Appendix:
e9919fe5989e90dd3ed8e8cc68c268a5.pdf
Citation: Lu v. Li,
2023 BCSC 271
Date: 20230227
Docket: S205071
Registry: Vancouver
Between:
Haixia Lu also known as Hai Xia Lu
Plaintiff
And
Xue Yun Li
Defendant
Before: The Honourable Justice Schultes
Reasons for Judgment
Counsel for the Plaintiff: J.A. Dawson
Counsel for the Defendant: J.E. Wittman
A. Lee
Place and Date of Hearing: Vancouver, B.C.
November 25, 2021
Place and Date of Judgment: Vancouver, B.C.
February 27, 2023
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Lu v. Li Page 2
Introduction
[1] In this summary trial application, the plaintiff seeks judgment against the
defendant on what is alleged to be an unpaid loan. The amount of principal and
interest being claimed as of the hearing date was $661,970. The plaintiff also seeks
a declaration that a property in Richmond that is owned by the defendant is subject
to an equitable mortgage in her favour.
[2] The defendant argues that for several reasons the matter is not suitable for
summary trial. She has also filed a jurisdictional response, submitting that the
dispute should be resolved in the People’s Republic of China. On the merits, she
says that the funds in question were actually advanced as part of a joint investment
by the parties with a third party, which did not pan out, and that she did not actually
agree to the mortgage that is being claimed. As an evidentiary issue, a recorded
conversation between her and the plaintiff in which she made statements about the
issues is said to be subject to settlement privilege.
[3] At the time she swore her affidavits, the plaintiff was suffering from a terminal
illness. She passed away about two months before the hearing of this application.
The defendant does not oppose an order substituting her executor as the plaintiff.
For the sake of clarity, I will continue to refer to the plaintiff in her personal capacity
in the narrative.
Evidence
The Plaintiff’s Version
Previous Loan
[4] The parties had been friends for many years, beginning when the both still
lived in China. Both were retired when these matters arose.
[5] Before the alleged loan in issue, there was a transaction between them that is
potentially relevant to the nature of their financial relationship.
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[6] The plaintiff deposed that in May 2017, the defendant asked to borrow 1
million Chinese yuan from her, and she agreed.
[7] This arrangement was documented in a “Loan Agreement” that was signed by
both parties 1 .
[8] The loan period was between May 8, 2017 and May 8, 2018. Interest was in
the fixed amount of $20,000 Canadian dollars - $10,000 to be paid in June 2017 and
another $10,000 on the last day of the loan period.
[9] The plaintiff provided the money to the defendant in keeping with the
agreement.
[10] The defendant made the required interest payments during the loan period. At
the end of that period, after making the second interest payment, she asked for an
extension for an additional year, which was granted by the plaintiff. This extension
was added in writing to the loan agreement, including the term that “the content of
the agreement remains unchanged”. In her affidavit the plaintiff deposed that this
included an additional $20,000 in interest during the extension period, but she did
not describe actually receiving it.
[11] In May of 2019 the defendant asked for an extension for another year, which
the plaintiff again granted on the same basis. This time the $20,000 in interest was
paid at the outset. None of the principal had been repaid by this point however.
[12] In January and April 2020, the defendant made payments towards the
principal, which reduced the amount owing to 600,000 yuan. On April 17, 2020 the
loan agreement was endorsed to reflect this outstanding amount.
1 All of the relevant documents in this application were originally written in simplified Chinese
characters but have been translated into English by an official translator.
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[13] The plaintiff began this action on May 12, 2020, shortly after the second
extension expired. By May 2021 the defendant had repaid the outstanding amount,
and by the time this application was heard nothing further was owing on it.
The “Loan” in Issue
[14] According to the plaintiff, around May 2018 she told the defendant that she
had sold a property that she owned in China. The defendant then asked her for a
loan of 3 million yuan. She sought a term of two years and offered an interest rate of
8% per year.
[15] The plaintiff expressed hesitation about doing so, because she was elderly
and averse to any financial risk, but the defendant assured her that the money would
be safe. During this same time period the defendant told her that she had purchased
nine properties in the Greater Vancouver area.
[16] According to the plaintiff, the defendant told her that to secure the loan she
would grant the plaintiff a mortgage against any properties “in which she had, or
would acquire an ownership interest”, including her own home, which was on
Granville Avenue in Richmond. In particular, she would register a mortgage against
that home at her own expense.
[17] The plaintiff deposed that she would not have agreed to provide this loan if
the defendant had not made those representations.
[18] Like the previous one, this transaction was documented in a “Loan
Agreement”. It described the loan amount, the term, and the interest rate in the
manner that the plaintiff described in her affidavit. In addition, the agreement
specified the amount that 8% interest per year worked out to in yuan (240,000) and
required that the interest amount for each year be paid on specific dates.
[19] It also provided that the defendant’s Granville Avenue property would be
mortgaged to the plaintiff, and that the defendant would not sell or otherwise
mortgage the property while that mortgage was in place. However, this agreement
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did not contain the additional term that the plaintiff had described in her affidavit -
providing for mortgages to the plaintiff on any other properties in which the
defendant had or acquired an interest.
[20] The mechanism for transferring the funds to the plaintiff was to be through
their respective bank accounts at the Agricultural Bank of China (Beijing). After the
plaintiff transferred them to the defendant, the defendant was to “submit a money
order to [the plaintiff] for signing”. The signed money order was then to be “kept as
evidence.”
[21] The plaintiff provided the money pursuant to the agreement on May 25, 2018.
As the agreement required, the defendant provided her with the first installment of
interest of 240,000 yuan on that day. On March 21, 2019 the defendant paid her the
equivalent in Canadian dollars of that amount ($49,000) as the second interest
installment. The plaintiff’s bank records show these payments.
[22] The defendant did not pay back the principal. She also did not register a
mortgage on her Granville Avenue property. The plaintiff only found out that there
was no mortgage in her favour on that property when she began this action.
[23] The defendant actually sold the Granville Avenue property in January 2020.
Although she had told the plaintiff the month before that she was considering doing
it, she did not tell her that it had been accomplished until March 2020. In March, the
defendant also disclosed that she had sold another one of her properties, which was
on Hazelbridge Way in Richmond. The plaintiff asked her several times in April and
May of 2020 to pay back the loan from the proceeds of these sales, without success.
[24] The plaintiff and defendant frequently exchanged messages by WeChat.
Beginning in January 2020, the defendant made comments in the messages that the
plaintiff’s counsel relies on as confirmation that the transaction was a loan, and of
the defendant’s continuing obligation under it.
These comments by the defendant included:
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• January 15: …[D]on’t worry about us, I guarantee you will get the money even if I
spend my entire fortune, but you must give me some time.
• February 29: I understand, the only thing I can do to solve the problem now is to
sell the house.
• March 12: I want to go borrow some money now to pay you back, the problem is I
can’t borrow any even [if] I want to.
• April 5 (11:27 pm): Don’t worry, neither the house nor I am going anywhere, all
the money will be definitely returned to you, but you have to give me some time,
you can’t just push me to the death road
• April 5: (11:36 pm) Remember the time when you were willing to give me those
three million dollars, now the accident happened, it was also so not expected, but
I am not weaseling out, I am trying to find a solution…
• April 6: (2:00 am) …[T]hat investment was my mistake, I can’t pass the buck. [I]t
was me who took your money and did all this investment and financial
management thing. [T]hat’s why I can’t do anything that hurts you no matter what
happens. [T]here’s no problem to mortgage my house, but it won’t happen if I am
only given one year. [N]obody buys houses right now because of the pandemic,
this is also the reality…
• April 6 (8:01 am) If that wouldn’t work you can also take legal action to get your
hard-earned money back from me, you can totally use the contract we signed
before to seek justice through legal procedures, now the house is still here, I am
still here, it is me who owes you money, I am not weaseling out, nor am I saying
that I’m not paying you back, the whole world has not been functioning well right
now. Can you just give me some time? I need two years to return you the money,
within these two years I think I can definitely sell the house.
