COURT FILE NO.: CV-11-420294
DATE: 20191220
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Zheng Zhang
Plaintiff
– and –
Hua Hai Li Steel Pipe Co. Ltd., Renjie Zhang also known as Ren Jie Zhang, Ruqiu Zhang also known as Ru Qiu Zhang, Jiaming Zhang also known as Jia Ming Zhang, and Yuming Yang also known as Yu Ming Yang
Defendants
C.P. Goldson, Agent for Wen Wu Law Office, for the Plaintiff
Jiaming Zhang and Yuming Yang, appearing in person
HEARD: December 2, 3, 4, 5, 6, 9, 10, 11, 12, 13, 16, 17, and 18, 2019
CAVANAGH J.
REASONS FOR JUDGMENT
Overview
[1] In this action, the plaintiff Zheng Zhang sues her father, Renjie Zhang, her mother, Ruqiu Zhang, her brother, Jiaming Zhang, her sister-in-law, Yuming Yang, and an enterprise named in the title of proceedings and translated from Mandarin as Hua Hai Li Steel Pipe Co. Ltd. The correct translation is Hua Hai Li Steel Pipe Co. I will generally refer to this enterprise as the “company”.[^1]
[2] This action is defended by the defendants Jiaming Zhang and Yuming Yang. They are self-represented. The company did not defend the action. The company and the defendants Renjie Zhang and Ruqiu Zhang were noted in default after they failed to deliver a statement of defence following service of the plaintiff’s amended statement of claim.
[3] The plaintiff claims in her amended statement of claim a declaration that she is one of four shareholders or, alternatively, owners, proprietors, stakeholders, or partners in the business and operations of the company where each owns a ¼ interest in the company. She claims additional relief which flows from this declaratory relief including compensatory and punitive damages, an order for disclosure of documents and an accounting of assets of the company, an injunction restraining the company and the individual defendants from disposing of assets, and a tracing order with respect to funds improperly diverted from the company or the plaintiff.
[4] By order dated July 12, 2018 on a motion brought without notice to any party, the plaintiff obtained partial default judgment against her father and mother for some claims made in the amended statement of claim.[^2] At this trial, the plaintiff seeks other relief from the defendants who were noted in default, including the declaration claimed in paragraph 1(a) of the amended statement of claim, based upon additional evidence tendered at trial including evidence of the law of China which applies to the question of ownership of the company.
[5] The central issue in this action is whether the plaintiff is entitled to a declaration that she is a shareholder or has another status in the business and operations of the company where she owns a ¼ interest in Hua Hai Li Steel Pipe Co. The other relief the plaintiff claims depends on her success in obtaining this declaratory relief.
[6] The question of ownership of the company, an enterprise formed in China, is governed by the law of China. The plaintiff called expert evidence at trial to prove the law of China upon which she relies. The plaintiff’s expert testified that the company is owned by the “whole people”, that is, the State. She agreed that the Chinese law under which this enterprise was founded provides that its assets are also owned by the “whole people”. The expert witness called by the defendants agreed.
[7] The plaintiff’s expert testified that China passed a regulation in 1988 which permitted state-owned companies to operate under a management contract with the State that, depending on its terms, could provide for distribution of net profits, after payment of taxes, to the general manager of the enterprise or to members of its management, instead of to the State. In this way, state-owned companies could operate more like private corporations which had shareholders. At that time, China did not permit private corporations with a shareholding structure.
[8] The plaintiff asks me to find that the company operated under this management system and that there is a management contract between the company and the State which the individual defendants refuse to disclose. The plaintiff asks me to find that she was a member of the leadership team and, under a management contract with the State, she was entitled to receive ¼ of the net profits of the company. The plaintiff asks me to find that she was deprived of her right to receive her share of the excess profits by the actions of the individual defendants who fraudulently misappropriated assets of the company and brought them to Canada, including her interest in these assets, and, therefore, she is entitled to the relief sought.
[9] The plaintiff submits that her pleading claiming a declaration that as a shareholder or in another capacity she owns a ¼ interest in the company should be read and understood as a pleading claiming a declaration that she was a member of the management team of the company with a contractual entitlement to receive a ¼ share of the net profits of the company pursuant to its management agreement with the State.
[10] The plaintiff founded her entire action on her claim for a declaration that as a shareholder or in another capacity she owns a ¼ interest in the defendant company. The expert evidence called by the plaintiff establishes beyond question that Hua Hai Li Steel Pipe Co. is an enterprise owned by the State and its assets are owned by the State. The existence of a management agreement, even if proven, would not affect this conclusion. The plaintiff does not own any interest in the company.
[11] For the reasons that follow, I conclude that the plaintiff is not entitled to the declaratory relief she seeks, either against the defendants who were noted in default or the defendants who defended this action at trial. The other relief which the plaintiff claims depends of her success in obtaining the declaratory order she seeks. The plaintiff is also not entitled to this relief.
Plaintiff’s Claims
[12] I begin by describing the plaintiff’s claims as pleaded in the amended statement of claim.
[13] This action was commenced by a statement of claim issued on February 15, 2011. In the statement of claim as originally issued, the plaintiff pleaded that the company is a corporation incorporated in China. She claimed a declaration that she is one of four equal shareholders of this corporation.
[14] The plaintiff amended her statement of claim on June 29, 2017. In her amended statement of claim, the plaintiff claims in paragraph 1(a):
A declaration that the Plaintiff is one of four equal shareholders, or four owners, or four proprietors, or four family stakeholders, or four family partners (hereinafter “shareholders”) in the business and operations of the Defendant Hua Hai Li Steel Pipe Co. Ltd. (“Steel Pipe Company” hereinafter), where each shareholder owns a ¼ interest in Steel Plaintiff Company.
