More Chinese cases target property in B.C., say lawyers

SAM COOPER
More from Sam Cooper

Published on: September 9, 2016

China CiNG

Lawyers in Vancouver say they are seeing a substantial increase in B.C. court cases filed by Chinese companies seeking to seize real estate assets from Chinese immigrants in B.C.

The Chinese plaintiffs are asking B.C. judges to enforce monetary judgments awarded in Chinese courts. These Chinese rulings typically involve people found in China to have defrauded Chinese banks or business partners and then fled to Canada with the money and invested in real estate here.

The rapid rise in the numbers of Chinese cases in Canada and the U.S. — two preferred destinations, according to the Chinese government, for financial fugitives — has also been recognized by Dan Harris, a Seattle lawyer who advises international law firms on strategies for recovering assets from Chinese defendants.

Such cases have been trickling into B.C. courts for several years, including a 2015 B.C. Supreme Court award of $670 million to the Bank of China against money allegedly laundered through buying multiple homes and setting up bank accounts in Richmond.

But, according to Vancouver lawyer Christine Duhaime, a precedent-setting case in June appears to have opened the flood gates.

Duhaime says that after her client, China Citic Bank, won a so-called Mareva injunction from B.C. Supreme Court, prohibiting the sale of four Vancouver-area homes worth $7.2 million, calls from China poured in. The homes belong to a couple who were alleged to have “fled China” with an unpaid $10-million loan.

Duhaime says she understands this is the first case of a Mareva injunction, also called a freezing order, being won by a Chinese bank in North American courts. Such injunctions prevent assets from being sold before a court can rule on whether they should be used to repay a court award.

Based on the case, Duhaime says she has obtained information from China alleging that “billions of dollars” of bank fraud proceeds are invested in B.C. real estate. She said she could not share the documents for reasons of client privilege.

“The (Citic) Mareva case absolutely increased the interest in China, and caused a number of banks in China to reach out to us and say ‘We have all these cases. Can we do something in B.C., too?'” Duhaime said. “There is lots of cases coming down the pipe, and there is lots of appetite in China from the government, down to the banks, to come to B.C. to enforce judgments.”

In the Citic case, the defendant, Shibiao Yan, a citizen of China, is now seeking to overturn the Mareva injunction. Yan argues Mareva is a “harsh and exceptional remedy that should only be available in the clearest of cases,” according to B.C. legal filings. Yan’s lawyers did not respond to a request for comment on the case.

Duhaime says as the Citic case continues, her law firm is already working on new cases.

“One of our next projects is a Toronto house we are looking at, worth $100 million,” Duhaime said. “A guy went to a bank in China, defrauded them, got a loan and all the money in one day, and moved to Canada and got a mansion. And no one asked any questions, even though he never worked a day in Canada. It’s all the same type of story, where a foreign national doesn’t have a job, but is living in homes in Canada and owes money to a bank in China.”

The house at 2790 Chelsea Close, West Vancouver, that a Chinese company is naming in an effort to collect on a Chinese court award against the homeowners. GERRY KAHRMANN / PNG

Vancouver lawyer Ross McGowan recently filed a case for the Chinese industrial giant, Lonking. The heavy equipment manufacturer is seeking to collect on a $6-million judgment awarded by a Chinese court against a Chinese couple living in West Vancouver. The B.C. lawsuit, against Xing Fu Zhao and his wife Ren Tao Li, says they are living in a $3.38-million West Vancouver home.

The defendants have responded, alleging that Lonking obtained their judgment through “fraud” in the Chinese court, and that as a major company in China, “Lonking has enormous power and influence,” so that the Chinese court was “biased against the defendants.”

Lonking, a maker of heavy machinery, including these models, is trying to recover a Chinese court award through the B.C. courts. LONKING HOLDINGS / PNG

In an interview, McGowan said that he could not speak specifically about the case. But he told Postmedia that he anticipates a growing wave of legal actions from Chinese citizens seeking to recover debts by targeting B.C. properties.

“What I can say generally is that I’ve seen and I’m anticipating seeing a lot more claims like this,” McGowan said in an interview. “The amount of inflow litigation from China is substantial. I think the Chinese are starting to appreciate there is an opportunity to make recovery on their losses in China … against people who have immigrated to Canada.”

Harris, the Seattle lawyer, said he agrees with the Vancouver lawyers “100 per cent” that cases from China are rapidly increasing.

“There is an influx of these cases because they are in some ways so easy to bring in the U.S. and in Canada,” Harris said. “And, more importantly, they are so easy to collect on, unlike in China, where winning a case is one thing but collecting on the judgment is another.”

Harris said his firm is often approached by Canadian and U.S. lawyers seeking to recover assets from companies and people in China. He advises these lawyers to seek out assets owned by the litigation targets outside China and then take action “in other countries with more effective legal systems for collecting on court judgments or arbitration awards.”

