IN THE SUPREME COURT OF BRITISH COLUMBIA
|
Citation: |
Fu v. Zhu, |
|
|
2018 BCSC 9 |
Date: 20180104
Docket: S147523
Registry: Vancouver
Between:
Guoqing Fu
Chunqin Zhou
Xiao Feng Fu
Plaintiffs
And
Cui Yun Zhu also known as Cuiyun Zhu
Hai Ling Xia also known as Hailing Xia
Chen Xia also known as Chenchen Xia
Defendants
Before: The Honourable Madam Justice Griffin
Reasons for Judgment
|
Counsel for the Plaintiffs: |
Roger D. Lee Jared Enns |
|
Counsel for Defendants: |
Kathleen J. MacDonald |
|
Place and Dates of Trial: |
Vancouver, B.C. March 20-24, 27-31, April 3-7, 11-13, 18-21, 24-28, May 1-5, July 10, 17-21, 2017 |
|
Place and Date of Judgment: |
Vancouver, B.C. January 4, 2018 |
Table of Contents
PLAINTIFFS’ EIGHT CHINESE MONEY TRANSFERS
DIRECT SOURCES OF FUNDS FOR PROPERTY PURCHASES
ACCOUNTING EXERCISE AND DEFENDANTS’ CHINESE PAYMENTS
Uncontroversial Facts Regarding Mayfair
Plaintiffs’ Version of Events Regarding Mayfair
Plaintiffs’ Version of Accounting Regarding Mayfair
Defendants’ Version of Events Regarding Mayfair
Defendants’ Version of Accounting Regarding Mayfair
Analysis of the Evidence Regarding Mayfair
Prior Inconsistent Versions of Plaintiffs’ Claim
Plaintiffs’ Credibility Generally
Needing D1’s Assistance in Canada
Defendants’ Immigration Intentions
Source of Money in D1’s HSBC Account
Parties’ Conduct Concerning Rental of Mayfair and Expenses
D1’s Reason for Putting Mayfair in Plaintiffs’ Names
Frailties in D2’s Evidence Regarding Mayfair
The Eight Transfers in China and Plaintiffs’ Records
Accounting Discussions in April and May 2013
Possible Reasons for Transfers of Money in China from Plaintiffs to Defendants
Uncontroversial Facts Regarding W. 19th
Plaintiffs’ Version of Events Regarding W. 19th
Defendants’ Version of Events Regarding W. 19th
Analysis of the Evidence Regarding W. 19th
Prior Inconsistent Versions of Plaintiffs’ Claim
Defendants’ Evidence Regarding W. 19th
Source of Money in D1’s HSBC Account
Uncontroversial Facts Regarding Elm
Plaintiffs’ Version of Events Regarding Elm
Defendants’ Version of Events Regarding Elm
Analysis of the Plaintiffs’ Evidence Regarding Elm
Prior Inconsistent Versions of Claim
Alleged False Inflation of Purchase Cost of Elm
Allegations Regarding USD $160,000
The Defendants’ Chinese Payments
Analysis of the Defendants’ Evidence Regarding Elm
The Defendants’ Chinese Payments
[1] This is a case involving competing claims to ownership of residential properties in Vancouver, British Columbia. There are two families on either side of the case. I will refer to the plaintiffs as “the Fu Family” and the defendants as “the Xia Family”.
[2] The Fu Family and the Xia Family are from the People’s Republic of China. They both invested in real estate in China, often in parallel in the same development projects and sometimes together in partnerships, starting in 2007.
[3] Because some of the parties are family members and have similar names I will refer to the parties by the order in which they appear in the style of proceeding.
[4] The two key people involved in making these investments were the second-named plaintiff Ms. Chunqin Zhou (I will refer to her as “P2”) and the first-named defendant, Ms. Cui Yun Zhu (I will refer to her as “D1”) who were friends.
[5] The plaintiff Mr. Guoqing Fu (“P1”) is the husband of the plaintiff P2. P2 was at times referred to in the evidence as “Mrs. Fu” to distinguish her name and because she is married to P1.
[6] The third plaintiff, Mr. Xiao Feng Fu, is the son of P1 and P2. I will refer to him as “P3” for ease of reference.
[7] The second-named defendant Mr. Hai Ling Xia is the husband of D1 and will be referred to as “D2”. The third named defendant, Ms. Chen Chen Xia, is the daughter of the other two defendants, and will be referred to as “D3”.
[8] The two families were also involved in exploring immigration to Canada at around the same time.
[9] Ultimately, three residential properties were purchased in Vancouver in 2010, 2011, and 2013. The beneficial ownership and contributions to these properties are the central issues in this case. Each family accuses the other of lying about these matters.
[10] The properties which are the subject of dispute and the key dates of the purchase agreements with arm’s length sellers are:
· 3561 Mayfair Avenue (“Mayfair”), purchase contract made November 25, 2010 for a purchase price of $2,380,000, closing on January 31, 2011 with possession on February 1, 2011;
· 3307 West 19th Avenue (“W. 19th”), purchase contract made March 21, 2011 for a purchase price of $2,850,000, closing on May 20, 2011; and
· 4769 Elm Street (“Elm”), purchase contract made September 25, 2012 for a purchase price of $3,080,000, closing on November 8, 2012.
[11] The following table shows who held registered title to each property at the time it was purchased, and what are the parties’ respective claims to ownership:
|
Property |
Registered Title |
Plaintiffs’ Claim |
Defendants’ Claim |
|
Mayfair |
P1 and P2 |
P1 and P2 own 100% jointly |
D1 and D2 are beneficial owners |
|
W. 19th |
D1 (property subsequently sold) |
P1 and P2 owned a 50% beneficial interest, together with D1 and D2 who owned the other 50% interest |
D1 owned on behalf of her and D2 |
|
Elm |
P3 |
P3 owns solely; D1 owes the Plaintiffs money in relation to the purchase of Elm |
D1 and D2 own a 50% beneficial interest; P1 and P2 own the other 50% beneficial interest |
[12] The plaintiffs say that Mayfair and Elm were always intended to be their sole properties and that registered title reflects true ownership. They say that D1 assisted them in purchasing Elm but misrepresented the amount of money needed to purchase Elm and so they claim they overpaid her and are seeking some of the money to be returned. The plaintiffs describe the overpayment in their pleadings as “Excess Funds” and at trial particularized it as in the amount of $502,296. This is denied by the defendants.
[13] D1 claims by way of counterclaim that Mayfair is held by the plaintiffs in trust for her; and that Elm was a joint investment by the Xia Family and the Fu Family, each holding 50% beneficial interest.
[14] The plaintiffs say that W. 19th was a joint investment by the two families and it was understood that D1 held 50% of her registered interest in trust for P2. D1 says that W. 19th was always her property alone, purchased on behalf of the Xia Family.
[15] D1 sold W. 19th to an unrelated third party on May 28, 2014.
[16] The plaintiffs are seeking a tracing with respect to the proceeds of the sale of the W. 19th property, which they say was used by the defendants towards the purchase of two other properties, 7218 Cartier Street (“Cartier”), which purchase completed on April 18, 2014, and 3545 W. 34th (“W. 34th”), which purchase completed on June 30, 2014.
[17] The trial of this case was in part an attempt at a detailed accounting exercise but it would not be helpful to review all of the evidence in similar detail. I consider the most helpful approach to be to address my findings on each of the properties in dispute, one by one.
[18] However, I will start with an overview of certain transfers of money at issue and what is known about the source of funds to purchase the properties.
[19] Both the Fu Family and Xia Family appear to be very wealthy by Canadian standards, moving hundreds of thousands and ultimately millions of Renminbi (RMB) or dollars around back and forth between each other’s family members’ accounts without worrying about documenting the purpose and without feeling the need to explain the source of their funds to this Court.
[20] It is virtually impossible to “follow the money” as a way of figuring out the true facts of what happened. Some information is known but it does not paint a complete picture. I will sketch out a brief summary of the allegations and known facts regarding the money.
[21] The crux of the plaintiffs’ case is that P2 caused eight money transfers from Fu Family bank accounts in China to Xia Family bank accounts in China, at the direction of D1, all relating to the purchase of the properties in Canada (the “Transfers”).
[22] It is agreed that P1 and P2 used each other’s bank accounts and names on property interchangeably as husband and wife; likewise for D1 and D2.
[23] The eight Transfers in China in RMB, and the approximate Canadian dollar equivalent at the time, were as follows:
|
Designation |
Date |
Amount (RMB) |
CAN$ Equiv. |
|
“1st Transfer” |
Nov. 18, 2010 |
¥1,000,000 |
$153,400 |
|
“2nd Transfer” |
Nov. 18, 2010 |
¥1,000,000 |
$153,400 |
|
“3rd Transfer” |
Feb. 1, 2011 |
¥620,000 |
$ 92,876 |
|
“4th Transfer” |
Mar. 2, 2011 |
¥2,900,000 |
$429,490 |
|
“5th Transfer” |
Mar. 3, 2011 |
¥460,000 |
$ 68,218 |
|
“6th Transfer” |
Apr. 8, 20101 |
¥739,200 |
$108,219 |
|
“7th Transfer” |
Feb. 29, 2012 |
$200,704 |
|
|
“8th Transfer” |
Nov. 26, 2012 |
¥1,026,270 |
$163,988 |
[24] The plaintiffs in their current pleading and final submissions seem to allege that the 1st and 2nd Transfers were for the purchase of Mayfair; the 3rd through 6th Transfers were for the purchase of Mayfair and W. 19th; and the 7th and 8th Transfers were for the purchase of Elm. However, in evidence P2 seemed to say something different: that part of the 1st and 2nd Transfers were for Mayfair and W. 19th; that the 3rd through 5th Transfers were for Mayfair; and the 6th Transfer for W. 19th alone; and again that the 7th and 8th Transfers were for Elm.
[25] It is not seriously contested that these Transfers took place, but the purpose of them is contested as the defendants say they had nothing to do with the purchase of the three Canadian properties.
[26] Over the years there were many transfers of funds between the plaintiffs’ and defendants’ bank accounts in China, in both directions but more from the plaintiffs to the defendants. Indeed, in the timeframe in question from 2007 to 2014 there were approximately 174 wire transfers from the plaintiffs to the defendants in China based on the plaintiffs’ evidence. The defendants say that the eight money Transfers that the plaintiffs have pulled out of these multiple transfers had nothing to do with the Canadian properties but had to do with other investments in property in China or other transactions in China.
[27] For this reason, there was considerable evidence at trial about some of the property transactions in China in which the parties invested. Unfortunately, the parties were also at odds on the true facts of these transactions, which also were not documented by any written agreements. For reasons that will become apparent, I have not found it necessary to sort out the true facts of these transactions as I have rejected the plaintiffs’ version.
[28] There is no question that the direct source of funds for the purchase of Mayfair and W. 19th came from the defendants who supplied the cash both to pay the deposits and to pay the balances due on closing of the purchases. Despite this, the plaintiffs allege that several of the Transfers related to these purchases.
[29] As for Elm, the source of the money for the deposit and the closing balance was mixed and the evidence was confusing. There were multiple transfers of money directly to Canada and within Canada by both families around the time period that Elm was purchased. I will deal with this in more detail when it comes to addressing the facts regarding that purchase.
[30] What is clear is that the 7th Transfer was well before the offer was made to purchase Elm; and the 8th Transfer was after the purchase closed; yet the plaintiffs allege both transfers related to Elm.
[31] The plaintiffs and defendants agree that there were discussions between them regarding accounting in relation to some properties in April and May 2013 but disagree as to what was discussed and what was the outcome.
[32] There were two transfers from the defendants to the plaintiffs that are in issue around the time of or after this accounting, namely transfers made from D1 to P2 in China on April 1 and September 10, 2013, in the amounts of 2,000,000 RMB and 2,075,000 RMB respectively (the “Defendants’ Chinese Payments”). The April 2013 exchange rate of 6.1 RMB to the Canadian dollar means these amounts would be roughly equivalent to $327,869 and $340,164, or a total of approximately $668,033.
[33] The defendants say that the Defendants’ Chinese Payments were to pay back the funds they had borrowed from the plaintiffs to contribute to the purchase of Elm and to make allowance for two future years’ worth of mortgage payments on Mayfair, and any past Mayfair mortgage payments that had been funded out of the plaintiffs’ own money.
[34] The plaintiffs say that these two transfers were unrelated to the Canadian properties, but instead, related to P2’s sale of a one-half interest in a Chinese property investment to the defendants, an investment known as “Dongfan Runyuan”.
[35] The parties agree that the outcome of this case will turn on the credibility of the witnesses and the Court’s findings as to the parties’ intentions when the Canadian properties were purchased.
[36] There was no central agreement governing the various transactions; there were no written agreements between the parties either. The parties admit that their intentions in their dealings were oral and not written and it seemed to me from the evidence that at times the intentions were not even stated but implied.
[37] The parties also admit that some transactions were structured using the name of a person who was not the true beneficiary of the transaction, in order to gain some perceived advantage, whether it be to evade Chinese currency controls, minimize taxes, obtain a favourable mortgage, evade Chinese restrictions on the number of properties a person could own, or otherwise.
[38] Importantly, neither side can prove their version of events without this Court accepting either the oral testimony of P2 or D1 as to the intentions with respect to the purchase of the Canadian properties. It is understood that I may accept or reject all or part of a witness’s evidence.
[39] Some caution had to be exercised in assessing credibility because the witnesses were from another country and culture and did not speak English. Often cultural and linguistic differences can affect the demeanour of witnesses in ways not necessarily understood by the trier of fact. For this reason, I was hesitant to conclude that a witness was evasive, in case what appeared to be evasiveness could be due to language or cultural differences.
[40] I have approached the evidence aware that nuances might be lost in translation, both in terms of the translation of the question to the witness and in the answer. Word choice and word order in a sentence might be an interpreter’s preference and I have been careful not to form judgment based on the wording of a single answer. Rather, I have considered the whole tenor of the evidence in coming to conclusions as to the facts. In my view it would be a mistake to take a single passage from a witness’s evidence as a conclusive admission against interest, given the nuances that might be lost in translation.
[41] As well, I have kept in mind that motives and conduct that might seem improbable to a person raised in a Canadian culture might not be improbable in another cultural context. The very structure of the transactions at issue in this case was unusual in the Canadian context, as it involved large sums of money changing hands over several years, without any written agreements in place or any common accounting practices. I have been mindful that different cultural contexts can affect the court’s perspective as to inherent probabilities or improbabilities.
[42] On the other hand, certain characteristics probably cross all cultures, and that includes the instinct and ability to be self-serving in one’s memory so as to advance one’s own interests, especially when it comes to matters of money.
[43] I also note that there was a great deal of data in front of me to allow me to consider the key witnesses’ evidence. For example, key witnesses testified for several days and so I could consider changes in demeanour during the course of testimony and whether those changes in demeanour were generally consistent or inconsistent with the testimony being truthful. Also, I could compare the demeanour of the witnesses as between each other, as they were all from a similar cultural background and required the use of interpreters.
[44] By the conclusion of the evidence I was confident that I was able to assess credibility largely by considering internal and external consistencies in witnesses’ evidence and the actions of the witnesses.
[45] My assessment of credibility also factored in somewhat, but to a much lesser extent, the demeanour of the witnesses as they answered questions and the inherent probabilities of human behaviour, tempered by an attempted appreciation of cultural context.
[46] Sometimes the difficult matter of assessing credibility is assisted by legal presumptions.
[47] Here at first glance it might appear that legal presumptions were of assistance.
[48] There is a presumption under s. 23(2) of the Land Titles Act, R.S.B.C. 1996, c. 250:
(2) An indefeasible title, as long as it remains in force and uncancelled, is conclusive evidence at law and in equity, as against the Crown and all other persons, that the person named in the title as registered owner is indefeasibly entitled to an estate in fee simple to the land described in the indefeasible title.
[49] The presumption is difficult to give much weight to in this case given that each side admits regularly purchasing properties in the names of other people for various reasons, and each claims that at least one of the properties at issue was put in the name of someone other than the true owner.
[50] There is also the presumption of resulting trust, as summarized in Rascal Trucking Ltd. v. Nishi, 2013 SCC 33 at para. 1:
A purchase money resulting trust arises when a person advances funds to contribute to the purchase price of property, but does not take legal title to that property. Where the person advancing the funds is unrelated to the person taking title, the law presumes that the parties intended for the person who advanced the funds to hold a beneficial interest in the property in proportion to that person’s contribution. This is called the presumption of resulting trust.
[51] The presumption of resulting trust in the above scenario applies where the defence to the claim is that the person advancing the money made a gift.
[52] Here, neither side advances the argument that the person advancing the money made a gift. Rather, each side explains some of the money transfers linked to the property purchases by saying that the other side made a loan to them which was later paid back.
[53] I have concluded on the facts of this case that the legal presumptions are not ultimately of assistance and simply are cancelled out by each party’s respective evidence as to the intentions they had to create express trusts.
[54] I have concluded that the fundamental question as to who were the true owners of the properties at issue must in the end be resolved by the simple balance of probabilities and the test of what facts are more likely than not.
[55] I now turn to analyze the evidence regarding each property.
[56] Starting with the dispute regarding Mayfair, to repeat: the plaintiffs are registered owners of Mayfair which they claim represents the true ownership; the defendants say that the plaintiffs hold Mayfair in trust for them as beneficial owners.
[57] There are some facts that are easy to find in respect of the purchase of Mayfair.
[58] The Fu Family obtained approval to come to Canada as landed immigrants before the Xia Family attained their immigration status.
[59] The Fu Family, each of P1, P2 and P3, arrived in Vancouver from China on November 23, 2010. The day of arrival, they went to a branch of the Bank of Montreal (“BMO”) and opened a bank account in P1 and P2’s name and deposited $4,000 into the account.
[60] D1 came to Vancouver at the same time as the Fu Family. At that time D1 and P2 were close friends and trusted each other.
[61] On November 25, 2010, a couple of days after their arrival in Vancouver, the Fu Family flew to PEI. They did so because they had applied to immigrate through a provincial nominee investor program in PEI and so that is where they needed to go through the immigration process of landing.
[62] D1 stayed in Vancouver and did not accompany the Fu Family to PEI. On November 25, 2010, D1 opened bank accounts with a Richmond, BC branch of HSBC Bank Canada. There was more than one type of account opened but I will refer to all of the defendants’ linked HSBC accounts in the singular.
[63] D1 looked for residential property while in Vancouver, together with Mr. Gu, a realtor associated with Pacific Place-ARC Realty Ltd.
[64] On November 25, 2010, D1 signed a contract of purchase and sale in the names of P1 and P2, to purchase Mayfair. The evidence is that Mr. Gu had no trouble signing the document falsely attesting to witnessing P1 and P2 signing it instead of D1. He did not testify at trial but this fact was undisputed by the parties.
[65] On November 28 or 29, 2010, the Fu Family returned to Vancouver from PEI.
[66] On November 29, 2010, D1 received just under $600,000 in her HSBC account in Vancouver, namely $599,995 wired from elsewhere.
[67] The same day, November 29, 2010, D1 wired into the BMO account of P1 and P2 the amount of $200,000.
[68] The Mayfair purchase contract required that a deposit of $150,000 be paid. This was paid on December 2, 2010, drawn from P1 and P2’s BMO account. The source of that money was the transfer that had been made from D1 to the plaintiffs’ BMO account a few days earlier.
[69] On December 2, 2010, P1 and his son, P3, returned to China.
[70] The contract to purchase Mayfair was subject to the buyer’s inspection and financing by December 3, 2010. P2 signed a document waiving these conditions on December 3, 2010. She signed it as though signing it for both P1 and P2, and Mr. Gu again apparently signed it as though he had witnessed both P1 and P2 signing it.
