B.C. Law Society citation charges Richmond lawyer issued a 'criminal rate' loan

A Richmond lawyer used his private mortgage corporation to arrange a "criminal rate" loan agreement, a B.C. Law Society investigation alleges.

SAM COOPER

April 2, 2018

 

A Richmond lawyer used his private mortgage corporation to arrange a “criminal rate” loan agreement, a B.C. Law Society investigation alleges.

The Law Society investigation resulted in a February 2018 citation of professional misconduct against Richmond lawyer William Lim. The case is related to a 2015 B.C. Supreme Court ruling, which found that Lim, and his company Canmerica, issued a criminal rate loan to borrowers involved in a real estate investment Ponzi scheme. Under the Criminal Code of Canada interest rates exceeding 60 per cent per annum are “criminal rates of interest.”

The citation posted by the Law Society says that a panel will hear two allegations of professional misconduct against Lim. The first allegation is that Lim issued a loan through Canmerica “he knew or ought to have known provided for interest at a criminal rate.”

Also, it is alleged that in a B.C. Supreme Court case Lim “gave misleading evidence to the Court with respect to the rate of interest to be charged” in a Canmerica loan.

The allegations are unproven and the Law Society can’t comment while the discipline case proceeds, a spokeswoman said.

Lim did not respond to several requests from Postmedia News for comment on the allegations.

In a 2015 B.C. Supreme Court ruling, a judge found that a number of investors were involved in a Ponzi scheme perpetrated by a woman named Chiu Ling Chung. Starting in 2009, two women, Quo Huo Huang and Li Yi Wu, were involved in lending and arranging very large loans to Chung’s company, Canada World Moneytrans Finance, the ruling says. The loans from a number of investors were secured by Vancouver real estate. Chung’s company used some of the later loans to repay earlier loans. But the Ponzi scheme eventually started to unravel.

As pressure mounted for a number of investors to be repaid, in 2011 Huang, Wu and their husbands claimed they were induced by Chung to take out another loan of $2.5 million, which Chung said would fund an investment that would recoup missing funds already invested by others involved in the Ponzi scheme. The ruling says that Huang and Wu searched for a private lender to fund the loan, and eventually made a deal with William Lim.

Lim agreed to fund the $2.5 million loan, the ruling says, because it was secured by eight properties connected to the borrowers.

“Canmerica is a private equity lender. It makes loans to borrowers based on the value of the security they offer and not on their ability to repay,” the ruling says.

The loan of $2.5 million was advanced in February 2011, and it was to be repaid in May 2011. It was written up to include both a mortgage and a promissory note. If the borrowers repaid the $2.5 million loan in under three months, interest would be waived, the ruling says. But after three months passed, they would owe $3.1 million.

After Huang and Wu took Lim’s loan of $2.5 million and paid it to Chung, Chung left Canada either to Hong Kong or China, the ruling says. Other unidentified property owners also had real estate loans secured on Chung’s two Vancouver properties, the ruling says.

In April 2011, Bill Lim wrote to the borrowers on Lim and Company legal letterhead, reminding them of their coming obligation to repay a “loan in the amount of $3.1 million in favour of Canmerica Mortgage Corporation.”

But Huang and Wu were unable to recover millions in funds they and others had provided to Chung, meaning they could not repay Canmerica the loan due on May 16, 2011.

In court, Lim sought repayment of Canmerica’s loan. But the borrowers claimed that they were victims of a Ponzi scheme, and Lim had taken advantage of them.

“The defendants characterize Bill Lim as being greedy and unscrupulous,” the ruling says. “They say that he took advantage of the desperate situation that the defendants found themselves in, to impose an agreement containing obligations that they had no prospect of satisfying.”

Lim claimed that he had not written up Canmerica’s loan so that it would require interest of more than 60 per cent. But the judge disagreed. The loan, however, did not involve “loan sharking,” the ruling says, because there was “no evidence that Canmerica engaged in any intimidation or coercion.”

“Even on Bill Lim’s own evidence, he clearly intended that Canmerica would receive interest at a criminal rate, 8% per month, from February 16, 2011 to May 16, 2011, a rate the parties agree was 96% per annum, but which was probably significantly higher,” the ruling says.

“I am satisfied that Canmerica knowingly charged interest at the criminal rate of more than 60 per cent,” the judge wrote. “I found Bill Lim’s evidence on this issue to be contrived and designed to persuade the court that he did not intend to charge criminal interest.”

The judge found that Canmerica was entitled to repayment of $2.5 million of its loan to Huang and Wu, and could enforce its mortgage against the Vancouver properties securing the loan. But Canmerica could not recover interest on the loan, the ruling says.

Lim and Canmerica have been involved in a number of legal cases revolving around immigration, real estate and business investment. Most recently, in a B.C. Supreme Court case that was settled just before going to trial, legal filings detailed allegations of secret cash dealings and transactions involving Lim and Canmerica at a Richmond Chinese restaurant business. Lim and the restaurant’s owner, a wealthy offshore real estate investor, successfully petitioned to close the settlement proceedings to the public.

In this case, a bitter financial dispute between the owners and Lim on one side, and the restaurant’s head chef and food suppliers on the other, spilled into allegations made in Chinese media.

Lim and Huang claim their reputations have been unfairly damaged in the Chinese media reports.

Case filings say that the restaurant’s principal investor, who is in China, invested in the business by using his company, YSY International Investments. Postmedia’s review of B.C. property documents shows that the investor, his wife and YSY International Investments own a total of $35.9 million in B.C. properties, including a number of farm plots in Richmond.

Daniel Reid, the lawyer representing Lim in the restaurant case, said he could not comment for this story.

In other findings involving Lim and Canmerica, several Immigration and Refugee Board decisions say Canmerica is allegedly involved in providing work for Chinese citizens that are attempting to fulfil Canadian residency requirements.

In one case, the board found a man named Chun Qing Huang could provide “no credible evidence … that the alleged work done by the appellant for Canmerica produced any results … the evidence does not establish, on the balance of probabilities, that there is any operation for Canmerica separate from (Lim’s law practice.)”

The decision also held that Canmerica is a “business that serves primarily to allow a permanent resident to comply with their residency obligation while residing outside Canada.”

In another case, the board rejected the appeal of Guo Qing Liu, who claimed his work for Canmerica Mortgage Corporation qualified as employment for a Canadian business. The decision says that Liu landed in Canada in 2005 with his wife and son, under the investor category.

Lim hired Liu to work for Canmerica, according to the decision, in order to provide real estate development consulting work in China for Tianjin Dongda, an investment company.

The board said that Canmerica Mortgage Corporation’s hiring of Liu for “‘assignment’ to China does not fall under the definition of employment outside Canada … (as) there is no connection to Canada.”