[15] The plaintiff pleads that Hua Hai Li Steel Pipe Co. is a corporation which was incorporated in China in 1992 by the four family members. She pleads that when the company was formed, she agreed with her father, mother, and brother that “the company belongs to the whole family”. The plaintiff pleads that the company carried on business of purchasing and distributing steel pipes and related products in China and, in or around 1998, after it had accumulated significant assets, it shifted its business focus to stock investment. She pleads that this company, when it was in operation, was owned and operated by the family.
[16] The plaintiff alleges that by early 2000, Hua Hai Li Steel Pipe Co. had shifted the focus of its business from steel pipe trading to investments. The plaintiff claims that by this time, the assets of the business had a value of approximately 100 million renminbi (RMB), the official Chinese currency.
[17] The plaintiff pleads that her brother and sister-in-law immigrated to Canada in 1999 and she immigrated to Canada in September 2001, followed soon after by her parents. The plaintiff pleads that the company ceased its operations in China.
[18] The plaintiff alleges that her parents and her brother brought all or a significant part of the assets of Hua Hai Li Steel Pipe Co. to Canada. The plaintiff claims that her brother transferred a vast amount of the company’s assets to his wife, the defendant Yuming Yang, without the plaintiff’s consent. The plaintiff claims that her parents, brother, and sister-in-law have refused to return to the company the assets they have taken or disclose their whereabouts, and that they are disposing of these assets to prevent her from recovering her ¼ interest in them. She pleads that the individual defendants profited from their conduct by misappropriating approximately $16,000,000 of the assets and equity of the defendant enterprise, and they are in the process of disposing of the assets of the defendant enterprise in an attempt to prevent the plaintiff from recovering what belongs to her and to defeat her statutory and equitable rights.
[19] The plaintiff pleads that her parents’ and brother’s conduct breached fiduciary duties and a duty of care owed to Hua Hai Li Steel Pipe Co. and to the plaintiff as a shareholder (a defined term in the pleading which includes the status of owner, proprietor, stakeholder and partner) of the company. The plaintiff pleads that the conduct of her parents, her brother, and her sister-in-law constitutes misappropriation, conversion, fraud, and breach of fiduciary duty in respect of the assets of the company which is 25% owned by her. This claim was amended from the statement of claim as issued in which plaintiff had claimed that the properties of the company partially belong to her.
[20] The plaintiff pleads that as a result, she has suffered significant and substantial damages and loss, and will continue to do so.
[21] In addition to her claim for a declaration that she owns a ¼ interest in the company, the plaintiff claims against the defendants, jointly and severally, general damages in the amount of $4,000,000 representing 25% of the value of the assets of the company, special damages of $250,000, and punitive and exemplary damages in the amount of $1,000,000. The plaintiff also claims an order directing the individual defendants to account for all assets and equity of the company, a tracing order with respect to funds improperly diverted and/or removed from the plaintiff and from the company, and permanent injunctive relief restraining the individual defendants from disposing of any assets of the company (or proceeds of disposition of such assets) or the defendants’ own assets.
[22] The plaintiff also makes two other claims for (i) liquidated damages in the amount of $599,000 USD for misappropriation and conversion of funds removed on or around August 24, 2010 without her signature from a joint bank account held in the names of the plaintiff and her mother, Ruqui Zhang, and a tracing order with respect to these funds; and (ii) an order discharging a mortgage registered by her mother in the amount of $266,600 as instrument number AT2772828 on title to property at 45 Carlton Street, Suite 1214, which was purchased in the name of the plaintiff.
[23] The plaintiff pleads that her parents agreed to transfer the $599,000 USD to her “as the shareholder of the company” as part of payment and allocation of the assets and equity of the company. With respect to the mortgage, the plaintiff pleads that she requested the defendants to advance part of her share in the “family assets” to assist her to purchase the Carlton Street property. She pleads that her mother agreed to advance $266,600 on condition that such advance shall be made in the form of a mortgage, and both she and her mother understood that the registration of the mortgage “is for record keeping purpose”. The plaintiff obtained default judgment in respect of these claims on July 12, 2018 against her mother and father who had been noted in default.
[24] The defendants Jiaming Jang and Yuming Yang delivered an amended statement of defence dated July 24, 2017. In their amended statement of defence, these defendants plead that the company was founded in Shanghai, China by a large state-owned enterprise - Chengdu Seamless Steel Pipe Company - and that the type of ownership is state-owned. These defendants deny that the company participated in any stock or equity investment of any kind. They plead that the plaintiff was only an employee of the company and that she did not have any ownership interest in it. It was state-owned. These defendants deny that they brought into Canada any of the assets of the company. They deny the other claims made by the plaintiff in her amended statement of claim and they deny that the court has jurisdiction to grant the remedies sought.
Analysis
[25] The following issues arise in this action:
a. Is the plaintiff entitled to a declaration that she is one of four equal shareholders, or four owners, or four proprietors, or four family stakeholders, or four family partners in the business and operations of the defendant Hua Hai Li Steel Pipe Co., an enterprise formed under the laws of the People’s Republic of China, where each of the four persons owns a ¼ interest in this enterprise?
b. Is the plaintiff entitled to other relief, specifically, (i) general damages or special damages, (ii) a permanent injunction restraining the individual defendants from disposing of or depleting assets, (iii) an order directing the individual defendants to disclose and produce documents and to account for all assets of Hua Hai Li Steel Pipe Co., (iv) a tracing order against the defendants Jiaming Zhang and Yuming Yang with respect to funds improperly diverted and/or removed from the plaintiff and from Hua Hai Li Steel Pipe Co., or (v) an award of punitive and exemplary damages?
c. Is the plaintiff entitled to an award of liquidated damages in the amount of $599,000 USD for misappropriation and conversion of funds removed on or around August 24, 2010 from joint bank account number 06762-4513545 held at Royal Bank of Canada in the names of the plaintiff and the defendant Ruqui Zhang?