[71] The closing date for the Mayfair purchase was January 31, 2011 and the possession date was February 1 at 11:59 a.m. The purchase price of the property was $2,380,000. The property was being purchased in part by mortgage financing provided by BMO. The mortgage was in the names of P1 and P2 in the amount of $1,666,000. After taking into account the deposit of $150,000 and normal closing costs and adjustments, the amount of $613,997.50 was required to complete the purchase.
[72] On December 7, 2010, P2 returned to China.
[73] On January 25, 2011, P1 and P2 returned to Vancouver from China.
[74] On January 26, 2011, D1 drew out $600,000 from her HSBC account by way of bank draft payable to P1. This was transferred to P1 and P2’s BMO account. A draft in the amount of $613,997.50 was then drawn on the same BMO account, as funds to complete the purchase of Mayfair. The excess of just over $36,000 transferred by the defendants remained in the plaintiffs’ BMO account.
[75] In summary, D1 provided $200,000 plus $600,000 to P1 and P2’s BMO account, which was the source of the cash funds used to pay the $150,000 deposit and $613,997.50 closing funds to purchase Mayfair.
[76] On January 27, 2011, P1 and P2 together with D1 attended at a lawyer’s office, where P1 and P2 provided the bank draft and signed the mortgage documents and other documents to complete the purchase of Mayfair.
[77] The purchase of Mayfair completed on January 31, 2011.
[78] P1 and P2 gave the lawyer’s package of closing documents for the purchase of Mayfair to D1 and did not keep a copy for themselves.
[79] P1 and P2 returned to China, arriving there on February 2, 2011, which meant they likely left Canada on February 1, 2011.
[80] Initially the contract of purchase and sale for Mayfair contained an option for the sellers to rent back the property for one month after the purchase, for $5,000. However, the sellers did not exercise this option.
[81] A two-year lease of Mayfair was signed with a tenant, Mr. Martin, on February 2, 2011 for $4,000 monthly rent, commencing February 10, 2011. The landlords were shown on the document as P1 and P2. The tenant also paid a $2,000 security deposit.
[82] The rent paid by the tenant of Mayfair was paid into the BMO account of P1 and P2. Mortgage payments in the amount of $5,647.95 per month were taken out of the same account. There was enough money in the account, based on the earlier transfers made into it by D1, to cover the shortfall between the rent and rental deposit and mortgage until close to April 2013.
[83] In April and May 2013 the parties met and discussed some accounting matters regarding the Canadian properties
[84] The plaintiffs’ version of events is based on the evidence of P2. P2 says that it was D1 who, in August 2010, led her to think that purchasing property in Vancouver would be a good investment because D1 had visited Vancouver and it had a good environment, was scenic, had good food, and had a good university, the University of British Columbia (“UBC”), that if P2’s son wanted to attend in the future would be very prestigious.
[85] P2 and D1 had met in 2006 and became friends. D1 and P2 had together invested in properties in China beginning in 2007 and following.
[86] In around 2008 the plaintiffs and defendants each applied to immigrate to Canada.
[87] The plaintiffs’ application was accepted but the defendants’ was not, initially.
[88] P2 said that she learned in September or October 2010 that her immigration application to Canada had been approved. She wanted to buy a property in Canada but did not know how to do it or how to transfer money to Canada. D1 said she would help her as she had an account with HSBC and was a resident of Macau and P2 could transfer money through her.
[89] P2 claimed that D1 came to Canada with her in November 2010 to help her with the immigration process and to help look for and purchase a house for the plaintiffs.
[90] P2 says that D1 found the Mayfair property for the plaintiffs and signed an offer to purchase in the names of P1 and P2.
[91] P2 admits that D1 transferred $200,000 and $600,000 to the plaintiffs’ BMO account which was used to pay the $150,000 deposit and the closing balance required to purchase the Mayfair property. However, she asserts that this was because the plaintiffs did not know how to get money to Canada and relied on D1 in this regard.
[92] P2 says that the source of D1’s money for the deposit was the 1st Transfer and 2nd Transfer in China on November 18, 2010. These transfers of 1,000,000 RMB each totalled the equivalent of roughly $306,800. P2 says that the amount of the transfers was suggested by D1 and P2 just followed D1’s suggestion. However, that means, according to the plaintiffs, that when D1 transferred $200,000 to their BMO bank account, D1 still owed the plaintiffs another approximately $106,000.
[93] As well, P2 says that the $600,000 provided by D1 to them to close the purchase of Mayfair was a loan from D1. The loan was necessary because when P2 returned to China, P2 had become interested in buying a property in Shanghai and did not at that moment have enough cash for both. P2 says she asked D1 to loan them $600,000 and D1 said “no problem”.
[94] P2 claims that when she and P1 came to Canada on January 25, 2011, they went to BMO the next day and saw that $600,000 had arrived in their bank account. According to P2, D1 told her that she could just repay it by paying her in RMB in China, at the exchange rate on January 26.
[95] P2 says that she later decided against buying the property in Shanghai. She called D1 and told her, and asked her how much would be required to pay D1 back. She testified that D1 told her that it would be 3.98 million RMB. P2 checked the exchange rate and thought that was a little generous but decided to go along with it. She claims to have repaid the loan in three instalments. She cannot recall why it was in three instalments: maybe it was because that is what D1 asked or maybe it was because of the money in her account.
[96] According to P2, the loan was repaid by way of the 3rd, 4th and 5th Transfers made from P2 to the defendants in China in February and March 2011. Those Chinese transfers totalled the equivalent of approximately $590,584. The plaintiff says that exchange rate fluctuations meant that the amount repaid would have been considered close to $600,000.
[97] The plaintiffs concede that the payment of rent into the plaintiffs’ BMO account, and deduction of mortgage payments from that account, is not determinative of the issues and is equally consistent with the version of events presented by both sides of the case regarding the true ownership of Mayfair.
[98] However, the plaintiffs’ evidence regarding the expenses connected with Mayfair is confusing.
[99] P1 testified that in April 2013 he and P2 came to Canada to see the newly purchased Elm property; and to file income tax returns. On that trip, there was a meeting between P1 and P2, and D1 and D2. At the meeting P2 said that now that the three properties were purchased, they should do an accounting. D1 walked through what was spent to purchase Elm and W. 19th, but she did not mention one payment, of 1.2 million RMB, which was about $200,000 in Canadian dollars. This was a reference to the 7th Transfer, made February 29, 2012. P1 and P2 claim that once they mentioned this payment, D1 gave them assurances that the money was still with her and was secured and so they did not press it.
[100] P1 testified that he returned to Canada in May of 2013, without P2. His evidence was that P2 asked him to do an accounting with D1 with respect to all three properties. P1 met with D1 and D2 at Elm to discuss the accounting for all three properties, and claims he took contemporaneous notes in a notebook as well as on the back of a bank statement.
[101] P1 claims that in the course of this accounting exercise in May 2013, D2 took him aside and told him in private words to the effect of they needed to stop the accounting because the defendants were tight with money; it was important for his wife D1 to save face; and they had used the plaintiffs’ money and owed them about 1 million RMB. P1 says that he returned to China and told P2 that he had done the accounting for the three properties; the defendants owed them about 1 million RMB and would return it to them when they were not so hard up for money.
[102] The defendants’ version of events regarding Mayfair is primarily based on the evidence of D1.
[103] D1 agrees that she and P2 became friends in around 2006. D1 had become experienced in buying property for investment purposes in China, including in obtaining good prices and occasionally discounts from developers due to her bringing multiple buyers to a new project.
[104] D1 shared some property recommendations with P2 who ended up investing in ten properties in China recommended by D1. D1 made purchases at the same time in the same projects. Sometimes the properties were purchased in other person’s names, such as one of the parties’ children, because there was a better mortgage interest rate if the person was a first-time buyer. One of these, a property known as Dongfan Runyuan, was purchased by D1 and P2 in partnership.
[105] D1 and P2 each purchased, for their own family’s residential use as a luxury apartment, a unit in one of those projects introduced by D1, known as “Gold Coast” and located in Hangzhou.
[106] According to D1, P2 was so happy with D1’s assistance and recommendations that she promised her a share of the profits from some of these Chinese property purchases. While D1 referred to this as just a verbal agreement, my sense of the meaning of her evidence was that she did not think of it as a binding legal contract, rather, D1 saw the promise as more of a moral obligation on P2’s part.
[107] As well, in the course of their relationship, D1 and P2 became investors in a project known as “Hefei Diyuan”, as did another friend of theirs, Fei Song. Hefei Diyuan began paying back capital to investors in early 2010.
[108] Also, a group of investors, first a group of three, then a group of four, including P2, invested in a number of properties together in China, leaving the purchases and management of these investments to D1. This required transfers of money to D1 in China to make mortgage payments in relation to these property purchases (“Chinese Partnership Properties”). Some of these Chinese Partnership Properties were purchased for the partnership in D1’s name or in the names of relatives of D1.
[109] D1 says that she paid for the deposit and closing balance of Mayfair out of the defendants’ own money.
[110] D1 says that she had planned to move to Canada permanently if her immigration application was approved. She had come to Canada in July 2010, having applied to immigrate through a program based in Manitoba. On that trip, she met with Mr. Gu, the realtor, and he showed her properties in metropolitan Vancouver. She also went to Winnipeg. She made the decision that she wanted to buy property in both Winnipeg and Vancouver.
[111] D1 says that when she returned to China from that visit, in August 2010, she told P2 about it. D1 knew that P2’s immigration had been approved or was close to approval because she had been through the medical examination but that P2 did not really want to move to Canada, she just wanted the immigration card and at that time had no intention of purchasing property in Canada. D1 did not know whether one could purchase property as a visitor, so she asked P2 if she could purchase property in her name, and P2 agreed that she could do so.
[112] When D1 came to Canada at the same time as the plaintiffs in November 2010, D1 looked to buy a property in Vancouver, with Mr. Gu acting as realtor. She found Mayfair and decided to purchase it. She put it in the names of P1 and P2 as P2 had agreed she could do.
[113] D1 obtained the funds to purchase Mayfair from transfers into her HSBC account, and then transferred funds to the plaintiffs’ BMO account for the deposit and closing balance.
[114] The defendants and plaintiffs agree that after the defendants transferred money into the plaintiffs’ BMO account in 2010 in relation to the purchase of Mayfair, there was enough money left over to cover the difference between mortgage payments and rent for a period of time approaching into early 2013.
[115] According to the defendants, in April 2013 and May 2013 the parties met and discussed accounting matters regarding Mayfair and Elm.
[116] In the meantime, Elm had been purchased and according to D1, was a joint investment between the Fu Family and Xia Family. According to D1, part of the accounting exercise in April and May 2013 was to figure out what the defendants owed the plaintiffs in relation to the purchase of Elm.
[117] D1 says she knew she already owed the plaintiffs some money and so had transferred 2 million RMB to the plaintiffs in China on April 1, 2013.
[118] D1 says that after the resolution of the accounting in April and May 2013 it was agreed that the defendants were to pay the plaintiffs a total of 4.075 million RMB in relation to: amounts outstanding in relation to Elm; two years of mortgage payments net of rent going forward in relation to Mayfair ($39,551); any past mortgage payments for Mayfair that had been funded by the plaintiffs (after the funds that had been transferred to the plaintiffs’ account by the defendants had run out); less some amounts on account of personal items D1 had purchased for P2.
[119] The defendants transferred 2.075 million RMB to the plaintiffs in China on September 10, 2013 in this regard, to bring the total they transferred to the plaintiffs in China between April and September 2013 to 4.075 million RMB, the Defendants’ Chinese Payments.
[120] After initially making money in Chinese real estate investments, certain investments in the Chinese Partnership Properties began to take a downturn and there was a falling out between the partners and D1 around the time of the summer and fall of 2014. The partners including P2 became angry with D1. Some of them, including P2, confronted D1 and D2’s daughter, D3, at her workplace and home in China in a very intimidating manner, as will be mentioned later.
[121] The plaintiffs started this lawsuit against the defendants in September 2014 and soon after one of the Chinese partners started a lawsuit against D1 in China in relation to the Chinese Partnership Properties. That Chinese lawsuit was in collaboration with the plaintiffs. The defendants believe the present lawsuit was started in part to put pressure on them to submit to the plaintiffs’ demands in respect of the Chinese Partnership Properties. As part of their goals in this lawsuit and the lawsuits in China, the plaintiffs took steps to freeze assets held by D1.
[122] D1 denies that the plaintiffs made any payments to the defendants in China in relation to Mayfair or any other Canadian property and says all the Transfers from the plaintiffs to the defendants in China would have been for other matters. However, given the huge numbers of transfers from the plaintiffs to defendants in China D1 says that she cannot recall specifically the purpose of each of the eight Transfers. D1 and D2 say they have been unable to prove with certainty what the eight Transfers related to because despite best efforts they have not been able to access their bank records in China and cannot do so without attending in person at the bank. D1 and D2 say they are fearful that if they return to China the plaintiffs’ considerable influence and allegations will result in their detention there.
[123] However, the defendants advance some theories as to what some of the eight Chinese Transfers may have related to, including: some profit-sharing by P2 with D1; some capital repayment by Hefei Diyuan which came to the plaintiffs’ account and then was transferred to the defendants; and some everyday transactions between P2 and D1.
[124] I will analyze a few subtopics arising from the evidence regarding Mayfair, as follows:
· prior inconsistent versions of pleaded claims asserted by the plaintiffs against the defendants in relation to Mayfair;
· P3 and inconsistent pleadings;
· P2 and inconsistent pleadings;
· P1 and inconsistent pleadings;
· the plaintiffs’ credibility generally;
· the alleged loan of $600,000;
· the plaintiffs’ evidence regarding the need for D1’s assistance in Canada;
· the defendants’ evidence regarding their immigration intentions;
· the defendants’ evidence regarding the source of funds for the purchase;
· the parties’ conduct regarding the rental of Mayfair and expenses;
· the defendants’ reason for putting Mayfair in the plaintiffs’ names;
· frailties in D2’s evidence regarding Mayfair;
· the eight Transfers in China and plaintiffs’ records;
· accounting discussions in April and May 2013;
· possible reasons for the Transfers in China.
[125] The plaintiffs’ claims in this matter have changed over time. It would be wrong to describe this as an evolution, which suggests small nuanced change over time. It would be more accurate to describe these changes as wholesale revisions.
[126] The original Notice of Civil Claim (“NOCC”) was filed on September 30, 2014 by experienced counsel on behalf of the plaintiffs.
[127] The plaintiffs admitted that they all met with their former counsel two or three times, for one to two hours each, with interpreters present, before the NOCC was prepared and filed.
[128] The plaintiffs claim they did not read the NOCC before it was filed or have it interpreted to them. However, I find that while language differences and complicated facts may allow for some minor errors, these cannot explain why the NOCC presents an entirely different story of what happened as compared to the case asserted by the plaintiffs at trial.
[129] The plaintiffs maintained solicitor-client privilege in respect of their dealings with their former counsel, and did not expressly testify that they told him something different than what is reflected in the NOCC. Given the plaintiffs’ decision not to waive solicitor-client privilege the defendants could not challenge the facts regarding the lawyer’s instructions. I am unable to infer that the lawyer must have got his instructions fundamentally wrong given the many meetings the plaintiffs had with him and their use of interpreters.
[130] The NOCC asserted different version of events regarding Mayfair than the plaintiffs asserted at trial. In summary, the plaintiffs advanced a very dark picture, that D1 and D2 were fraudsters who had defrauded them in respect of the purchase of Mayfair, as follows:
· that plaintiffs came to know D1 and D2 after they were approached by them offering their assistance in purchasing real estate in Vancouver at favourable prices;
· the defendants directed them to transfer money into their bank accounts for purchases of several properties in BC;
· the plaintiffs had “now discovered” that on every single residential property purchase, the funds provided by them exceeded the actual amount of the purchase price;
· the plaintiffs transferred $1,030,000 to D1’s bank account at the defendants’ direction for the purchase of Mayfair but later learned only $600,000 of that was paid towards the purchase of Mayfair;
· after the plaintiffs discovered this, they asked about the extra $430,000 and were told by the defendants it would be used to purchase an investment property together with them, namely, the W. 19th property.
[131] None of these allegations regarding Mayfair were true and all have been abandoned. The plaintiffs continue to assert that there was this kind of fraud in respect of Elm, which I will come back to when I address the Elm property.
[132] The attempt by the plaintiffs in the NOCC to lump payments together for Mayfair and W. 19th was repeated in their evidence at trial, although the details of this changed.
[133] I find that this was in part to address the problem that the amounts they transferred in China to the defendants do not clearly relate to the purchase of one property or the other, neither Mayfair nor W. 19th nor Elm.
[134] Concurrently with the filing of the NOCC the plaintiffs filed certificates of pending lien (“CPLs”) on the title to the defendants’ properties in Vancouver, namely W. 34th and Cartier.
[135] The defendants brought an application to set aside the CPLs. D1 swore an extensive affidavit, pointing out clear problems with the allegations in the NOCC, including evidence that the plaintiffs had executed documents in connection with the closing of the purchase of Mayfair that were inconsistent with their claim. She also included evidence that it was the defendants who had paid $800,000 for the purchase of Mayfair i.e. the two transfers of $200,000 and $600,000 from the defendants to the plaintiffs which was the source of the deposit and closing balance paid on the Mayfair purchase.
[136] In response to D1’s affidavit, P3 swore an affidavit on March 16, 2015.
[137] Dealing for the moment with Mayfair alone, P3 made the following false or inconsistent assertions regarding the purchase of Mayfair in his affidavit:
· he repeated the allegation that the defendants misrepresented the funds required to be paid to purchase Mayfair, but he changed the numbers from what was alleged in the NOCC. This time P3 alleged that: the defendants represented that $1,005,603 was needed to purchase Mayfair, which the plaintiffs then transferred to them, but the defendants deceived them because only $763,997.50 was required to be paid, and so the plaintiffs overpaid by $241,605.50;
· he alleged that the transfers in relation to Mayfair totalling $1,005,603 were from the plaintiffs’ Chinese bank account to the defendants’ Canadian accounts, and referenced transfers as though they had occurred in Canadian dollars but which were relating to the 1st to 6th Transfers that actually occurred in China;
· he alleged that the $800,000 paid by the defendants mentioned in D1’s affidavit was from the $1,005,603 transferred to D1 and that D1 kept $205,603 without the knowledge or consent of the Fu Family;
· he noted that D1 had “admitted” in her affidavit that she signed the purchase contract for Mayfair in his parents’ name, but he said that the “signature was made fraudulently, without consent” for “the purpose of ensuring that neither I nor my family would see the true purchase details and purchase price”;
· he claimed that a similar thing happened with respect to Elm: that the plaintiffs were told a false inflated price by the Xia Family and the Fu Family overpaid the Xia Family by transferring money from their bank accounts in China to the Xia Family Canadian account;
· he claimed that in or about May 2011 the Xia Family admitted they had kept $858,005 of the Fu Family’s money, and the two families decided they would invest the money in a third property, in which each family would have a 50% ownership interest, and that became the W. 19th property.
[138] There were other falsehoods and inconsistencies in P3’s affidavit regarding the purchase of W. 19th and Elm, some of which I will touch on later.
[139] Each of the plaintiffs failed at trial in coming up with a credible, reasonable explanation for the huge change in the details and theory of the plaintiffs’ claim from the original NOCC; to P3’s Affidavit; to an Amended NOCC filed in 2016; to the Second Amended NOCC which was the final version of the plaintiffs’ pleading at trial; to the trial evidence which varied from this somewhat too.
[140] P3 testified at trial, after hearing his mother and father testify. He said he was the one who communicated with the plaintiffs’ former counsel, mostly, but he says he did not read the NOCC before it was filed.
