CITATION: Lu v. Chen, 2016 ONSC 3255

DIVISIONAL COURT FILE NO.: DC-15-00000304-0000 DATE: 20160616

ONTARIO SUPERIOR COURT OF JUSTICE DIVISIONAL COURT

BETWEEN:

RUI ZHEN CHEN Plaintiff/Respondent

– and –

BAO QUAN LU and YI YONG LU Defendants/Appellants

J. Loeb, for the Respondent

Melissa Truong, for the Appellants

HEARD at Toronto: March 31, 2016

Stewart J.

Nature of the Appeal

[1] Bao Quan Lu and Yi Yong Lu appeal from the decision of Deputy Judge Buie of the Small Claims Court dated May 12, 2015. Following a trial, the trial judge found in favour of the Respondent Rui Zhen Chen and ordered the Appellants, jointly and severally, to repay to her the sum of $22,080.00, being the balance of a loan advanced to or guaranteed by them.

[2] The Appellants submit that the trial judge erred in law by “amending the pleadings” during the course of the trial. They also assert that the trial judge made a palpable and overriding error in finding that the loan funds were borrowed from and advanced to them by the Respondent in her personal capacity.

[3] The Respondent submits there is no basis for interfering with the decision of the trial judge which they describe as being fully supported by the facts and the law.

Jurisdiction

[4] An appeal lies to a single judge of the Divisional Court from a final order of a judge of the Small Claims Court in an action for the payment of money pursuant to ss. 21(2)(b) and 31 of the Courts of Justice Act, R.S.O. 1990, c.C. 43.

Standard of Review

[5] The standard of review applicable in appeals from a final order of a judge is stated in Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235: On questions of law, the standard is correctness. On questions of fact, the standard is palpable and overriding error. On questions of mixed fact and law, there is a spectrum. Where there is an extricable legal principle, the standard of review is correctness. However, with respect to the application of the correct legal principles to the evidence, the standard is palpable and overriding error.

Background

[6] This action was commenced to recover the sum of $22,080.00, being the balance of a loan advanced to the Appellant Bao Quan Lu by the Respondent, and secured by a guarantee from the Appellant Yi Yong Lu.

[7] The Respondent is the president of a Mutual Help Club (“MHC”) to which all the parties at one point belonged. Mutual help clubs are popular in China and have the purpose of providing members with access to credit and debt from other members. This MHC was unincorporated and organized and controlled by the Respondent.

[8] In September 2008, the Appellant Bao Quan Lu required money for a down payment to purchase a home. He first attempted to secure financing by bidding as a participating member of the MHC but lost out to another member who outbid him. The winning bidder was not prepared to assign the loan entitlement to him.

[9] Accordingly, Bao Quan Lu then sought and obtained a loan directly from the Respondent. In order to assemble funds to advance this loan, the Respondent entered into side loan agreements with two other persons, members of the MHC, who contributed with her to the overall amount advanced.

[10] The Appellants made regular repayments directly to the Respondent between September 2008 and September 2010. The Respondent repaid the other persons who had contributed to the loan funds.

Discussion

[11] At trial, the Appellant Bao Quan Lu did not deny that he had borrowed $32,000.00 and that he had repaid only $19,920.00 to the Respondent. The Appellants argued that, because the MHC had been disbanded after this loan was advanced, the Respondent was somehow no longer entitled to claim repayment.

[12] The Appellants also argued that the Respondent had no authority to take action on behalf of the MHC, even though she had brought the claim as Plaintiff.

[13] The trial judge found that the MHC was not a separate legal entity but rather a “one man operation” controlled by the Respondent.

[14] The trial judge also found on the evidence before her that, in order to provide the Appellant Bao Quan Lu with the loan proceeds of $32,000.00, the Respondent had obtained two personal loans from two other members of the MHC on terms consistent with the MHC’s rules. The Respondent then loaned the $32,000.00 to the Appellants on terms consistent with those of the MHC and, in turn, repaid the two personal loans obtained by her from her own funds when required to do so.

[15] Although her Statement of Claim asserts that the Respondent’s claim was a personal one for repayment of the loan, it also refers to her repaying the “MHC”. The trial judge determined that this was not in any way fatal to the viability or validity of the Respondent’s claim.

[16] The Appellants were not prejudiced by the trial judge’s finding and interpretation that the Respondent’s pleading asserted a claim in her personal capacity for repayment of the loan. The Appellants were well aware of this issue from the outset, and endeavoured to address it in the evidence and submissions at trial.

[17] The trial judge allowed Appellants’ counsel the opportunity for full cross-examination of the Respondent and the other witnesses and to make submissions on the nature of the loan.

[18] At the conclusion of the trial, the trial judge made several findings of fact on the evidence and found that the loan was a personal loan from the Respondent to the Appellants. This determination does not amount to any amendment of the pleadings, as is alleged by the Appellants. In fact, the pleadings were found to not require any amendment and were considered by the trial judge to be satisfactory.

[19] The trial judge concluded (at para. 15):

I also note that the plaintiff did not seek to amend its pleadings, but it also should be noted that the pleadings indicate that Ms. Chen was seeking repayment on a personal basis. Based on the pleadings, I cannot find that the defendants have incurred any injustice in discovering that Ms. Chen personally borrowed the funds.

[20] The trial judge therefore had ample evidence before her that the loan funds were advanced by the Respondent as claimed. Any additional side agreements the Respondent may have had with others does not impair her legal ability and entitlement to assert a claim for repayment of the loan in her own right.

[21] This claim was, in spite of the background of MHC membership, a straightforward collection matter. It was open to the trial judge on the state of the pleadings and the evidence before her to find that the balance of the debt remained owing by the Appellants to the Respondent. This approach is not only supported by the facts as found by the trial judge, it is in keeping with the process and function of the Small Claims Court.

[22] Accordingly, I see no error made by the trial judge that would provide any basis upon which appellate interference would be justified.

Conclusion

[23] For these reasons, the appeal is dismissed.

costs

[24] I have considered the submissions on costs made at this hearing in light of the factors that affect an award of costs, including the offer to settle made by the Respondent and the principle of proportionality. The successful Respondent shall have costs of this appeal which I fix at $5000.00, all-inclusive, to be paid forthwith by the Appellants, jointly and severally.

___________________________ Stewart J.

Released: June 16, 2016

CITATION: Lu v. Chen, 2016 ONSC 3255

DIVISIONAL COURT FILE NO.: DC-15-00000304-0000 DATE: 20160616

ONTARIO

SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT

BETWEEN:

RUI ZHEN CHEN Plaintiff/Respondent

– and –

BAO QUAN LU and YI YONG LU Defendants/Appellants

REASONS FOR JUDGMENT

Stewart J.

Released: June 16, 2016