Is the plaintiff entitled to a declaration that she owns a ¼ interest in Hua Hai Li Steel Pipe Co.?
[26] A threshold issue in this action is whether the plaintiff is entitled to a declaration that she owns a ¼ interest in Hua Hai Li Steel Pipe Co. as a shareholder, proprietor, stakeholder, partner or in any other capacity. All the plaintiff’s other claims depend on the plaintiff succeeding on this claim.
[27] The parties agree that the question of ownership of the company is governed by the law of China. The plaintiff tendered evidence from a lawyer in China who was qualified to give expert evidence on the law of China as it relates to the plaintiff’s claim. The defendants Jiaming Zhang and Yuming Yang also called an expert to give evidence on the law of China.
[28] The question of ownership of the company is one that is governed by the law of China. It is well-established that questions concerning the status of a body of persons associated together for some enterprise and all matters of internal management of the enterprise including the creation of share capital and related matters must be determined by the law of the domicile of the enterprise. If the enterprise is a corporation, its domicile is the country in which it was incorporated. A local court may hear matters concerning ownership of shares in a foreign corporation if it applies the law of the place of incorporation. See National Trust Company Limited v. Ebro Irrigation and Power Company Limited et al., 1954 CanLII 82 (ON SC), [1954] O.R. 463; Phillips v. Avena, 2006 ABCA 19 at paras. 81-82.
[29] The defendant Hua Hai Li Steel Pipe Co. was formed in China pursuant to the laws of China and, in its operations, it is subject to the laws of China. Whether the plaintiff owns a ¼ interest in Hua Hai Li Steel Pipe Co. is governed by Chinese law. Chinese law is a question of fact which must be proven.
Ownership of the Hua Hai Li Steel Pipe Co. and ownership of its property under the laws of China
[30] The plaintiff called evidence from a licensed Chinese lawyer with experience in corporate law, Jia Jin, to prove Chinese law. Ms. Jia had provided three reports which were marked as exhibits and she was qualified to give expert evidence based on these reports.
[31] Ms. Jia testified that she attended at the Department of the Hongkou Sub-Bureau of Shanghai Administration for Industry and Commerce and obtained a number of publicly available documents which relate to the company and to another enterprise, Shanghai Hai Li Steel Pipe Sales Centre (“Steel Pipe Sales Centre”), which Ms. Jia described as a subsidiary of the company. These documents are authentic, and they were marked as exhibits. Ms. Jia testified that she relied on these documents as the basis for her reports, and she referred to some of them in her testimony.
[32] Ms. Jia testified that according to government records, the enterprise was founded on October 18, 1993 and its business licence was suspended on December 13, 1999 for failure to file annual inspection documents as required by regulation, but the enterprise was not dissolved. The government records show that Chengdu Seamless Steel Pipe Factory, a large state-owned enterprise, applied to the government to open the company and the application was approved. The registered capital was certified to be 500,000 RMB. According to government documents, the “business type/economic nature” of the company is “Enterprise Owned by the Whole People”. Some government records show the business type to be “State-Owned”. The legal representative/managing director of the enterprise was the plaintiff’s father, Renjie Zhang. The government records show that he was appointed by Chengdu Seamless Steel Pipe Co. as general manager of Shanghai Hua Li Industrial Co.[^3] Ms. Jia described Chengdu as the supervising entity for the company.
[33] According to government records, the company applied to open Steel Pipe Sales Centre and it was founded and came into operation on May 9, 1996. The defendant Jiaming Zhang, the plaintiff’s brother, was appointed by the company to be the legal representative for Steel Pipe Sales Centre. The business type of Steel Pipe Sales Centre was described as “Ownership by the Whole People” or, in some records, as a “State-Owned Enterprise”. It had independent operation and self-accounting. According to government records, Steel Pipe Sales Centre had its business licence suspended on February 15, 2001, but it was not dissolved.
[34] Ms. Jia explained that, traditionally, businesses in China were state-owned or, in other words, owned by the “whole people”. In the 1980’s and into the 1990’s there were no private corporations with a shareholding structure. In the 1980’s and 1990’s China learned that with the development of the global economy, this mode did not fit well with how businesses were conducted in other parts of the world, and China’s laws were changed to allow Chinese businesses to operate in ways which were more similar to those of businesses in other countries.
[35] Ms. Jia explained that China’s first law permitting the formation of private corporations with a shareholding structure, “The Company Law of the People’s Republic of China”, started to take effect from July 1, 1994. This law allowed individuals to establish a limited liability company with private shareholders. This law was not in effect when the company was formed.
[36] Ms. Jia was asked on cross-examination to identify the law of China under which the company and Steel Pipe Sales Centre were formed. Ms. Jia responded that there was a law, and she would have to look for it. She did not refer to this law in her reports or in her evidence in chief. Ms. Jia was presented with a law entitled Law of the People’s Republic of China on Industrial Enterprises Owned by the Whole People, and she agreed that this is the law under which the two enterprises were formed.
[37] Ms. Jia explained that effective March 1, 1988 China introduced a law that provided for a special mode of operations for enterprises owned by the whole people that was named “Interim Regulation on the Contracted Management Responsibility System for Industrial Enterprises Owned by the Whole People”.