[141] P3 has a Bachelor’s Degree in Finance & Accounting obtained from a university in the UK in 2005, and a Master’s Degree in Business Management also obtained from a university in the UK at the end of 2010 or beginning of 2011.
[142] Of all the witnesses with credibility problems, P3 impressed me as the witness the least acquainted with the truth although that did not deter him from making things up. His evidence on many points changed from when he first filed affidavit evidence in the case; to examination for discovery; to direct evidence at trial; to cross-examination at trial.
[143] P3 struck me as having complete ease in weaving a false story. He had a confident demeanour throughout, and when his transparent falsehoods were pointed out in cross-examination he was defiant and unflinching.
[144] Cross-examination established that P3’s affidavit was densely packed with deliberate falsehoods. Some of the allegations that P3 levelled against the Xia Family in his affidavit in the case were not simply false, they were malicious. P3 knew that the affidavit was intended to be relied upon in court to resist the defendants’ application to lift the CPLs placed on their properties.
[145] It was clear to me from the content of his evidence that P3 had no internal moral guideline to tell the truth, and absolutely no hesitation in lying when he thought it might help him or the Fu Family. I could not detect any sincerity in his evidence.
[146] Indeed, P3 was sophisticated in lying, including scheming to deceive Canadian immigration authorities in 2012 so that he could maintain permanent residency status without spending the necessary days residing in Canada. This scheme involved him pretending to rent accommodation in Vancouver by writing cheques for rent to D1; pretending to be employed by Jie Chen, the wife of the family’s realtor, Mr. Gu, who pretended to pay him employment income (all of which was paid back behind the scenes by payment from P2 to Mr. Gu); having someone use his credit card in Canada in his absence; and then in 2013 falsely reporting to police in China that he had lost his permanent residency card which would have noted when he truly was in Canada, so that he could falsely claim he was in Canada during the period he pretended to pay rent and to receive employment income.
[147] The evidence at trial persuaded me that P3 deliberately lied about these matters on his examination for discovery.
[148] P3 initially claimed on examination for discovery that the rent cheques he wrote were actually payments he made to D1 at her request and he just wrote what she told him on the cheques (including “deposit” “first months’ rent” and so on), and he did not know these were intended to be fake rent cheques. I did not believe this evidence, but this was a theme not just of P3’s evidence but also P2’s evidence: whenever P2 could not explain something and there was a logical gap in her evidence, she fell back on the excuse that she just did what D1 told her to do.
[149] I did not believe any of the suggestions in the plaintiffs’ evidence that they were merely meek followers of D1’s orders. The plaintiffs’ showed themselves to be quite independent-minded and indeed held themselves as superior to D1 in terms of wealth.
[150] P3 also originally claimed on examination for discovery that he had lost his wallet with his permanent resident card in it, making up false details in his evidence about what else was in his wallet and explaining he had reported it to police.
[151] Both P1 and P2 knew of this false immigration scheme and approved of it and colluded in it, and indeed it appears most likely to me that it was masterminded by P2. They too claimed they had lost their permanent resident cards, filing a report with police in China. P1 claims P2 lied to him about this but I do not believe him and find that the whole family knew that they were making up a story about losing their Canadian permanent resident cards.
[152] The plaintiffs claim this false immigration scheme reflects equally badly on D1, as she assisted in receiving the fake rent cheques paid by P3. I agree it reflects poorly on her for assisting her friends, the plaintiffs, in creating a false impression that P3 was renting space from her in W. 19th, but it is degrees worse for the plaintiffs who actively sought to deceive Canadian immigration authorities in respect of their own status and then lied under oath about it.
[153] The plaintiffs tried to blame D1 for coming up with the idea for this immigration scheme but I do not believe their evidence in this regard. These events happened in 2012 when D1 did not yet have immigration status in Canada and I do not accept that she would have the knowledge and confidence to come up with a scheme to deceive Canadian immigration authorities.
[154] Returning to the changing pleadings, P3 had no reasonable credible explanation for the false assertions in the NOCC and his affidavit and the inconsistencies with the plaintiffs’ claim at trial.
[155] P3 prepared the first draft of his own affidavit, after receiving D1’s affidavit, and looking at documents he had. He claimed to have also talked to an accountant, Ms. Mo, who P2 claims helped her with keeping track of transactions and who worked for P1’s company.
[156] On examination for discovery, P3 claimed that Ms. Mo had given him accounting records and a spreadsheet; that she kept separate accounts for each of the Canadian properties; and that these records were historical records not something made for the lawsuit. When the plaintiffs were asked to produce all such accounting records before trial, no such records were produced.
[157] Later in the course of trial the plaintiffs sought leave to call Ms. Mo as a witness at trial, and to introduce part of a document through her claimed to be her notebook, despite not including her in their witness list in their trial brief and not disclosing their intention to do so or the documents in accordance with the Civil Rules in a timely way. I denied the plaintiffs leave to call her as a witness and to introduce her partially redacted notebook, in a ruling indexed at 2017 BCSC 754.
[158] The plaintiffs’ description of the records kept by Ms. Mo was a moving target that changed during submissions and P2’s evidence.
[159] The plaintiffs did not have a credible explanation for why they asserted that Ms. Mo purportedly had accurate accounting records yet P3 made so many “mistakes” in his affidavit after consulting with her.
[160] P3 claimed that he put together his own spreadsheet based on information given to him by Ms. Mo. Given the problems with his credibility, his spreadsheet is not entitled to any weight.
[161] P3 tried to explain inconsistencies in the plaintiffs’ claim and his affidavit by asserting that he made mistakes in his “understanding”. He did not say how he came to have this “understanding”. He did suggest that his mother, P2, was too emotionally upset for him to be able to talk to her much about the case at the beginning, crying all the time after having learned that her good friend D1 had defrauded her.
[162] But of course the plaintiffs do not claim now that D1 defrauded them at all in respect of Mayfair; they simply claim that P1 and P2 own it as shown on the registered title. So there was nothing for P2 to be emotional about in respect of Mayfair.
[163] In short I did not believe any of P3’s evidence where it was not independently corroborated by documents that were not generated by the plaintiffs or against the plaintiffs’ interests.
[164] P3 set out in his affidavit that he had read the key paragraphs of D1’s affidavit to his parents, and they told him facts in response, implying that the facts in his affidavit were based on what his parents told him.
[165] P2 and P1 tried to distance themselves from this assertion at trial.
[166] Both P1 and P2 signed affidavits in this proceeding stating that they adopted as true the facts set out in P3’s affidavit, which had been read to them by a competent interpreter. Both P1 and P2 say that these affidavits they signed were not translated for them. However, neither P1 nor P2 go so far as to say that they did not discuss the facts with P3 before he finalized his affidavit.
[167] As mentioned, the Fu Family uses as one excuse for their changing version of events that P2 was the one dealing with D1, and she was very upset when the NOCC and P3’s affidavit were put together.
[168] P2 did not strike me as emotional despite the fact she was under pressure for several days of cross-examination at trial. Rather, she struck me as determined and careful, so careful in fact that many times she came across as evasive. Her evidence was given so slowly it was like she was on a slippery path crossing a stream: she was trying to be very sure of her footing.
[169] P2 typically took a long time to give a straight answer to questions asked of her. She frequently seemed to forget what the question was and asked for it to be repeated, as though she got lost in thought when the question was really not so difficult as to require it to be repeated.
[170] I have carefully considered whether P2’s long delay in answering many questions and multiple requests to have questions repeated arose out of the fact that questions in the English language had to be translated into Mandarin to her, and her answers in Mandarin had to be translated to English. It is my experience in some cases that cultural differences can give rise to misunderstandings and confusion, even when an interpreter is used.
[171] However, I concluded in the end that the problem with P2’s evidence was not due to the fact the questions and answers had to be translated. Rather, P2 stood out in the way she seemed to have difficulty answering questions directly as compared to other witnesses who were in the same situation of requiring Mandarin interpreters.
[172] There were many material inconsistencies in P2’s evidence, from one moment of her testimony to the next, from evidence one day in direct to the next day, to her evidence in cross-examination, to evidence given on examination for discovery and as between her testimony, her other family members’ testimony, and more compelling evidence at trial.
[173] It takes a lot of energy to lie: energy to try to remember what the lie is; and energy to try to remember if the truth conflicts with the lie and so has to be denied or twisted. I have concluded from her demeanour and the substance of her evidence that P2 was stressed by the burden of having to support the many lies which her case depended upon, and this caused her to have to think and re-think about the questions she was asked so as to try to come up with answers she thought would support her claim. Her evidence unfolded as though she had tried to memorize a story but was not sure of it, and was carefully thinking of all angles so that she could not get caught out in lies.
[174] I have concluded, after noting the many inconsistencies in her evidence, that the great degree of thought and time P2 seemed to require before she could answer many of the questions put to her was a mark of her untruthfulness. I was left without any confidence that she was telling the truth about anything, unless it was against her interests and consistent with an independent source of evidence.
[175] What P2 purported to remember, and to forget, was quite self-serving. Despite purportedly now remembering details of her investments with D1 (despite a changing story about these investments), she claimed to not recall how much money she had to put up as part of an immigration program to invest in the provincial nominee investor program in PEI, or how the money was transferred to Canada for this investment.
[176] Coming back to the quite different version of events in the NOCC and P3’s affidavit, if P2 was emotionally upset this would not explain making facts up: some details might be left out or forgotten but emotional upset would not cause an entirely different story to be fabricated.
[177] I conclude that the facts asserted in the NOCC and P3’s affidavit that formed the basis of the plaintiffs’ claim regarding Mayfair were made up.
[178] P2 was undoubtedly the person who had the dealings on the Canadian properties and dealings with D1. I have no doubt she was the source of the incorrect assertions in the NOCC and in P3’s affidavit. These incorrect assertions of how the defendants allegedly defrauded the plaintiffs cannot be explained away as simple mistake.
[179] Further, even if P2 did sincerely believe her evidence (and I conclude she did not), I would find her evidence to be unreliable. Too much time has passed from the dates of the many money transfers between the parties over the years. There were too many transactions and there was a complete lack of documents concurrently exchanged between the parties to describe their purpose and intentions in relation to the money transfers at issue. This situation provides too much fertile ground for the human memory to be self-serving. That the plaintiffs have tried to piece together stories about what happened working backwards from the limited records of the transactions and have no accurate memory is clear from the changing stories they have advanced.
[180] The defendants’ theory is that the plaintiffs have changed their story about what happened between them regarding Mayfair, as documents and information is produced by the defendants which refutes the plaintiffs’ many versions of events. I agree with the defendants that this is the most likely conclusion and that the plaintiffs cannot be believed in respect of their present version of events regarding Mayfair.
[181] P1 had his own credibility problems, including asserting to Canadian authorities on his Canadian income tax return a miniscule worldwide income of $97.11. This was an incredible assertion given the fact he owns one of the top ten textile manufacturing and distribution companies based in one of the biggest textile manufacturing centres of China.
[182] P1’s evidence did not offer a reasonable, credible explanation for the changes in the plaintiffs’ claim regarding Mayfair, from the allegations in the NOCC, to P3’s affidavit, to the evidence at trial.
[183] I also found P1 to not be a credible witness generally.
[184] P1 sat through P2’s evidence at trial and testified after her. He basically repeated much of her evidence as though she had told him these events at the time (and therefore to rebut allegations that her evidence was the product of recent fabrication). Yet P1 was an interested party and much of his evidence was too simplistic and lacking in detail to give it an air of truth.
[185] There were many contradictions between P1’s evidence on examination for discovery and his evidence at trial. Often these contradictions appeared as though he was trying to shape his evidence at trial to more closely match his wife’s evidence. For example:
· P1 testified at trial that he first had the idea of buying property in Canada soon after the plaintiffs went through an immigration interview in Hong Kong, in May or June 2010; the plaintiffs then made the decision to buy property in Canada one or two months before coming to Canada in late November 2010.
· On examination for discovery, P1 said that they had the idea of buying property in Canada about ten days before landing in Canada.
· When these contradictions were put to him, P1 said he had no clear recollection other than he remembered his wife told him that D1 told her to transfer money, and that was when he was aware that the property was about to be purchased.
· Asked further questions, P1 said that the day his wife advanced 2 million RMB was the day they decided to purchase property, i.e. November 18, 2010, the date of the 1st and 2nd Transfers.
[186] As another small example, P1 testified that when he and P2 were in PEI on their November 2010 trip to Canada, P2 received a telephone call from D1 and learned that D1 had found them a house, and P2 told him about this. Yet on examination for discovery, P1 testified that he did not learn about this until he and his wife returned from PEI. A small detail, to be sure, but it was in the lack of details or inconsistent details that P1’s evidence left me with the impression that he was untruthful.
[187] It appeared to me that P1 well understood that his wife’s evidence as to the purpose of the eight Transfers in China was essentially uncorroborated, and so he was doing his best as a witness to try to give evidence that she discussed the purpose of these Transfers or Canadian property purchases with him at the time. I did not believe him.
[188] At times P1 ended up contradicting P2’s evidence and I came to conclude he did this not because his evidence was true but either because he believed his version had a greater likelihood of being believed and supporting their claims, or because he had forgotten a detail in P2’s false story and so made a mistake.
[189] P1 became loud and aggressive in demeanour when he was challenged in cross-examination, taking great umbrage when inconsistencies in his evidence were pointed out. He certainly did not come across as a meek member of the Fu Family and I find it unlikely he was ever under the direction of D1. I find that he made his own decisions, one of which was to largely stay out of his wife’s dealings with D1.
[190] In summary, the plaintiffs in the NOCC and P3’s affidavit advanced a claim that D2 had defrauded them with respect to Mayfair. They now agree she did not do so. The changes in their version of events cannot be explained away as a simple mistake. It points to the plaintiffs being prepared to say anything in pursuit of a claim against the defendants, regardless of it being based on fact or fiction, and this undermines the credibility of the plaintiffs on all of their assertions in the present lawsuit.
[191] The whole of the evidence led me to conclude that the Fu Family will assert false facts in this legal proceeding when they believe it suits their interests. I did not find any one of the plaintiffs to be generally credible or reliable.
[192] There are other reasons in addition to the changing claims that cause me to disbelieve the plaintiffs’ assertions regarding Mayfair.
[193] The plaintiffs’ present story that they are the true owners of Mayfair has to explain D1’s payments to them at the time of the purchase of Mayfair. The present explanation they offer is that:
· P2 caused to be transferred to the defendants in China on November 18, 2010, two amounts of 1 million RMB each, that is, the 1st and 2nd Transfers, which was the equivalent roughly of $306,000 if measured in Canadian currency. The plaintiffs did so anticipating that D1 would help them buy property in Vancouver.
· When D1 transferred $200,000 in Canada to P1 and P2’s bank account on November 29, 2010, after signing the offer to purchase Mayfair, she must have been using that roughly $306,000 they had transferred to her in China.
· When D1 transferred $600,000 to the plaintiffs’ Canadian bank account on January 26, 2011, from which the closing balance was paid on the closing of the purchase of Mayfair, this was a loan to the plaintiffs.
· The plaintiffs repaid the $600,000 loan by way of the 3rd to 5th Transfers made in China on February 14, March 2, and March 3, 2011, totalling the equivalent of close to $590,000.
[194] I did not believe the plaintiffs’ story which fails on a simple accounting basis. If the plaintiffs’ story was true, they would not owe D1 $600,000 on the purchase of Mayfair, but instead only just under $500,000. This is because on P2’s story, D1 would still have approximately $106,000 left over from the $306,000 she received in China in advance of the purchase of Mayfair.
[195] P2’s evidence in response to this rather obvious accounting flaw was varied. She essentially tried to toss off the $106,000 as a minor amount of money, that is, “not such a big deal”. She also suggested she knew the money remained in D1’s account so P2 could use it whenever she wanted. This last detail was necessary for P2’s story regarding W. 19th, which comes later. I did not find P2 credible regarding either the alleged advance or the alleged loan.
[196] P2 also suggested that the figures they chose to repay the $600,000 loan were based on D1’s suggestion they use a January 26, 2011 exchange rate. I also find this not believable. There was no suggestion they talked about exchange rates on any other occasion and the evidence of their usual conduct was that they usually just estimated amounts due to each other.
[197] In order to support the notion that the plaintiffs needed to send money to the defendants in China and to borrow money from the defendants to purchase Mayfair, P2 came up with what I have concluded were a number of embellishments:
· that D1 came to Canada with the plaintiffs in November 2010 and stayed behind in Vancouver just to voluntarily assist the plaintiffs in choosing a residential property and they relied on her entirely because she is an expert at buying residential property and knew how to get money into Canada;
· that P2 just happened to be cash-strapped at the time because she was interested in buying a property in Shanghai;
· that the plaintiffs could not access money they had recently received from another investment, an investment in Hefei Diyuan, because it was paid into P1’s company account.
[198] P2 claimed that D1 was assisting them in their immigration landing in Canada in November 2010 and in purchasing a residential property. She claimed that D1 told her that Vancouver would be a good place to purchase property, including for the reason that P3 could attend UBC which was a prestigious university.
[199] I find this evidence not credible.
[200] D1 had not become a landed immigrant herself yet, and the plaintiffs’ application to immigrate was more advanced than her own. She had no better knowledge than the plaintiffs on the process. There was no step she could take or did take to assist the plaintiffs in the immigration process of “landing” in Canada.
[201] As for recommending Vancouver as a place to purchase property, the notion that it was recommended in part because it would benefit P3 who could potentially attend UBC is not credible. By the time they came to Canada in November 2010, P3 had two degrees from universities in the UK. There was no evidence that he was planning to seek out yet another degree.
[202] It seems more likely that P2 was borrowing a fact from D1’s life when she made this assertion about P3 and UBC. The youngest child of D1 and D2, a boy, was born in 2002. D1’s evidence was that she thought it would be good for her son’s education if they, as a family, moved to Canada. Given the age of D1 and D2’s son, and their conduct in actually moving together to Canada, this was credible. P2’s evidence was not.
[203] I find that P2’s story about D1 assisting her in landing was a fabrication, meant to provide a reason for D1 travelling to Vancouver that was different than it being for D1’s own purposes, including to purchase a property for the defendants.
[204] P1 also asserted that D1 was assisting them in purchasing a property in Canada, when D1 remained in Vancouver and the plaintiffs flew to PEI in November 2010.
[205] Also, both P2 and P1 claimed as part of the reason that D1 was assisting them in buying a property, and to support the notion that they transferred money to D1 in advance in China, that D1 knew how to get money to Canada and they did not know how to get money out of China due to Chinese currency controls. This was also relied on by P2 to say she repaid D1 in cash for all the expenses that D1 paid for in Canada in relation to Mayfair.
[206] This evidence was not credible for a number of reasons including:
· The plaintiffs needed to deposit money in Canada as part of their immigration process in PEI, as security for their promise to live in PEI. P2 was quite willing to forfeit this money by abandoning any pretense of staying in PEI, and on my view of her evidence, did so as the price to get her immigration status. Despite the significance of this payment to obtaining immigration status in Canada, and despite P2’s evidence recounting her purported memories of the details of money transferred to D1, P2 claimed not to remember how much money it was or how she got the money into the country. This shows that what P2 purported to remember, and to forget, was quite self-serving.
· Likewise P1 claimed in cross-examination he did not recall how much of a deposit they paid to immigrate or how much of a deposit they paid as security for a promise to take a Canadian language course. He claimed they paid the money to an immigration company and did not inquire how they were getting the money out of the country.
· P2 and P1 were more successful financially than D1 and she was not their banker. P1 did not say he did not know how to get money out of China, he just testified in his direct evidence that D1 told his wife it would be “very convenient” to have D1 get the money out of China.