• April 6 (10:10 am) [T]the accident was my fault. It has done great harm to two
families.
• April 20:…I am not finding an excuse for the loss, I was also cruelly deceived,
and my only house is put up for sale to return your money…I really fell on hard
times, I’d rather you sue me and let the law punish me, what we can only do is
patiently wait until the pandemic is over and sell the house, to solve the problem
between us.
• After this action was begun, on date that is not shown on the messages: I have
no money to return to you no matter how I guarantee or promise you…[B]ut don’t
worry, I will find a way to return your money, I never think of not paying you back,
give me some time.
[Emphasis added]
[25] Initially unknown to the plaintiff, the defendant had bought another property,
on Camsell Crescent in Richmond, in July 2018, after the funds in issue were
provided. Despite her representation to the plaintiff before the loan was agreed to
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that she would put mortgages in the plaintiff’s favour on any properties that she
acquired an interest in, she did not put one on this property. The plaintiff provided
evidence that the defendant listed it for sale several times after buying it.
[26] The plaintiff deposed that when the loan period ended in May 2020, the
defendant offered to grant her a mortgage against this Camsell Crescent property.
She was seeking more time to repay the loan. The plaintiff was agreeable to a
further two-year extension on that basis, but the defendant did not provide the
mortgage.
[27] There were also WeChat discussions between the parties that the plaintiff’s
counsel submits show a common intention to secure the outstanding loan with a
mortgage on that property, as the plaintiff described. Although it is not specifically
named in the messages, it is common ground that the defendant’s references to her
“house” were referring to the Camsell Crescent property.
[28] These conversations arose in the context of discussions between the parties
about the defendant’s efforts to sell the Camsell Crescent property.
[29] On March 30, the plaintiff suggested, in light of the fact that she and her
husband had “grown old” and her worry that “accidents might occur”, that she and
the defendant should “do a notarization [which in context refers to a mortgage on the
defendant’s property] locally, to comfort me and make me feel at ease…”
[30] The defendant agreed, saying “[L]et’s do it then”, although she raised the
obstacle of not currently having insurance on her vehicle.
[31] After expressions of regret on the defendant’s part, including indicating that
she did not feel like living anymore, the plaintiff wrote:
…[I]t’s just a notarization, I’m not asking you for money right now…signing it
means that we trust each other that we will bear responsibility together, it’s
also responsible for my family if any accident occurs to us!
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[32] However, later in that exchange of messages on that date, in the course of
organizing a lawyer for them to attend to for the “notarization” that they had been
discussing, the plaintiff wrote:
But before we go, shall we discuss first because we haven’t come to an
agreement?
[33] In response to the message from the defendant on April 5 that I have
previously described, in which the defendant expressed concerned about being
pushed “to the death road”, the plaintiff wrote:
…You are just getting a notarization to make your house a mortgage, how is
that pushing you to the death road?
[34] As I have also previously described, on April 6, in the course of requesting
more than one year to carry out the sale of the property, the defendant had written
that “[t]here’s no problem to mortgage my house…”.
[35] On August 10, 2020, after the Notice of Civil Claim and Response to Civil
Claim had been filed, the parties had a meeting, which the plaintiff surreptitiously
recorded and had transcribed. Pursuant to a Notice to Admit, the defendant agreed
that the recording is accurate. According to her first affidavit, it took place at her
“primary residence”.
[36] During this conversation, the plaintiff confronted the defendant about her
recently-filed Response to Civil Claim, which alleged that the funds advanced were
not a loan but a joint investment. The defendant maintained that she was unaware of
the contents of her pleading, because it was in English, and that she had not told her
lawyer it was a joint investment. Instead, the defendant characterized the
arrangement as a loan, for example referring to the “promissory note” that she had
provided to the plaintiff, and said that it was “impossible” that she had told her lawyer
that she and the plaintiff did not have a “debtor-creditor relationship”.
[37] In the conversation, the defendant claimed that the only points in the
Response to Civil Claim that the lawyer had discussed with her were that the 3
million yuan that she had borrowed from the plaintiff had not been used to purchase
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her house, and that the “promissory note” provided that any disputes concerning it
were to be resolved in China.
[38] The parties also discussed a possible resolution of the matter, which would
involve the plaintiff removing what I infer was a certificate of pending litigation
against the defendant’s house. This would enable her to sell the house and pay back
part of the amount she owed the plaintiff, with the rest to follow. The defendant
asserts that her goal was to resolve the matter privately between them, and that she
assumed that their discussions would not be disclosed to any third parties if they
proved to be unsuccessful 2 .
[39] The transcript of the communications was made an exhibit to the defendant’s
first affidavit, and was referred to in the affidavit itself.
The Defendant’s Version
[40] The defendant agreed that she borrowed the 1 million yuan from the plaintiff
in May 2017, which she said was for her “personal expenses”. She also agreed that
the written agreement accurately set out the terms of the loan, that she requested
two extensions of the loan period, and that she made the interest payments and
ultimately paid off the principal as required.
[41] Where the defendant’s version differs from the plaintiff’s is with respect to the
second transaction.
[42] She explained that “in or around” May 2018, she was approached by a
representative of a company in China called “Boda Yaxin (Beijing)”. That person,
whose name she no longer recalled at the time she swore her affidavit, advised her
that Boda was offering a unique investment opportunity under which she would
2 In his application response, the defendant’s counsel refers to these assertions being contained in
paras. 17-19 of the defendant’s most recent affidavit. The copy of that affidavit in the application
record ends at para. 16, and the next page contains only the jurat. I draw the inference that the page
containing paras. 17-19 was inadvertently omitted. Because nothing ultimately turns on it, I am
content to proceed on the basis of the representations in the application response about what was
contained in those paragraphs.
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receive a guaranteed return of 8%. She was recently retired and did not have an
income, so she was attracted to the opportunity.
[43] She said that when she mentioned it to the plaintiff in the course of their
social discussions, the plaintiff advised that she would also be interested in taking
advantage of this opportunity. They agreed to pool their funds as a more efficient
way of managing their investments in it.
[44] According to the defendant, because she was already “on track” with her
investment plan, the plaintiff suggested to her that the pooling of their funds “could
be done informally, with [the plaintiff’s] investment nominally being held in [the
defendant’s] name.” The loan agreement was drafted as “a measure of protection”
for the plaintiff, at the plaintiff’s suggestion, as evidence that the defendant had
received the money. The defendant was described in the agreement as having
borrowed the plaintiff’s funds, “so as to ensure that there was a paper trail of her
having provided [the defendant] funds in relation to the [i]investment [o]pportunity.”
Crucially from the defendant’s perspective, the document “did not genuinely set out
a loan”.
[45] As a result, the plaintiff advanced the 3 million yuan “of her own volition”, for
“purposes exclusively related to the [i]nvestment [o]pportunity”.
[46] The defendant denied having made any of the representations to induce the
plaintiff to enter into the loan agreement that were alleged by the plaintiff, including
representing that she would grant mortgages against any properties in which she
had or acquired an interest, or specifically against her Granville Avenue property.
