Court File and Parties
Court File No.: CV-16-563500 Court File No.: CV-16-557309 Date: 20181227
Ontario Superior Court of Justice
Between: Wangdah Material Toronto Ltd. and Qing Chen, Applicants – and – 1691530 Ontario Ltd., Respondent
Counsel: Qing Chen, personally, for Wangdah Material Toronto Ltd. and Qing Chen Robert Wood, for 1691530 Ontario Ltd.
And Between: 1691530 Ontario Ltd., Applicant – and – Wangdah Material Toronto Ltd. and Qing Chen, Respondents
Heard: December 10, 2018
Lederer J.
Reasons for Judgment
[1] This was an unfortunate case. It operated at the confluence of several concerns which make more difficult the effort of the court to render well-reasoned decisions following an expeditious, efficient and fair hearing of the matters which come before it.
[2] At its root, this proceeding seeks damages for deposits paid and lost and commissions not fully paid; all in respect of automobiles the applicants purchased or contracted to purchase for export by the respondent, to China. It will be apparent, even to less experienced litigators, that such a claim should be the subject of an action commenced by the issuance of a statement of claim. It was commenced as an application. Why this is so is difficult to fathom. Both the counsel who commenced the proceeding on behalf of the “Applicants” and their immediate successor had long since left the file. The personal “applicant” Qing Chen indicated that he had become dissatisfied with the service they provided.
[3] The confusion was exacerbated by the fact of a second but earlier application. This one commenced by the respondent to the first (1691530 Ontario Ltd.) against the corporate applicant in that proceeding (Wangdah Material Toronto Ltd.) seeking possession of two motor vehicles said to have been purchased on 1691530 Ontario Ltd.’s behalf with funds it had provided. Little if anything was said in respect of this application. The matter proceeded under the auspices of the claim for deposits and commission. Qing Chen and his company were dealt with as, and are referred to in these reasons as, the applicants with 1691530 Ontario Ltd. being the respondent. These reasons serve to resolve both applications.
[4] Qing Chen, determined to act on his own behalf. He obtained an order pursuant to rule 15.01(2) allowing him to act on behalf of the corporate applicant. Thus, there was no lawyer who appeared on behalf of the applicants. As a matter of law, the relationship between the corporate applicant and the respondent was unusual and not without complication. Qing Chen has no background in the law or, apparently, anything else that would allow him to understand the legal aspects of the case or the process of the court.
[5] Qing Chen does not speak English. His first and primary language is Mandarin. In the circumstances it was only possible to communicate with him through an interpreter.
[6] Ping Yang is the sole director of the respondent corporation. She operates its business. Realizing that the applicants were able to proceed without counsel she determined to do the same. Ping Yang sought an order to act on behalf of the respondent which would have allowed her counsel to withdraw and left the court without the assistance of counsel, with parties that had no understanding of the law or experience with its processes. It was made plain to the court that Ping Yang was not unhappy with the service counsel had provided. Simply put, it was a case of: “If he does not need a lawyer why should I have one?” The court prevailed on counsel to review the situation with his client. Counsel did so and his retainer was continued. I am unaware, as I should be, of what arrangements were made between counsel and client. I note only that it would have been difficult, if not impossible, to resolve this case in a generally appropriate manner in the absence of counsel. I am indebted to him. He served his client but was fair and balanced in his approach.
[7] From the outset, it was readily apparent that this matter could not proceed as an application. I determined that some form of trial was required. Ultimately, the case proceeded relying, to the extent that it was referred to, on the material that had been filed but allowing each of the parties to testify as witnesses in court. Qing Chen was advised that, while he was free to act on his own behalf, taking on this role brought with it the responsibility to work to understand the rules and processes of the court. We proceeded, but with difficulty. Qing Chen testified on his own behalf and on behalf of the corporate applicant, cross-examined Ping Yang when she did the same on behalf of the respondent and made submissions at the conclusion of the evidence.
[8] I turn to the facts. Ping Yang, through the corporate respondent arranges for the export of automobiles to China. She is not a car dealer. She does not purchase the cars directly. Why this is so was never made clear. I assume there are limits of some kind on the ability to purchase cars for export. Be that as it may, Ping Yang has identified individuals who purchase cars for which she believes there is demand in China or for which she has a specific request. She advises these individuals of what she is looking for. They arrange to buy the cars from a dealer. They enter into a purchase agreement with the dealer. They pay the deposit the dealer requires. They take the purchase agreement to Ping Yang and if it is a car she wants she enters into a written agreement with the individual who has agreed to buy the car. She agrees to take possession of the vehicle. The agreement is a standard form utilized by the respondent. It is specific to the automobile concerned. Paragraph 20 reads:
The Parties hereby agrees [sic] to all conditions described in this agreement for the following motor vehicles: [followed by the identification of the car or cars by year, make and model ending with the applicable Vehicle Identification Numbers (“VIN number” or numbers].