· P2 and P1 immediately opened bank accounts at BMO when they arrived in Canada in November 2010. D1 banked with HSBC. It seems odd and unlikely that D1 would be recommending the plaintiffs bank at a different bank than her own if she was the one directing them on how to do things about their money.
· P2 and P1’s son had spent years studying in university in the UK and it was not suggested he was self-financing or on a scholarship. P1 admitted they knew how to wire money to the UK but he claimed they only wired small amounts.
· There are many examples in the evidence of the plaintiffs transferring money to bank accounts in Canada. As but three examples: in July 2012, $150,000; over $900,000 in September and October 2012; and another approximate $387,000 in October 2012. The plaintiffs had little difficulty using nominees to transfer money from China, such as their employees, to transfer lump sums just under the personal restriction on transferring more than $50,000 out of China.
[207] As for their evidence that D1 was helping them look for a home, neither P2 nor P1 gave any parameters to D1 in terms of cost or what kind of property they wanted in Vancouver, other than it was to be a single family residence. P1 could remember knowing nothing about the price or the mortgage or any details.
[208] I did not find the plaintiffs’ evidence in this regard credible, especially when associated with the plaintiffs’ story that they intended the house to be their residence because they intended to immigrate to Canada.
[209] It is conceivable that the plaintiffs are so wealthy that they were prepared to invest in a rental property in Vancouver based merely on someone else’s recommendation, if they could afford to lose on that investment and it was seen by them as a small amount relative to their overall wealth. However, this was not the plaintiffs’ story.
[210] P2 claimed that they planned to use the house for their residence on their eventual move to Canada. She understood that to keep permanent residency status, the plaintiffs would be required to spend a certain amount of time in Canada. She described the house as her “immigration jail”, a place for the family members to stay when fulfilling their residency requirements.
[211] Yet when it came to purchasing property in China for herself and her family to use personally, even when the property was recommended by D1, P2 had inspected it for herself first and been involved in the decision regarding how much to pay. The only exception was with respect to properties purchased in partnership with others in China that was purely for investment and was not intended for a personal residence.
[212] I find that it is not credible that the plaintiffs would let D1 make a decision about purchasing Mayfair as a personal residence for them without even seeing it first or discussing the cost, style, or even the neighbourhood.
[213] P2 was also not believable in her testimony that she and P1 planned to move to Canada as early as the beginning of 2010 when the 1st and 2nd Transfers were made in China. P1 had a large and successful business in China. When pushed for details about what they did to ready themselves to move, P2 could think of no steps that they took towards arranging their business affairs so that they could move to Canada.
[214] P2’s evidence was that she needed to borrow $600,000 from D1 because she was cash-strapped, as she became interested in buying a property in Shanghai around the same time.
[215] P1 testified that P2 told him about her interest in the Shanghai property and that because of this D1 had agreed to loan money to them for the down payment for the Canadian property. I found P1’s evidence in this regard to be so self-interested and lacking in detail to not be credible.
[216] There are two key problems with this evidence: P2’s evidence regarding the fact she intended to purchase a Shanghai property was not credible; and the plaintiffs were wealthy enough and had other sources of money they could draw upon to invest in Canada, without needing to borrow from D1.
[217] First, the story regarding P2 seeing a property in Shanghai she might buy and then changing her mind about it was vague and unsubstantiated and did not have sufficient detail to appear as true.
[218] Second, the parties implied and then submitted in closing argument that the plaintiffs are much wealthier than the defendants. It does seem from the way they conducted themselves that the plaintiffs are so wealthy that P2 did not feel a need to keep a close track of funds she was transferring here and there. It is hard to believe that the plaintiffs needed to borrow money from the defendants.
[219] Indeed, around the same time as P2 claims to have needed a loan, the plaintiffs received substantial cash return on their investment in Hefei Diyuan.
[220] P1’s evidence was that because the money paid to them from Hefei Diyuan was paid to his company, they could not access the money or it would be illegal. He varied this somewhat in cross-examination, stating they could borrow money from his company for up to three months.
[221] I find it hard to believe that P1 could not pay money to his family from his company including funds received from Hefei Diyuan. To be sure there might be tax consequences, but the inference at trial was that the plaintiffs were extremely wealthy because of P1’s successful business, which means they were able to receive funds from the business, whether as salary, dividends, loans or some other form.
[222] There are other embellishments in P2’s evidence but it is not necessary to review them all.
[223] I find the entire story that Mayfair was intended to be the plaintiffs’ personal residence in Canada, and that the reason D1 was involved in its purchase was because the plaintiffs relied on her for assistance, to be not credible. I find the plaintiffs’ evidence in this regard to be false, intended to support the plaintiffs’ false story that they were always intended to be the true beneficial owners of Mayfair.
[224] The evidence of D1 was not without some problems but it suffered from fewer material inconsistencies than the evidence of P2. D1’s version of events was also more in line with the parties’ actual conduct.
[225] D1 testified that she and D2 – presumably with their children – had applied to immigrate to Canada in 2005 or 2006, first to PEI through a provincial nominee investor program. That application was abandoned, because their daughter was against the move.
[226] Later, in 2008 or 2009, the defendants applied to immigrate again, this time through a Quebec program and a Manitoba program. The Manitoba program sent a notice to them which was the basis for D1’s trip to Canada in July 2010, and her visit to both Winnipeg and Vancouver. After the trip, D1 became confident about moving to Canada. She discussed it with her daughter who was by then in university in Chicago, and her daughter was now supportive of it.
[227] D1 said that she discussed with an immigration consultant buying property in Winnipeg and Vancouver.
[228] As mentioned, D1’s evidence was that she and her husband wanted to move permanently to Canada, with their young son (born in 2002), once their immigration application was approved. This evidence is credible in part because the defendants’ conduct matched this intention.
[229] D1 said she was shown properties and made the offer to purchase Mayfair on November 25, 2001, closing on January 31, 2011.
[230] Funds were wired into D1’s HSBC account on November 29 and December 2, 2010, in the amounts of: $599,985 and $204,000 respectively. The transferor was shown as “Sealand International Limited” (“Sealand”) on D1’s HSBC statements. D1 testified that these funds were transferred from a friend who deals with foreign trade, and she repaid him in China.
[231] These transfers were made following but in close temporal proximity to the offer to purchase Mayfair.
[232] I have no difficulty in accepting D1’s evidence that she caused the transfers to be made to her account, and from her account so that she could complete the purchase of Mayfair.
[233] The funds wired to D1’s HSBC account from Sealand provided the source of funds in D1’s HSBC account from which D1 paid amounts in respect of Mayfair: she transferred $200,000 on November 29, 2010 and $600,000 on January 26, 2010 to P1 and P2’s BMO account. From these funds the deposit of $150,000 was paid on December 2, 2010 and the closing balance of $613,997.50 was paid on January 31, 2011 for the purchase of Mayfair.
[234] The dates of the transfers to D1’s HSBC account from Sealand are inconsistent with the plaintiffs’ version of events. The alleged need for D1 to make a $600,000 loan to P2 for the purchase had not even arisen yet, on P2’s evidence. P2’s evidence was that she only realized she needed that loan later, in January or February 2011.
[235] There is no evidence as to Sealand’s source of the money transferred to the defendants. However, neither side to the case provided evidence as to their various personal sources and quantum of income. This much is clear: the plaintiffs did not claim to have any connection with Sealand.
[236] The dates of the transfers from Sealand to D1’s HSBC account are more consistent with the defendants’ version of events: that D1 made arrangements to pay the purchase price after she made the offer to purchase Mayfair because she was buying the property for the defendants’ beneficial ownership.
[237] Both P1 and P2 were evasive in their evidence about whether they were still in Canada at the time of taking of possession of Mayfair, which on the purchase contract was in the afternoon of February 1, 2011. P1 suggested in his evidence that the plaintiffs did go to the house on possession, but his evidence was inconsistent in this regard and unbelievable, as he could not remember any details including whether anyone was living in the house.
[238] P2 was insistent in her evidence that the sellers stayed living in Mayfair after the closing of the purchase, renting it. This was indeed an option available on the purchase contract documents which were produced in this litigation. Unfortunately for P2’s credibility, it was not an option the sellers ended up pursuing and so P2 was wrong that they were living there.
[239] The information regarding the plaintiffs’ travel suggests that they arrived back in China on February 2, which also suggests they left Canada on February 1.
[240] Mayfair was rented to a tenant who was not the seller of the property, with the tenancy not commencing until February 10, 2011.
[241] As mentioned, P2 did not know about the rental arrangements for Mayfair.
[242] The rental was arranged by the realtor, Mr. Gu. D1 gave evidence that she had the dealings with Mr. Gu regarding arrangements for the tenant and he gave her the tenancy agreement. D1’s evidence was credible in this regard. In contrast to P2, D1 knew that the sellers of Mayfair moved out and decided not to rent the property.
[243] D1’s evidence was that she, D2, and their son stayed “a few days” in the Mayfair house, sleeping on the floor, to celebrate the purchase of the property and the Chinese New Year, before the new tenant of the home moved in. This evidence is consistent with the documents: possession date was February 1 and the lease commencement date was February 10.
[244] Also of interest is the fact that the plaintiffs gave all of the legal documents regarding the purchase of Mayfair to D1. P2 says she gave the documents to D1 for safe-keeping but that evidence was not credible. P2 was not in a habit of giving property purchase documents to D1 for safe-keeping. D1 had no better opportunity to keep the documents safe than did P2. This fact is more consistent with D1’s evidence that the defendants were the true owners of Mayfair.
[245] In addition, the defendants paid all of the ongoing expenses for Mayfair, including property taxes and insurance. P2’s answer to this was to suggest in her evidence that every time the plaintiffs visited Canada, they and any friends travelling with them brought large amounts of cash – $10,000 each, which was the maximum permissible for import to Canada – and gave it to D1 so that she could pay ongoing expenses. However, I find this to be another unbelievable embellishment inconsistent with other conduct and evidence.
[246] If the plaintiffs wished to pay back D1 for ongoing expenses, they could have done so with money they had already wired to their bank accounts in Canada; they did not need to bring cash.
[247] The plaintiffs also did not point to any document or occasion when the expenses paid on Mayfair by the defendants were apparently reviewed with the plaintiffs or agreed to as necessary and proper expenses as a first step prior to the plaintiffs allegedly handing over cash to D1.
[248] I find the fact that D1 knew the details about the rental of Mayfair, and was given all of the purchase documents, and paid all ongoing expenses, to be consistent with D1’s evidence that the defendants were the true owners of Mayfair and inconsistent with the plaintiffs’ version of events.
[249] D1’s evidence is to the effect that she asked P2 if she could put the purchase of a Vancouver property in P2’s name because P2 and P1 had attained immigration status in Canada (or were on a path to be assured of same) and P2 confirmed that the Fu Family did not at that time intend to live in Canada, they just wanted their immigration status. In contrast, D1 had not, as of late 2010, had her immigration application approved but she did want to move to Canada and buy a property.
[250] Only a few months later, D1 also purchased property in Winnipeg and purchased W. 19th in her own name. She explained that she had learned through the process of buying Mayfair that she was able to purchase property as a visitor to Canada, but the procedure for the mortgage would be more complicated and the percentage of the down payment would have to be higher.
[251] D2’s evidence was that when D1 told him about purchasing Mayfair, she told him it would be put in the plaintiffs’ names because it would be more convenient for them to get a mortgage. I suspect the word “convenient” is the best translation of a word that might have a slightly different nuance.
[252] In cross-examination, D1 added the explanation that she was concerned that if she was not successful in immigrating, then Mayfair would have to be sold and she had heard that there would be a lot of taxes that would have to be paid i.e. as opposed to the taxes that would have to be paid if it was owned by someone who had residency status. This was another reason for D1 wanting to have Mayfair in the plaintiffs’ names.
[253] It is quite credible that the parties might put properties they own in the other’s name, as this was done in China. Both P2 and D1 were used to buying properties in China that were registered in someone else’s name, and they trusted each other.
[254] While there are some inconsistencies in D1’s and D2’s evidence, I find it credible based on their past practices that at the time of the purchase of Mayfair D1 felt she would have some advantage to registering the title in P1 and P2’s names while at the same time she had an understanding with the plaintiffs that the defendants were the true beneficial owners.
[255] D2 gave evidence that in August 2014 he approached P1 and asked him to put something in writing confirming the Canadian properties that the plaintiffs held in trust for D1 and D2, including Mayfair. He testified that P1 confirmed that the Fu Family held Mayfair in trust for the defendants.
[256] However, D2 was asked expressly on examination for discovery less than a year before this trial, in November of 2016, if P1 or P2 ever acknowledged that they were holding Mayfair in trust, and his evidence was that he could not recall.
[257] I do not accept D2’s evidence that in August 2014, when he met with P1, P1 acknowledged to him that the plaintiffs held Mayfair in trust for the defendants. By August 2014 the plaintiffs were unlikely to have made that concession as the relationship between the two families was unravelling and they were having disputes about the Chinese Partnership Properties. The plaintiffs started this action in September 2014.
[258] Also, D2 testified that two documents which appear to be accounting notes, tendered as exhibits at trial, Exs. 25 and 26, were in his handwriting but that he could not recall what was the purpose or what were the circumstances of the notes. The lack of recollection seemed incredible and so undermined the credibility of D2’s evidence generally.
[259] The amounts and timings of the Transfers in China for the most part did not match the funds required to pay for the Canadian properties. The plaintiffs have put forward multiple equations breaking down numbers from multiple transfers or within a single transfer to try to show that the numbers “add up” to whatever supports their argument. They also have produced handwritten notes and notebooks to try to support their version of facts. But to paraphrase a famous remark, there are three kinds of lies: lies, damn lies, and math.
[260] It would be one thing if the plaintiffs could show, by way of example, that they transferred to the defendants a certain sum, such as $1,000,000, and the defendants then, in close temporal proximity, spent the same sum, $1,000,000, on a property. But that is not what the plaintiffs can show. Instead the plaintiffs seem to have worked backwards to try to group together a number of payments made in China, or parse from one payment separate amounts, and then to relate these payments to the property purchases at issue in Vancouver.
[261] I also find that P2 attempted to buttress the lack of corroboration of her recollection as to the purpose of the Transfers by falsely asserting that she had made notes in a notebook, and other notes in her husband’s notebook, prior to any falling out and the contemplation of litigation. When she was questioned about these notes in cross-examination, her evidence was confused and inconsistent.
[262] P2 had no organized method for keeping notes in her notebook. Her evidence as to when she wrote notes in the book, and on what page order, was variable and uncertain but this much was clear: she wrote notes out of order from the dates on which events occurred.
[263] P2’s oral evidence as to when these self-serving internal records was created was not persuasive. Record-keeping was not part of her regular practice and no reason was given for creating these exceptional records. The way the notes are collected looks very much like P2 was going through her bank records of transfers and grouping some together by date and amounts. This book does not appear as though she was writing notes in chronological fashion when events occurred.
[264] Further, P2’s oral evidence attributing the purpose for some of these Transfers was not matched by notes on the page. For example, at what was p. 315 of Ex. 6, her notebook, there was a reference to transfers on dates that match the 1st through 6th Transfers. P2 stated in her evidence that the 3rd through 6th Transfers were in relation to Mayfair and W. 19th, but she did not point to any note on the page stating this.
[265] Indeed the premise of P2’s evidence was that she completely trusted D1 and so could give her very general instructions such as “buy a nice house”, without more. If so, her attitude would suggest there was no need for notes.
[266] Also, on some pages of P2’s notebook there were different pens used, suggestive that some notes on some pages were supplemented by additional notes at a later time. When it was suggested to P2 in cross-examination that she did not know the order of her notes, an assertion that seemed clear from how she paused in going through the notebook and the variability of her evidence, she answered “I know the approximate order” [emphasis added]. There was no evidence to support how she could objectively “approximate” when a particular note was written, other than to be self-serving.
[267] P2 also claimed to have instructed Ms. Mo, the accountant or bookkeeper working with P1’s company, to keep “real time” records of each transfer and the purpose of each transfer and that she did so. As mentioned, the plaintiffs produced a spreadsheet at trial to support this evidence. There was a considerable amount of leading of P2’s evidence in her examination in chief, including walking her through Ms. Mo’s alleged spreadsheet.
[268] In an earlier judgment, I denied the plaintiffs’ application to call Ms. Mo as a witness, in the face of inadequate notice: see Fu v. Zhu, 2017 BCSC 754. Besides inadequate notice to the defendants, I further held that Ms. Mo’s anticipated evidence and the newly-produced spreadsheet (and any other records) did not prove anything of substance in relation to the pleadings and, moreover, was intended only to bolster P2’s credibility (at para. 98). Ms. Mo’s anticipated evidence would seem to be nothing more than oath-helping.
[269] I do not find credible P2’s evidence that there was a contemporaneous accounting record relating to the Transfers. Had there been it would not have taken until the eve of trial for the plaintiffs to produce it and there would not have been so many different versions of the plaintiffs’ stories regarding the Transfers to the defendants.
[270] As for P1, he claimed to have had important accounting meetings with D1 and D2 to reconcile accounts in April and May 2013, and to have made contemporaneous notes of the latter meeting which he brought back to China towards the end of May 2013.
[271] I did not find P1’s evidence regarding what occurred during the accounting meetings and his note-taking to be credible. I do not accept that these notes were contemporaneous but rather, find them also to be a self-serving attempt to buttress the Fu Family oral evidence.
[272] Indeed, this conclusion is supported by the fact that P2 made her own notes in the same notebook as P1.
[273] P2 was questioned about notes she made in P1’s notebook about the 7th Transfer of 1.28 million RMB on February 29, 2012. P2 made two notes in the notebook to suggest the transfer was about the Elm purchase; then she crossed her notes out and attributed the transfer to Mayfair and W. 19th. The problem is that the transfer of funds was not close in time to any of the purchases: Mayfair and W. 19th were purchased in 2011; and Elm was purchased in September 2012. P2 was unable to say why or when she crossed out her notes.
[274] I repeat the important point that the plaintiffs failed to explain how it is that they could purport to have accurate contemporaneous notes about the transactions or discussions with the plaintiffs, yet so many “mistakes” were made in their pleadings and P3’s affidavit.
[275] P1’s story regarding meeting with D1 and D2 in April and May 2013 for an accounting with respect to the three properties fell apart under cross-examination and made no sense. He could provide no details about why the defendants needed to account for anything with respect to Mayfair, if the rest of the plaintiffs’ evidence regarding Mayfair was to be believed. In other words, if the plaintiffs were, as they alleged, the true owners of Mayfair who had paid all the expenses, then why would there need to be any accounting?
[276] Because the plaintiffs were so loose with the truth when it suited their interests in other ways, and by intention did not put in writing any intentions regarding money transactions between the Fu Family and the Xia Family, I am left with no confidence that they were truthful when they testified about the creation of their notes and the purpose of the eight Transfers in China.
[277] I reject the plaintiffs’ evidence regarding their notebooks or notes being contemporaneous records of transactions or discussions with the defendants corroborative of the plaintiffs’ version of events. These records are unreliable and I find they are more likely to be after-the-fact attempts at reconstruction or revision.
[278] The plaintiffs’ attempt to group together or parse apart the Transfers made in China to the defendants proves very little as to the purpose of the Transfers, especially given the multiplicity of transactions between the parties and the absence of any written communications exchanged between the parties at the time.
[279] I return to the meetings to discuss accounting. The parties do agree that there were two meetings between some of the plaintiffs and defendants in April 2013 and again in May 2013 to discuss some accounting matters.
[280] The plaintiffs say that, with respect to Mayfair, all of the expenses had been covered, up to close to April 2013, and there were no accounting adjustments to be made for past expenses other than perhaps a few mortgage payments. This seems to be the case: the monthly rental income of $4,000 was being used to pay part of the monthly mortgage payment of $5,647.95; and the shortfall between the rent and mortgage payment, which was a monthly shortfall of $1,647.95, had been mostly covered by cash put in the plaintiffs’ BMO account by the defendants when the property was purchased, an excess of around $36,000.