[38] Both the Law of the People’s Republic of China on Industrial Enterprises Owned by the Whole People and the Interim Regulation were referred to by Ms. Jia and both these laws were introduced into evidence, together with certified English translations.
[39] Article 2 of the Law of the People’s Republic of China on Industrial Enterprises Owned by the Whole People expressly addresses ownership of the enterprise and its property in the following words:
An industrial enterprise owned by the whole people (hereinafter referred to as the enterprise) shall be a socialist commodity production and operation unit which shall, in accordance with law, make its own managerial decisions, take full responsibility for its profits and losses and practice independent accounting.
The property of the enterprise shall be owned by the whole people, and shall be operated and managed by the enterprise with the authorization of the state in line with the principle of the separation of ownership and managerial authority. The enterprise shall enjoy the rights to possess, utilize and dispose of, according to law, the property which the state has authorized it to operate and manage.
The enterprise may, in accordance with the decision of the competent department of the government, adopt contract, leasing or other forms of the system of managerial responsibility.
[40] The Interim Regulation provides in article 34 that enterprises that implement the contracted operating responsibility system shall implement a fund division system, dividing state funds and enterprise funds, and record them separately. This article provides that the nature of the ownership of the enterprise funds is by the whole people.
[41] Under the law of China which was introduced into evidence through Ms. Jia, regardless of whether the company adopted a particular system of managerial responsibility, it is owned by the whole people and its property is also owned by the whole people. As a matter of Chinese law, the company does not have, and cannot have, private owners through a shareholding structure or any other legal structure.
[42] In her evidence in chief, Ms. Jia downplayed the significance of her evidence by testifying that “on the surface”, the company is owned by the whole people. She agreed, when prompted, that ownership of the company by the whole people is a “technical requirement”. Nevertheless, when asked about the difference between this type of company and a private company (which was permitted under the law of China in 1994), Ms. Jia responded that these two types of entities are very different because a private company will have a shareholding structure with private shareholders whereas a company such as the defendant company is owned by the whole people.
[43] The defendants’ expert Mr. Jin Meng, a lawyer in China, agreed with Ms. Jia. He testified that the company was founded by a large state-owned enterprise, Chengdu. He testified that under the law of China the company is state-owned. Under the law of China, this kind of enterprise cannot be privately owned.
The nature of the plaintiff’s claim for a declaration as pleaded
[44] I accept Ms. Jia’s evidence with respect to ownership of the company under the law of China. The company is owned by the whole people, the State, and it does not have private shareholders. Under Chinese law, the plaintiff does not have and cannot have an ownership interest in the company.
[45] During his closing submissions, when counsel for the plaintiff addressed the expert evidence and the plaintiff’s evidence concerning the “family agreement”, I asked him to explain how the expert evidence that the company is owned by the State, not privately owned, can be reconciled with the plaintiff’s claim that she is entitled to a declaration that, as a shareholder or in another capacity, she owns a ¼ interest in the company. In response, counsel for the plaintiff explained how the plaintiff’s amended statement of claim should be read and understood.
[46] Counsel explained that it is essential to consider the importance of the contract system of managerial responsibility under the Interim Regulation which, he submits, I should find that the company used in its operations. The plaintiff’s position is that the company is different from other state-owned enterprises which did not adopt this system because the contract system of managerial responsibility allowed it to operate in ways that were similar to how a private company would operate. Counsel submitted that although the company is technically owned by the State, the plaintiff effectively acquired an interest in the company under this system of management. This is key to the arguments made on behalf of the plaintiff at trial.
[47] The plaintiff submits that I should find that the company, through her father as managing director, made a management contract with the State which provided for distribution of excess profits from the business of the company to the four family members equally, as members of management or of the leadership team of the company. In order for me to make this finding with respect to the management contract, the plaintiff asks me to accept her evidence that there was a family agreement when the company was formed by which the family members agreed that each would share equally in the profits of the company.
[48] The plaintiff testified that in 2001 when the business stopped operating, the assets of the company, in which she had a ¼ interest, had a value of 100 million RMB. [^4] The plaintiff contends that she has an interest in these assets through her contractual entitlement to receive excess profits under the company’s management contract with the State. She claims that the individual defendants fraudulently misappropriated her share of the assets of the company (which represented excess profits available for distribution under the management contract) through the actions of her father and brother, who were the legal representatives of the company and Steel Pipe Sales Centre, respectively, with the knowledge and support of her mother.
[49] The plaintiff submits that paragraph 1(a) her amended statement of claim in which she claims a declaration that she owns a ¼ interest in the company should not be read as a claim that she is an owner of a ¼ interest in the company (which can only be owned by the whole people, the State, as a matter of Chinese law). The plaintiff contends that her amended statement of claim should be read and understood as a claim that she had a contractual right under the company’s management contract to receive ¼ of its excess profits which, effectively, gave her an interest in the company and its assets.
[50] I disagree that the plaintiff’s amended statement of claim can be reasonably so read, no matter how liberally it is construed.
[51] Rule 25.06(1) provides that every pleading shall contain a concise statement of the material facts on which the party relies for the claim. The plaintiff did not plead that the question of ownership of the company, as a Chinese enterprise, is governed by the laws of China. Foreign law is a question of fact and should be pleaded. She did not plead the fact of the Interim Regulation, or any of its provisions. She did not plead as a fact that the company adopted the contract system of managerial responsibility. The plaintiff did not plead as a fact that the company made a management agreement with the State. The plaintiff did not plead as a fact that she was contractually entitled to receive excess profits from the company under a management agreement. These are material facts. They are not legal conclusions.