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Legal experts and precedent cases say that as global trade increases, North American judges are increasingly willing to enforce commercial case judgments from China, even though Canada and the U.S. do not have treaties with China for reciprocal enforcement of judgments.

While the legal process without such a treaty is more challenging, if Chinese plaintiffs can establish that their court judgments were awarded in China following fair and due process, experts say that B.C. judges will enforce monetary awards. But Chinese defendants can avoid enforcement of Chinese monetary judgments in B.C. courts if they can show fraud or denial of natural justice in the Chinese court process.

The civil claim from plaintiff Lonking Machinery was filed in B.C. Supreme Court on June 23. It says that defendants Xingfu Zhao and Rentao Li, also known as Xing Fu Zhao and Ren Tao Li, are a married couple that “reside or have property within the jurisdiction of this honourable court.”

Lawyer Ross McGowan in front of BC Supreme Court in Vancouver, B.C., Sept. 8, 2016. Ross McGowan is one of the lawyers bringing a case against Chinese citizens who live in B.C. but lost commercial cases in China. These cases against B.C. property are on the increase. ARLEN REDEKOP / PNG

The plaintiff’s claim states that in October of 2013, Lonking sued defendants including Zhao and Li, and Liaoning Mechanical, a company controlled by Zhao, in the People’s Court of Longyan. The Supreme Court claim indicates that Zhao and Li were not in China at that time, and the couple “did not appear for or participate” in the court case.

In July 2014 the Chinese court, in Fujian province, awarded a judgment against Liaoning Mechanical, Zhao and Li for 30.5 million yuan (about $6 million), Lonking’s B.C. Supreme Court claim says.

Lonking says that the defendants have not appealed the Chinese judgment and that, in B.C., the Chinese verdict is “a valid and enforceable judgment and stands as a debt owing by the personal defendants to the plaintiff.”

The lawyer for Zhao and Li, Kathleen MacDonald, said her clients did not want to comment. She referred Postmedia to their legal response, filed on Sept. 1.

The response says the couple are permanent residents who arrived in Canada in 2011 as landed immigrants.

Title documents say that in 2011, “Ren Tao Li, housewife” purchased the West Vancouver residence named in Lonking’s Supreme Court claim.

Zhao and Li say Liaoning Mechanical was an exclusive wholesaler for Lonking machinery, and after a distribution deal went sour in 2012, Liaoning signed a new deal with Lonking to pay outstanding debts, and has continued to pay back Lonking. The defendants say they were not properly notified of Lonking’s action against them and did not have a fair chance to defend themselves.

Furthermore, the defendants claim they could not have a fair hearing in China, as “Lonking has enormous power and influence,” in Fujian, and in China as a whole, and the company’s president is a member of the elite National People’s Congress, and other political bodies linked to the Chinese state.

“Canadian courts will not enforce a foreign judgment,” that is contrary to Canadian notions of fundamental justice, the defendants stated, and “has been obtained through fraud (and) where the judgment is granted by a foreign court that is biased against the defendants.”

While Lonking’s B.C. claim only names one West Vancouver property, the claim cites various versions of the defendants’ names which are found in connection to a number of B.C. properties or loans, valued at about $11 million.

Xing Fu Zhao and Ren Tao Li are owners of a $2.2-million 100-block Wollny Court home in Anmore, documents show. Xingfu Zhao and Rentao Li are shown as owners of a $639,000 Metrotown condo. On July 12, 2016, Xing Fu Zhao, “retired” and Ren Tao Li “homemaker” of 2790 Chelsea Close in West Vancouver, paid $1.36 million for a home in Maple Ridge, title transfer documents show. The property was assessed at $817,400 in 2016.

Land title and mortgage documents show that Rentao Li, “business person” and Xingfu Zhao, “business person” of 5065 Whiskey Cove Lane in Belcarra, lent $3.6 million in a mortgage to a business person named “Didi Zhao” of 5065 Whiskey Cove Lane.

The mortgage document says the principal amount is $3.6 million, and it does not list any interest rates or payment dates, and says the balance is to be paid at 5065 Whiskey Cove Lane, “on demand.”

In another case, filed in July in B.C. Supreme Court, Beijing Jinxinrun Investment Co. and business person Huimin Li, are seeking enforcement of a 67-million yuan, or about $12.9-million, judgment awarded in a Beijing court in 2015 for defaulted loans. The defendants, Hebei Zhongli Industrial and Trading Group and business persons Ying Min Li and Dong Yan, have not paid the award in China legal filings say, but they are believed to have assets in B.C., according to the plaintiff’s Vancouver lawyer, Junzhong Cao. The plaintiff’s claim indicates no known Canadian addresses for Li and Yan. The defendants have not filed a response to the July 13 claim, and could not be located for comment in China or B.C.