[47] Their funds were then pooled and invested with Boda, the defendant said.
She invested approximately 1.96 million yuan of her own.
[48] She asserted that it was “an implied term [of the agreement] consented to and
acknowledged by” the plaintiff, “that each party was to bear their own risks
proportionate to the amount of funds invested.”
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[49] The defendant also deposed that as both she and the plaintiff were living in
China at the time they entered into the agreement, “it was a material term of [it] that
in the event a dispute arose both parties would adjourn [perhaps meaning “attorn”] to
a court of competent jurisdiction in China.”
[50] As her counsel highlighted, several aspects of the agreement had a
connection to China:
Both parties had accounts at the Agricultural Bank of China Beijing, and the
loan was to be provided by the plaintiff transferring the money from her
account at the institution to the defendant’s;
In the event that a party was unable to “discharge” the agreement, the
agreement designated a relative of each – the plaintiff’s husband and the
defendant’s son – who would be “entrust[ed] and entitl[ed]” to do so. In
addition to providing these relatives’ names, the agreement included their
Chinese identity card and passport numbers, and their addresses in China;
and
The agreement provided that, “[i]f either party breaks [it], the Parties…may file
a lawsuit to the legal administration in China for resolution.”
[51] She maintained that the funds that she transferred back to the plaintiff after
they entered into the agreement, which the plaintiff characterized as interest on the
loan, were made to “alleviate any further concerns” of the plaintiff, and were made
“following repeated requests” by her.
[52] While the defendant believed at the point that she and the plaintiff pooled and
invested their funds that Boda was a legitimate company, she found out in June
2019 that the investment opportunity was “little more than a sham.”
[53] She agreed that she sold her Granville Avenue property in January 2020, as
the plaintiff alleged. In keeping with her overall position on the nature of the
agreement, she denied that she was under any obligation to notify the plaintiff that it
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was listed for sale, or to pay a portion of the sale proceeds to her. The defendant
took the same position on the sale of her Hazelbridge Way property, which she sold
“at or around” the same time.
[54] With respect to the issue of a mortgage on her Camsell Crescent property,
the defendant denied ever advising the plaintiff that she would grant a mortgage
over it. She said this in relation to the WeChat messages between them on this
topic:
27 I assert that such representations were either not made or were made at
that time purely to calm the nerves of the [p]laintiff and to ensure the stability
of our long-term friendship. At no point did I fully intended to register a
[m]ortgage against the Camsell Property.
[55] She provided a similar response to the recording of her conversation with the
defendant on August 10, 2020. Because the plaintiff had “aggressively confronted”
her in prior situations, she made certain comments during the conversation that she
believed were “untrue”, “in an attempt to prevent further escalation”. Specifically, she
maintained that it was not true that (1) her relationship with the plaintiff was one of
creditor-debtor, (2) her Response to Civil Claim incorrectly denied any relationship
between the funds advanced by the plaintiff and her primary residence or other
property and; (3) she had intended, and continued to intend to repay the funds.
[56] The defendant provided a second affidavit, which was sworn two days before
the hearing date. Although the defendant’s main arguments have to do with
jurisdiction and suitability for summary trial, this affidavit and the documents
attached to it will be relevant if the matter is decided on its merits, to provide support
for the defendant’s assertion that the money received from the plaintiff was part of
the Boda investment. The plaintiff’s counsel objected to its inclusion, but I ruled that
it was admissible, subject to the right of the plaintiff to provide reply material if there
was any prejudice. The plaintiff’s counsel did not ultimately consider it necessary to
provide such material.
[57] This affidavit attached records from the defendant’s account at the Chinese
Agricultural Bank. In her affidavit the defendant mistakenly described the year of
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these transactions as 2019, but since the records themselves refer to 2018, nothing
turns on this.
[58] These records show a “transfer deposit” into the defendant’s account of
“3000000.00” on May 25, 2018. Under the heading “Time and message” for that
transaction are what appear to be an account number and the plaintiff’s name 3 .
[59] Immediately below that entry, on the same date, was a “Transfer withdrawal”
of “240000”, again with a reference to the plaintiff. It is common ground that this was
a payment back from the defendant to the plaintiff although, as I have described, the
defendant denied that it was an interest payment under the agreement.
[60] Also on the same date, there were two reductions of the defendant’s balance,
by “1000000” each time. The “Time and message” for both of these reductions
makes reference to an account number and the name “Beijing Boda Yaxin Wujin
Investment Management Co., Ltd.” These transactions were described in the
translated record as “Consumption”. That term was not further explained, but in
context it seems to refer to a payment from the account.
[61] There was another transaction, described as a “Transfer withdrawal” of
“1000000” on May 28, but there was no reference to Boda under “Time and
message”. Only the number “135246” was shown. The defendant’s counsel says
that this was the third payment to Boda, out of the 3 million yuan obtained from the
plaintiff.
[62] In addition, the defendant relied on these banking records to show the interest
payments that she received from the investment. From June 24 to December 24
2018, there are monthly transfer deposits of “33333.40” with a “Time and message”
that includes the name Zeyun Zhang.
3 There is another entry above this transfer deposit, also labelled as a transfer deposit of “1000000”
with a reference to the plaintiff under “Time and message”. This may represent the funds that were
the subject of the previous loan in 2017, although is not clear. Counsel did not address it in their
submissions, and it does not appear to have any relevance to the current issues.
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[63] To show the basis of her belief that what Boda was offering was legitimate,
the defendant attached what she said were the “investment agreements” that she
entered into with it. These consist of four documents, each titled “Private Lending
Consultation and Service Contract”. They relate to the years 2019-2020. The
defendant explained that the original 2018 contracts were renewed, from which I
infer that she does not have access to those originals.
[64] In three of the four contracts, the defendant was listed as the “Assignee”
under the agreement. In the fourth the name of the person with that title was left
blank. In all of them Mr. Zhang was listed as the “Assignor”, and Boda was listed as
the “Administrator”.
[65] There were two schedules to each contract. The second schedule was titled
“Form of Transacted Creditor Rights Details”. In each contract this schedule listed
the defendant as the “creditor”.
[66] The schedules also had headings for the principal involved, the assignment
period and the expected annualized rate of return, among others. Those three
headings were completed as follows:
Principal Assignment Period Expected Rate of Return
1. “Two million five
hundred thousand
Yuan”
May 24, 2019 - May 24,
2020
16%
2. “90,000.00” June 12, 2019 – August 12,
2019
Not stated
3. “Two million one
hundred fifty
thousand Yuan”
May 9, 2019 - May 9, 2020 16%
4. “Two hundred
thousand Yuan”
May 8, 2019 to July 8, 2019 Not stated
[67] The last of these contracts had a feature of its Schedule Two that was not
found in the other ones: it provided that the “redemption payment” was to be paid
into the defendant’s account at the Agricultural Bank.
[68] The defendant deposed that as soon as she realized that the investment was
a sham, she reported it to the Beijing Police Department.
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[69] On September 8, 2019, Mr. Zhang was detained by the police. She said that
while he was detained he provided her with a “promissory note”, in which he
committed to paying back 4.94 million yuan by September 25, 2019, and assumed
personal liability for the investment funds. The corresponding document attached to
her affidavit is titled “Repayment Plan”. Mr. Zhang placed his fingerprint on it in
several locations, which I infer was a means of further affirming its contents. In it, he
committed to paying back the amount described by the defendant, which he referred
to as “the investment [the defendant] made in our company.” He committed to
assuming personal liability if the money was not repaid by the specified time.