[52] Rule 25.06(9) provides that where a pleading contains a claim for relief, the nature of the relief claimed shall be specified. The plaintiff did specify in paragraph 1(a) of the amended statement of claim the nature of the declaratory relief she seeks. From the time that this action was commenced in 2011, the plaintiff pleaded that she owns a ¼ interest in the company. This is a claim to an ownership interest in the company, not a claim that the plaintiff had a contractual right to receive a distribution of profits.
[53] In her statement of claim as originally issued, the plaintiff pleaded that she was a shareholder of the company which, she alleged, was a private corporation, and she asked for an order directing the defendants to issue ¼ of the common shares of the company to her. This claim was withdrawn in the amended statement of claim, but it shows that the plaintiff was claiming an ownership interest in the company as a private shareholder, not the benefit of a contractual right. Then, after the reports from Ms. Jia were received, the plaintiff amended her statement of claim to add, in addition to her claimed status as one of four equal shareholders, an alternative claim to status as one of four owners, proprietors, stakeholders, or partners. The plaintiff’s prayer for relief is clear, however, that regardless of her status, she claims a declaration that she “owns a ¼ interest” in the company.
[54] The nature of the plaintiff’s claim is also clear from other paragraphs of her amended statement of claim in which she pleads:
a. The company was “owned and operated” by the family (paragraph 8).
b. The plaintiff “owned ¼ of the interest of the company via her time and effort invested on the company” (paragraph 13).
c. The family agreed that “the company belongs to the whole family” (paragraph 36).
d. The plaintiff is “the owner of a 25% interest” in the company (paragraph 38).
e. The individual defendants misappropriated the assets of the company “which is 25% owned by the plaintiff” (paragraph 43).
[55] In support of the plaintiff’s submission that she adequately pleaded her interest in the company, the plaintiff places particular reliance on the following sentence in paragraph 36 of her amended statement of claim:
It was agreed by the Defendants Renjie Zhang, Ruqiu Zhang, Jiaming Zhang, and the Plaintiff that the company belongs to the whole family.
[56] In this statement, the plaintiff does not plead that she had a contractual right to receive excess profits from the company under a management agreement. She does not allege in her amended statement of claim that this “family agreement” was a legally enforceable contract, or that it was breached. The plaintiff does not claim any relief in this action for breach of contract. [^5] Under the laws of China which were in force when the company was formed, it was not possible to incorporate a privately owned corporation that would belong to the whole family, in any legal sense. The family company, as the plaintiff described it, was, and could only be, a state-owned enterprise under Chinese law. It was not possible for the family members to change this by their own private agreement.
[57] The defendants could not have known when they were served with the plaintiff’s statement of claim or her amended statement of claim the theory upon which the plaintiff now makes her claim. This is because the material facts needed to support this theory were not pleaded. The defendants defended the action from the outset on the ground that the plaintiff’s claim is fatally flawed because the plaintiff could not own an interest in the company which, under the laws of China, is a state-owned enterprise. The defendants moved for summary judgment on this basis, and their motion was dismissed when the motion judge concluded that she was not able to fully appreciate “whether or not the plaintiff has a legal interest in the companies”. [^6]
[58] For these reasons, I reject the plaintiff’s submission that her amended statement of claim should be read and understood as a pleading of a claim for a declaration that the plaintiff had a contractual right to receive a ¼ share of the excess profits of the company under a management contract between the company and the State. The specific nature of the declaratory relief claimed in paragraph 1(a) of her amended statement of claim is that the plaintiff owns a ¼ interest in the company.
Conclusion on the plaintiff’s claim for a declaration that she owns a ¼ interest in the company
[59] The plaintiff proved through the evidence of Ms. Jia that the defendant company is state-owned and that a private person such as the plaintiff cannot own an interest in this company under the law of China. The plaintiff’s claim in paragraph 1(a) of the amended statement of claim for a declaration that she owns a ¼ interest in the defendant company must be dismissed.
Is the plaintiff entitled to the other relief claimed?
[60] The plaintiff pleads that she sustained and suffered significant and substantial damages and loss, and will continue to suffer losses and damages, as a direct result of the wrongful conduct of the individual defendants. She claims general damages in the amount of $4,000,000 representing the value of 25% of the assets of the company against the defendants, jointly and severally. The plaintiff also claims special damages in the amount of $250,000 against the defendants, jointly and severally.
[61] This claim is based upon the pleaded allegations that the individual defendants took the assets of the company to Canada, refused to return the assets of the company to it, and refused to disclose the whereabouts of these assets. The plaintiff pleads in paragraph 43 of the amended statement of claim that this conduct “constitutes misappropriation, conversion, fraud and breach of fiduciary duty in respect of the assets of Steel Pipe Company which is 25% owned by the Plaintiff”.
[62] The plaintiff’s claims for general and special damages depend upon her having the ownership interest she claims in the company. The plaintiff’s claims for general and special damages must be dismissed.
[63] The plaintiff claims a permanent injunction order restraining the individual defendants from directly or indirectly disposing of or depleting any of the assets, or proceeds from the disposition of the assets, of the company, or their own assets. This claim for relief also depends upon the plaintiff having the ownership interest she claims in the company. The plaintiff’s claim for injunctive relief must be dismissed.
[64] The plaintiff claims an order directing the individual defendants to produce full disclosure of documents including financial statements, banking records, transaction records, journal entries, and corporate records from the incorporation of the company to the present time, and to account for all assets of the company. Again, this claim for relief depends upon the plaintiff having the ownership interest she claims in the company. The plaintiff’s claim for a disclosure order and an order requiring the defendants to account for the assets of the company must be dismissed.
