Seller ordered to return buyer's $1.5M deposit for 2 Vancouver teardowns at centre of fraud litigation

The single-family home at 426 W. 41st Ave. is seen in this photo from BC Assessment. The home is one of two teardowns owned by 1011066 B.C. Ltd. that were the subject of a recent court case. (BC Assessment)

The owner of a pair of teardown homes in Vancouver's rapidly redeveloping Oakridge neighbourhood has been ordered to refund a would-be buyer's deposit of $1.5 million.

In a decision issued Monday, B.C. Supreme Court Justice Sharon Matthews ruled that the owner – 1011066 B.C. Ltd. – was in breach of its contract to sell the properties to iFortune Homes Inc.

While the addresses of the two properties are not specified in Matthews' decision, the properties have been the subject of ongoing litigation for years. Other court decisions published online identify them as 408 and 426 W. 41st Ave.

An adjacent property – 448 W. 41st Ave. – is not owned by 1011066, but is considered a candidate for land assembly and redevelopment alongside the properties owned by 1011066, according to a B.C. Supreme Court decision from May of this year. 

All three parcels are currently home to older, single-family homes. Last year, the 448 property made headlines for an unusual $10.5-million listing that specified would-be buyers were not welcome to schedule a showing, because the home was being sold "for land value only."

• Read more: 'No showing of property at seller's request': Land value behind $10.5M listing for Vancouver teardown 

The Zhang litigation

The numbered company's contract to sell the properties to iFortune called for a purchase price of $16 million, with an initial deposit of $1.5 million, which iFortune paid in September 2020.

The contract initially called for a sale completion date of Dec. 15, 2020, but it was later amended multiple times to extend that date, each time with a clause setting the new date for "the first business day that was 90 days after all certificates of pending litigation had been discharged from title to the properties," according to Matthews' decision.

The certificates of pending litigation stem from a separate case, referred to in Matthews' decision as "the Zhang litigation."

The Zhang litigation, which has had two trial dates postponed since it was filed in 2020, was most recently scheduled for a trial beginning in March 2025, according to other court decisions related to the 41st Avenue properties.

The allegations in that case, which have not been proven in court, are that Hang Yin – one of the principals of 1011066 – made misrepresentations that caused Tong Zhang to invest $45 million with him.

Yin then allegedly misappropriated Zhang's funds for various purposes, including the acquisition by 1011066 of the West 41st Avenue properties.

An early court decision on document disclosure in that case describes Zhang alleging that Yin and his spouse Yan Chun Liu, among others, had engaged in "a complex commercial fraud." 

Zhang is now deceased, but his estate has continued the litigation against Yin and Liu, who is also a principal of 1011066.

According to the May 2024 B.C. Supreme Court decision, Yin and Liu "deny both that the investments were as made by Mr. Zhang, and that there was any scheme to divert monies for their own use."

Summary trial appropriate

In its defence against iFortune's lawsuit, 1011066 argued that the existence of the Zhang litigation and the scale of iFortune's land-assembly project made the case "much more complex than it seems at first glance," and therefore not suitable for a summary trial.

Matthews disagreed with that assertion, citing the "clear language" used in the contract between 1011066 and iFortune.

The judge also rejected 1011066's argument that a full trial was necessary because it had made requests for documents from iFortune that had not been provided to it.

The documents in question, Matthews noted, were communications that iFortune had sent to 1011066 before the litigation began, and therefore should already be in 1011066's possession.

"Clearly, 1011066 should be in a position to produce those written communications as evidence if they exist," the judge's decision reads.

Matthews was also unpersuaded by the numbered company's explanation for why it was unable to access the documents.

"(The defendant) asserts that the Zhang litigation is related to an investigation by the Chinese government pertaining to allegations of corruption that have been made against Zhang’s father, and Hang Yin … has been compelled to participate in that investigation," the decision reads.

"(The defendant)’s counsel has explained that the Chinese government has limited Mr. Yin’s access to his electronic records. There is some evidence about this from Mr. Yin, but it is extremely vague and is insufficient to accept that 1011066 does not have communications relating to this litigation, which it asserts that iFortune sent to it."

Deposit must be returned

According to Matthews' decision, iFortune demanded the return of its deposit from 1011066 in May 2023 and again in July of that year.

The plaintiff argued that 1011066 had breached the contract by failing to set a completion date and complete the sale, a condition that would have required the numbered company to resolve the certificates of pending litigation on the properties.

The numbered company did not respond to either of iFortune's demand letters, and argued before the court that the company was not entitled to a return of its deposit for various reasons.

The defendant argued that the requirement that it set a completion date was not a "material term" of the contract, since both sides knew that iFortune's land assembly process would be lengthy and complex, and both sides knew the certificates of pending litigation would need to be cleared before the sale could be completed.

It also argued that iFortune had – through its conduct, if not explicitly – waived the deadlines in the contract, and that iFortune had committed an "anticipatory breach" of the contract by informing parties affiliated with 1011066 that it was having trouble securing the funds necessary to complete the purchase.

The defendant further argued that the $1.5-million deposit was not actually a deposit, and that iFortune had breached its duties of "honest performance and good faith in contractual performance."

Matthews rejected each of these arguments, concluding that 1011066 was obligated to refund the deposit. She also awarded court costs to iFortune.