[9] By the terms of the agreement the corporate respondent (the “Principal”) is obliged to pay the purchase price of the vehicle:
It is understood and agreed by the parties hereto that Principal [sic] shall be responsible for the payment of the purchase price for the purchase of the unit purchased hereunder in the name of the Agent.
The parties hereto agree that some authorized dealers may ask for a certified cheque drawn from the Agent’s account. In these situations that Principal, in its sole discretion and options, but not having the obligation to, may deposit the funds for the purchase price in the Agent’s account for the sole purpose of purchasing the motor vehicle unit. It is the Agent’s responsibility that he/she has no outstanding financial obligations which may result in Agent’s bank putting off a hold on the Principle’s [sic] cheque or using the funds to pay the Agent’s debt obligations. Such funds shall be designated as Trust Funds for the benefit of the Principal.
[10] The agreement makes clear that any automobile purchased in this manner is owned by the Principal:
- The Agent agrees that ownership of any such motor vehicle purchased in his/her name shall be that of the Principal. In the event that it is necessary in order to purchase a motor vehicle to register under the Motor Vehicle Registration Act, or any other relevant or succeeding legislations and regulations, it is understood and agreed by the Agent that, notwithstanding the said registration, the Agent is acting in trust for the benefit of the Principal and shall not receive any legal or beneficial interest in said motor vehicle.
[11] Pursuant to the agreement the relationship between the Agent (the “purchaser” from the dealer) and the Principal is demonstrated by the identification of the Agent as an “independent contractor”:
- Independent Contractors, The relationship between Principal and the Agent as established by this Agreement is that of an independent contractor and nothing contained in this Agreement shall be construed to (1) constitute the parties as partners, joint ventures [sic], co-owners or otherwise as participants in a joint undertaking, or (2) allow the Agent to create or assume any obligation on behalf of the Principals unless expressly permitted by that Principal in writing, (3) this Agreement does not create an employment relationship between the parties.
[12] Once an agreement was signed, in respect of any particular vehicle or vehicles, Ping Yang, as the representative of the corporate respondent, would provide the purchaser of the vehicle (the Agent) with the funds necessary to complete the acquisition. This would include the value of the deposit that had been paid by the Agent at the time he or she entered into the agreement to purchase the vehicle from the dealer. The agreement the parties sign in respect of the vehicles refers to a commission:
- Commission, Principle [sic] had agreed to pay commission according the oral [sic] or written promise And [sic] pay this before the transferring of the vehicle.
[13] With the vehicle in hand, it would be sold to a buyer in China for more than it had been purchased in Canada. Once the cost of the purchase and the ancillary costs associated with it (i.e.: warehouse, safety certificate, insurance and ownership transfer) were deducted the profit achieved would be split evenly between the respondent (the “Principal”) and the “Agent” who had purchased the car. This was the agreement as to the commission to be paid.
[14] Qing Chen was one of the individuals who purchased cars for transfer to the respondent. In fact, he arranged for cars to be purchased in the name of friends. He had what was described as a “network” of people who purchased cars for this purpose. These individuals purchased the cars for him for transfer. Over time Qing Chen came to the conclusion that he was not being treated fairly by Ping Yang. He became concerned that the costs deducted from the ultimate sale price increased such that the profits were reduced so that he was not paid as much as he had been and anticipated he would be. In particular there were charges for “Admin Fees” and something referred to as “Captain interest” (understood to be what is typically referred to as “Capital interest”). As perceived by Qing Chen these and other changes and problems placed him “under extremely difficult financial conditions”. In response, having signed the requisite agreement with the respondent for the purchase of two Toyota Sienna vehicles he bought them with the money provided by Ping Yang, sold them to a buyer in the United States and kept the funds received from their sale. (These are the two vehicles that are the subject of the second application; the one through which 1691530 Ontario Ltd. sought possession.)
[15] It is not clear what Qing Chen thought would happen after he kept and sold the cars. For her part Ping Yang concluded that she could no longer trust him. She had given him the funds to buy the cars for transfer and he had taken her money and put it to his own use. In her testimony she did not mince words. As she sees it, he stole vehicles that were hers. As a result she stopped doing business with Qing Chen. She refused to accept any further vehicles from him. He says this is not so. In the weeks following the taking over of the two vehicles she approached him about assisting in the purchase of two Maseratis. Ping Yang explained this. These cars and their purchase were the subject of a separate law suit between the respondent and Qing Chen in the Small Claims Court. She was given advice, either by staff of the court or a lawyer, it is not clear which, that it would be better if she was able to resolve that dispute outside of a court proceeding. The approach she made to Qing Chen concerning the two Maseratis was in furtherance of an attempt to find a resolution to that disagreement. Beyond this there is no evidence of Ping Yang demonstrating any willingness to continue to work with Qing Chen. The problem for Qing Chen was that he had already entered into agreements to purchase vehicles and paid the applicable deposits. He had, as yet, not signed agreements to transfer the cars to the respondent. He was left without recourse (at least through the respondent) to obtain the funds to purchase the vehicles and get back the deposits he had paid. He commenced this proceeding seeking, among other things, payment of these deposits presumably in response to the application seeking possession of the vehicles which he had, by then, sold. The value of the deposits represents a substantial part of the damages he claims. Among its defences, the respondent claims set-off for the value of the two Toyota Sienna vehicles taken and sold by Qing Chen. This sets the structure of the proceeding heard and now being determined.