[281] However, as of April 2013, the surplus cash put in the plaintiffs’ BMO account by the defendants had run out.
[282] The limited notes in evidence regarding the parties’ meetings in the spring of 2013 and the bank records which contain the parties’ notes are more consistent with the defendants’ version of events regarding Mayfair than with the plaintiffs’ version of events. These notes indicate that the parties did indeed discuss the monthly shortfall between the mortgage payments and rent.
[283] Importantly, there are some print-outs from the plaintiffs’ BMO account as of April 10, 2013 and May 9, 2013 containing handwritten notes which are consistent with the parties meeting to discuss Mayfair, and in particular the difference between the monthly mortgage payment and monthly rent. As of April 10, 2013 the plaintiffs’ BMO account had a balance of $73,431; as of May 9, 2013 the account had a balance of $67,715. These cash balances were more than enough to continue funding the shortfall between the mortgage payment and rent if Mayfair belonged to the plaintiffs. There was no need for the parties to be discussing the subject at all if Mayfair belonged to the plaintiffs.
[284] I reject as incredible P1’s evidence which was to the effect that the discussions about Mayfair were because D1 was helping him understand his own banking records regarding his costs and expenses in relation to Mayfair. He was a sophisticated businessman and did not rely on D1 as his accountant.
[285] It is more credible that if Mayfair was beneficially owned by the defendants, going forward there needed to be a plan on how the defendants would address the future monthly shortfall between the mortgage payment and the rent. I accept D1’s evidence that this was one of the purposes of the parties’ discussions in April and May 2013, to address the monthly mortgage shortfall for Mayfair going forward. This is logical and more consistent with the totality of the evidence than the plaintiffs’ version of events which is wholly unbelievable.
[286] As mentioned, the Defendants’ Chinese Payments to the plaintiffs in China were in the amount of 2 million RMB on April 1 and 2.075 million RMB later, on September 10, 2013, roughly the equivalent of $327,869 and $340,164.
[287] I accept the defendants’ position that after the parties’ accounting discussions, an agreement was reached between D1 and P1 in May 2013 that the defendants would make a payment to the plaintiffs that would include enough funds to pay the monthly mortgage shortfall on Mayfair for the next two years, and that the Defendants’ Chinese Payments were in part meant to cover that cost for that mortgage shortfall until May of 2015. Two years of mortgage payments net of rent received would amount to approximately $39,551. The Defendants’ Chinese Transfers totalled approximately $668,033 and so were sufficient to cover these future costs, consistent with the defendants’ evidence.
[288] When I deal with Elm below, I will address whether the Defendants’ Chinese Transfers were also to account for loans made to them by the plaintiffs in respect of their alleged purchase of a 50% interest in Elm.
[289] Before leaving the topic of Mayfair, I will address the many possible reasons for the eight Transfers of money in China, from P2 to accounts of the defendants.
[290] As mentioned there were approximately 174 transfers of money from the plaintiffs to the defendants in China in the years 2007 to 2014 totalling over 39 million RMB, the vast majority of which have been admitted by the plaintiffs as having had nothing to do with properties in Canada. Even P2 could not remember the purpose of most of these transfers although she thought some related to the Chinese property purchases and Chinese Partnership Properties and others may have related to “three-sided loans” which she did not explain, and to repay purchases of special personal items for her by D1, such as Chinese medicine.
[291] D1 agreed that some of the transfers by P2 to her in China were related to “third party loans”, which she also did not explain but appeared to suggest it was a means by P2 to transfer money indirectly to someone else using D1’s name or accounts.
[292] There were also some transfers of money in the other direction, from the defendants to the plaintiffs. Initially the plaintiffs did not disclose, in their production of documents in this case, the Chinese bank transfers received from the defendants.
[293] The dealings between the two families were largely conducted between P2 and D1. The defendants asserted that they could not remember with any certainty the specific reason for each of the eight Transfers in issue in this case. I find this credible. P2 and D1 did not appear to have any formal method of accounting for their transactions in writing between them. Rather, they operated without written agreements, trusting each other.
[294] It is not disputed that in China one must attend in person at a bank in order to obtain copies of bank account records. The defendants say that given the plaintiffs’ considerable influence in China and what they have perceived as threats from the plaintiffs as well as false charges and reports to the security bureau, they fear travelling back to China to get their bank records.
[295] The plaintiffs have shown in this case that they are not fearful of using legal process to make false allegations of fraud against the defendants, in part for the goal of freezing the defendants’ assets. I have no difficulty in inferring that they could be inspired to do the same in China.
[296] There were two incidents in China involving confrontation by the plaintiffs of D3, at her work and her home.
[297] One of the co-investors in the Chinese Partnership Properties, Mr. Wan Zuo Teng (“Mr. Teng”) and three other men confronted D3 at her workplace. D3 testified about this at trial, testifying by videolink from China.
[298] The confrontation occurred on October 20, 2014. D3 was 24 years’ old at the time. P2 and Mr. Teng showed up at D3’s workplace together with one other partner in the investments in Chinese properties plus two other men. They demanded to meet with D3. They then made accusations in loud voices for others to hear, accusing her parents of defrauding them of 30 million RMB in relation to the Chinese Partnership Properties, and asking her a number of questions about those investments.
[299] During the confrontation of D3 in October 2014, at D3’s office in China, P2 tried to get D3 to sign some document in relation to an investment in Dongfan Runyuan but D3 refused. One of the men pushed D3. They insisted that she sign the paper or they would not leave the building. They stayed for hours. Eventually she wrote something down so that they would leave. D3 called an uncle to help and there was a physical altercation. Her uncle was taken to the police station. As part of this intimidation, Mr. Teng also suggested to D3 that he would follow her.
[300] P2 and Mr. Teng came back to D3’s office again in November 2014 and Mr. Teng came back twice after that, in 2015 and in 2016. On another occasion in 2016, D3 was at her home when P2, Mr. Teng and others came to her home. She did not see them but could hear them speaking to her mother-in-law. D3 heard P2 tell her mother-in-law that D3 owed them 10 million RMB.
[301] While P2 admitted going to D3’s office, she denied that the meeting was meant to intimidate the defendants. She was evasive about the men who accompanied her to the meeting. There was a security video of the office meeting on October 20, 2014, part of which was played in evidence, and it is consistent with D3’s description of the men appearing to accompany P2. P2 appeared quite confident in the video. This was in contrast to the plaintiffs’ evidence that P2 was so distraught around that timeframe that it explains why they got their facts so wrong in the pleadings in this case.
[302] D1 testified as well that the plaintiffs intimated to her that they could not predict Mr. Teng’s behaviour. This was again in relation to their dispute about the Chinese Partnership Properties. D1 interpreted this as a threat: that the plaintiffs were suggesting that Mr. Teng could get violent with her if she did not comply with their demands.
[303] Further, because of P1’s wealth and stature in China, the defendants fear he holds considerable influence over law enforcement and security authorities.
[304] I accept that the defendants have legitimate fears about travelling to China and that this has prevented them from getting some of their bank records. But in any event, these records would not necessarily show the reason for the multiple transfers between the parties.
[305] The defendants have identified several plausible possible reasons for the Transfers of money in China from the plaintiffs to the defendants, including:
· the fact that the P2 and D1 had many investments in property in China, of which at least six of seven were still owned at the time of the property purchases in Canada;
· some of the Chinese properties were bought in partnership and required mortgage financing, of which D1 would manage the mortgage payments but P2 would often make lump sum transfers of money to D1 to cover the payments;
· D1 alleges that P2 saw D1 as a close friend and felt that because D1 had introduced her to properties that had made a great profit, she would share some of the profits with her, and so P2 advanced some payments to D1 in thanks for her efforts;
· the parties were exiting their investments in one of the Chinese properties, Hefei Diyuan, around the same time as some of these payments. Because of the way the Hefei Diyuan investment was originally made and the way negotiations proceeded in exiting from these investments, the return on D1’s investment could have been made by way of direct payment to the plaintiffs or to P1’s company, which in turn resulted in the plaintiffs making payments to the defendants;
· as good friends, P2 often asked D1 to purchase expensive personal items for her, and then would repay her by bank transfer.
[306] There was enough persuasive evidence to make all of these theories plausible.
[307] For example, while this evidence came out very reluctantly, it became clear during cross-examination of P2 that during the years from 2007 to 2010 she relied on D1’s advice and recommendations regarding multiple property investments in China.
[308] It is also clear on the evidence that there were some dramatic increases in property values in China enjoyed by D1 and P2. For example, D1 says she introduced P2 to the development called Gold Coast in Hangzhou. The two families both bought apartments in the building to live in, side by side, in the spring of 2010. P2 testified that the purchase price for her unit was 6.8 million RMB plus approximately 200,000 or 250,000 RMB for the parking stall. The property was purchased in around the spring of 2007. Later P2 sold her family’s unit in 2012 for approximately 17 million plus 100,000 for the parking stall. This is an incredible increase in property market value over such a short time span, just two years.
[309] P2 disputed D1’s evidence that D1 introduced her to the Gold Coast development and called Mr. Teng and Ms. Fei Song as witnesses to corroborate her version of events.
[310] Ms. Song was called to testify about two collateral matters, namely: the investments by the Fu Family and Zhu Family in the Hefei Diyuan project; and their purchases in the Gold Coast development.
[311] Ms. Song testified by videoconference from China. Unfortunately, it was only revealed near the end of her cross-examination that there was another interested person in the room with her when she testified, out of camera view, Ms. Ding. Ms. Ding was an expected witness to be called by the plaintiffs as well, but they changed their minds after this was revealed.
[312] I had no confidence that Ms. Song was not being coached or that she was not consulting with Ms. Ding before she gave evidence in answer to the questions. Furthermore, the video transmission kept failing, with questions and answers broken-up mid-transmission, and there seemed to be problems with comprehension, whether because of poor transmission, uncertain translation, or otherwise.
[313] The essence of Ms. Song’s evidence in direct regarding Hefei Diyuan was that D1 had no role in negotiations regarding the payment of the Fu Family’s interest in Hefei Diyuan and that D1’s negotiation to exit Hefei Diyuan had preceded the Fu Family’s. Ms. Song seemed to be testifying about accounting matters regarding Hefei Diyuan but without producing the accounting records she claimed to have reviewed. It was unclear to me whether her entire source of knowledge was as a direct witness or in part was based on a claim to having read the unproduced accounting records or based on other hearsay sources.
[314] In addition, Ms. Song had a lifelong friendship with P2 since their teenage years. She expressed that she was good friends with D1 yet showed open hostility towards D1, not in answer to any question but volunteering without substantiation the suggestion that D1 was using unlawful means to threaten her.
[315] Ms. Song testified as to details of the purchases of the Gold Coast property units that was contradicted by another witness for the plaintiffs, Mr. Teng.
[316] For all of these reasons, I found Ms. Song’s evidence to be not credible or reliable.
[317] I preferred D1’s evidence regarding how the purchase of Gold Coast unfolded, as her evidence was consistent with the overall conduct of P2 in making property investments in China based on D1’s recommendations.
[318] In any event, it is clear that both D1 and P2 purchased in Gold Coast at around the same time and made a remarkable profit on their investments.
[319] A large profit stood to be made from the purchase of some properties in China and it is plausible that P2 was grateful to D1 for introducing her to profitable investments; it is also plausible that P2 was so wealthy that she offered to reward D1 by sharing some of the profits with her.
[320] It is not necessary that the plaintiffs prove the reason for each Transfer. Rather, the question is whether on the balance of probabilities I have found that any of the eight Transfers in China related to the purchase of Mayfair, W. 19th, or Elm.
[321] I have found that none of the eight Transfers related to the purchase of Mayfair. I have accepted that it is more likely than not that the plaintiffs paid for the deposit and closing balance in relation to the purchase of Mayfair with their own funds. I will address W. 19th and Elm below.
[322] In conclusion with respect to the true ownership of Mayfair, I reject the majority of the plaintiffs’ evidence regarding the purchase of Mayfair. I find that the plaintiffs never intended to be the true owners of Mayfair.
[323] Based on the whole of the evidence I accept D1’s evidence as to the purchase of Mayfair: that she asked P2 if she could put title in the plaintiffs’ names and P2 agreed; that it was D1 and D2 who were always agreed by the plaintiffs and defendants to be the true beneficial owners of the property; that the money paid for the deposit and to complete the purchase came from the defendants’ own sources and not from payments made to them by the plaintiffs, nor was the $600,000 paid by the defendants a loan which was repaid by the plaintiffs; and that the Mayfair expenses were paid by the defendants until this lawsuit was commenced in May 2015.
[324] Having weighed all of the evidence, I conclude that the defendants’ version of events regarding the purchase and ownership of Mayfair is more likely than not to be true, and that the plaintiffs’ version of events is, more likely than not, untrue.
[325] I find therefore that the defendants are the true beneficial owners of Mayfair. I declare that P1 and P2 hold the property as trustees for D1 and D2. The defendants are entitled to register this trust against the Mayfair title, subsequent in priority to the existing BMO mortgage.
[326] After the commencement of this litigation as of May 2015, the plaintiffs asserted themselves as owners of Mayfair and paid all ongoing expenses to maintain the property, including property taxes and insurance and the shortfall between the mortgage and any rental income. D1 and D2 will therefore be liable to P1 and P2 to reimburse P1 and P2 for actual net expenses they paid to maintain Mayfair in this regard.
[327] I direct that the Registrar conduct an accounting of the amounts owed by the defendants to the plaintiffs in relation to the maintenance of Mayfair and to certify the results, pursuant to R. 18-1(1), (2) and (8), that is, determining the expenses net of revenue paid by the plaintiffs for the maintenance of Mayfair since May 2015 and the amount therefore owed by the defendants to the plaintiffs to reimburse them for the same. I direct the Registrar to treat the plaintiffs as having the burden of proof of establishing the fact of any costs they allege to have paid in this regard.
[328] As beneficial owners of Mayfair, D1 and D2 wish to have the title of Mayfair registered in their names. I agree that relief in this form is practical and necessary and invite the parties’ submissions as to how this may be accomplished.
[329] I have found that the plaintiffs were incredible and unreliable witnesses generally, not just in relation to their evidence regarding Mayfair.
[330] For the reasons that follow, I also reject their evidence that any of the eight Transfers related to the purchase of W. 19th or Elm.
[331] Again a brief outline of the issues regarding W. 19th: it was purchased in D1’s name only on May 20, 2011; the defendants say it was intended to be theirs alone; but P2 says W. 19th was to be a joint investment on the part of the Fu Family and Xia Family, and so she and D1 each beneficially owned a 50% interest in the property.
[332] I find certain facts to have been proved on largely uncontroversial evidence regarding the purchase of W. 19th.
[333] The Fu Family had returned to China at the beginning of February 2011. They did not travel to Canada again until July 30, 2011, returning to China on August 11, 2011.
[334] D1 returned to China on February 6, 2011 but came back to Canada on March 7, 2011.
[335] D1 signed in her name an offer to purchase W. 19th on March 21, 2011. Mr. Gu was the realtor acting for her in the purchase. The seller accepted the offer on March 23, 2011. The completion date was initially May 25, 2011 but this was later changed by contract addendum to May 20, 2011.
[336] The purchase price of W. 19th was $2,380,000 of which a $200,000 deposit was required to be paid to Mr. Gu’s real estate agency. The deposit was required to be paid by March 24, 2011.
[337] D1 paid the $200,000 deposit from her HSBC account, on March 24, 2011.
[338] D1 returned to China on March 27, 2011 but then came back to Canada on May 16, 2011, later returning to China on June 1, 2011.
[339] D1 obtained mortgage financing for the purchase of W. 19th from HSBC in the amount of $1,628,000. She was the sole borrower under the mortgage and signed all the documents on May 19, 2011.
[340] The balance due on the closing date of the purchase of W. 19th, May 20, 2011, after all closing costs and adjustments, was $600,004.59. D1 paid this amount from her HSBC account and the purchase of W. 19th completed on May 20, 2011.
[341] There is therefore no question that in respect of W. 19th, D1 paid the deposit of $200,000 and the funds due on closing of $600,004.59 from her own HSBC account. She also paid subsequent mortgage payments.
[342] After the defendants obtained approval of their immigration application in the summer of 2012, D1 and D2 and their son came to Canada as landed immigrants in August 2012. They stayed in Winnipeg for around one week and then moved to Vancouver and lived at W. 19th.
[343] D1 sold W. 19th in the spring of 2014.
[344] The plaintiffs’ pleaded claim at trial is that the 3rd through 6th Transfers in China, made in the period of February to April 2011, were intended and used to repay the loan made by the plaintiffs for the purchase of Mayfair (the alleged $600,000 loan) and for a joint investment in a new property, which became the investment in W. 19th. P2’s evidence at trial varied from this claim, and I will touch on this below.
[345] The plaintiffs say also that W. 19th was sold without their consent, and they only learned about the sale by accident in the spring of 2014. Having learned of this, they then began to distrust D1 and that was the beginning of the unravelling of the parties’ relationships as they pursued more information about the three properties and, they allege, found out they had been defrauded.
[346] The defendants say that they purchased W. 19th in D1’s name because it was intended for the defendants; the defendants made all the payments and it was never a joint investment with the plaintiffs. They say they did not need the plaintiffs’ permission to sell W. 19th.
[347] The plaintiffs’ allegations in relation to Mayfair regarding the Transfers of money in China were part of a house of cards on which their claim regarding W. 19th depended. Since the Transfers in China did not match the money used to purchase Mayfair, in essence the plaintiffs claim that the extra funds they transferred in China were for an additional purpose, namely, a joint investment in W. 19th. The plaintiffs’ house of cards regarding Mayfair has fallen and without this foundation I have concluded that it is more likely than not that the plaintiffs’ allegations regarding W. 19th are untrue as well.
[348] There are additional reasons I do not accept the plaintiffs’ version of events regarding W. 19th.
[349] There are inconsistencies in the plaintiffs’ evidence with respect to the purchase of W. 19th that are similar to the inconsistencies in their evidence regarding Mayfair, including:
· prior materially inconsistent versions of the plaintiffs’ pleadings regarding W. 19th; and,
· inconsistencies regarding the alleged accounting that took place in the spring of 2013.
[350] In addition, the plaintiffs tried to bolster their evidence regarding their co-ownership of W. 19th by giving evidence regarding renovations of that property, and their shock on learning about the sale of the property by D1, which I will touch on.
[351] The first theory of the plaintiffs’ claim regarding W. 19th, as set out in the original NOCC, was that on learning that the defendants had defrauded them in respect of Mayfair by overstating the amounts required to purchase Mayfair, and confronting the defendants, the defendants agreed they would apply the extra amount to the purchase of a joint investment property, which they did and which became W. 19th. The amount of the extra funds as originally pleaded was $430,000.
[352] P3’s affidavit sworn March 16, 2015 repeated this false theory, but with a twist. Now P3 changed the chronology, and alleged that the defendants admitted to defrauding the plaintiffs on both Mayfair and the purchase of Elm, and so the defendants agreed that they would use the excess funds they had received for both Mayfair and Elm to invest in a third property, W. 19th. This new theory changed the numbers from what was in the original NOCC in respect of the alleged fraud, from $430,000 to $858,005 as funds then available and used to purchase W. 19th.
[353] The plaintiffs’ claims changed again in an Amended Notice of Civil Claim filed May 16, 2016. This time the theory was close to what P3 had set out in his affidavit, but the supposedly defrauded funds retained from the purchase of Mayfair and Elm and used to purchase W. 19th were said to be in the amount of $857,955.