[70] The defendant described retaining counsel in China to initiate civil
proceedings with respect to the loss. She said that the investigation of the Beijing
Court revealed that Mr. Zhang had stolen the money from Boda and transferred it to
his personal account. Because this involved criminal actions, the Court transferred
the case back to the police, who began an investigation. The defendant asserted
that there were other victims of this fraudulent scheme besides herself and the
plaintiff.
[71] The defendant explained that she was not able to able to obtain records of
the case from the police in Beijing because it would have required her personal
attendance there, something that was precluded by travel restrictions arising from
the pandemic.
Issues
Jurisdiction
Governing Principles
[72] The initial question is whether the court in British Columbia has territorial
competence over this action. This is addressed by s. 3 of the Court Jurisdiction and
Proceedings Transfer Act, which provides that:
3 A court has territorial competence in a proceeding that is brought against
a person only if
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(a) that person is the plaintiff in another proceeding in the court to which the
proceeding in question is a counterclaim,
(b) during the course of the proceeding that person submits to the court's
jurisdiction,
(c) there is an agreement between the plaintiff and that person to the effect
that the court has jurisdiction in the proceeding,
(d) that person is ordinarily resident in British Columbia at the time of the
commencement of the proceeding, or
(e) there is a real and substantial connection between British Columbia and
the facts on which the proceeding against that person is based.
[Emphasis added.]
[73] The subsections that potentially apply here are (b) and (e). Although there is
some evidence in the material from which an inference with respect to (d) might be
drawn, it was not directly addressed in the affidavits of either party.
[74] Under s.10 of the CJPTA a “real and substantial connection” between this
province and the facts of the proceeding is presumed in certain situations. The ones
that potentially apply here arises if the proceeding:
(a) is brought to enforce, assert, declare or determine proprietary or
possessory rights or a security interest in property in British Columbia that is
immovable or movable property…
[or]
(e) concerns contractual obligations, and
(i) the contractual obligations, to a substantial extent, were to be
performed in British Columbia…
[75] If territorial competence is found, s. 12 provides that a court in this province
may nonetheless decline it if it concludes that “a court of another state is a more
appropriate forum in which to hear the proceeding”: ss. (1). Sub-section (2) provides
that in resolving that question, the court must consider “the circumstances of the
proceeding, which include:
(a) the comparative convenience and expense for the parties to the
proceeding and for their witnesses, in litigating in the court or in any
alternative forum,
(b) the law to be applied to issues in the proceeding,
(c) the desirability of avoiding multiplicity of legal proceedings,
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(d) the desirability of avoiding conflicting decisions in different courts,
(e) the enforcement of an eventual judgment, and
(f) the fair and efficient working of the Canadian legal system as a whole.
[76] Finally, it is relevant to note that an agreement that disputes between the
parties will be resolved in a particular jurisdiction is known as a “forum selection
clause”. The proper approach when a court is presented with such a clause is to (1)
determine whether the clause is enforceable and applies to the circumstances and, if
so, (2) assess whether there is “strong cause” in favour of denying a stay of
proceedings, despite the clause: Z.I. Pompey Industrie v. ECU-Line N.V, [2003] 1
S.C.R. 450 at paras. 19, 39. In Preymann v. Ayus Technology Corporation, 2012
BCCA 30 at para. 49, the Court explained that the forum selection clause should be
considered after the court has determined that it has territorial competence. The
inquiry should then be whether the clause is “clear, unambiguous and enforceable”.
Plaintiff
[77] A crucial factor underlying the court’s territorial competence in this case, the
plaintiff’s counsel submits, is that fact that the plaintiff is seeking the declaration of
an equitable mortgage in the Camsell Crescent property. This falls squarely within
s. 10(a), as a proceeding to declare a security interest over immovable property in
British Columbia.
[78] Also on the issue of territorial competence, counsel argues that the defendant
has already submitted to this Court’s jurisdiction. Despite the jurisdictional response
that was filed by her present counsel shortly before the hearing, she previously filed
a substantive Response to Civil Claim, produced a list of documents, and responded
to this summary trial application.
[79] Her counsel submits that the portion of the alleged loan agreement that the
defendant relies on as requiring proceedings in China is permissive rather than
mandatory – providing only that the parties “may” choose to proceed in China. It is
not a “forum selection clause” as that term is defined in the case authorities, and it
does not purport to oust this Court’s jurisdiction.
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[80] Given the absence of a contractual requirement for the litigation to proceed in
China, the defendant bears the onus of showing that the Chinese courts are clearly
the more appropriate forum. Such efforts must fail, counsel argues, in light of the
facts that both parties reside in this province and the property that is said to be
subject to an equitable mortgage is located here. The last point is important,
because it means that the plaintiff cannot obtain relief with respect to that property
from a court in China. In essence, it was a loan secured on property in British
Columbia, and so its “guts” were to be performed here.
[81] Despite the existence of a criminal investigation in China, there is also little
possibility of inconsistent outcomes in the two jurisdictions, counsel submits,
because the essential documents relating to the transaction that is actually in issue
are here.
Defendant
[82] Her counsel argues that the required real and substantial connection between
this province and the facts underlying the action that is needed to support a finding
of territorial competence is not present. Section10(e) does not assist the plaintiff,
counsel argues, because the obligations under this agreement were to a substantial
extent, if not entirely, to be performed in China.
[83] On the question of whether the defendant has submitted to the jurisdiction of
the court, counsel reminds me that Rule 21-8 of the Supreme Court Civil Rules,
which governs disputes over jurisdiction, does not impose any time limit on the filing
of a jurisdictional response, so nothing turns on the proximity of the defendant’s
response to the hearing date.
[84] If I am satisfied that this court has territorial competence, which is sometimes
described as jurisdiction simpliciter, he submits that a review of the relevant factors
should result in this court declining jurisdiction. The agreement in question was
drafted in China, by parties who were there at the time; they chose Chinese courts
as the form for any required dispute resolution; and the transaction that was being
documented was funded through a transfer between them within a Chinese bank.
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[85] The resulting investment was with a Chinese company, and in terms of proof
of the defendant’s case, Mr. Zhang and the relevant records from Boda are also
located in that country. Further, the referral for a criminal investigation in China
means that there might be a different outcome in the courts there, and expert
evidence could be required, at considerable expense (on behalf of the defendant I
took it), to show that those courts would reach a different conclusion.
Discussion
[86] First of all, I conclude that British Columbia has territorial competence over
this proceeding.
[87] The defendant has clearly submitted to the court’s jurisdiction during this
proceeding, as captured by s. 3(b). Despite the recent filing of the jurisdictional
response, the defendant previously filed a substantive Response to Civil Claim,
provided a list of documents, filed a substantive response in this summary trial
application and, but for a scheduling problem, would have been examined for
discovery. Her counsel is quite correct that Rule 21-8 imposes no time limit on the
filing of a jurisdictional response, but the ability it provides to takes steps in the
litigation without submitting the jurisdiction of this court is essentially limited to
applications to contest that jurisdiction, or the validity of the originating process, after
the jurisdictional response has been filed (ss. (1) and (3)). Under the rule, a party
who contests jurisdiction cannot defend on the merits except while waiting for a
decision on a permitted jurisdiction-related application (ss. (5)(b)(ii)).
