint (the “February-Declaration’).
2. With regard to my person, my academic education and my professional
status | refer to the statements given under items 3. and 4. of the February-Declaration
3 | have been asked to supplement the February-Declaration with regard
to specific questions concerning the Anfechtungsgesetz (German Act concerning the contest
of a Debtor's Transaction) as they have been raised in the Declaration of Christian Duve dat-
ed 2 May 2014. In particular | have been requested
a) to describe the allocation of burden of proof when a creditor in-
tends to challenge a transfer of assets that the debtor effected with the intent to
harm the creditors within the last ten years prior to the challenge (sec. 3 para. 1
Anfechtungsgesetz);
b) to specify the exceptions to the expiry of the time limits set forth
by sec. 3 and 4 Anfechtungsgesetz.
When giving answers to these questions, | will not argue the facts of the case at hand or
subsume them to the Anfechtungsgesetz or apply the Anfechtungsgesetz to the alleged facts
but rather state the German law and give examples of precedents or legal commentaries so
that it will be up to the Court to derive its own conclusions
4 Pursuant to sec. 3 para. 1 Anfechtungsgesetz, the creditor is entitled to
challenge any transfer of assets by the debtor with the intent to harm its creditors within the
last 10 years prior to the filing of the challenge, if the other party — i. e. the recipient benefit-
ting from the legal act - was aware of the debtor's intent at the time of the legal act (= trans-
fer).
a) Basically the creditor has to prove all of the above-mentioned
prerequisites for the right to challenge a legal act, i.e. transfer of assets. This par-
ticularly applies to the debtor's intent to harm its creditors.
b) With regard to the creditor's burden to prove the debtor's intent
to harm (see above under a)) the Act does not provide for any legal presump-
tions. Therefore the creditor has to prove the intent of the debtor with regard to
the challenged transfer and his awareness of the imminent illiquidity at the time
the transfer was effected. Since the debtor's intentions and his awareness are
not visible objective circumstances but purely subjective facts it is often difficult to
prove. Thus the German Federal Court of Justice (Bundesgerichtshof) held in
various cases that indications of evidence may show the debtor's subjective in-
tent to harm its creditors (“tatsdchliche Beweisanzeichen’) (e.g. BGH NJW 1993,
3267, 3268; BGH NJW-RR 2002, 478, 480; BGH WM 2008, 464, 466). If — for
example — the recipient has received a payment by the debtor, although this
payment was due at a later date, this objective course of events may indicate the
debtor's intent to harm his (other) creditors.
c) It should be noted, that this case law does not result in a rever-
sal of the burden of proof, but rather in an “assumption on a factual basis” which
is justified on the basis of “common experience” (Kirchhof in Munchener Komm.
z. AnfG, 2012, § 3 Rn. 82). Thus, if the debtor can reasonably explain, why in the
particular circumstances of the case at hand this “assumption on a factual basis”
would be incorrect, the creditor has not proven the debtor's (subjective) intent to
harm its creditors by just proving the relevant (objective) course of events (which
- under usual conditions — would justify the “assumption on a factual basis”)
(Haertlein in Kindl/Meller-Hannich/Wolf, HK-ZV, 2. Aufl. 2013, § 3 AnfG Rn. 19;
Kirchhof in Munchener Komm. z. AnfG, 2012, § 3 Rn. 82). In other words: the
debtor is always in the position to rebut the “assumption on a factual basis”.
qd) A derogation to the principle that the creditor has to prove all
prerequisites (see above under a)) follows from sec. 3 para. 1 sent. 2
Anfechtungsgesetz: The awareness of the recipient of the assets of the debtor's
intent to harm its creditors is assumed by law if the recipient knew that the debt-
or’s illiquidity was imminent and that the legal act (transfer of assets) harmed the
creditors. This presumption by law results in a reversal of the burden of proof, but
only with regard to the requirement of the “awareness of the recipient of the
debtor's intent to harm” (Kirchhof in Munchener Komm. z. AnfG, 2012, § 3 Rn.