[16] What is the value and substance of the claims being made by Qing Chen?
[17] I pause for a moment to say that this was a point in the process where counsel for the respondent demonstrated the balanced approach that made it possible for the court to see its way through the difficulties the case presented.
[18] At an earlier appearance, confirmed by reliance on affidavits provided, both side accepted that the claim for money taken by Qing Chen and Wangdah through the sale of the two vehicles was $115,157.98. This was reduced by the acknowledgment that the respondent owed the applicants commissions for May 2016 ($14,415.99) and for June 2016 ($12,897.64). There was an additional commission resulting from the purchase and sale of a particular vehicle ($1,229.25). The total commissions agreed to are $28,742.88. Based on this calculation, $86,415.10 remained as the amount the respondent claimed was being improperly held by Qing Chen and Wangdah as a result of the improper sale of the two Toyota Sienna vehicles. This was the amount not subject to set-off. There was a further claim for HST apparently paid by Wangdah ($7,255.19) for which it should have been reimbursed. On this basis, of the funds held by Wangdah as a result of the sale of the two Toyota Sienna vehicles, the respondent claimed it should receive, was ($86,415.10 minus $7,255.19) $79,159.81. This was the amount that would not be subject to any set-off.
[19] Counsel referred to a schedule which he had prepared and was included in an “Additional Document Brief” provided as part of the record. It listed 63 vehicles which were said to be the subject of the various claims made by Qing Chen and Wangdah for deposits that they claimed should have been reimbursed by the respondent. The total value of the deposits listed was $81,800. To the extent these claims were established, they would represent funds owed by the respondent to the applicants and subject to the claim for set-off against the money received by Wangdah for the improper sale of the two Toyota Sienna vehicles. This claim was subject to a series of adjustments. Each one was put to Qing Chen. He agreed with them all. The trial adjourned to allow Qing Chen to review the calculations that would demonstrate the result of these changes. Ultimately, it was acknowledged that the value of the claim for deposits made by Qing Chen and Wangdah, for which it said they should have been but had not been paid, was $52,800.
[20] Qing Chen and Wangdah also claim $12,900 for “Captain interest” representative of what Qing Chen said was a unilateral and improper alteration to the contractual relationship between the parties.
[21] If proved these claims would represent further amounts to be set-off against the monies taken by Qing Chen and Wangdah. As it is I find that these are not proper claims.
[22] The problem arises from the failure of Qing Chen to understand the legal relationship between the parties. There is no over-arching contract which governs a consistent and continuing business relationship between them. Rather there are a series of individual and independent contracts dealing with the purchase of the automobiles, their delivery to 1691530 Ontario Ltd. and the payment of commission upon their sale in China. This is consistent with the identification of the “purchasers” as independent contractors. The relationship with the dealers from which the cars are purchased does not involve 1691530 Ontario Ltd., the company through which Ping Yang conducts her business. The purchaser who enters into an agreement with a dealer is an individual, for example, Qing Chen (or the members of his “network” of friends), each of whom determines for themselves to take up the interest expressed by Ping Yang in obtaining any particular vehicle. There is no obligation on 1691530 Ontario Ltd. to take any vehicle when offered by the purchaser. It is only when 1691530 Ontario Ltd. agrees to accept a vehicle that a contract is entered into between it and the party who acquired the right to purchase it from the dealer. By this agreement 1691530 Ontario Ltd. agrees to buy the car and pay for it including the deposit that the purchaser will have given the dealer to secure the right to the car. Only with the agreement signed does 1691530 Ontario Ltd. take on the obligation to take the car and provide the funds that reimburse the purchaser for the deposit and allow the purchaser to complete the transaction with the dealer. As I understand it, what Ping Yang and her company are doing is providing an entry into a market for the purchasers to sell (in the vernacular “flip”) cars they have acquired the right to buy. Until the agreement between the “purchaser” and 1691530 Ontario Ltd. is signed the risk is with the purchaser. Like any independent contractor they are obliged to monitor and govern their business in an appropriate manner. In her evidence Ping Yang observed that there are times when a purchaser agrees to buy too many cars, puts down too many deposits and overextends himself or herself. The implication is that this may be the problem that confronted Qing Chen, placing him, as he described it, “under extremely difficult financial conditions”. In her evidence Ping Yang said that there are circumstances where, as a result of a change, she will absorb the cost of the deposit. This was different. Her relationship with the purchasers is based on a level of trust. She gives them the money to go and buy the car accepting and expecting that the car will be purchased and delivered. When Qing Chen took the money to buy the two Toyota Sienna vehicles and then sold them independently and kept the money he breached that trust. The deposits she has refused to pay are for cars he sought to deliver after he had sold those two cars. She was unwilling to trust him with the funds necessary to buy the cars or to take responsibility for the deposits.