[65] The plaintiff claims a tracing order with respect to funds improperly diverted and/or removed from the plaintiff and from the company. This claim for relief also depends upon the plaintiff having the ownership interest she claims in the company. The plaintiff’s claim for a tracing order must be dismissed.
[66] The plaintiff claims punitive and exemplary damages in the amount of $1,000,000 against the defendants, jointly and severally. The plaintiff pleads that the individual defendants engaged in numerous commissions of misappropriation, conversion, fraud, and breach of fiduciary duty. She pleads that the individual defendants acted in ways which were high-handed, malicious, arbitrary and highly reprehensible and their conduct represents a marked departure from the ordinary standards of decent behaviour. The plaintiff pleads that the actions of the individual defendants were calculated with the sole purpose of misappropriating the plaintiff’s interest and defeating her legitimate claims.
[67] There is no evidentiary basis whatsoever to support these allegations. The plaintiff’s claim that she has an ownership interest in the defendant company was misconceived from the outset of this litigation. I do not accept the plaintiff’s evidence that her parents or her brother and sister-in-law acted fraudulently or, indeed, that they acted improperly towards her in any way. The plaintiff’s claim for punitive and exemplary damages must be dismissed.
Is the plaintiff entitled to liquidated damages of $599,000 USD for misappropriation of this amount from a joint bank account in the names of the plaintiff and her mother?
[68] The plaintiff claims against all defendants liquidated damages in the amount of $599,000 USD for misappropriation and conversion of funds removed on or around August 24, 2010 without the necessary plaintiff’s signature from a joint Royal Bank of Canada (“RBC”) account held in the names of the plaintiff and her mother, the defendant Ruqui Zhang.
[69] The defendants Jiaming Zhang and Yuming Yang called a witness from RBC to testify with respect to this claim.
[70] The plaintiff pleads that in June 2010 her parents agreed to transfer US$599,000 from their joint account at RBC to the plaintiff by depositing these funds into a joint account held by the plaintiff and her mother, Ruqiu Zhang. She pleads that the transfer consists of part of assets belonging to the company. The plaintiff pleads that her parents agreed to transfer these funds as part of payment and allocation of the assets of the company to her as the shareholder of the company.
[71] The plaintiff pleads that on July 6, 2010 US$599,000 was transferred from the joint bank account of her father and mother and deposited to the joint bank account of the plaintiff and her mother. The plaintiff pleads that on August 9, 2010 when she visited the RBC branch, Mr. Wen Huang confirmed that the transfer was made from her parents’ joint account under their instruction to the joint account in the names of the plaintiff and her mother. The plaintiff pleads that on August 24, 2010, without warning or explanation, or her authorization or consent, US$599,000 was withdrawn from the plaintiff’s joint account with her mother and transferred back to the joint account of her parents.
[72] The plaintiff pleads that under banking policy, no one can withdraw funds from a joint account without the authorization of both account holders and she never authorized the transfer of funds out of her joint account.
[73] The plaintiff claims that she suffered irreparable harm as a result of the withdrawal of funds from her account.
[74] The plaintiff’s claim that she was entitled to receive and keep for herself the deposit of $599,000 to the joint account that she held with her mother, as pleaded, is founded on her claim that this payment represented part of the payment and allocation of the assets of the company to her “as the shareholder of the company”. This factual foundation for the plaintiff’s claim has not been proven. I have concluded that the plaintiff does not have an ownership interest in the defendant company as a shareholder or in any other capacity.
[75] While the plaintiff’s claim for a declaration that she owns a ¼ interest in the company was pending and awaiting trial, the plaintiff moved without notice to any party for partial default judgment against her parents, who had been noted in default. She obtained an order on default (i) removing her mother’s name from the joint bank account with the plaintiff; (ii) tracing the US$599,000 which was misappropriated on or around August 24, 2010 without the necessary plaintiff’s signature; and (iii) that a tracking order to be issued with respect to funds improperly diverted and/or removed from the plaintiff and from the defendant company by the defendants Renjie Zhang and Ruqiu Zhang.
[76] The plaintiff also obtained an order, on default, discharging a mortgage registered in the name of her mother in the amount of $266,600 on property at 45 Carlton St., Suite 2014. This claim is one that only affects the plaintiff’s mother’s interest in the mortgage, and it is not a claim that is before me now. There is no motion before me at this trial to set aside the order made without notice for partial default judgment.
[77] The defendants Jiaming Zhang and Yuming Yang called Wen Huang to testify as a witness at trial. Mr. Huang is a financial planner employed by RBC. He is the person named by the plaintiff in the amended statement of claim.
[78] Mr. Huang testified about the events with respect to the deposit of US$599,000 into the joint bank account in the names of the plaintiff and her mother. Mr. Huang was the RBC financial planner who was responsible for the accounts of the plaintiff’s father and mother at RBC. He gave his evidence by reference to a letter that he had sent which detailed the relevant events and was marked as an exhibit at trial. Mr. Huang also had an independent recollection of the relevant events.
[79] Mr. Huang explained that he met with the plaintiff’s parents on April 6, 2010 to discuss maturity options for term deposits in their names. He received instructions from them not to renew two term deposits when they matured and to leave the funds in the joint bank account in the names of the plaintiff’s parents. Mr. Huang explained that the plaintiff’s mother called RBC and instructed the person who answered to withdraw US$599,000 from the joint account and purchase a term deposit with these funds. Mr. Huang was unaware of these instructions. He testified that he later noticed that the new term deposit in the amount of US$599,000 had been purchased and, because he had not received further instructions from the plaintiff’s parents to renew their term deposits, he believed that this purchase was a mistake. He gave instructions to the RBC branch to redeem the new US$599,000 certificate and deposit the funds into the joint account of the plaintiff’s parents. The bank employee to whom he gave these instructions, Helen, redeemed the term deposit but mistakenly deposited the funds to the joint bank account in the names of the plaintiff and the plaintiff’s mother, instead of the joint bank account of the plaintiff’s parents.