58). Knowledge of the recipient of the imminent illiquidity has to be proven by the
claimant. Consequently, if the claimant has proven that the recipient knew that
the debtor's illiquidity was imminent and that the transfer of assets harmed the
creditors, the recipient has to prove that he was not aware of the debtors’ intent
(Kirchhof in Munchener Komm. z. AnfG, 2012, § 3 Rn. 58; Haertlein in
Kindl/Meller-Hannich/Wolf, HK-ZV, 2. Aufl. 2013, § 3 AnfG Rn. 21).
5 A declaration has to distinguish precisely between the three periods as
prescribed by the Anfechtungsgesetz, the burden of proof with regard to the different pre-
requisites of the Anfechtungsgesetz, the exceptional circumstances under which general
principles of law overrule the Anfechtungsgesetz and the burden of proof for these general
overruling principles.
6 As set forth in sec. 8. (i) to (iii) of the February-Declaration, the respec-
tive rights for a creditor to challenge a legal act are barred after certain periods of time as set
forth by the Anfechtungsgeseiz.
a) The length of the preclusive period (two, four or ten years, re-
spectively) depends on the section of the Anfechtungsgesetz the challenge is
based on. When calculating the preclusive period, a retroactive evaluation has to
be carried out as from the date of challenge (for details see secs. 9 - 11 of the
February-Declaration).
b) These deadlines provided by the Anfechtungsgesetz for the dif-
ferent rights to challenge are not proper time-bar provisions within the general le-
gal meaning of the statute of limitations but “preclusion periods” under substan-
tive law. Thus, if the creditor fails to challenge the legal act in due time, his right
to challenge is no longer existent (and not only time-barred) (Kirchhof in Man-
chener Komm. z. AnfG, 2012, § 7 Rn. 8).
°) Therefore, in principle, an extension of preclusion periods is not
admissible.
q) The Anfechtungsgesetz only provides for two derogations to
this principle. However, even these derogations do not lead to an extension of
the preclusion period, but rather modify its calculation:
(i) On the one hand such modification may apply if the
creditor, prior to having obtained an enforceable judgment or prior to
maturity of his claim, had informed the counterparty (i.e. the recipient of
the transfer) in writing of his intent to contest the legal act. In this case,
the period is calculated retroactively as from the date of receipt of the
creditor's notice if the debtor had already been unable at that time to
satisfy the creditor and if the contestability is asserted in court prior to
expiry of 2 years as from that date (comp. sec. 7 sent. 2 Anfechtungs-
gesetz).
(ii) On the other hand the calculation of the time period may
be modified if insolvency proceedings were instituted: Pursuant to
sec. 18 para. 2 sent. 1 Anfechtungsgesetz the time period in this case
is calculated retroactively as from the date of the opening of the insol-
vency proceedings, if the challenge of the legal act was not filed with
the court at this date and is filed with the court within one year after the
termination of the insolvency proceedings.
(iii) Filing a claim with a competent court for payment of
money does not qualify as instituting insolvency proceedings. The term
of sec, 18 para. 2 sent. 1 Anfechtungsgesetz requires that a competent
court has opened insolvency proceedings and that these insolvency
proceedings have been terminated.
e) It is a principle of German civil law that the exercise of any right
is subject to the standards of good faith.
(i) In this context, in legal commentaries on the
Anfechtungsgesetz (only extraordinary few cases have been tried on
these principles) it is argued that in exceptional cases the recipient
may not rely on the expiry of the preclusion period if this would violate
the standards of good faith (e.g. Haertlein in Kindl/Meller-Hannich/Wolf,
HK-ZV, 2. Aufl. 2013, § 7 AnfG Rn. 17; Kirchhof in Minchener Komm.
z. AnfG, 2012, § 7 Rn. 42). It is pointed out by these commentaries that
in cases of a violation of the good-faith-standards the creditor has to
challenge the legal act within a short period as soon as the distraction
ceases to exist (Kirchhof in Munchener Komm. z. AnfG, 2012, § 7 Rn.