[88] If it is necessary to resort to the existence of a real and substantial connection
between British Columbia the facts upon which this proceeding is based, as
envisioned in s. 3(e) of the CJPTA, one of the factors in s. 10 of the CJPTA that
leads to a presumption to that effect is clearly engaged. This action seeks a
declaration that there is an equitable mortgage over real property in British
Columbia, which falls within ss. (a).
[89] Although that finding is sufficient to support the presumption, I will consider
the potential application of ss (e)(i) (contractual obligations to be performed to a
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substantial extent in this province). JTG Management Services Ltd. v. Bank of
Nanjing Co.,2015 BCCA 200, is helpful on this issue:
37 Fundamentally, the inquiry with respect to s. 10(e)(i) of the Act
concerns the existence of circumstances that connect performance of the
contract to the forum. In asking whether the obligations were to be performed
in British Columbia, the inquiry focuses on the expectations of the parties as
to performance at contract formation... Put another way, the Act requires the
Court to engage in a preliminary interpretive inquiry to determine the limited
question of the jurisdiction (or jurisdictions) where the parties intended the
contract to be performed. The phrase "performed to a substantial extent"
clearly denotes that the contract may be performed in multiple jurisdictions;
thus, it is no bar to the operation of s. 10(e)(i) to say that the contract was
intended to be performed in more than one jurisdiction... It is entirely possible
to have an international contractual arrangement whereby both parties to the
contract perform obligations "to a substantial extent" in their home
jurisdictions.
[Emphasis added.]
[90] I think that is similar to the situation here, except that in this case both parties
were to perform the obligations under the agreement in both jurisdictions. While the
transfers to fund the alleged loan took place in China, the security arrangements that
the agreement put in place could only be carried out in British Columbia, since that
was the location of the specific property that was identified as being subject to a
mortgage. Thus, it is accurate to characterize the obligations under the agreement
as having to be performed to a substantial extent here.
[91] The last issue in relation to territorial competence has to do with the effect of
the clause in the agreement about enforcement proceedings in China.
[92] I conclude that as a potential forum selection clause it fails at the definitional
stage, by using the permissive “may” to the action “file a lawsuit to the legal
administration in China for resolution”. Considering the clause in light of the entire
contract and the surrounding circumstances, I cannot identify any basis for attaching
a different objective meaning to “may” within that context than its ordinary one. It
certainly does not produce any practically absurd results to apply that meaning, so
that another one should be preferred (see Guarantee Co. of North America v.
Gordon Capital Corp., [1999] 3 S.C.R. 423, at para. 61). Indeed, it may make
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objective sense, as an effort to give the parties a measure of flexibility in the litigation
despite the factors connecting the transaction to British Columbia.
[93] This conclusion is similar to the one that was reached in Wang v. Wang, 2018
BCSC 667, a case relied on by the plaintiff’s counsel. There, the court found, at
para. 25, that a purported forum selection clause providing that in the event of a
breach, “either party may bring a suit in the people's court of the area where the
lender resides in accordance with the law" was not “clear and unambiguous”, as the
authorities required.
[94] As a result, it is not necessary to proceed further in the analysis of this clause.
I am satisfied that it means the parties were permitted, but not required, to litigate
any breaches in China.
[95] With respect to the application of s. 11, I do not think any of these factors
should lead to jurisdiction in British Columbia being declined.
[96] In my opinion, the location of the property specified in the agreement, as well
as of the property to which an equitable mortgage is sought to be attached, is a
strongly influential factor. Because only a British Columbia court can give effect to
remedies relating to them, the law on at least that issue must be the law of this
province. There can be no multiplicity of proceedings or conflicting decisions arising
from that issue, since it can only be heard and decided here. A stand-alone
enforcement in China of the debt that the agreement created, isolated from both the
original means by which it was to be secured and the current application for
alternative security, would make no sense, and would actually be the approach that
offers the greatest risk of inconsistent rulings.
[97] The other factors under s. 11 do not appear to be to be particularly significant
in comparison.
[98] I do not fully understand why expert evidence on the outcome in China would
be required if the agreement is litigated here under Canadian law, but I take the
representation that it would, and would be an additional expense to the defendant, at
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face value. On its own however, it does not outweigh the factors in favour of a British
Columbia trial.
[99] The banking documents are already available, as are a meaningful number of
the defendant’s contracts with Boda, and Mr. Zhang’s promissory note. On the basis
of what has been provided so far, it is speculative to anticipate that further
documents from the police investigation that would need to be obtained in person
would implicate the plaintiff in the investment schedule in any way. There is already
ample evidence of the defendant’s participation in it, to the extent that such evidence
supports her version of events.
[100] Finally, to the extent “the fair and efficient working of the Canadian legal
system as a whole” will be enhanced by not requiring the plaintiff to abandon
enforcement of her security under the agreement, that also makes British Columbia
the most appropriate forum.
[101] As a result, I am unable to accept the defendant’s arguments on jurisdiction.
Suitability for Summary Trial
Governing Principles
[102] As is well known, Rule 9-7(15) of the SCCRs provides that:
(15) On the hearing of a summary trial application, the court may
(a) grant judgment in favour of any party, either on an issue or
generally, unless
(i) the court is unable, on the whole of the
evidence before the court on the application, to
find the facts necessary to decide the issues of
fact or law, or
(ii) the court is of the opinion that it would be
unjust to decide the issues on the application…
[103] Relevant factors in deciding whether it would be “unjust” to decide the issues
summarily have been found to include: “the amount involved, the complexity of the
matter, its urgency, any prejudice likely to arise by reason of delay, the cost of taking
the case forward to a conventional trial in relation to the amount involved, the course
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of the proceedings… the cost of the litigation and the time of the summary trial,
whether credibility is a critical factor in the determination of the dispute, whether the
summary trial may create an unnecessary complexity in the resolution of the dispute,
and whether the application would result in litigating in slices”: Gichuru v. Pallai,
2013 BCCA 60 at paras. 30-31, citing Inspiration Management Ltd. v. McDermid St.
Lawrence Ltd., (1989), 36 B.C.L.R. (2d) 202 (C.A.) at p. 215, and Dahl v. Royal
Bank of Canada et al., 2005 BCSC 1263 at para. 12, aff’d 2006 BCCA 369.
[104] With respect to the determination of credibility, “[i]n appropriate
circumstances, it is perfectly acceptable for a summary trial judge to make credibility
findings on affidavit evidence alone”: ARC Digital Canada Corp. v. Amacon Alaska
Development Partnership, 2023 BCCA 34 at para. 40, citing Orangeville Raceway
Ltd. v. Wood Gundy Inc., [1995] 6 B.C.L.R. (3d) 391 (C.A.)
[105] Similarly, in MacMillan v. Kaiser Equipment Ltd., 2004 BCCA 270, the Court
stated:
[22] ...It should be noted that the mere fact that there is a conflict in the
evidence does not in and of itself preclude a chambers judge from
proceeding under Rule 18A [the predecessor of Rule 9-7]. A summary trial
almost invariably involves the resolution of credibility issues for it is only in the
rarest of cases that there will be a complete agreement on the evidence. The
crucial question is whether the court is able to achieve a just and fair result by
proceeding summarily.
[Emphasis added.]
[106] There is no rule that examinations for discovery must always take place
before a matter can be dealt with by way of summary trial, and the suggestion that
something “might turn up” in the course of discovery is not sufficient to defeat a
summary trial application: Tassone v. Cardinal, 2014 BCCA 149 at para. 38.