[354] The plaintiffs have never provided a reasonable explanation for these dramatic allegations that an agreement was made with the defendants that the defendants would use excess funds, obtained by fraud, to purchase W. 19th as a joint investment. It is clear to me that they were trying to work backwards to come up with numbers and a theory that might work to support their claims. They simply ignored the fact that Elm was purchased after W. 19th in order to try to make their numbers and theory work. They also ignored the absurdity of the notion that having allegedly learned of D1’s fraud in relation to two properties, the plaintiffs would go into a joint investment with the defendants on a third property.
[355] For all of the reasons already set out, I do not accept that the earlier versions of the plaintiffs’ pleadings and P3’s affidavit were incorrect because of simple error or misunderstanding. These pleadings were an attempt to create a claim where none existed. The new version of the plaintiffs’ story is seriously undermined by these changing allegations. If there had truly been an agreement to use specific funds transferred in China for the purchase of W. 19th, there would have been no reason to plead a different story and then make so many changes in the plaintiffs’ stories over time.
[356] Even at trial P2’s evidence regarding W. 19th was different than the present Second Amended NOCC.
[357] The Second Amended NOCC was filed on October 5, 2016 by present counsel on behalf of the plaintiffs and there was no suggestion in the evidence of any confusion in instructions.
[358] The presently pleaded allegations regarding W. 19th are in essence that: in February or March 2011 D1 asked P2 if she was interested in jointly investing in a property in Vancouver; P2 agreed; D1 asked P2 to provide her with funds to allow her to purchase a property quickly; P2 followed D1’s instructions regarding how much to send for the purchase of the new property and to repay the loan on Mayfair; in February, March and April, 2011, P2 caused to be transferred to the defendants’ accounts in China in RMB the equivalent of approximately $698,803 to repay the $600,000 Mayfair loan and for the joint investment in W. 19th (which is a reference to the 3rd through 6th Transfers); W. 19th was purchased; and D1 advised P2 that she would let her know if any further funds were needed.
[359] In other words, the pleaded claim by the plaintiffs is that the 3rd through 6th Transfers in China related to two purposes: the repayment of the $600,000 Mayfair “loan” which the defendants had loaned the plaintiffs on the purchase of Mayfair; and the purchase of a new joint investment, which became W. 19th.
[360] P2’s evidence on examination for discovery was similar to the present pleaded claim: the 3rd through 6th Transfers were amounts she transferred because these were the amounts D1 told her were to repay the $600,000 Mayfair loan and to invest in the new property, W. 19th.
[361] I find the reason the plaintiffs had to group the 3rd through 6th Transfers as serving two purposes is that the numbers do not work out for either one or the other purpose. As mentioned above, if the plaintiffs’ story was true regarding Mayfair, the plaintiffs would not need to repay a $600,000 loan because D1 would still have approximately $106,000 of their money (i.e. from the 1st and 2nd Transfers which added up to the equivalent of approximately $306,800 less the $200,000 that D1 transferred to the plaintiffs in Canada).
[362] At trial, P2 had figured out a new way to try to make the numbers fit. She testified in direct that when it came time to purchase W. 19th, she knew that D1 still had approximately $100,000 in her account from Mayfair; and D1 asked her to only transfer an additional 739,200 RMB, which was the amount of the 6th Transfer.
[363] Thus at trial, P2’s evidence differed from the theory advanced in the plaintiffs’ present pleading and her evidence on discovery. Rather than say that the plaintiffs’ investment in W. 19th was a combination of funds from the 3rd through 6th Transfers, she now took the position that the investment in W. 19th was much more specific: an additional approximately $100,000 already held by D1 in relation to the 1st and 2nd transfers for Mayfair; plus the amount of the 6th Transfer.
[364] Stopping there, the 6th Transfer occurred after the closing of the W. 19th purchase. It makes no sense that D1 would ask P2 for the specific amount of the 6th Transfer after closing of W. 19th, as a contribution to the purchase of that property, when it, alone or in combination with the additional alleged $100,000, does not resemble any number having anything to do with the purchase price or half of the purchase price. It would not be anywhere close to half the cost of the purchase of W. 19th.
[365] Under cross-examination at trial, P2 tried to explain the change in her story from her examination from discovery, by suggesting that she had talked to her accountant, Ms. Mo, who reminded her that D1 had told P2 to use a different exchange rate in relation to the 3rd through 5th Transfers. This change would, coincidentally, mean that the 3rd through 5th transfers more closely matched the amount of the alleged Mayfair “loan” of $600,000. Incredibly P2 purported to remember this although there were so many other details she could not remember. P2 did not explain why she did not remember this at the time the plaintiffs amended their claim one more time, in the Second Amended NOCC in October 2016. P2 did not persuade me that her purported memory was real.
[366] The many changes to the plaintiffs’ claims regarding how the Transfers in China related to their investment in W. 19th are not minor matters. The plaintiffs’ case depends on them having a credible and reliable story as to the purpose of each of the eight Transfers in China. The changing nature of their story regarding the purpose of each of these Transfers leads me to conclude that the plaintiffs’ story regarding their investment in W. 19th, much like Mayfair, is neither credible nor reliable. I have concluded that the plaintiffs’ claim to a 50% interest in W. 19th is a fabrication.
[367] In addition, the plaintiffs’ evidence regarding the accounting they said they did with the defendants in April and May 2013 is also inconsistent with the evidence and their claim in relation to W. 19th.
[368] The plaintiffs’ evidence is that they felt a need to meet with the defendants to have an accounting for all three properties, Mayfair, W. 19th and Elm, in April and May 2013.
[369] If such an accounting took place for this purpose, it should have resulted in the plaintiffs realizing that they owed the defendants money in respect of the purchase of W. 19th, if the plaintiffs were truly purchasers of a 50% interest in W. 19th. However P1’s evidence was that they did not really talk about that.
[370] The plaintiffs produced no notes to show any calculation of what they owed the defendants in respect of the purchase of W. 19th, yet they would have owed a considerable amount to the defendants even on their different versions of evidence.
[371] The differing versions of the plaintiffs’ evidence suggest they had only contributed to the purchase of W. 19th amounts of either $98,000 (based on their present pleading) or perhaps $200,000 (distilled from P2’s unbelievable evidence at trial) if some portion of the 1st to 6th Transfers was used towards the purchase of W. 19th.
[372] In contrast, the evidence is clear that D1 had paid $200,000 for the deposit and $600,004.59 on closing of the purchase of W. 19th, as well as mortgage payments of $6,050.02 per month commencing in June 2011. The mortgage payments would have been around $72,000 per year and by May of 2013 would have added up to approximately $145,000.
[373] P2 claims D1 did not raise with her the issue of mortgage payments and so she did not contribute to them.
[374] Yet, for the properties for which they were co-investors in China, P2 did contribute to the mortgage payments.
[375] As well, D1 paid for all expenses of W. 19th including the expense of renovating the property.
[376] P2 tried to address part of this problem by her evidence that whenever she and her family or friends visited Canada they would bring lots of cash which she would give D1. As noted above, I did not find that evidence credible. P2 had cash in her account in Canada and had the knowledge of how to make transfers to that account in Canada.
[377] There are additional details in the plaintiffs’ case which, like much of the plaintiffs’ evidence regarding Mayfair, presented as embellishments meant to plug holes in their story regarding their purported investment in W. 19th. These details concerned the renovation of W. 19th, and the sale of W. 19th. I find it unnecessary to go into these details other than to say I found the plaintiffs’ evidence unconvincing and unbelievable.
[378] D1 testified that she decided in January or February 2011 to buy more property in Vancouver. She viewed a property with the realtor, Mr. Gu, made an offer on the property, but it was not successful. She also flew to Winnipeg and bought a property there, bare land, on which the defendants were going to build a home. D1 testified that she returned to Vancouver and made an offer on W. 19th which was accepted.
[379] D1’s evidence was that she purchased W. 19th as a home to live in, not as an investment. She did not yet know what climate would be most comfortable for them in Canada, so she had prepared for this by purchasing a property both in Winnipeg and in Vancouver.
[380] The plaintiffs submit that D1’s evidence that she purchased W. 19th to live in was inconsistent with her evidence regarding the purchase of Mayfair to live in. I agree that this is an inconsistency given that the purchases were only a few months apart. For some reason the parties on both sides of the case seem to be reluctant to suggest that some property purchases in Vancouver were for investment purposes. In any event, the fact is that Mayfair was rented to a tenant, and ultimately W. 19th was indeed the home that D1, D2 and their son (then 9 years’ old) lived in when they were accepted as landed immigrants in Canada in August 2012.
[381] On the whole I find credible D1’s evidence that she purchased W. 19th for her family.
[382] Funds were wired into D1’s HSBC account on March 7, 9, and 17, 2011 in the amounts of $299,975; $199,975; and $299,985 respectively. The transferor was again Sealand.
[383] This money received in D1’s account, plus the amounts previously wired into D1’s HSBC account from Sealand in November and December 2010 (and which had not entirely been used in the purchase of Mayfair), provided a source of funds from which D1 paid the deposit and closing funds for the purchase of W. 19th. She also used these funds to pay the deposit on the purchase of the Winnipeg property.
[384] The amount of these transfers does not correlate to the Transfers in China, and the 6th Transfer had not even occurred yet.
[385] This evidence, combined with the fact that D1 made all of the mortgage payments and paid all of the expenses for W. 19th, supports the conclusion that D1 purchased W. 19th with her own source of funds for her family.
[386] I find that D1 was the true owner of W. 19th and the plaintiffs’ claim to a beneficial interest in W. 19th must fail. The plaintiffs’ claims to a tracing of funds received by the defendants on the sale of W. 19th must therefore also fail.
[387] I turn now to the Elm property. To repeat: Elm was purchased in P3’s name, closing November 8, 2012. The plaintiffs say it is and was always intended to be P3’s property and that he is the true owner of it.
[388] D1 and D2 claim that P3 was holding Elm in trust as 50% beneficially owned by his parents, P1 and P2; and 50% beneficially owned by the defendants, D1 and D2. It does not matter to the defendants, however, if the plaintiffs’ half-interest is now considered by the plaintiffs to be P3’s rather than P1’s and P2’s interest.
[389] As mentioned, the defendants were trying to obtain immigration status in Canada through a Manitoba immigration program. They learned in July 2012 that their application was accepted. While in Canada in July, D1 travelled to Winnipeg and purchased a property.
[390] On July 28, 2012, D1 left Canada, returning later on August 21, 2012 with D2 and their son as landed immigrants. They stayed for approximately one week in Winnipeg and then moved to Vancouver into the house at W. 19th.
[391] On September 24, 2012, D1 signed an offer to purchase Elm in P3’s name. This time she used a different realtor, not Mr. Gu. The offer was accepted on September 25, 2012.
[392] The purchase price of Elm was $3,080,000 and the closing date was November 8, 2012.
[393] The sellers of Elm wanted to rent it for two months, and so it was agreed that they could do so for $2,000 per month, ending January 10, 2013.
[394] There were 21 transfers from Chinese bank accounts of the employees of P1’s company to D1 and D2 into new bank accounts with BMO in Canada from September 26, 2012 to Oct. 22, 2012. The amounts of these transfers were all designed to be under the Chinese currency restriction prohibiting a person from removing more than approximately $50,000 from China. These transfers totalled $917,595 as received by the defendants (accounting for bank fees and exchange rates). The parties agree that these transfers did relate to the purchase of Elm.
[395] P2 also arranged for the transfer of $387,090 to P3’s HSBC account in October 2012, by way of eight transfers. The amount of each of these transfers was around $48,000 which again was obviously designed to evade Chinese currency controls. The plaintiffs’ claims and evidence varied on whether these funds were intended for the purchase of Elm.
[396] D1 paid a deposit of $150,000 towards the purchase of Elm on October 5, 2012 by payment made out of D1’s HSBC account.
[397] D1 signed the addendum to the contract of purchase and sale, in P3’s name.
[398] D1 transferred to P3’s HSBC account the following amounts on the following dates: on October 1, 2012, the amount of $100,000; on October 16, 2012 the amount of $160,000; and on November 5, 2012, the amount of $370,000. The total transferred by D1 to P3’s HSBC account was $630,000 which, added to the $150,000 deposit paid by D1, meant that D1’s contribution to either the purchase of Elm or to P3’s HSBC account totalled $780,000.
[399] Mortgage financing from HSBC in the amount of $2,048,000 was obtained in respect of the purchase of Elm, with P3 as the borrower. The mortgage payments were $8,274.72 per month commencing December 2012, paid out of P3’s HSBC account.
[400] D1 arranged for all the necessary paperwork to be sent to China for signature by P3. P3 signed the closing documents in advance in China on October 24, 2012, in front of a lawyer qualified in BC.
[401] The amount of cash needed on closing of the purchase of Elm was $941,019 taking into account all adjustments including the seller’s rent obligations of $4,000 in total. This amount was drawn on P3’s HSBC bank account on November 8, 2012.
[402] This meant that the total cash paid in relation to the Elm purchase was $1,091,019 (the $150,000 deposit paid by D1 and the closing balance of $941,019 paid out of P3’s account). For ease of reference, a 50% share of this would be $545,509.50.
[403] It was around the same time as the purchase of Elm in P3’s name that the Fu Family was making efforts to create a false scenario of P3 living and working in Vancouver, so that it would appear he was in Canada for more days than he actually was, all with the aim of fraudulently maintaining immigration status as a permanent resident. As well, P2 made efforts to falsely document P3’s income in China, falsely inflating his annual income to $500,000 to support mortgage financing from HSBC in P3’s name in Canada for Elm.
[404] The offer to purchase Elm, arrangements for the purchase, and completion of purchase, all took place without P3 visiting Canada or seeing the property.
[405] After Elm was purchased, the Xia Family moved out of W. 19th and into Elm as their residence.
[406] In the January to March 2013 timeframe, the Xia Family arranged for and paid for some renovations of Elm including interior and exterior painting, and also paid for furniture for the residence. The defendants also paid property taxes and for property insurance on Elm in 2013 and 2014, as well as some additional fees. The total of these costs was around $34,000.
[407] P2 testified in her examination in chief that in the summer of 2012 she was very busy and she called D1 in Vancouver from China and asked D1 to help find a property in Vancouver that P2 could buy for her son, P3.
[408] However, immediately after giving that evidence, P2 changed the timeline and said the phone call to D1 was in February 2012. P2 testified that in response to that call, D1 told P2 to transfer 1.28 million RMB to the Xia Family bank accounts in China that month, the 7th Transfer, which she did and was the equivalent of approximately $200,000.
[409] P2 claims that the only parameters she gave D1 in terms of the property was that it be a single family home in the west side of Vancouver, but that D1 could decide on the design and the price.
[410] P2 said she wanted to purchase a home for P3 as a gift, for the future if he was to get married and have a baby and they wanted to live in Vancouver; and for an investment.
[411] P2 claims that later D1 called her, around mid-September 2012, and told her she had found a home for P3 and the price was around $3.4 million but that the real estate agent for the other side wanted a secret commission of $300,000 which was included in that price; and with further negotiation that D1 had got the price down to $3.38 million in total. P2 claims that she told D1 she approved of the purchase.
[412] P2 then claims that D1 told her to transfer $900,000 to the Xia Family accounts and $400,000 to P3’s account in Canada, which she did. These are the transfers using employees of P1’s company in September and October 2012, totalling $917,595, plus a direct transfer from the plaintiffs to P3’s account of $387,090.
[413] P2 testified that later D1 called her and told her that she had a brother of a classmate who was in the United States and who wanted $160,000 USD exchanged into RMB, and wanted to know if D1 wanted US dollars. P2 agreed to buy the US currency. She says D1 told her that the $160,000 would soon be arriving in P3’s account. This is P2’s apparent explanation for the transfer in Canada from D1 to P3’s HSBC account of $160,000 on October 16, 2012.
[414] P2 claims that D1 told her that she would tell her later how much RMB was needed to repay her for the equivalent of $160,000 USD. P2 claims D1 did this in November 2012, telling her that the amount required was 1,026,270 RMB, and so P2 transferred this amount to D1 by way of the 8th Transfer, made November 26, 2012.
[415] P2 claims that she and P1 met with D1 in April 2013 to do an accounting for the three properties. At that meeting, D1 did not mention the 7th Transfer made in February 2012 (for 1.28 million RMB). P2 claims she asked D1 if she had forgotten, and D1 told her not to worry, the $200,000 given to her was like it was in a safety deposit box. P2 claims that this issue created a sticking point in her heart, and made her uncomfortable and suspicious.
[416] P2 testified in her evidence in chief that she asked her husband P1 to have a good talk with the defendants when he came to Vancouver in May 2013 to do an accounting of all three properties. P2 stated in cross-examination that the May 2013 accounting had to do with Elm only.
[417] When P1 came back from his May 2013 visit to Vancouver with his notebook, P2 claims she went through it and made her own notes in it based on her own memory, as she was trying to figure out the total amount she had transferred to D1. As noted earlier in this judgment, I reject as incredible P2’s evidence in this regard.
[418] The plaintiffs allege that D1 deceived them by telling them that there was a secret commission of $300,000 that had to be paid in relation to the Elm purchase, when no such commission was in fact paid.
[419] The defendants deny the plaintiffs’ allegations.
[420] The defendants say the 7th and 8th Transfers had nothing to do with Elm.
[421] D1 testified that after living in the W. 19th property, they discovered that it had a lot of problems, including blockage of the drainage system caused by tree roots. It was going to take a lot of energy to fix the house.
[422] D1 said around that time she was learning to drive when she saw a park with a beautiful view, and near to it noticed a house for sale. She called the realtor listed on the sign and made an appointment to view the house. Once she saw the house she liked it very much: it was only seven years old; was big; and the lot size was big as well. This was the Elm property. She wanted to buy the property but she did not have enough money in her Canadian bank account to do it; rather, her funds were tied up in China.
[423] D1 said she then called P2 and asked to borrow $1 million so that she could buy the property. She told P2 she would repay her when she returned to China. D1 says that P2 agreed to lend her $1 million by way of multiple transfers from employees of P1’s company.
[424] According to D1, later P2 asked her about the property, and after learning about it, asked to go into buying the Elm property as partners. P2 asked to have the property put in P3’s name as they were trying to help him keep his “Maple Leaf Card”, meaning his permanent residency status, as he had not been living in Canada for a long enough time. D1 testified that she agreed that they would go in as equal partners, each family paying half the price of the property.
[425] D1 said that she estimated that each family’s purchase costs were approximately $550,000 to purchase Elm. She considered the $917,595 funds transferred from P1’s employees in China to the defendants’ Canadian bank accounts to be a loan which she would repay in China.
[426] The defendants say that they borrowed money from the plaintiffs for their purchase of a one-half share of Elm; that they overpaid their share by their payment of the deposit and the transfers to P3; that the defendants paid for expenses in relation to Elm including property taxes and insurance, furniture and renovations; and that they and the plaintiffs engaged in an accounting exercise in April and May 2013 in which they reconciled the amounts owed on Elm and dealt with future mortgage payments for Elm and Mayfair as well as some past mortgage payments for Mayfair.
[427] The defendants say that the Defendants’ Chinese Payments to the plaintiffs in the amount of 2 million RMB and 2.075 million RMB on April 1 and September 10, 2013 was the total amount agreed between the parties as the amount owed to the plaintiffs by the defendants after the accounting exercise. These payments included repayment in full of the amount borrowed by the defendants to purchase a one-half interest in Elm.
[428] In analyzing the plaintiffs’ evidence regarding the purchase and ownership of Elm, I will touch on the following subjects:
· prior inconsistent versions of the plaintiffs’ claim;
· alleged false inflation of the purchase cost of Elm;
· the 7th and 8th Transfers;
· the allegations regarding the US $160,000;
· the Defendants’ Chinese Payments.