43).
(ii) Since — on the basis of these commentaries — a violation
of good-faith-standards may only be considered in exceptional circum-
stances, the creditor has to prove the exceptional circumstances
(Kirchhof in Munchener Komm. z. AnfG, 2012, § 7 Rn. 62). Thus it
should not suffice if a creditor argues that
a third person (not the debtor himself) has falsely informed the
creditor that the debtor did not have sufficient assets to pay its
obligations,
a third person (not the debtor himself) intermingled the debtor's
assets with its own or
a third person (not the debtor himself) transferred the ownership
of its subsidiaries.
It should suffice e.g. if the recipient of the legal act (= transfer) has in-
duced the creditor not to file the claim by e.g.
waiving the time-limits or
- promising an upcoming fulfilment before the expiry of the time-
limits.
A creditor should not be prevented by the debtor from challenging the
relevant legal act (transfer of assets) if a third person orally refers to
the debtor's debts as its own. Even if this may be interpreted as a
guarantee (“Burgschaft”) under German law, this would not distract an
experienced creditor from challenging the relevant legal act because
under German law a guarantee requires a written confirmation of the
guarantor in order to become effective (comp. sec. 766 sent. 1 BGB
(German Civil Code)). A distraction seems even more implausible with
regard to a creditor who — as a bank — is familiar with these formal re-
quirements.
Dated: Dusseldorf, Germany
23 May 2014
/)
hI ot at
Frank A. Schafer
Preview
INDEX NO. 161257/2013 (FILED: NEW YORK COUNTY CLERK 0670372014) NYSCEF DOC. NO. 100 RECEIVED NYSCEF 06/03/2014 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK penne cent nnn enennnnenmnnnnnnnnnnnnnne anne nnn nnnn anne anne nennn DEUTSCHE BANK AG, Plaintiff, Index No. 161257/2013 -against- ALEXANDER VIK; CARRIE VIK, AS AN INDIVIDUAL REPLY-DECLARATION AND AS TRUSTEE OF THE CSCSNE TRUST; THE CSCSNE TRUST; C.M. BEATRICE, INC. AND SEBASTIAN HOLDINGS, INC., Defendants. mannee: = Frank A. Schafer, declares under the penalties of perjury as follows: 1 On 18. February 2014 | submitted a declaration in support of the mo- tion of defendants to dismiss the Complaint (the “February-Declaration’). 2. With regard to my person, my academic education and my professional status | refer to the statements given under items 3. and 4. of the February-Declaration 3 | have been asked to supplement the February-Declaration with regard to specific questions concerning the Anfechtungsgesetz (German Act concerning the contest of a Debtor's Transaction) as they have been raised in the Declaration of Christian Duve dat- ed 2 May 2014. In particular | have been requested a) to describe the allocation of burden of proof when a creditor in- tends to challenge a transfer of assets that the debtor effected with the intent to harm the creditors within the last ten years prior to the challenge (sec. 3 para. 1 Anfechtungsgesetz); b) to specify the exceptions to the expiry of the time limits set forth by sec. 3 and 4 Anfechtungsgesetz. When giving answers to these questions, | will not argue the facts of the case at hand or subsume them to the Anfechtungsgesetz or apply the Anfechtungsgesetz to the alleged facts but rather state the German law and give examples of precedents or legal commentaries so that it will be up to the Court to derive its own conclusions 4 Pursuant to sec. 3 para. 1 Anfechtungsgesetz, the creditor is entitled to challenge any transfer of assets by the debtor with the intent to harm its creditors within the last 10 years prior to the filing of the challenge, if the other party — i. e. the recipient benefit- ting from the legal act - was aware of the debtor's intent at the time of the legal act (= trans- fer). a) Basically the creditor has to prove all of the above-mentioned prerequisites for the right to challenge a legal act, i.e. transfer of assets. This par- ticularly applies to the debtor's intent to harm its creditors. b) With regard to the creditor's burden to prove the debtor's intent to harm (see