[107] More generally, when a summary trial is set down, the parties are obliged “to
take every reasonable step to put themselves in the best position possible...[and]
cannot, by failing to take such steps, frustrate the benefits of the summary trial
process.” As in the case of discovery “the defendant may not simply insist on a full
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trial in hopes that with the benefit of viva voce evidence, 'something might turn up'”:
Everest Canadian Properties Ltd. v. Mallmann, 2008 BCCA 275, at para. 34.
Defendant
[108] Her counsel submits that deciding this matter summarily would be unjust.
[109] Because the parties’ versions of events are fundamentally opposed and
irreconcilable, the assessment of credibility will be determinative of the outcome,
counsel emphasizes, and that assessment cannot be carried out on the existing
material. This means that the necessary facts cannot be found at this point.
[110] The proceedings are at an early stage in terms of the procedural steps, and
no examinations for discovery of the parties have been performed, despite the
defendant’s attempt to make herself available just before the hearing date. While the
plaintiff’s documents have been disclosed, the defendant’s self-represented status
for significant parts of the proceedings means that she still has to disclose additional
documents. (As a result, I took counsel to be saying, the means by which credibility
could more accurately be assessed, even in a summary trial setting, are not yet
available.)
[111] Several of the other recognized factors also weigh against a summary trial, it
is argued. The amount at issue is very significant, and if it were enforced by the
mortgage that is being sought, it would deprive the defendant of her personal
residence. The plaintiff’s counsel has not demonstrated any urgency that would
require proceeding in this manner, and given that relatively little has occurred in the
litigation so far, the cost savings from proceeding summarily will not be significant.
Plaintiff
[112] Her counsel submits that the necessary facts, including admissions of
indebtedness by the defendant, are undisputed, so they can be readily found based
on the present material. He notes that affidavits of a deceased person are
admissible despite the absence of cross-examination, with the ultimate weight to be
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accorded to them a matter for the trier of fact. The plaintiff’s affidavits would also
meet the criteria for admissibility under the principled exception to the hearsay rule.
[113] It would also not be unjust to decide it on a summary basis, her argues. The
evidence is unlikely to change if the matter proceeds to trial.
[114] Significantly, rather than prepare to put her best foot forward, the defendant
has delayed the matter, as shown by the procedural history, which he summarized
as.
• She was self-represented until July 2021, when she retained counsel.
That counsel obtained an adjournment of the summary trial, which was set
for later that month. The summary trial was then rescheduled for August.
• Two weeks after retaining counsel, she filed a Notice of Intention to Act in
Person.
• In early August, she retained her second counsel, who obtained an
adjournment of the summary trial date set for later that month. The
summary trial was re-set for the ultimate hearing date in November 2021.
• She retained her present counsel on September 21. The plaintiff had
passed away on September 14.
• A condition of the adjournment was that the defendant agree to an
examination for discovery on October 26. She was unable to attend on
that date because of illness. On November 12, her counsel proposed a
new discovery date of November 17, which was before the hearing date,
but a court reporter could not be obtained on that amount of notice.
Discussion
[115] I am satisfied that the facts necessary to decide this matter as a summary trial
can be found on the basis of the existing material.
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[116] As I will discuss further, the issues to be decided would be (1) whether the
agreement is a valid one on its face; (2) whether the defendant’s extrinsic evidence
should be permitted to vary its apparent meaning; (3) the weight to be attached to
the defendant’s alleged admissions of indebtedness under the agreement; and (4)
whether she agreed to place mortgage on the Camsell Crescent property to secure
that indebtedness.
[117] The first issue will be resolved on a construction of the objective meaning of
the words of the agreement, in light of the surrounding factual circumstances that
were known to the parties. The second issue requires a legal analysis of whether an
exception has been demonstrated to the usual rule against introducing extrinsic
evidence of the meaning of the words of a contract. The third and fourth issues can
be resolved by analyzing and drawing the appropriate inferences, if any, from the
electronic messages and recorded conversations.
[118] Any conclusions about the overall plausibility of the defendant’s version of the
true nature of the agreement can readily be drawn from the affidavits that assert it.
[119] The point is that the fact-finding exercise in this case will involve deciding
what inferences should be drawn, or conclusions reached, from a body of mainly
uncontested facts. Having passed away, the plaintiff is not in a position to contradict
the defendants’ exculpatory explanation, so it cannot be rejected unless it is
inadmissible to contradict the written contract, or it does not make sense in light of
the evidence as a whole.
[120] Nor do I think it would be unjust to decide the matter summarily.
[121] Viewed in the light that I have described, I do not see this as a typical
credibility contest. The defendant’s evidence seeks to support a reinterpretation of a
written document and recorded communications, the apparent meanings of which
will otherwise be decisive. The real question will be whether the alternative
interpretation of their contents that she put forward, viewed in light of its inherent
degree of plausibility and any objective confirmation of it that may be available, is
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more likely than their apparent meaning. In other words, the resolution of the case
will involve ascribing meaning to largely undisputed evidence. As I will discuss, if I
accede to the plaintiff’s submissions on the applicability of the parol evidence rule,
most of what the defendant says about the true nature of the agreement will not
even be admissible.
[122] Of course the assessment of credibility, particularly the defendant’s since she
seeks to displace the apparent meaning of the evidence, will play a role, but this is
still very far from the battles of uncorroborated assertions between parties that are
frequently found to be unsuitable for summary trial.
[123] On that note, the defendant’s counsel referred to two decisions – Jutt v.
Doehring, (1993) 24 B.C.A.C. 313 at para. 13, and Cotter v. Dominion of Canada
General Insurance Co., 2018 BCSC 1527 at para. 32 - to support the proposition
that meaningful credibility disputes will require a trial with viva voce evidence to
resolve. As I have said, I do not agree that the present dispute is of that nature. To
the extent that this case does require any credibility assessment, I am satisfied that
both of those decisions reflect the inappropriateness of resolving in a summary trial
the credibility issues that arose on their particular facts, and that they do not displace
the general principles that I have previously summarized.
[124] The amount at issue is indeed large and judgment against the defendant,
particularly on the equitable mortgage, would have significant consequences for her,
but those factors will not change in a full trial, and they would be influential only if
allowing further time for such a trial to take place could somehow ameliorate them.
[125] While there is no particular urgency that weighs in favour of summary
proceedings, I do not think matters would be rushed along by it in any sense.
[126] Examination for discovery of the plaintiff is obviously no longer possible even
for a full trial, and the defendant’s discovery, if it had occurred, could not have been
read in on her own behalf.
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[127] The defendant’s list of documents may not be complete, but she has unfolded
the Boda investment narrative quite fully in the ones that she has provided. As I
mentioned previously, we have not heard that any remaining documents, including
from a criminal investigation in China, are likely to implicate the plaintiff in that
investment.
[128] Until she retained her current diligent counsel, her response to the plaintiff’s
previous efforts to set the matter for summary trial was quite dilatory, and she has
known for a meaningful period of time that the plaintiff was seeking to resolve the
case by this means.
[129] The case is not a particularly complex one in itself, and a summary trial does
not threaten to add any complexity.
[130] All issues are in play in both types of trial, so litigation in slices is also not a
danger.
[131] Finally, when considering proportionality, the one day of submissions that has
been required for this application offers a significant savings of time and expense
over a full trial which, even with the plaintiff’s case proceeding on the basis of her
affidavits, would still take at least three days.