[429] The plaintiffs have changed their allegations regarding the purchase of Elm several times in the course of this proceeding. The changes in the plaintiffs’ claims in this proceeding as pleaded and as described under oath are multiple: changing the figures they use; changes in the nature of allegations of the defendants’ alleged dishonesty, from misrepresentations regarding the purchase price, to keeping some of the funds transferred, to misrepresenting a commission payable; changes in the allegations regarding what funds the plaintiffs’ transferred with the intention they be used to purchase Elm; and changes in what happened with the alleged excess funds transferred to the defendants. The changing allegations are so multiple and varied it is difficult to keep track of them all.
[430] The plaintiffs’ initial allegations regarding Elm in the NOCC were that the defendants purchased Elm with funds provided by the plaintiffs directly to D1’s account. The plaintiffs alleged that the defendants represented that the purchase price was $3,500,000 when it was actually $3,080,000; and so D1 collected an additional $420,000 from the plaintiffs above the value of the purchase price. The NOCC also alleged that D1 “refused” to hand over any documentation regarding Elm.
[431] D1 then filed an affidavit which included documents setting out the cash payments that the defendants had made to P3’s bank account. D1’s affidavit evidence claimed that the cash required on the purchase of Elm was paid partly with funds loaned by the plaintiffs to the defendants; partly with the plaintiffs’ own funds; and partly with the defendants’ own funds. D1 claimed she repaid the loan in 2013.
[432] After receiving D1’s affidavit, P3’s affidavit made March 16, 2015 was filed in response. By the facts set out in P3’s affidavit, the plaintiffs had changed their story, now claiming that: the defendants represented the total amount of cash required to be paid on the purchase of Elm was $1,282,392; that the plaintiffs transferred that amount to the defendants’ bank account; and that this was $187,383 in excess of the actual amount required to purchase Elm. This now seemed to be a claim that the defendants’ falsely inflated the amount needed to close the purchase by $187,383. This was materially different from the allegation of inflated purchase price made in the NOCC.
[433] P3 further alleged that of the amount transferred to the defendants for Elm, the defendants only transferred back to the plaintiffs $630,000 and kept $652,402 of the plaintiffs’ money. This seemed to be an additional allegation, not about inflation of the purchase price, but just wrongful retention of funds intended for the purchase. This was an entirely new allegation, not in the NOCC.
[434] In his affidavit, P3 alleged that the money the defendants had wrongly kept back from the Fu Family in relation to both the purchase of Mayfair and Elm, which he said totalled $858,005.00, was used by the defendants to purchase W. 19th on the agreement that the defendants would pay this back later. Again, this was a new allegation, not in the NOCC.
[435] P3’s affidavit made a rather obvious error, probably because the plaintiffs were not that familiar with the purchases of the three properties. The error was that W. 19th was purchased more than a year before Elm, so it could hardly be true that excess funds paid by the plaintiffs for the purchase of Elm were used to purchase W. 19th. I have already found that W. 19th was purchased entirely with the defendants’ funds, as set out above.
[436] There was an Amended NOCC filed May 16, 2016. This seemed to be a mix of some of the original allegations plus some of the allegations in P3’s affidavit. The Amended NOCC alleged that D1 misrepresented the purchase price of Elm as being $3.5 million when the true purchase price was $3,143,019 (although there was still a reference to a purchase price of $3,080,000 as well); that the plaintiffs caused a total of $1,282,352 to be transferred to the defendants’ bank accounts when only $1,095,019 was needed (an inflation of $187,333, the figures changed by $50 from P3’s affidavit on this point); and that the defendants collected and retained an additional $652,352 above the amount transferred to them to purchase Elm.
[437] In the Amended NOCC the plaintiffs alleged that the parties agreed that the excess funds wrongfully retained by the defendants in relation to the purchase of Mayfair and Elm would be considered an “investment” of the plaintiffs in W. 19th. Presumably by this time the parties realized that P3’s allegations that the money had been used to purchase W. 19th made no sense given that W. 19th was purchased more than a year before Elm. Nevertheless, it is a remarkable change, with the plaintiffs taking the position that the alleged overpayment was to be considered a retroactive investment by the plaintiffs in W. 19th rather than the contribution by the defendants to the actual purchase of W. 19th.
[438] In both P3’s affidavit and the Amended NOCC the plaintiffs still did not acknowledge that the defendants paid directly the $150,000 deposit on the purchase of Elm.
[439] The plaintiffs then changed their claim again in the Second Amended NOCC, filed only a few months later, on October 5, 2016. This is the pleading which the plaintiffs’ rely on at trial.
[440] In the Second Amended NOCC the plaintiffs plead that:
· they asked D1 and D2 in early 2012 to look for a property in Vancouver that the plaintiffs could purchase for P3;
· D1 told P2 to transfer approximately $200,704 in yuan to her in February 2012 so that if she found a place she could move “quickly” to pay the deposit which transfer then occurred. This is the plaintiffs’ specific allegation to explain the 7th Transfer, which occurred so much earlier than the purchase of Elm;
· in September 2012 D1 told P2 she had found a good property and fraudulently misrepresented that the “total cost” would be approximately $3.4 to $3.5 million and P2 agreed that D1 should proceed with the purchase;
· D1 paid the $150,000 deposit on the purchase of Elm. This is true but is the first time this was admitted by the plaintiffs in their pleadings;
· the plaintiffs caused to be transferred $917,655 of their funds to the defendants’ accounts in Canada (this fact had been and is admitted);
· the defendants transferred $630,000 to P3’s account in Canada. This is true;
· the purchase of Elm completed on payment of $941,019 from P3’s bank account. This is also true;
· in addition, in our about September 2012, D1 told P2 that a brother of a friend wanted to convert USD $160,000 to yuan, P2 agreed to do that; and on November 26, 2012, transferred approximately $163,988 (in yuan) to the defendants in China; but the plaintiffs have not been paid the USD $160,000. This is the plaintiffs’ claim in relation to the 8th Transfer;
· the defendants have wrongly retained $502,296 (“Excess Funds”) being the excess funds transferred to them for Elm, less the amounts they paid for the deposit and transferred to P3, plus the amount transferred to convert the US funds (paras. 41-42 of the Second Amended NOCC, figure of $502,347 changed to $502,296 at trial).
[441] There was another change in this version of events in evidence at trial.
[442] In oral evidence at trial the plaintiffs gave evidence that D1 told them she had to pay a secret commission of $300,000 to the seller’s agent in order to purchase Elm.
[443] The plaintiffs’ claim about the defendants falsely inflating the cost of purchasing Elm changed from the initial allegation in the NOCC that the cost was inflated by $420,000; to the allegation in P3’s affidavit that the cost was inflated by $187,383; to the allegation in the Amended NOCC that it was inflated by $187,333; to the present Second Amended NOCC that it was inflated to $3.4 or $3.5 million which, given the actual purchase price of $3.08 million, would be an inflation of $320,000 to $420,000.
[444] There is no credible explanation for the many changes in the plaintiffs’ pleadings and versions of events regarding the purchase of Elm. I have concluded that the plaintiffs have simply tried to piece together numbers that support a claim and have invented their story at trial that D1 told both P1 and P2 that there was a secret commission of $300,000 which had to be paid on Elm.
[445] It must be kept in mind that the plaintiffs were raising as many allegations as they could think of against the defendants in P3’s Affidavit and that affidavit made no mention of the $300,000 secret commission.
[446] For example, P3’s affidavit stated the following now admitted or proven to be false allegations: that D1 falsely signed his name on the Elm purchase contract, fraudulently and without his knowledge or consent for the purpose of ensuring the plaintiffs would not see the true purchase details and purchase price; the plaintiffs had allowed the Xia Family to live in Elm because they said they had no money and the plaintiffs considered them to be friends; the defendants used the money they had wrongly kept in respect of Mayfair and Elm towards the purchase of W. 19th. These allegations were abandoned by the time of trial but there was no rational explanation for P3 having made them in the first place other than he made them because the plaintiffs were not concerned about telling the truth in this proceeding.
[447] P1 attempted to corroborate the plaintiffs’ story at trial regarding the $300,000 false commission by pointing to his handwritten notes which included a reference to the figure “3” representing $300,000, allegedly made at the accounting meeting with D1 in May 2013. The note contains no words associated with that figure. There are multiple ways the numbers could be juggled in this case to explain why P1 would write down the figure “3” or $300,000.
[448] For reasons already mentioned, I do not believe P1 to have made a contemporaneous or reliable record of anything said by any of the defendants to the plaintiffs. The plaintiffs’ records are too self-serving and there are too many inconsistencies in their evidence to accept them as being anything but an attempt to recreate what they hope to be a plausible story.
[449] Furthermore, although the NOCC was amended twice, in none of the versions of the NOCC did the plaintiffs include an allegation that the defendants falsely represented there was a commission that had to be paid of $300,000. Indeed, even though this was the subject of testimony at trial, it was not part of the latest pleading, the Second Amended NOCC.
[450] To be sure, there is a subtle change in the Second Amended NOCC. The allegation in earlier versions of the pleadings was that the defendants falsely inflated the “purchase price” of Elm. However, more recently in the Second Amended NOCC, the allegation changed to stating that the “total cost” was inflated. Perhaps this was meant to include the allegation that there was an additional “cost”, namely, the secret commission. Yet, if so, it is remarkable that the plaintiffs’ evidence at trial was that this was a certain sum, namely, $300,000. In contrast, in the Second Amended NOCC the total cost of the purchase is only approximated as $3,400,000 to $3,500,000 (an inflation of $320,000 to $420,000, as noted above).
[451] I reject entirely as incredible the plaintiffs’ evidence that the defendants misrepresented to them the total cost of the purchase of Elm.
[452] One of the biggest problems with the plaintiffs’ story in relation to Elm is that they wish to link the 7th Transfer and 8th Transfer to the purchase of Elm, even though the timing is off: the 7th Transfer was in February 2012, well before the purchase or offer to purchase was made in late September 2012; and the 8th Transfer was on November 26, 2012, after the purchase of Elm had closed on November 8, 2012.
[453] P2 was not the least bit credible in her evidence about discussing purchasing a property for P3 as early as February 2012.
[454] P3’s evidence, by the way, was that he never wanted to live in Vancouver; was not married and was not engaged. In 2012 he turned 26 years old.
[455] As a small detail, the Second Amended NOCC states that D1 told P2 she wanted that money (the 7th Transfer) so that if D1 found a place, she could “move quickly” (at para. 31). In cross-examination, P2 was evasive about whether this was the reason. P2 was asked about why she did not simply transfer the money to her own account in Canada so that it would be there if it was needed “quickly”. P2 had no credible explanation, simply saying she did what D1 told her to do.
[456] Having money transfer from one account in China to another account in China, the 7th Transfer, hardly made the money available to D1 “quickly” to purchase a property in Vancouver.
[457] Further, if the plaintiffs or D1 on their behalf wished as early as February 2012 to purchase another property in Vancouver, they did anything but act quickly.
[458] P1 was in Canada in March 2012 for a period; and P1, P2 and P3 also came to Canada in July 2012 for a period. On neither occasion did they talk to a real estate agent about finding a house for P3. When asked if she talked to D1 about looking for a house for P3 in July 2012, or whether she went out looking at properties together with D1, P2 retreated to simply not recalling.
[459] It was my observation that P2 was perplexed as to how she might come up with a plausible story to assign the 7th Transfer to a property purchase in Canada. As mentioned above, P2 wrote down and scribbled out notes about the 7th Transfer on different pages of P1’s notebook, indicating her struggle on how to link this transfer to an allegation that it related to a purchase of one of the Canadian properties.
[460] I find it not credible that P2 decided as early as February 2012 to purchase a property in Vancouver, for P3 or otherwise, and was content to do nothing about it for months until D1 made an offer to purchase Elm in September 2012.
[461] I find the more likely fact to be that the 7th Transfer in February 2012 had nothing to do with the purchase of property in Canada.
[462] I find likewise that P2 invented the story that when she and P1 met with D1 to go over accounting matters in April 2013, D1 failed to mention this 7th Transfer in relation to Elm, and then P2 reminded her of it, following which D1 acknowledged it and said it was secure. I prefer D1’s evidence that the 7th Transfer had nothing to do with Elm and D1 would not have acknowledged that it did.
[463] As for the 8th Transfer, this too was a difficult one for the plaintiffs to try to link to the Elm purchase because it came after the purchase and was unnecessary for the purchase if the rest of the plaintiffs’ evidence was to be believed.
[464] The plaintiffs also varied in their stories as to how much money was transferred by the plaintiffs to Canada as relating to the purchase of Elm.
[465] P3’s affidavit referenced three sets of transfers related to the purchase of Elm: the 7th Transfer which he referred to as worth $200,704; the 8th Transfer which he referred to as worth $163,988 (not mentioning that the 7th and 8th Transfers were in RMB in China); as well as the several transfers from P1’s company’s employees’ accounts to the defendants’ Canadian accounts (which, as I have mentioned, totalled $917,595 although the numbers as received by the defendants were slightly different than the numbers sent due to exchange). The total of these transfers is equivalent to $1,282,287. This is more than the $1,091,019 actually needed for the purchase (the deposit plus closing balance).
[466] P3 did not mention in his affidavit the transfers that the plaintiffs made directly to his Canadian bank account from China i.e. the $387,090 transferred to him by way of eight transfers from China in October 2012. I find this is likely because at that time the plaintiffs made the strategic decision not to include this amount in their calculations, as it would illustrate how far off their numbers were and show that the 8th Transfer was clearly not linked to the purchase. Further, it would expose a hole in the logic of the plaintiffs’ story: why the need to transfer money from China to the defendants’ bank accounts when the plaintiffs clearly were able to transfer money from China to P3’s bank account?
[467] Interestingly, in her examination in chief P2 seemed to give evidence consistent with P3’s affidavit, mentioning only the three groups of transfers as relating to Elm and not mentioning the additional money she transferred to P3’s account in Canada directly in October 2012, the $387,090.
[468] However, later in cross-examination, P2 included another amount “just a little short of $400,000”, which must have been a reference to the $387,090 transferred from the plaintiffs in China directly to P3’s account in Canada in October 2012.
[469] On this latter version of the plaintiffs’ evidence, the total transferred to Canada by the plaintiffs plus the 7th and 8th Transfers add up to approximately the equivalent of $1,669,377. This is almost $578,358 more than was needed for the purchase (namely the $150,000 deposit plus the closing balance of $941,019 totalling $1,091,019).
[470] The 8th Transfer was unnecessary on the rest of the plaintiffs’ story, as they had already transferred enough funds to Canada to purchase Elm. I find that this realization is the genesis for the plaintiffs’ additional claim that D1 inflated the purchase price by saying there was a $300,000 secret commission. Even this belated allegation ignores the fact that the numbers still do not quite match up and are about $278,000 off (the alleged $578,358 extra less the $300,000 alleged secret commission).
[471] I come back to the point that P3 was acting as the plaintiffs’ representative in his affidavit. I find that P3’s affidavit combined with the plaintiffs’ changing positions in their pleadings and evidence shows that the plaintiffs were simply pulling together numbers that they thought might support a claim against the defendants without any regard to the truth.
[472] I reject the plaintiffs’ evidence and I find that the 7th and 8th Transfers had nothing to do with the purchase of Elm.
[473] The NOCC and the Amended NOCC made no mention of there being a transfer from the plaintiffs to the defendants in China in exchange for USD $160,000.
[474] It was in the Second Amended NOCC that the plaintiffs first set out an allegation regarding the USD $160,000. In that pleading they separate the 8th Transfer out as not being in relation to Elm but instead, as being in addition to the payments for Elm, its purpose being to purchase USD $160,000: Second Amended NOCC paras. 40, 41.
[475] The amount of the 8th Transfer on November 26, 2012 equates to close to $164,000. As well, one of the transfers from the plaintiffs to P3’s account was $160,000 made on October 16, 2012.
[476] P3 did not mention in his affidavit that the 8th Transfer was to exchange USD $160,000.
[477] The plaintiffs’ evidence was confusing on this point. On the one hand there was some evidence that the plaintiffs were suggesting that the transfer of $160,000 from the defendants to P3’s account on October 16, 2012 was the deposit of the USD $160,000 from this friend of a friend – they seemed not to understand you could not simply deposit US dollars to a Canadian dollar bank account; on the other hand, they also seemed to suggest that the 8th Transfer was in anticipation of receiving the USD $160,000 which they never received.
[478] I find that the plaintiffs as a whole confused their story and ended up conflating their stories regarding Elm with the story regarding the USD $160,000 and at trial alleged the 8th Transfer was for both things: to purchase the USD $160,000 which they now testified was part of the money used to purchase Elm.
[479] I find the plaintiffs’ story regarding the 8th Transfer being in relation to the promised but never-realized transfer to them of USD $160,000 to be a fabrication.
[480] As part of their assertion that P3 is the true and sole owner of Elm, the plaintiffs deny that the defendants’ repaid any loan in respect of the purchase of Elm. In particular, the plaintiffs deny the defendants’ evidence that the Defendants’ Chinese Payments of 2 million RMB in April 2013 and 2.075 million RMB in September 2013, in part constituted repayment of the loan made to the defendants by the plaintiffs by which the defendants purchase a one-half interest in Elm.
[481] P2’s evidence is that the Defendants’ Chinese Payments had nothing to do with property purchases in Canada, but had to do with D1 purchasing P2’s half‑interest in a Chinese property investment known as Dongfan Runyuan.
[482] The plaintiffs called evidence from Mr. Teng to support P2’s evidence in this regard.
[483] Mr. Teng was an investor in China in some of the same real estate partnerships that P2 invested in and which D1 operated. The evidence is undisputed that beginning in the summer of 2013 and culminating in the summer of 2014, the Chinese partners became unhappy with D1’s management of the investments in the Chinese Partnership Properties and the parties had a falling out.
[484] Mr. Teng gave evidence to support the plaintiffs’ theory that the Defendants’ Chinese Payments of 2 million RMB in April 2013 and 2.075 million RMB in July or August 2013, by D1 to P2, were because D1 was purchasing P2’s one-half share in Dongfan Runyuan. He claimed that both P2 and D1 told him that (although his evidence was a little off on the exact figures).
[485] By way of background, the uncontroversial evidence was that Dongfan Runyuan was a property purchased in China by P2 and D1 in equal partnership, in around April 2008. It was D1 who made all of the financial arrangements; arranged for the purchase; and arranged for the mortgage financing. It was purchased in D3’s name, with a mortgage in D3’s name. According to P2, the purpose of this was to evade local Chinese restrictions on how many properties an individual could own.
[486] P2’s evidence about the investment in Dongfan Runyuan was pretty much equivalent to “I knew nothing but handed over whatever money D1 asked for”. She said at the time she agreed to the joint purchase she did not know what the purchase price was, that she did not think much about it. She claims that she never saw the documents in relation to Dongfan Runyuan: not the purchase contract nor the mortgage. She never asked D1 for an accounting.
[487] P2 claimed that she just paid to D1 the amounts D1 asked her to pay in relation to the Dongfan Runyuan purchase and mortgage and claims to have paid 4.5 million RMB towards the purchase and 1 million RMB towards the mortgage.
[488] D1’s evidence was that she learned of the Dongfan Runyuan property and introduced P2 to it as a potential investment. D1 said that she gave to P2 copies of the relevant purchase contract and mortgage documents and that P2 did not pay her the amounts claimed in her evidence.