above under a)) the Act does not provide for any legal presump- tions. Therefore the creditor has to prove the intent of the debtor with regard to the challenged transfer and his awareness of the imminent illiquidity at the time the transfer was effected. Since the debtor's intentions and his awareness are not visible objective circumstances but purely subjective facts it is often difficult to prove. Thus the German Federal Court of Justice (Bundesgerichtshof) held in various cases that indications of evidence may show the debtor's subjective in- tent to harm its creditors (“tatsdchliche Beweisanzeichen’) (e.g. BGH NJW 1993, 3267, 3268; BGH NJW-RR 2002, 478, 480; BGH WM 2008, 464, 466). If — for example — the recipient has received a payment by the debtor, although this payment was due at a later date, this objective course of events may indicate the debtor's intent to harm his (other) creditors. c) It should be noted, that this case law does not result in a rever- sal of the burden of proof, but rather in an “assumption on a factual basis” which is justified on the basis of “common experience” (Kirchhof in Munchener Komm. z. AnfG, 2012, § 3 Rn. 82). Thus, if the debtor can reasonably explain, why in the particular circumstances of the case at hand this “assumption on a factual basis” would be incorrect, the creditor has not proven the debtor's (subjective) intent to harm its creditors by just proving the relevant (objective) course of events (which - under usual conditions — would justify the “assumption on a factual basis”) (Haertlein in Kindl/Meller-Hannich/Wolf, HK-ZV, 2. Aufl. 2013, § 3 AnfG Rn. 19; Kirchhof in Munchener Komm. z. AnfG, 2012, § 3 Rn. 82). In other words: the debtor is always in the position to rebut the “assumption on a factual basis”. qd) A derogation to the principle that the creditor has to prove all prerequisites (see above under a)) follows from sec. 3 para. 1 sent. 2 Anfechtungsgesetz: The awareness of the recipient of the assets of the debtor's intent to harm its creditors is assumed by law if the recipient knew that the debt- or’s illiquidity was imminent and that the legal act (transfer of assets) harmed the creditors. This presumption by law results in a reversal of the burden of proof, but only with regard to the requirement of the “awareness of the recipient of the debtor's intent to harm” (Kirchhof in Munchener Komm. z. AnfG, 2012, § 3 Rn. 58). Knowledge of the recipient of the imminent illiquidity has to be proven by the claimant. Consequently, if the claimant has proven that the recipient knew that the debtor's illiquidity was imminent and that the transfer of assets harmed the creditors, the recipient has to prove that he was not aware of the debtors’ intent (Kirchhof in Munchener Komm. z. AnfG, 2012, § 3 Rn. 58; Haertlein in Kindl/Meller-Hannich/Wolf, HK-ZV, 2. Aufl. 2013, § 3 AnfG Rn. 21). 5 A declaration has to distinguish precisely between the three periods as prescribed by the Anfechtungsgesetz, the burden of proof with regard to the different pre- requisites of the Anfechtungsgesetz, the exceptional circumstances under which general principles of law overrule the Anfechtungsgesetz and the burden of proof for these general overruling principles. 6 As set forth in sec. 8. (i) to (iii) of the February-Declaration, the respec- tive rights for a creditor to challenge a legal act are barred after certain periods of time as set forth by the Anfechtungsgeseiz. a) The length of the preclusive period (two, four or ten years, re- spectively) depends on the section of the Anfechtungsgesetz the challenge is based on. When calculating the preclusive period, a retroactive evaluation has to be carried out as from the date of challenge (for details see secs. 9 - 11 of the February-Declaration). b) These deadlines provided by the Anfechtungsgesetz for the dif- ferent rights to challenge are not proper time-bar provisions within the general le- gal meaning of the statute of limitations but “preclusion periods” under substan- tive law. Thus, if the creditor fails to challenge the legal act in due time, his right to