Settlement Privilege
Governing Principles
[132] These were helpfully summarized in Ross v. Bragg, 2020 BCSC 337, a
decision relied on by the defendant:
11 Settlement privilege "wraps a protective veil around the efforts parties
make to settle their disputes by ensuring that communications made in the
course of these negotiations are inadmissible": Sable Offshore Energy Inc. v.
Ameron International Corp, 2013 SCC 37, at para. 2.
12 In Sharbern Holdings Inc. v. Vancouver Airport Centre Ltd., 2008
BCSC 442, Madam Justice Wedge adopted the following criteria for
settlement privilege from Sopinka, Lederman and Bryant, The Law of
Evidence in Canada, 2d. ed., at para. 14.207:
a) A litigious dispute must be in existence or within contemplation;
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b) The communication must be made with the express or implied
intention that it would not be disclosed to the court in the event
negotiations failed; and
c) The purpose of the communication must be to attempt to effect a
settlement.
Defendant
[133] Her counsel submits the necessary elements of the privilege were all fulfilled
during the recorded conversation. The explicit topic of discussion for a significant
portion of it was a resolution of their existing dispute outside of the legal steps that
were then being taken by their counsel. The defendant also asserted that she did not
envision those discussions being passed on any further if they were unsuccessful.
Plaintiff
[134] Her counsel notes the absence of any actual proposals in the course of the
conversations, but more fundamentally says that the defendant has waived the
privilege by attaching the transcript of the recording to a previous affidavit.
Discussion
[135] The transcript shows fairly direct efforts at resolving the existing lawsuit by the
parties. In addition to the defendant’s description of her own intentions, I also feel
comfortable drawing the inference that the plaintiff would not have wanted the
discussions to be used against her if they failed. Despite the existence of the
elements of settlement privilege however, the conclusion that the defendant has
waived that privilege by relying on the transcript of the parties’ discussions in her
affidavit in this action, which appears to have been prepared with the assistance of
her previous counsel, is really inescapable. To his credit, her current counsel
candidly acknowledged during submissions that this was a possible outcome of her
actions.
[136] Therefore, I find that the privilege does not apply.
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The Merits
Governing Principles
[137] In additional to the usual requirements of offer, acceptance, consideration,
and certainty of terms, the elements of a contract in the specific context of a loan
agreement were summarized in Jacobs v. Yehia, 2014 BCSC 845, rev'd on other
grounds 2016 BCCA 38:
253 A loan is a specific form of contract. As such, it requires mutual
concordance between the parties as to the existence, nature and scope of
their respective rights and duties. Like other contracts, it may be evidenced
orally, in writing, by conduct or by a combination thereof: Biehl v. Strang,
2011 BCSC 1373, paras. 326-330; Le Soleil [Hotel & Suites Ltd. v. Le Soleil
Management Inc., 2009 BCSC 1303], para. 323.
254 The essential elements of a loan were discussed by Satanove J. in
Lee v. 1137434 Alberta Ltd., 2009 BCSC 284. As she noted, they have been
described as: i) a principal sum; ii) placed with a borrower; iii) on agreed
terms for the payment of interest; and iv) liability on the borrower's part for
return of the principal with accrued interest. A loan has also been defined as
delivery by one party and receipt by another of money on agreement, express
or implied, to repay the money with or without interest: Lee, paras 9-10.
[138] The correct approach to interpreting a contract was described in Geoff R.
Hall, Canadian Contractual Interpretation Law 4th ed (Toronto, LexisNexis Canada,
2020), at 2.41
The exercise…is not to determine what the parties subjectively intended but
what a reasonable person would objectively have understood from the words
of the document read as a whole and from the actual matrix.
[139] The parol evidence rule, as it applies to this process, was summarized in
Gallen v. Allstate Grain Co., (1984) 53 B.C.L.R. 38 (C.A.) at para. 10, leave to
appeal refused [1984] S.C.C.A. No. 171:
10 … Subject to certain exceptions, when the parties to an agreement have
apparently set down all its terms in a document, extrinsic evidence is not
admissible to add to, subtract from, vary or contradict those terms.
[140] The rule does not apply to the factual matrix surrounding the contract,
because those facts are “used as an interpretive aid for determining the meaning of
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the words chosen by the parties, not to change or overrule the meaning of those
words”: Sattva Capital Corp. v. Creston Moly Corp., [2014] 2 S.C.R. 633 at para. 60.
[141] Two other relevant exceptions to the rule are to establish a collateral
agreement or in support of an allegation that the document was not intended by the
parties to constitute the whole agreement: Gallen at para. 11. Crucially however, to
be admissible such proposed additional agreements or terms must not contradict the
written agreement: Hawrish v. Bank of Montreal, [1969] S.C.R. 515 at 520-1; Village
Gate Resorts Ltd. v. Moore, (1997) 47 B.C.L.R. (3d) 153 (C.A.) at para. 25.
[142] Finally, there is the issue of equitable mortgages, as explained in Vancouver
(City) v. Smith, (1985) 63 B.C.L.R. 180 (C.A.), citing Re Sikorski (1978), 21 O.R. (2d)
65, 89 D.L.R. (3d) 411 (H.C.) at p. 416:
12 …[T]he important feature of an equitable mortgage is the common
intention of the parties to the mortgage contract to make the property in
question security for the debt due. If this intention is lacking an equitable
mortgage cannot be said to have been created.
[143] In that case the Court drew a distinction between a valid equitable mortgage
and “a promise to give security in the future on request over unspecified real
property and unspecified personal property” (para. 16).
[144] It is also important to keep in mind, as explained in Elias Markets Ltd (Re),
(2006) 274 D.L.R. (4th) 166 (Ont. C.A.), citing Fisher and Lightwood's Law of
Mortgage, 7th ed., at p. 16, that:
Equitable mortgages ... are created by some instrument or act which is
insufficient to confer a legal estate, but which, being founded on valuable
consideration, shows the intention of the parties to create a security; or in
other words, evidences a contract to do so.
[Emphasis added.]
Plaintiff
[145] Counsel submits that the written agreement contained all of the essential
terms, and demonstrated the required degree of certainty about the parties’
obligations, to have binding effect.
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[146] The defendant’s efforts to contradict it based on alleged oral collateral
representations runs afoul of the parol evidence rule. The alleged implied term that
the funds advanced were for the joint investment, and that each party bore their own
risk, is likewise inadmissible. Rather than being necessary to give effect to the
agreement, or representing a term that the parties would obviously have assumed at
the time, it seeks to negate the agreement’s very purpose.
[147] In addition, it is argued that the substance of the defendant’s allegations are
improbable. It is unclear why the parties would not have made an agreement
addressing the joint investment, if that was their actual intention. Notably, the
defendant then paid a considerable amount of interest pursuant to an agreement
that she maintained was not for a loan, and repeatedly confirmed her indebtedness
under it in the electronic messages and the recorded conversation. The plaintiff’s
counsel says it is significant that there are no references to a joint investment in any
of the WeChat messages, only to the defendant’s own investment.
[148] With respect to the equitable mortgage being sought, the agreement
specifically required the defendant to place mortgage in the plaintiff’s favour on her
Granville Avenue property, and not to sell or mortgage it further. Instead, she failed
to have mortgage placed on it, and sold it without advising the plaintiff. When she
was confronted in the WeChat messages, she ultimately agreed, in the messages in
April 2020, to place a mortgage on the Camsell property, in return for an extension
on the loan of two years. This demonstrates their common intention to charge the
property as security for the defendant’s debt.
