Vancouver man defrauded Chinese developers of US$500K, court rules

B.C. Supreme Court in Vancouver is seen in this undated image. (Shutterstock)

A Vancouver man has been ordered to pay more than US$500,000 after a B.C. Supreme Court judge found he had defrauded the would-be developers of a real estate project in China of that amount.

In a decision issued earlier this week and published online Friday, Justice Neena Sharma ruled that Christopher Lee is liable to Hainan Dehong Real Estate Development Corporation and Hainan Kinghouse Real Estate Development Corporation for "fraud and/or fraudulent misrepresentation."

The two companies sued Lee – along with a mortgage brokerage and one of its contractors – for his role in an ultimately failed attempt to secure US$100 million in financing for a land development project on Hainan Island in China.

The development pitch

Sharma's decision describes the two development corporations as "family companies" run by Cexen Fu, whose daughter Julie Fu lives in Vancouver and represented the plaintiffs at the trial.

In 2014, the younger Fu worked with a mortgage broker named Frank Lee – who is not related to Christopher Lee – to acquire a large tract of commercial land on Alderbridge Way in Richmond for $65 million on behalf of one of the family companies.

Early the following year, she reached out to Frank Lee again to inquire about financing for the Hainan Island project, which is described in the decision as a proposed "shopping centre and recreation complex."

Frank Lee told her he was not licensed to provide mortgage broker services for transactions outside British Columbia, but agreed to assist her in some capacity, according to the decision.

Frank Lee contacted his acquaintance Christopher Lee, who presented himself as the Canadian representative of a company called Westbay Partners Services Ltd. After a series of meetings with Fu and Frank Lee, Christopher Lee convinced Fu to have her father's companies enter an agreement with Westbay for a "syndicated" loan.

The idea, according to the decision, was that Westbay would raise the US$100 million from "one or more private equity funds, real-estate investments trust and high net worth individuals" and provide it to the Fu companies in two tranches of US$50 million each.

In exchange for this service, Westbay requested a US$500,000 "commitment fee," which would be refunded if it was unable to secure the private financing for the loan.

While Westbay notified the companies in November 2015 that it could not secure the financing and promised to return the fee, it never did so, according to Sharma's decision.

Instead, banking records cited in the decision indicate that the money was transferred to personal accounts held by Christopher Lee in a series of transactions that began the day after the fee was deposited into Westbay's account.

Agreement was 'a sham'

Sharma's decision notes that both Julie Fu and Frank Lee provided testimony that had "diminished" credibility and reliability, and which she used "with caution."

Christopher Lee's testimony, however, was even less credible, according to Sharma, who wrote that some of his version of events "defies logic and common sense."

"His explanation for suspicious facts was far-fetched," the decision reads.

Christopher Lee told the court he had purchased the company that owned the account into which the commitment fee was deposited, but documentary evidence disclosed after a court order in Hong Kong did not show any record of the account changing hands.

The account – referred to in the decision as the "Roxschild account," named after the company that opened it – was opened by a Canadian named James Christopher Wong in 2012 and remained under his name until it was closed, according to the decision.

Christopher Lee claimed he had acquired the account from Wong, then sold it to Westbay in November 2014. He claimed that Westbay transferred the funds to him as payment for a debt it owed him, but Sharma rejected this claim, finding there was no evidence that he had ever relinquished control over the account.

"Instead, I find on a balance of probabilities that at all material times, Christopher Lee owned and controlled both Roxschild and the Roxschild account based on the evidence adduced, Christopher Lee's admission (contrary to his pleadings) that he 'at one time' owned Roxschild, and the lack of contrary documents," the decision reads.

"That being the case, I also find that he knew and was solely responsible for usurping the commitment fee for his own personal use."

"Combined with the significant and telling gaps in his document production, I am persuaded on a balance of probabilities that the Westbay agreement was a sham," it adds. "The plaintiffs have adduced clear and cogent evidence that Christopher Lee was the driving force behind a fraudulent scheme designed to induce Ms. Fu to pay a US$500,000 'commitment fee' that he knew would never be returned."

The judge concluded that Christopher Lee was liable to the plaintiffs for the entire US$500,000, plus pre- and post-judgment interest.

Allegations against other defendants dismissed

The Fu companies' lawsuit alleged that Frank Lee and the mortgage brokerage for which he worked as an independent contractor were also liable through negligence, rather than fraud.

Sharma rejected and dismissed these allegations, concluding that Frank Lee was not acting as a mortgage broker, but rather undertook to work as an advisor in facilitating the transaction.

Because of this, the judge concluded, Frank Lee did not owe a duty of care to the plaintiffs as a mortgage broker, nor did he fail to meet any standard of care that would have been expected of him under the circumstances.

Likewise, because Frank Lee was an independent contractor and not an employee of the mortgage company, Sharma concluded that the company could not be held vicariously liable for his negligence, even if it had been established.