SUPERIOR COURT OF JUSTICE - ONTARIO

COURT FILE NO.: CV-11-420294
DATE: 20120726

RE: ZHENG ZHANG

Plaintiff

• and -

HUA HAI LI STEEL PIPE CO. LTD., RENJIE ZHANG, RUQIU ZHANG, JIAMING ZHANG and YUMIN YANG

Defendants

BEFORE: Justice S. M. Stevenson

COUNSEL:
Goldson, C. P., for the Plaintiff

Edward F. P. Hung, for the defendants Renjie Zhang, Ruqiu Zhang, Jiaming Zhang and Yumin Yang

DATE HEARD: July 11, 2012

E N D O R S E M E N T

Introduction

[ 1 ] The plaintiff commenced an action on February 17, 2011. She seeks, inter alia, an order directing the defendants, being her father, her mother, her brother, and her sister-in-law to compensate her for their alleged misappropriation of corporate equity, assets, profits and funds from a family business she states was operated by the plaintiff and the defendants in China.

[ 2 ] The plaintiff is seeking a court order to direct the defendants to account for the family assets, which are estimated to be approximately Cdn$10 million, which were accumulated in China, but which the plaintiff believes have already been distributed by the individual defendants to themselves. The plaintiff submits that all or most of those assets were transferred to Ontario.

[ 3 ] The defendants submit that the evidence is clear that the company in question has no connection with Canada, was state-owned in China and was therefore not owned by any of the defendants. They further contend that the evidence is clear that regardless of whether the company is state-owned or not, its assets have not been distributed and have remained in China.

[ 4 ] There have been two orders of this Court made with respect to this action. Counsel for the defendants submits that the defendants were self-represented when these orders were made and they did not understand the process. An order of Master Short dated October 25, 2011 and an order of O'Marra J. dated March 26, 2012, required the defendants to answer questions on discoveries properly and set deadlines for the providing of affidavits of documents and attendance at discoveries by the defendants. A contempt order, which was sought by the plaintiff, was deferred to be determined at a later date to be brought back on notice to the defendants.

[ 5 ] It is the defendants’ position that this Court does not have jurisdiction to hear this action and that any litigation with respect to these issues should take place in China. The defendants have brought a motion for summary judgment. However, both counsel indicated that they wanted the issue of whether this Court has jurisdiction to hear the action in Ontario to be decided before the summary judgment motion or any further matters were dealt with by the court. As such, this motion is to only to determine the issue of jurisdiction.

The Law

[ 6 ] With respect to the issue of jurisdiction, the Supreme Court of Canada in the decision of Club Resorts Ltd. v. Van Breda, 2012 SCC 17 at para. 90, recently outlined the factors which are presumptive connecting factors that prima facie entitle a court to assume jurisdiction over a dispute. Those factors are as follows:

i) the defendant is domiciled or resident in the province;

ii) the defendant carries on business in the province;

iii) the tort was committed in the province; and

iv) a contract connected with the dispute was made in the province.

[ 7 ] As stated in the Van Breda decision at para. 94, "Where...a recognized presumptive connecting factor does apply, the court should assume that it is properly seized of the subject matter of the litigation and that the defendant has been properly brought before it. In such circumstances, the court need not exercise its discretion in order to assume jurisdiction. It will have jurisdiction unless the party challenging the assumption of jurisdiction rebuts the presumption resulting from the connecting factor.”

[ 8 ] The burden of rebutting the presumption of jurisdiction rests on the party challenging the jurisdiction: “That party must establish facts which demonstrate that the presumptive connecting factor does not point to any real relationship between the subject matter of the litigation and the forum or points only to a weak relationship between them.” (See: Van Breda at para 95.) If a party fails to rebut the presumption that results from a presumptive connecting factor, the court must acknowledge that it has jurisdiction. Van Breda para 98. “At this point, it does not exercise its discretion to determine whether it has jurisdiction, but only to decide whether to decline to exercise its jurisdiction should forum non conveniens be raised by one of the parties.” (See: Van Breda at para. 90.)

[ 9 ] The Court in Van Breda, at para. 103, explained the effect of a claim of forum non conveniens as follows:

If a defendant raises an issue of forum non conveniens, the burden is on him or her to show why the court should decline to exercise its jurisdiction and displace the forum chosen by the plaintiff. The defendant must identify another forum that has an appropriate connection under the conflicts rules and that should be allowed to dispose of the action. The defendant must show, using the same analytical approach the court followed to establish the existence of a real and substantial connection with the local forum, what connections this alternative forum has with the subject matter of the litigation. Finally, the party asking for a stay on the basis of forum non conveniens must demonstrate why the proposed alternative forum should be preferred and considered to be more appropriate.

[ 10 ] The Court in Van Breda, at para. 108, discussed the burden which was imposed on a party asking for a stay on the basis of forum non conveniens. The Court clarified that the party must show that the alternative forum is "clearly more appropriate".

Disposition

[ 11 ] The defendants submit that the company in question has no connection to Ontario and no business was conducted in Ontario. The defendants contend that there are bold assertions made by the plaintiff that assets from the business which operated in China were brought from China to Ontario by the defendants. The defendants further submit that this was a state- run company in China and that any assets were left in China as evidenced by the opinion of the plaintiff's own legal expert in China.

[ 12 ] The defendants also submit that the doctrine of forum non conveniens applies and that Ontario is clearly not the appropriate forum to adjudicate these matters. The defendants submit that many witnesses will have to come from government bodies in China. They further contend that this is a very complex, difficult case which must be dealt with by experts in China who have expertise in Chinese corporate law. They further contend that the expert opinion provided by the plaintiff is from an expert who resides in China and that for his opinion to be challenged the expert report of the defendants must be completed by an expert in China.

