A B.C. Supreme Court judge had to sort out a battle between two quarrelling families from China over the ownership of three multimillion-dollar homes on the West Side of Vancouver.
On January 4, Justice Susan Griffin sided with the three defendants, collectively referred to as the Xia family, in a decision revealing Byzantine movements of money between China and Canada.
Griffin opened the 552-paragraph ruling by noting that the Fu and Xia families both invested in real estate in China.
This occurred "often in parallel in the same development projects and sometimes together in partnerships, starting in 2007".
Each family looked into immigrating to Canada around the same time.
"Ultimately, three residential properties were purchased in Vancouver in 2010, 2011, and 2013," Griffin wrote. "The beneficial ownership and contributions to these properties are the central issues in this case. Each accuses the other of lying about these matters."
The first home at 3561 Mayfair Avenue was bought for $2.38 million. The second purchase was a house at 3307 West 19th Avenue for $2.85 million. The third was a home at 4769 Elm Street for $3.08 million.
"The two families thought it best to not document the basis for their dealings with each other," Griffin wrote. "The two families also thought it best to structure the transactions in ways that disguised true ownership, just as they often did when buying properties in China."
They were still discussing accounting of the properties in 2013 but had a falling out the following year.
Two of the three plaintiffs—Guoqing Fu and Chunqin Zhou (part of the Fu family)—claimed that the Mayfair and Elm properties were theirs alone. They conceded that one defendant, Cui Yun Zhu (part of the Xia group), helped in the purchase of the Elm Street home.
These two plaintiffs also claimed that they overpaid Zhu by $502,296 and wanted this money returned.
Zhu, on the other hand, claimed that the Mayfair property was held in trust for her and that the Elm Street home was a 50-50 joint investment by the Fu and Xia families.
The plaintiffs also alleged that the Xia family sold the West 19th property and used these funds to buy two other West Side properties at 7218 Cartier Street and 3545 West 34th Avenue.
"Both the Fu Family and Xia Family appear to be very wealthy by Canadian standards, moving hundreds of thousands and ultimately millions of Renminbi (RMB) or dollars around back and forth between each other’s family members’ accounts without worrying about documenting the purpose and without feeling the need to explain the source of their funds to this Court," Griffin wrote.
The judge then added: "It is virtually impossible to 'follow the money' as a way of figuring out the true facts of what happened. Some information is known but it does not paint a complete picture."
Further complicating matters were 174 money transfers from Fu family bank accounts to Xia family bank accounts in China from 2007 to 2014, according to the plaintiffs.
The plaintiffs highlighted eight transactions, which they claimed were linked to the Vancouver real-estate purchases. But the Xia family disputed that.
Griffin noted: "The defendants say that the eight money Transfers that the plaintiffs have pulled out of these multiple transfers had nothing to do with the Canadian properties but had to do with other investments in property in China or other transactions in China."
The judge also revealed that there were no written agreements documenting these transactions.
"There is no question that the direct source of funds for the purchase of Mayfair and W. 19th came from the defendants who supplied the cash both to pay the deposits and to pay the balances due on closing of the purchases," Griffin stated.
The plaintiffs claimed that their money transfers were linked to these transactions.
The judge rejected this in connection with the Mayfair property.
"As for Elm, the source of the money for the deposit and the closing balance was mixed and the evidence was confusing," Griffin acknowledged. "There were multiple transfers of money directly to Canada and within Canada by both families around the time period that Elm was purchased."
One of the transfers linked by the plaintiffs to the Elm Street purchase occurred after the deal closed.
Because of the dearth of documentation, the case hinged on the credibility of the two families.
Both plaintiffs and defendants admitted that "some transactions were structured using the name of a person who was not the true beneficiary...in order to gain some perceived advantage, whether it be to evade Chinese currency controls, minimize taxes, obtain a favourable mortgage, evade Chinese restrictions on the number of properties a person could own, or otherwise".
"The very structure of the transactions at issue in this case was unusual in the Canadian context, as it involved large sums of money changing hands over several years, without any written agreements in place or any common accounting practices," Griffin wrote. "I have been mindful that different cultural contexts can affect the court’s perspective as to inherent probabilities or improbabilities."
After analyzing the plaintiffs' inconsistent pleadings, their general credibility, the defendants' reasons for putting the Mayfair Street home in the plaintiffs' names, and various other issues, the judge dismissed the plaintiff's claim.
"Simply put, I found the defendants far more credible than the plaintiffs in respect of their evidence as a whole and specifically with respect to each of the three Canadian property purchases," Griffin concluded.
As a result, the Xia family were declared the sole beneficial owners of the Mayfair Street property, the beneficial owners of the West 19th Avenue property, and 50 percent owners of the Elm Street property, with the other half owned by plaintiff Xiao Feng Fu.
"It is clear that the Fu Family and Xia Family cannot cooperate as co-owners of Elm," the judge noted.
Therefore, she stated that two of the Xia family members are entitled to orders to provide for the sale of the Elm Street property, keeping half of the net proceeds and turning the other half over to Xiao Feng Fu.More