'Untethered from the truth': B.C. judge orders family to pay millions it held in trust for business partners

The B.C. Supreme Court and Court of Appeal is seen in this image from Wednesday, Feb. 7, 2018.

A B.C. Supreme Court judge has ruled in favour of the plaintiffs in a lengthy and complicated battle between two Chinese Canadian families whose intertwined business interests stretch across seven years and almost 10,000 kilometres.

Justice Gordon C. Weatherill began his 84-page decision – issued Dec. 9 and posted online this week – with several observations about the difficulty he had in adjudicating the case. 

"The issues raised are an illustration of the level to which some people will descend to extract retribution when money is lost," Weatherill wrote. "Unfortunately, this case is also an example of the willingness on the part of some counsel to advocate a client’s position despite it being untethered from the truth."

He noted that the case involved "allegations of document fabrication and fraudulent misrepresentation," as well as "denials of obvious fact."

"Many of the questions asked of witnesses were poorly articulated and the meaning was lost in both translation and the nuances of the Chinese language," Weatherill wrote. "The court was left to weave as best it could through a labyrinth of irrelevant evidence and dealings that defied common sense."

Ultimately, after untangling a complicated web of claims and counterclaims, Weatherill found in favour of the plaintiffs, Ming "Myles" Zhang and his wife Xiaoquin "Rose" Yang, and made several orders to their benefit.

THE ORDERS

The judge ordered that Rose is entitled to a declaration that one of the defendants, Ping Hui "Helen" Lu, held 25 shares in a company called Unison International Holdings Ltd. in trust for her.

He also ruled that Rose is entitled to judgment against Helen for a breach of the Unison trust of more than $3.7 million, plus interest, and that she is entitled to judgment against Helen's husband Guang Ning "Nick" Zhang for breach of a different trust.

The judgment for Rose against Nick amounts to more than $2.2 million, plus interest.

Both plaintiffs (Rose and Myles) are entitled to damages against Nick and Helen for unjust enrichment, Weatherill wrote, awarding them the Canadian-dollar-equivalent of 298,900 Chinese Yuan, converted on May 1, 2019, plus interest.

The plaintiffs are also entitled to orders requiring Nick and Helen to account for the money they received from selling shares of a company called Electrameccanica Vehicles Corp. (EVC), as well as freezing all trading accounts of Helen, Nick and Unison that contain EVC shares or the proceeds from selling such shares.

Weatherill also awarded the plaintiffs $100,000 in punitive damages, plus special court costs.

CREDIBILITY

While all of the judge's orders were made in favour of the plaintiffs, he determined that witnesses on both sides of the dispute lacked credibility.

Weatherill wrote that Myles gave his evidence "in a seemingly credible manner," but "was anything but forthright" during cross-examination.

"I have no difficulty concluding that Myles is a person who will say anything he perceives is necessary to achieve what in his view would result in justice for him and his family," Weatherill wrote, noting several instances of testimony from the plaintiff that he simply did not believe.

The judge found Rose more credible, but added that Myles was responsible for the family's business decisions, including the decisions to invest through trusts held by Helen and Nick, which Weatherill characterized as a strategy for hiding money.

"Because she followed her husband’s instructions, Rose knowingly participated in Myles’ scheme to make investments by way of trust in order to avoid creditors," the judge wrote.

Weatherill described other witnesses – including Nick and Helen's son Yue "Jack" Zhang, and Nick himself – as "obviously scripted," and placed little weight on their testimony. But he reserved his harshest criticism for one defendant.

"Helen’s testimony was replete with unabashed lies," he wrote. "It was rambling, contradictory and devoid of veracity. Rather than answer the questions that were asked of her, she appeared to view the witness stand as a platform for advocating her position in the actions, rarely missing an opportunity to malign Myles’ integrity."

BACKGROUND

The background to the dispute is complex, stretching back to the Chinese city of Chengdu, where Myles founded a company called Sichuan Sunfor Light Co. Ltd.

In October 2015, Nick and Jack visited Chengdu and took a tour of Sunfor's facility there, which Myles had arranged. The court decision indicates that the two families began working together, incorporating a few different companies with each other after that date.

One of these companies was Lumenari, a Canadian company led by Jack that was incorporated to sell lighting products made by Sunfor or by Chengdu Century Photosynthesis Technology Co. Ltd. (referred to throughout the decision as "Light & Effects") – a company run by Myles' son Ben – in the North American market.

The court documents indicate that Lumenari's sales were poor, and that Jack and his family lost money on their investment.

Another of the companies the families incorporated was Unison, which was created for the purposes of purchasing shares in EVC on behalf of the two families.

While all this was happening, Myles and Sunfor were the subject of several legal actions in China, which resulted in judgments against him for tens of millions of Yuan.

Myles testified that he had told Helen, Nick and Jack about these judgments against him in China. Helen, Nick and Jack told the court he had not informed them of these liabilities.

THE ARGUMENTS

"The thrust of the defendants’ case is that, because Myles and Rose were facing significant financial claims in China, they developed a scheme to immigrate to Canada to hide their assets from their Chinese creditors," Weatherill wrote in his analysis.

"The defendants say that they became the unknowing victims of the plaintiffs’ scheme and were misled into participating in the investments that are the subject matter of these actions."

Weatherill found this argument lacking. He noted that it was based on speculation, and that none of the Chinese creditors, nor Canadian immigration officials, had been called to testify.

Even if Myles and Rose had structured their investments with Helen and Nick the way they did in order to hide assets from either the Chinese or Canadian governments, there was no evidence that any party had been harmed by the trusts that had been created, Weatherill wrote.

Nor was there evidence that enforcing the trusts – by ordering Helen and Nick to pay out assets they or their companies held in trust for Myles and Rose – would result in unjust enrichment, the judge added.

"I reject the submission of defendants’ counsel that a mere intention on the part of the plaintiffs to use the trusts as a means for hiding assets, without more, is sufficient in law for the court to exercise its discretion against enforcing the trusts," Weatherill wrote. "I am not aware of any authority for such a novel proposition and none was provided to me."

The judge articulated an alternate explanation for what brought the parties to court, placing the blame squarely at the feet of Helen and her family for failing to honour their agreements with Myles and his.

"I am left with little doubt that the defendants’ conduct was motivated by Helen, and to a lesser extent Nick, being unhappy about the money they lost in their investment in Lumenari," Weatherill wrote.

"I find that Helen decided she would exact retribution by denying the trusts and usurping to herself and her family the EVC shares and warrants held by Unison and Nick, as well as the Light & Effects investment proceeds. She fabricated claims, agreements and evidence as a means of doing so. The defendants persisted in their contrived and contemptuous conduct, attempting to justify it throughout this litigation. They profited at the plaintiff’s expense."