[ 13 ] Further, the defendants contend that the assets of the company, although it has been dormant for some time, have not been distributed and the assets remain in China as is evidenced by the opinion of the plaintiff's own expert. There is no evidence that the assets have been brought to Ontario.

[ 14 ] The defendants also submit that no tort has been committed in Ontario and the only reference to a tort in the statement of claim is the tort of conversion which seems to relate to allegations against the defendant sister-in-law, but there is no allegation that she has any shares in the corporate defendant.

[ 15 ] The defendants contend that if the Court found that it had jurisdiction under Rule 17.02 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, the only factor in favour of the plaintiff is that the defendants reside in Ontario and this is not sufficient. Even though the defendants immigrated to Ontario in 2001, the defendants contend that their residency in Ontario has no relationship to the subject matter of the litigation.

[ 16 ] It is the plaintiff's submission that the Ontario courts have expertise with respect to assets owned by parties outside of Ontario and the court regularly deals with these types of cases.

[ 17 ] The plaintiff further submits that there is evidence that some assets have been transferred to Ontario from China. They point to the cross-examination of the defendant Renjie Zhang where he stated that he had investments in China. The plaintiff states that these assets are now in a bank in Ontario and that additionally, Jiaming Zhang and Yumin Yang, her brother and sister-in-law and two of the defendants, own a family home in Ontario. These assets which are owned in Ontario are the subject matter of this litigation.

[ 18 ] The plaintiff contends that the company was not state-owned; however, the defendants have blocked any attempt to obtain details with respect to the company. The defendants have even refused to provide their consent to the plaintiff's counsel to enable him to write to the Chinese government or other officials in China to obtain more information about the company.

[ 19 ] The plaintiff submits that based on the Van Breda test, the defendants are domiciled in Ontario, there is property in Ontario which is in dispute and a tort was committed in Ontario. As such, they submit that the Ontario courts are perfectly suited to resolve the litigation.

[ 20 ] With respect to the issue of forum non conveniens, the plaintiff submits that this is a high test to meet and the defendants must show that China is clearly the more appropriate forum. The plaintiff submits that the defendants do not meet this test as the defendants all reside in Ontario. Additionally, the defendant Renjie Zhang acknowledged that he established the company and was in control of the company. The plaintiff also submits that Renjie Zhang and Jiaming Zhang both have complete control over obtaining the information in China despite the fact that they have resided in Ontario since 2001 as they are the owners, legal representatives and managing directors of the company.

[ 21 ] Further, as the defendants are domiciled in Ontario and only one of the factors has to be present for the court to assume jurisdiction, Ontario is the proper forum. They submit that the defendants have been unable to rebut the presumptive connecting factors. The plaintiff also contends that she would be able to show an even stronger connection with Ontario; however, the defendants have refused to answer direct questions on examination for discovery which would provide further information as to where the assets are located. Their refusal to allow plaintiff's counsel to write to the authorities in China has also frustrated attempts to obtain more information. The plaintiff submits that the defendants have failed to disclose information which they control. She submits that the defendants’ refusal to provide this information and to comply with two court orders should not entitle them to rebut the presumptive connecting factors.

[ 22 ] I find that as the defendants have been domiciled in Ontario since 2001, they have one of the presumptive connecting factors that prima facie entitles this court to assume jurisdiction over the action as set out in Van Breda, supra. The defendants are clearly domiciled or resident in Ontario. The defendants have not rebutted the presumption resulting from the connecting factor. The defendants are unable to demonstrate that the presumptive connecting factor does not point to any real relationship between the subject matter of the litigation and the forum or points only to a weak relationship between them as set out in Van Breda. The defendants may have brought assets from the company which they operated in China to Ontario and those funds may have been significant as there is evidence of funds in the amount of $599,000 and $570,000 being in the possession of the defendants in Ontario at one point. Additionally, a tort may have been committed in Ontario with respect to the assets brought from China. Unfortunately, given the defendants' refusal to answer questions regarding their assets, it is very difficult for the Court to determine this issue at this stage.

[ 23 ] The defendants have also raised the issue of forum non conveniens, but I find the defendants have not shown that the alternative forum, being China in this case, is clearly more appropriate. The defendants were in control of the company and it appears from the documents which have been obtained from China through the plaintiff's efforts, they may continue to be in control of the company even though it is dormant. Additionally, as they operated the company, they should be able to access the corporate documents very easily.

[ 24 ] Further, it may be that there are experts in Chinese corporate law who reside in Ontario who will be able to explain the corporate structure and organization of the company as it existed in China. It may not be necessary to bring experts in Chinese corporate law from China to testify in Ontario. As the documents can easily be obtained by the defendants themselves and these experts which may be necessary for trial most likely are available in Ontario or Canada, I do not find the China is the appropriate forum for this action. Further, the Ontario courts are able to determine this issue as the court regularly deals with matters where assets exist outside of Ontario, whether they are in another province or another country.

[ 25 ] For these reasons, I find that the proper jurisdiction to determine these issues is Ontario.

Order

[ 26 ] I therefore order the following:

i) the action shall be heard in Ontario; and

ii) the defendants' motion for summary judgment is adjourned to a date before me to be arranged through the motions scheduling office.

[ 27 ] I urge the parties to agree on costs; however, if they are unable to do so the plaintiff shall serve and file written costs submissions no longer than three double-spaced pages along with a Costs Outline within 20 days and the defendants shall serve and file written costs submissions, no longer than three double-spaced pages, along with a Costs Outline within 20 days thereafter.

Stevenson J.

DATE: July 26, 2012