[489] D1 testified that the original purchase price of Dongfan Runyuan was about 9.3 million RMB for the unit, but with garage costs, prepaid strata maintenance fees and title tax, the initial cost of the investment would have been about 10 million RMB. Her evidence was that, taking into account that part of the purchase price was paid by way of mortgage financing, the total amount of cash paid to purchase Dongfan Runyuan was about 3.5 million RMB and each of D1 and P2 paid half of this or around 1.75 million RMB. She thought that P2 probably paid another 850,000 RMB in relation to mortgage payments.
[490] Mr. Teng claimed that in March 2013 D1 contacted him to ask if he could be the intermediary as she wanted to purchase P2’s one-half interest in Dongfan Runyuan so that she could give the whole property to her daughter, D3, who was engaged. Mr. Teng testified that it would be awkward for D1 to try to negotiate the price of P2’s half-share directly with P2 since they were friends; so she asked Mr. Teng to do it because he was their friend too, and he agreed.
[491] Mr. Teng claimed that the agreed price between D1 and P2 for D1 to purchase P2’s one-half share of the Dongfan Runyuan property was 14 million RMB.
[492] P2 testified that D1 offered to purchase her half share in Dongfan Runyuan based on a price of 14.5 million, but because it was going to be P3’s “marriage house” and because they were such good friends, P2 agreed to a price of 14 million.
[493] P2 then claimed that when she received the Defendants’ Chinese Payments from D1, first in April 2013 and then in September 2013, for 2 million and 2.075 million RMB respectively, she was of the view she had been paid the full amount she was entitled to for her half-share of Dongfan Runyuan.
[494] There were many inconsistencies in Mr. Teng’s evidence which came out in cross-examination. Also, he was not an independent witness. He is a businessman closely tied with P1’s business. He lives in the same building as P1 and P2 in China, one floor below the plaintiffs’ apartment. He was one of the co-investors in the Chinese Partnership Properties purchased in China under D1’s guidance, and together with the Fu Family, is involved in suing D1 in China.
[495] To understand the motives of Mr. Teng, D1 claims in summary that the Chinese Partnership Properties decreased in value (which is not disputed), and that her Chinese investor partners wanted her to bear the sole loss which she refused to do, leading to this lawsuit in Canada and the lawsuit in China. In other words, according to the defendants this is the possible motive for the plaintiffs’ claims and Mr. Teng’s assistance of the plaintiffs.
[496] Indeed, Mr. Teng had taken aggressive steps in China in relation to his claims in respect of the Chinese Partnership Properties. As mentioned, Mr. Teng went more than once to confront D3 in China to demand money from her. Mr. Teng is a solid looking man in contrast to D3’s slim physique. When he and P2 confronted D3 at her office, they brought with them their “drivers”, who appeared more like bodyguards. I have little doubt that Mr. Teng was trying to intimidate the defendants. Despite this behaviour, he claimed they were still friends.
[497] Mr. Teng was evasive and combative in his testimony. Mr. Teng expressed sympathy for how the length of this lawsuit was unfair to P1 because it was wasting P1’s time as a businessman. At times when his evasiveness became apparent in cross-examination and he became aware of the contradictions in his evidence, he became angry and raised his voice. He was sarcastic and rude at times.
[498] Mr. Teng also came across as arrogant. As one example, he referred to the amount of 500,000 RMB as being so trivial it was like toilet paper.
[499] In short, Mr. Teng left a very poor impression as a witness.
[500] I found Mr. Teng not to be credible or reliable as a witness.
[501] As an example, Mr. Teng claimed to remember details that were not credible, such as where he was when he received a phone call from D1 asking him to intervene with P2; and the fact that D1 made a first payment of 2 million RMB in April 2013. This seemed to me a blatant attempt to manufacture evidence to corroborate P2’s story in relation to the purpose of the Defendants’ Chinese Payments in April and September 2013.
[502] Mr. Teng’s and P2’s story regarding Dongfan Runyuan made no sense. There was no credible reason why D1 would ask Mr. Teng to intervene to discuss this matter with P2. Mr. Teng was quite a bit younger than P2 and D1. P2 and D1 were “best friends” according to P2. D1 and P2 regularly discussed property transactions and partnerships. D1 would have no need for Mr. Teng to intervene if she wanted to purchase P2’s one-half interest in the property.
[503] Further, D3 was not engaged or about to be married in 2013, and there was no effort by D1 to ever suggest to D3 that she would be the true owner of the Dongfan Runyuan property, as opposed to just having her name on title. D3 testified at trial and was credible in her evidence that she had no understanding of the true ownership of the property.
[504] P2’s evidence about being paid 4.075 million RMB for her half share of Dongfan Runyuan was also not believable. As a first and obvious point it is not near the 14 million RMB purchase price she said she agreed to; and if that was a translation error and she meant that figure as the total value of the property, she still would be entitled to 7 million RMB, not 4.075 million RMB, for her share of the property on her evidence. Indeed, in cross-examination she stated that on her calculations she should have received something in the range of 8 million RMB for her half-share of Dongfan Runyuan.
[505] It is more than strange that whenever P2 was questioned about details of financial transactions she relied on to support her version of events, she claimed not to have paid attention to the details at the time or to have even known them; yet P2 also claims that she was upset at D1’s incorrect accounting in April and May 2013. I believe that the former position was true and the latter was not: P2 was so wealthy that she did not find it necessary to pay close attentions to the details of the property investments she made with D1 or to money transfers to and from D1, as she felt it was fine to simply broadly estimate what each owed the other from time to time. It also suited her purposes not to have written records.
[506] D1’s evidence was that P2 on her own volunteered to transfer P2’s half-interest in Dongfan Runyuan to D1 for no cost, as a form of payment for D1’s assistance in helping her with another property deal involving Hefei Diyuan, and in helping her sell Gold Coast. The tenor of D1’s evidence was that D1 accepted this; that D1 felt this was in keeping with P2’s earlier promise to share profits with her on property investments that D1 introduced. D1 calculated that she was owed approximately 3.5 million RMB by P2, based on P2’s promise to share profits on property investments introduced by D1.
[507] I found D1’s description of the deal she reached with P2 regarding Dongfan Runyuan to be somewhat convoluted and unbusinesslike in that no firm calculations were done and nothing about the deal was in writing. Yet, as I have noted, P2’s own evidence confirmed that they invested together in China this way.
[508] D1 said that the property was sold in September 2015 for about 12.5 million RMB, which was consistent with D3’s evidence.
[509] I do not accept Mr. Teng’s evidence and P2’s evidence regarding the Defendants’ Chinese Payments in April and September 2013. I find that the Defendants’ Chinese Payments had nothing to do with any agreement to purchase P2’s interest in Dongfan Runyuan.
[510] Turning to the defendants’ version of events regarding Elm, I will focus on the following aspects of the evidence:
· the parties’ conduct;
· the accounting exercise; and,
· the Defendants’ Chinese Payments.
[511] Consistent with the defendants’ version of events that they were part owners of Elm is the fact that they painted the property, bought furniture for it, moved into it and lived there, paying property insurance and property taxes in 2013 and 2014. The defendants did not appear to need any permission of the plaintiffs in this regard.
[512] Also consistent with the defendants’ version of events that D1 asked to borrow money from P2 to purchase Elm, is the fact that P2 arranged for approximately $900,000 of money transfers from China to go to new BMO bank accounts of D1 and D2; while around the same timeframe P2 arranged for close to $400,000 to be transferred from China to P3’s account. There was no need to transfer money from China directly to the defendants if the plaintiffs were intended to be the sole purchasers of Elm. All of the money could have been sent directly to P3’s bank account.
[513] Both parties agree there were some accounting discussions between them regarding the Canadian properties in April and May 2013.
[514] The evidence was clear that at the first meeting in April 2013 the plaintiffs had not obtained P3’s HSBC bank statements and so they could not sort out final numbers for Elm. His bank statements were only relevant with respect to Elm. His bank statements were obtained by the time of the second accounting meeting in May 2013, and that allowed D1 and P1 to rough out agreement on what would be paid by the defendants to square things up.
[515] My findings on Mayfair and W. 19th mean there was no need to do an accounting for those properties, except to create some allowance for future mortgage payments for Mayfair since the mortgage was in the plaintiffs’ names. In reaching the findings on Mayfair and W. 19th, I considered the entirety of the evidence at trial including the evidence regarding the parties’ dealings in respect of Elm.
[516] The biggest problem with the defendants’ story regarding Elm has to do with the confusing flow of money.
[517] One-half of the funds spent to purchase the property would be $545,509 (one-half of the deposit paid of $150,000 plus the closing balance paid of $941,019 totalling $1,091,019). It was not necessary for the defendants to borrow approximately $917,595 themselves if they were purchasing a one-half interest only.
[518] However, there is an explanation for this. D1’s explanation is that she initially planned to buy Elm as a property for the defendants only; and asked to borrow $1 million; and following this P2 asked to be an equal co-investor in the purchase. It is at least plausible, given P2’s repeated self-characterization as someone who did not pay a lot of attention to detail, that she simply went ahead and transferred the close to $1 million to D1 even though the purchase details had changed, as P2 expected this would be sorted out later.
[519] It is also the case that D1 made arrangements to immediately pay back some of the money transferred to her. In comparison to the $917,595 paid to the Xia Family accounts in Canada by transfers from P1’s employees in China, the Xia Family transferred $630,000 to P3 plus paid $150,000 towards the deposit for a total of $780,000.
[520] In other words, one way of looking at the numbers is to conclude that of the $917,595 received as a loan, the Xia Family soon thereafter repaid all but $137,595. If the defendants are to be believed that they had an agreement with the plaintiffs that the defendants would be 50% owners of Elm, then it would appear the defendants borrowed their share of the purchase costs – that is, one-half of the cash required to purchase Elm, namely, $545,509.50 – plus the extra $137,595 they did not use on the closing from the $917,595 transferred to them by the plaintiffs.
[521] The total borrowed by the defendants from the plaintiffs on this analysis in relation to Elm would be approximately $683,104 (prior to any adjustments for ongoing costs).
[522] The test of the defendants’ version of events is whether this was taken into account in the parties’ accounting discussions in April and May 2013.
[523] If the defendants were not considered by the parties to be co-owners of Elm, and given my finding that the 7th and 8th Transfers in China had nothing to do with the purchase of Elm, the accounting in relation to Elm should have concluded something like this: the defendants owed the plaintiffs $137,595 (the $917,595 they received less the $780,000 they paid in relation to Elm); and subtracted from this would be some of the costs paid by the defendants with respect to Elm while they lived there, and perhaps some of the costs they expected to pay as they continued to live there. Those ongoing property costs could perhaps be estimated in the $10,000 to $30,000 range. The plaintiffs never claimed to charge the defendants rent.
[524] This would mean that the defendants would owe the plaintiffs something in the range of $100,000 to $137,595 on the accounting if the defendants were never considered co-owners of Elm, before taking into account future mortgage payments for Mayfair or any personal purchases made by D1 for P2.
[525] This takes me to the Defendants’ Chinese Payments.
[526] The crux of the defendants’ claim to a half-ownership of Elm is their version of events regarding the purpose of the Defendants’ Chinese Payments to the plaintiffs: the transfers in China from the defendants to the plaintiffs of 2 million and 2.075 million RMB in April and September 2013, which represented approximately $327,869 and $340,164 for a total of approximately $668,033 based on an April 2013 exchange rate of 6.1 RMB to the Canadian dollar.
[527] The defendants’ claim is that the Defendants’ Chinese Payments were the net result of the accounting exercise they engaged in with the plaintiffs in the two meetings in April and May 2013, and represent repayment of net amounts borrowed in relation to the purchase of Elm, plus two years’ future mortgage payments on Mayfair, and any small amounts for past Mayfair mortgage payments. D1 also testified that it is likely that their accounting also took into account personal purchases she had made for P2 over time.
[528] This is the comparison: the Defendants’ Chinese Payments approximated $668,033; the amount the defendants would have owed the plaintiffs if they had borrowed money to become half-owners of Elm would be around $683,104; the amount the defendants would have owed the plaintiffs if they were not co-purchasers of Elm would be around $100,000 to $137,595. On this comparison, the numbers are not without problems but it is clear that the Defendants’ Chinese Payments are more logically consistent with the defendants’ version of events as to Elm being a joint purchase rather than a purchase solely for the plaintiffs.
[529] Also, these figures have not taken into account adjustments for Mayfair mortgage payments, other Elm expenses and personal purchases.
[530] D1’s evidence was that the defendants paid such things as property taxes, insurance, and security for the Elm home. Her evidence was also that the costs she paid for in relation to furniture and renovations was treated by the parties as equivalent to one year’s mortgage payment i.e. that the first year’s worth of mortgage payments would be paid out of P3’s account but would be treated as off‑set by what the defendants paid for renovations and furniture.
[531] This method of off-set seems very favourable to the defendants. The mortgage payments were $8,274.72 per month, so one year’s worth would be close to $100,000. I find the evidence too thin to reach the conclusion that the first year’s worth or mortgage payments were agreed to be funded solely by the plaintiffs.
[532] There is evidence that D1 did make personal purchases from time to time for P2, for which P2 would transfer money to her in China. It is therefore not implausible that some of this was accounted for in the accounting exercise and the Defendants’ Chinese Payments.
[533] It is true that the numbers were not exact, but the parties did not deal in exact numbers. Over and over again in her evidence P2 tossed off any of her own accounting discrepancies that showed her evidence to be illogical. She clearly took the position that it was her practice in her dealings with D1 not to care about being exact in their numbers. While I have rejected most of P2’s evidence, I do accept this tenor of her evidence as it is consistent with conduct: P2, as a matter of practice, only approximated the amounts of money owed between P2 and D1 over the years and never required a strict accounting.
[534] It is clear from the way P2 and D1 conducted their dealings that they did not treat their transactions with each other from a forensic accounting standpoint, but rather, simply estimated what each owed the other from time to time. It seemed that they were wealthy enough not to be bothered to account with each other down to the penny, or indeed to the nearest tens of thousands of dollars.
[535] Considering all of the evidence, I find it more likely than not that the Defendants’ Chinese Payments were as described by the defendants: to square up money that was owed by them to the plaintiffs primarily in relation to the Elm property purchase on the basis that the parties agreed and understood that D1 and D2 were beneficial owners of a one-half interest in the property.
[536] I accept D1’s evidence that following the accounting meetings between them in April and May 2013, an agreement was reached between D1 and P1 that the defendants would pay to the plaintiffs a total of 4.075 million RMB including the 2 million RMB already paid; that this amount would represent enough funds to pay the monthly mortgage shortfall on Mayfair for the next two years; and that it would represent whatever amounts the defendants owed in relation to the funds they borrowed from the plaintiffs towards a purchase of a 50% interest in Elm, net of any off-setting amounts for costs paid by the defendants or personal items purchased by D1 for P2. Having considered the whole of the evidence, I conclude this is more likely than not.
[537] In reaching this conclusion, I have considered multiple attacks on the defendants’ credibility, especially the challenges to D1’s credibility. I find it unnecessary to address each alleged inconsistency or problem in the defendants’ evidence.
[538] I accept the plaintiffs’ submissions that there are some inconsistencies in the defendants’ evidence, and problems with a lack of documentation. However, the plaintiffs’ evidence also suffered from a lack of credible documentation, and far more serious credibility problems.
[539] Simply put, I found the defendants far more credible than the plaintiffs in respect of their evidence as a whole and specifically with respect to each of the three Canadian property purchases.
[540] I find in favour of the defendants and declare that P3 holds title to Elm as trustee for D1 and D2 as to an undivided one-half interest. The defendants are entitled to register this trust against the Elm title, subsequent in priority to any prior registered mortgage.
[541] I have concluded that the parties accounted for their respective 50% interests in Elm when they conducted the accounting exercise in April and May 2013, and as concluded by the second of the Defendants’ Chinese Payments which was paid on September 10, 2013. After this date there has been no accounting for the expenses paid in relation to Elm, but such an accounting will now need to be done as of October 2013 and forward. The defendants will be liable to P3 to pay 50% of the net costs of maintaining Elm but this amount will need to be determined.
[542] I therefore refer the parties to the Registrar, to hold an accounting of the amounts paid by the plaintiffs, on the one hand, and the defendants, on the other hand, to maintain Elm since October 2013 to the date of the Registrar’s assessment, less any revenues received by the same parties in respect of Elm. I ask the Registrar to then determine what amount of payment by the defendants to P3 is necessary to equalize the defendants’ share of these net costs with the share paid by or on behalf of P3. I ask the Registrar to certify the results pursuant to R. 18-1(1), (2) and (8). In this regard, I direct the Registrar to treat the party asserting that it has paid costs for maintenance of Elm to have the burden of proof of that fact.
[543] It is clear that the Fu Family and Xia Family cannot cooperate as co-owners of Elm. D1 and D2 are entitled to orders that would provide for the sale of Elm and to 50% of the net sale proceeds, the other 50% going to P3. The parties are invited to make further submissions in this regard should they not be able to reach agreement on the same.
[544] The plaintiffs’ claim in relation to the alleged Excess Funds necessarily fails.
[545] This case involved two wealthy families from China transferring millions of dollars to Canada, and purchasing three properties in Vancouver. The two families thought it best to not document the basis for their dealings with each other. The two families also thought it best to structure the transactions in ways that disguised true ownership, just as they often did when buying properties in China.
[546] Having since fallen out, the two families left it to this Court to sort out which family was more likely to be telling the truth about the true basis for their property transactions in Canada. Not without some difficulty due to the complex nature of the accounting between the parties and the lack of documentation, I have decided that the defendants were more likely to be telling the truth than the plaintiffs.
[547] In respect of the property known as Mayfair, I have reached the following conclusions:
a) The defendants are the true, sole beneficial owners of Mayfair. I declare that P1 and P2 hold legal title to the property as trustees for D1 and D2. The defendants are entitled to register this trust against the Mayfair title, subsequent in priority to the existing BMO mortgage.
b) D1 and D2 will be liable to P1 and P2 to reimburse P1 and P2 for costs they paid in relation to the maintenance of Mayfair after May 2015. I direct that the Registrar hold an accounting of these amounts and certify the results pursuant to R. 18-1(1), (2) and (8).
c) D1 and D2 are entitled to relief which would provide for the legal title of Mayfair registered in their names. The parties may make submissions as to how this may be accomplished.
[548] In respect of the property known as W. 19th, I have concluded that D1 and D2, who hold legal title to that property, are also the beneficial owners of the property. The claims by the plaintiffs to an interest in that property are dismissed as are all claims to a tracing of proceeds of sale of that property.
[549] In respect of the property known as Elm, I have concluded:
a) D1 and D2 jointly hold a beneficial one-half interest in Elm. I declare that P3 holds legal title to the property as trustee for the one-half beneficial interest of D1 and D2. The defendants are entitled to register this trust against the Elm title, subsequent in priority to the existing mortgage.
b) D1 and D2 will be liable to P3 for 50% of the costs paid to maintain Elm from October 2013, net after taking into account any revenue received in respect of the rental of Elm and any maintenance costs paid by the defendants in this time period. I direct that the Registrar hold an accounting of these amounts and certify the result, pursuant to R. 18-1(1), (2) and (3).
c) D1 and D2 are entitled to relief which would provide for the sale of Elm and distribution of one-half the net proceeds of sale of Elm to them with the remainder going to P3. The parties may make submissions as to how this may be accomplished.
d) The plaintiffs’ claim in relation to Excess Funds is dismissed.
[550] Should the parties wish to make submissions as to this Court’s directions for the process before the Registrar or in respect of other matters regarding Mayfair or Elm, they can arrange a further hearing before me.
[551] The defendants would ordinarily be entitled to their costs as a result of my conclusions. Should either side of this case wish to address costs at a further hearing, I ask that they provide notice of their intention to do so and their positions within 60 days of this judgment.
[552] I wish to thank counsel for the parties for their detailed submissions and organization of the evidence in this case.
“The Honourable Madam Justice Griffin”