[80] Mr. Huang explained that the plaintiff and her husband came to the branch on August 9, 2010 and met with him to discuss the plaintiff’s banking. Mr. Huang reviewed her accounts, including the joint account which now held the US$599,000. Mr. Huang was not then aware that the account balance was in error and he did not know that the funds from the plaintiff’s parents’ term deposit had been mistakenly credited to this account, rather than to the parents’ account.
[81] On August 18, 2010 the plaintiff’s mother called RBC and complained that the redemption of the term deposit was made without her consent or knowledge and that the proceeds from redemption of the term deposit had incorrectly been deposited to the joint account in the names of the plaintiff and her mother. The plaintiff’s mother explained that these funds did not belong to her daughter and should not have been deposited to that account, or redeemed in the first place.
[82] Mr. Huang called the plaintiff’s mother in China to apologize and discuss a solution. Mr. Huang arranged for RBC to correct the error by withdrawing US$599,000 from the joint account in the names of the plaintiff and her mother and purchasing a term deposit and adding interest retroactive to July 6, 2010.
[83] Mr. Huang was clear that the US$599,000 deposit to the joint account in the names of the plaintiff and her mother was made because of his error.
[84] I asked counsel for the plaintiff during his closing submissions whether he accepted Mr. Huang’s evidence. Counsel responded that his client’s position is that the deposit of these funds to her joint account with her mother was not a mistake. Counsel submitted that the plaintiff’s position is that her parents were clients of Mr. Huang and they put pressure on Mr. Huang say that he made a mistake. I asked counsel whether he was asking me to find that Mr. Huang’s evidence was not truthful and counsel responded affirmatively.
[85] It is clear from Mr. Huang’s evidence, which I accept, that the US$599,000 was deposited to the joint account in the names of the plaintiff and her mother because of Mr. Huang’s error, and that he acted to correct this error. Mr. Huang was a forthcoming and truthful witness and his evidence was unshaken on cross-examination.
[86] The plaintiff’s mother testified at trial. She testified that the US$599,000 was money for her living expenses in retirement. She explained how RBC made a mistake by depositing this money to the joint account she had with the plaintiff. Mrs. Zhang testified that when she discovered this deposit, she called RBC and the bank admitted that a mistake was made and corrected the mistaken deposit. Mrs. Zhang said she received a letter from RBC about this mistake – she called it a letter of apology – and she testified that her lawyer at the time provided this letter to the plaintiff’s legal counsel (counsel of record, but not counsel at trial) a long time ago. Mrs. Zhang was clear in her evidence that the US$599,000 was not intended to be deposited to her daughter’s account. She testified that she never told her daughter that this money was for her daughter’s ¼ share of the company.
[87] I accept Mrs. Zhang’s evidence which was unchallenged on cross-examination. Mrs. Zhang’s evidence was supported by the evidence of Mr. Huang which I accept. I do not accept the plaintiff’s evidence with respect to this claim. I specifically reject her counsel’s submission that that I should find that the plaintiff’s parents put pressure on Mr. Hoang to say he made a mistake. There is no evidence to support this submission.
[88] The plaintiff’s claim for liquidated damages in the amount of US$599,000 against the defendants Jiaming Zhang and Yuming Yang must be dismissed.
[89] The plaintiff’s claim for liquidated damages against her parents must be addressed on a somewhat different footing, since these defendants were noted in default and are deemed to admit allegations of fact in the amended statement of claim. A necessary part of this claim is the plaintiff’s allegation that her parents agreed to transfer this money to her as part of payment and allocation of the assets of the company to the plaintiff “as a shareholder of the company”. The plaintiff pleaded that the defendant company was incorporated in China, and whether the plaintiff is a shareholder or owner in another capacity is governed by the law of China, which was not pleaded. These defendants are not deemed to admit any allegations of fact about the laws of China, and they are not deemed to admit that the plaintiff was a shareholder of the company. The plaintiff failed to prove a fact that is necessary for this claim to succeed.
[90] The plaintiff’s claim for liquidated damages of US$599,000 against the defendants Renjie Zhang and Ruqiu Zhang also must be dismissed.
[91] These findings and conclusions are sufficient for me to adjudicate the plaintiff’s claims. If I have erred, I go on to address other evidence which was tendered in relation to the plaintiff’s claim that she had a contractual right as a member of management or the leadership team of the company to receive ¼ of its excess profits according to the terms of a management agreement between the company and the State.
Was there a family agreement by which the plaintiff was to have a ¼ ownership interest in the company and share in its excess profits?
[92] The plaintiff testified that when the company was formed, the four members of the family reached an agreement, and a promise was made within the family that if the company did well, everyone would have a share. The plaintiff testified that it was agreed that she would have a ¼ share and she would be entitled to receive ¼ of any money the company made. She testified that on the strength of this agreement, she worked at the company for a low salary when she could have secured employment after graduation with other companies at a higher salary. The plaintiff testified that everything was verbal and based upon the trust that the family members had for one another. At the time the company was formed in 1993, the plaintiff was at university. She graduated in 1995.