[149] Looked at on a more technical basis, the paragraphs of the defendant’s
affidavits that address these issues are said to be filled with argument, opinion and
unsourced hearsay, which should result in the numerous offending paragraphs being
struck or disregarded. That would leave very little substantive content in those
affidavits.
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Defendant
[150] Her counsel seeks to demonstrate that numerous aspects of the evidence
support her version of what she and the plaintiff actually agreed. For example, the
introductory language of the agreement was:
Subject: Out of respective needs, [the parties] agree as follows through
consultation in principle of mutual assistance and benefit and win-win
cooperation…
[151] Counsel argues that this is much more suggestive of a jointly beneficial
activity like an investment than a straightforward loan with interest.
[152] Beyond this, their WeChat messages refer to an “investment” and to an
“accident” that was the defendant’s fault, and indicate that she herself was “cruelly
deceived” and that she and the plaintiff “are both the biggest victims”.
[153] The records attached to the most recent affidavit are also relied on as
important support for the defendant’s evidence. The immediate onwards transfer to
Boda of the funds that she received from the plaintiff, the contracts demonstrating
the type of investment scheme with that company that she described, and the
promissory note from the apparent culprit in the loss of the invested funds, all make
it more likely that the defendant’s version is accurate.
[154] With respect to the equitable mortgage, the defendant’s counsel submits that
the reference in the agreement to further property in which the plaintiff acquired an
interest is just the kind of promise to give security in the future over unidentified real
property that fell short of the requirements in the Vancouver (City) decision. This is in
addition of course to the fact that the agreement did not express the parties’ true
intentions.
[155] The WeChat conversations are also insufficient to support an equitable
mortgage – any inference of common intention on that point is contradicted by the
plaintiff’s observation on March 30 that “we haven’t come to an agreement” yet.
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Discussion
[156] To the extent that the defendant was seeking to demonstrate a collateral
agreement or implied terms of the agreement that support her description of its
actual purpose, I agree that that evidence is inadmissible as offending the parol
evidence rule. Her evidence seeks not just to contradict, but entirely subvert the
meaning of the agreement on its face. It is certainly not part of the legitimate
surrounding factual matrix, which the Supreme Court of Canada warned in Sattva
should not be allowed to “overwhelm the words of the agreement” (para. 57).
[157] One could also treat the defendant’s position as a complete denial that the
agreement actually reflected any common understanding between the parties of the
obligations it purported to impose, and was, as the defendant deposed, intended
simply to provide a “paper trail” for the funds that the plaintiff had jointly invested.
[158] If that is the defendant’s position, then I conclude that it does not make sense.
As the plaintiff’s counsel submitted, it is not clear why the parties could not simply
have drafted an agreement that captured what the defendant claims was their actual
arrangement. The previous agreement shows that they were well able to reduce
their financial arrangements to accurate written form. It is unclear what role the
defendant already being “on track” with her investment plans would have played in
their inability reduce their joint investment to writing, or how an agreement that did
not accurately set out the nature of that arrangement would have provided any
protection to the plaintiff. It also seems absurd that the defendant would make the
interest payments required on the face of the agreement, solely to “alleviate” the
plaintiff’s concerns, if it were not actually a loan agreement.
[159] Nor does the proposed confirmatory evidence render this version of events
any more believable. The defendant’s documents are certainly capable of showing
that the funds that the plaintiff provided ended up with Boda, that the defendant
entered into a contractual investment relationship with that company, and that one of
its officials subsequently confirmed his indebtedness to her once he was in the
hands of the police. The critical deficiency in this material is the absence of evidence
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linking the plaintiff to these actions in any way, which is the essence of the defence
to the agreement.
[160] As admissions against interest by the defendant, her statements in the
WeChat messages and the recorded conversation fatally undermine her position. I
do not think that the particular words and phrases that the defendant’s counsel has
selected from them to support the allegation of a joint investment can outweigh the
overwhelming inference that arises from an overall reading of them - that the
defendant was falling on her sword for having lost the money that she borrowed from
the plaintiff. Considering them as a whole, I also do not believe that these
statements were made merely to placate the plaintiff – they have a heartfelt, deeply
regretful tone, in which the defendant takes all of the responsibility on herself, never
referring to their joint assumption of the risk of that loss that she now asserts was a
term of the agreement.
[161] I am therefore satisfied that the written agreement reflects that actual terms of
a loan from the plaintiff to the defendant, and that the defendant then repeatedly
made admissions of her indebtedness under it.
[162] Turning to the question of the equitable mortgage, the clause in the
agreement in which the defendant committed to placing a mortgage on any future-
acquired property is not being put forward as the basis of the plaintiff’s argument. I
think this is correct, because while the purported granting of a future mortgage could
potentially give rise to an equitable mortgage, in this case, as in Vancouver (City),
the property to be charged was not specified. Of course, the Granville Avenue
property that was specifically mentioned in the agreement is no longer available to
be charged.
[163] Instead, I think the question comes down to whether the WeChat
communications objectively demonstrate a common intention to place a mortgage
on the Camsell Crescent Property as security for the loan, which was not ultimately
carried out in the form of an actual registrable mortgage.
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[164] My conclusion is that there is too much ambiguity in these communications to
satisfy me that such a common intention was formed.
[165] The defendant’s responses “Let’s do it then” in response to the plaintiff’s
request, and “[T]here’s no problem to mortgage my house”, if viewed in isolation,
tend to support an acquiescence on her part. But one must also keep in mind that,
having identified a potential lawyer to prepare such a mortgage, the plaintiff still
suggested that they meet first because they did not yet have an agreement. The
defendant also protested that the plaintiff’s request for a mortgage was pushing her
“to the death road”, which suggests an ongoing degree of resistance on her part,
although I appreciate that she subsequently made the “no problem” comment.
[166] I also find it a relevant factor that after that last comment, the subject of a
mortgage was not addressed again in the WeChat communications, which continued
into June. It seems odd that a concluded agreement to register a mortgage would sit
unfulfilled without being commented on further. In fact, the parties were still haggling
about the means by which the debt was to be repaid, and the need for the defendant
to sell her house to satisfy it, during the recorded conversation in August.
[167] At its best, I think the evidence is capable of showing an intermittent
receptiveness on the defendant’s part to the idea of granting a mortgage, without it
ever distilling down to a common intention to take that actual step, as opposed to her
preferred option of repaying the loan when her house sold.
[168] These decisions make it unnecessary to address the concerns that have
been raised about technical deficiencies in the defendant’s affidavits. Her evidence
with respect to the existence of a loan agreement fell short without even considering
such deficiencies, and the outcome on the equitable mortgage issue was based on
the insufficiency of the parties’ WeChat communications to demonstrate a common
intention, not on the defendant’s affidavits.
Conclusion
[169] As a result of these various findings, I will make the following orders:
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Zhong Gao is named the litigation representative on behalf of the plaintiff’s
estate and is substituted for her as party in this proceeding.
The litigation representative has leave to amend the Notice of Civil Claim in
accordance with Schedule “A” of his Notice of Application.
Judgment is granted to the plaintiff on the loan to the defendant in the amount
of $661,970 in Canadian currency.
The application for an equitable mortgage is dismissed.
[170] My preliminary view is that the characterization of the agreement as a loan
was by far the most significant issue in the trial and that the plaintiff, having prevailed
on it, should receive her costs, at the usual scale of difficulty. If the defendant
disagrees, I will keep an open mind on the issue, and counsel may arrange to make
written submissions according to whatever schedule for the exchange and filling of
the submissions suits them.
“Schultes J.”
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