challenge is no longer existent (and not only time-barred) (Kirchhof in Man- chener Komm. z. AnfG, 2012, § 7 Rn. 8). °) Therefore, in principle, an extension of preclusion periods is not admissible. q) The Anfechtungsgesetz only provides for two derogations to this principle. However, even these derogations do not lead to an extension of the preclusion period, but rather modify its calculation: (i) On the one hand such modification may apply if the creditor, prior to having obtained an enforceable judgment or prior to maturity of his claim, had informed the counterparty (i.e. the recipient of the transfer) in writing of his intent to contest the legal act. In this case, the period is calculated retroactively as from the date of receipt of the creditor's notice if the debtor had already been unable at that time to satisfy the creditor and if the contestability is asserted in court prior to expiry of 2 years as from that date (comp. sec. 7 sent. 2 Anfechtungs- gesetz). (ii) On the other hand the calculation of the time period may be modified if insolvency proceedings were instituted: Pursuant to sec. 18 para. 2 sent. 1 Anfechtungsgesetz the time period in this case is calculated retroactively as from the date of the opening of the insol- vency proceedings, if the challenge of the legal act was not filed with the court at this date and is filed with the court within one year after the termination of the insolvency proceedings. (iii) Filing a claim with a competent court for payment of money does not qualify as instituting insolvency proceedings. The term of sec, 18 para. 2 sent. 1 Anfechtungsgesetz requires that a competent court has opened insolvency proceedings and that these insolvency proceedings have been terminated. e) It is a principle of German civil law that the exercise of any right is subject to the standards of good faith. (i) In this context, in legal commentaries on the Anfechtungsgesetz (only extraordinary few cases have been tried on these principles) it is argued that in exceptional cases the recipient may not rely on the expiry of the preclusion period if this would violate the standards of good faith (e.g. Haertlein in Kindl/Meller-Hannich/Wolf, HK-ZV, 2. Aufl. 2013, § 7 AnfG Rn. 17; Kirchhof in Minchener Komm. z. AnfG, 2012, § 7 Rn. 42). It is pointed out by these commentaries that in cases of a violation of the good-faith-standards the creditor has to challenge the legal act within a short period as soon as the distraction ceases to exist (Kirchhof in Munchener Komm. z. AnfG, 2012, § 7 Rn. 43). (ii) Since — on the basis of these commentaries — a violation of good-faith-standards may only be considered in exceptional circum- stances, the creditor has to prove the exceptional circumstances (Kirchhof in Munchener Komm. z. AnfG, 2012, § 7 Rn. 62). Thus it should not suffice if a creditor argues that a third person (not the debtor himself) has falsely informed the creditor that the debtor did not have sufficient assets to pay its obligations, a third person (not the debtor himself) intermingled the debtor's assets with its own or a third person (not the debtor himself) transferred the ownership of its subsidiaries. It should suffice e.g. if the recipient of the legal act (= transfer) has in- duced the creditor not to file the claim by e.g. waiving the time-limits or - promising an upcoming fulfilment before the expiry of the time- limits. A creditor should not be prevented by the debtor from challenging the relevant legal act (transfer of assets) if a third person orally refers to the debtor's debts as its own. Even if this may be interpreted as a guarantee (“Burgschaft”) under German law, this would not distract an experienced creditor from challenging the relevant legal act because under German law a guarantee requires a written confirmation of the guarantor in order to become effective (comp. sec. 766 sent. 1 BGB (German Civil Code)). A distraction seems even more implausible with regard to a creditor who — as a bank — is familiar with these formal re- quirements. Dated: Dusseldorf, Germany 23 May 2014 /) hI ot at Frank A. Schafer