[23] Based on the nature of their legal relationship, she was free to do so. If I am wrong and there is an over-arching contractual relationship, Qing Chen breached it when he failed to deliver the two Toyota Sienna vehicles. There is no obligation on 1691530 Ontario Ltd. to pay for the deposits claimed.
[24] This leaves the question of the “Captain interest”. This was not an arbitrary change to an ongoing relationship. Like many businesses, particularly those that purchase inventory for subsequent sale, the one operated by Ping Yang required financing to cover the costs before the realization of sales. Ping Yang found it difficult to cover this on her own. She sent a notice to each of her purchasers advising them that in order to cover these costs she would be including a charge for what was a contribution to the cost of the interest. The amount depended on the value of the vehicle. The cross-examination of Qing Chen makes clear that he received the notice. The reconciliation statements included in the record indicate charges consistent with this advice. In the context of the relationship this is a charge associated with making the market available for the purchasers such that they can conduct their individual businesses. They were not obliged to continue but, if they did, they would have to pay.
[25] In the circumstances I find that Qing Cheng has no right to the return of the deposits represented by the $52,800 or to the interest charges of $12,900. These amounts cannot be and are not to be set-off against the money obtained through the sale of the two Toyota Sienna vehicles. In respect to the objection to any charge for Administrative costs, these too are referred to in the reconciliation statements. The amount noted is $200.00 per car. During the course of the hearing I observed to those present that an administrative fee is common place in circumstances such as this. Nothing was said about it in evidence and no amount referred to as demonstrative of something that Qing Chen and Wangdah should not have had to pay.
[26] In the circumstances I order judgment in favour of 1691530 Ontario Ltd. in the amount of $79,159.81. Any monies standing in court to the credit of either of the two applications are to be paid to 1691530 Ontario Ltd. on account of this judgment and whatever remains to be paid is to stand as a judgment owed, jointly and severally, by both Wangdah Material Toronto Ltd. and Qing Chen. I say this because, on the one hand, at least some of the contracts with dealers to purchase cars were entered into by Qing Chen personally as were at least some of the contracts governing the purchase of the cars for the benefit of 1691530 Ontario Ltd. Nothing was said as to the participation of Wangdah Material Toronto Ltd. I take its participation to have been acknowledged. I award both pre and post judgment interest pursuant to the terms of the Courts of Justice Act, R.S.O. 1990, c. C.43.
[27] Finally, there is the question of costs. The foundation for a claim for costs was explained to Qing Chen. He advised the court that he did not understand and could make no submissions. It was left to the court to consider. Counsel for 1691530 Ontario Ltd. sought costs. He provided a Costs Outline demonstrating costs on a full indemnity scale of $54,332.02. He acknowledged that an order based on this elevated scale was too high. A reasonable partial indemnity claim would be two thirds of that amount being $36,221.35. Counsel submitted there should be some additional amount to recognize the fundamental error of Qing Chen when he took property that was clearly not his and the delay caused by his conduct of the action. Counsel proposed costs of $38,000 inclusive of fees, disbursements and taxes.
[28] To my mind the Costs Outline lacks precision in that there is one paragraph describing all the work that was done coupled with a list of those involved, the total hours they contributed and the hourly rates charged. I have no quarrel with the rates charged and observe that the hours spent and charges rendered by those other than counsel who appeared in court are minimal. Counsel claims a total of 154.6 hours at three different rates ($300, $305 and $335). In the circumstances, I am not prepared to find this number of hours outside the range that would be reasonable.
[29] The difficulty I have is with the fact that some set-off was warranted. Thus, success is not entirely with the respondent. No formal settlement offer was referred to. Costs to 1691530 Ontario Ltd. $30,000.
Lederer J. Released: December 27, 2018
Court File No.: CV-16-563500 Court File No.: CV-16-557309 Date: 20181227
Ontario Superior Court of Justice
Between: Wangdah Material Toronto Ltd. and Qing Chen, Applicants – and – 1691530 Ontario Ltd., Respondent
And Between: 1691530 Ontario Ltd., Applicant – and – Wangdah Material Toronto Ltd. and Qing Chen, Respondents
Reasons for Judgment Lederer J. Released: December 27, 2018