[93] The plaintiff testified that she worked part time for the company while she was in university assisting her father with the business. She joined the business on a full-time basis following her graduation. The plaintiff testified that she was in charge of sales and quality control and that she visited the major oil fields with her father to visit customers and secure orders. She testified that when her brother and sister-in-law went to Canada in 1999, she took over responsibility for the investment activities that, by that time, were the main business carried on by the company. She testified that when she agreed to undertake this activity, her parents reminded her that she had a ¼ interest in the company, and they insisted that she come back to Shanghai to work for the company. The plaintiff testified that she was a successful investor and made a considerable amount of money for the company. The plaintiff testified that when her parents decided to move to Canada, they asked her to surrender control of the investment accounts because her brother had ways to lawfully move the money from the investments to Canada.
[94] Jiaming Zhang, the plaintiff’s brother, testified that he does not remember any discussion within the family when the company started about sharing ownership of the company. He testified that at the time, no one knew how sales would go and whether the business would be able to continue to exist.
[95] The plaintiff’s father, Renjie Zhang, also testified. He is 80 years old and lives in Shanghai with his wife, the plaintiff’s mother. Mr. Zhang was asked whether he ever said that the company was a family business and he responded that it was not a family business. He was asked whether any family member contributed money to the company, and he responded that none of the family members invested money in the company.
[96] The plaintiff’s evidence about the family agreement was vague. She gave no evidence of the occasion of this discussion, which would have taken place many years ago, which resulted in the alleged agreement. The plaintiff did not say precisely when the discussion took place, where it took place, the particular circumstances that gave rise to the discussion, or what was said and by whom. There are no written records to support this family agreement. The plaintiff would have been in university when the agreement was made, and she does not explain why her father, who had the experience, technical knowledge, and deep relationships in the business would have agreed to give the plaintiff a ¼ ownership interest in the new company.
[97] I do not doubt that there may have been discussions within the family when the company began, and as it developed, to the effect that all members of the family would benefit from the business if it was successful. The plaintiff may have reasonably expected that some day she would inherit money from her parents, or that they would be generous with her as she started her adult and married life, as many parents are with their children. There was evidence that the plaintiff’s parents helped her with financing to buy a condominium when she was at school at Ryerson University, and that they deposited money to the joint RBC account that the plaintiff had with her mother. However, I do not accept the plaintiff’s evidence that there was a family agreement which had or was intended to have any binding legal effect, or that through this agreement the plaintiff was entitled to an ownership interest in the company or a share of its profits.
[98] I accept the evidence of Jiaming Zhang that he does not recall any family discussion about family members owning a share of the company. If there had been such a discussion, I would expect him to remember it. I also accept the evidence of Renjie Zhang, which was not challenged on cross-examination, that the business of the company was not a family business.
Did the company operate under a management agreement with the State which provided for distribution of profits to the plaintiff?
[99] The plaintiff asks me to find that the company adopted a contract system of managerial responsibility. Even though no management agreement was put into evidence, the plaintiff asks me to find that there was such an agreement, and to find that, by its terms, it provides that the excess profits of the company are to be distributed to the plaintiff and her family members, equally.
[100] Ms. Jia testified that for enterprises which adopted the contract system for management responsibility and were subject to the Interim Regulation, a designated government department would make a contract with the enterprise subject to contract management. The contractee is the relevant government department designated by the government, and the contractor is the enterprise subject to contract management. Ms. Jia agreed that she had not seen such a contract. She testified that there was no legal requirement for the enterprise to file the contract with the government.
[101] Ms. Jia explained that each enterprise is different, and one would have to look at the terms of each contract to determine the contractual relationship between the enterprise and the State. With respect to distribution of profits, Ms. Jia testified that profits would first go to pay taxes then, based on the contract, part of the profit is given to the State and the rest is determined by the enterprise itself. All of this would be stipulated in the contract.
[102] Ms. Jia’s evidence was that for enterprises which adopted this contract system (she described it as “contracting out”), it was open to the enterprise, by contract with the State department, to distribute “excess profits” to persons identified in the contract, which could include the legal representative and the leadership team of the enterprise. In this way, the contract system differed from other systems of managerial responsibility where the excess profits were handed in to the State.
[103] Ms. Jia testified that in her opinion, the company was an enterprise owned by the whole people but one that adopted a contract system of managerial responsibility and was subject to the provisions of the Interim Regulation. An enterprise operating under this contract system would still have a supervising entity, but it would operate substantially differently than other enterprises owned by the whole people which did not operate under the contract responsibility mode. Ms. Jia testified that an enterprise owned by the whole people and operating under the contract responsibility mode is (i) responsible for its own profits and losses, (ii) has independent accounting, and (iii) makes its own managerial decisions. Ms. Jia testified that she looked to these three characteristics to determine whether the defendant entity had adopted the contract management responsibility system.
[104] Ms. Jia was challenged on cross-examination with respect to her explanation for how she had reached a conclusion that the company was owned by the whole people and one which had adopted a contract system of managerial responsibility. She responded that the characteristics of these enterprises are that they operate independently, practice independent accounting, and take responsibility for their profits and losses. Ms. Jia testified that state-owned enterprises which do not have the contract system of managerial responsibility do not have these characteristics. Ms. Jia pointed to two documents she had obtained from her search of public records relating to the company. The first is a letter dated November 17, 1993 approving the formation of Shanghai Hua Hi Li Industrial Co. which later changed its name to the name of the company. This document states that the company shall be an enterprise owned by the whole people “with independent operation and self accounting and be responsible for its own profits and losses”. The second document is the by-law for Shanghai Hua Li Industrial Co. which states in article 3 that the economic nature of the company is “[o]wned by the whole people, independent operation and self-accounting”. Ms. Jia relied upon these statements in these documents to support her opinion that the company had adopted a contract system of managerial responsibility.
[105] Ms. Jia was directed on cross-examination to the Law of the People’s Republic of China on Industrial Enterprises Owned by the Whole People which became effective on August 1, 1988. She had not referred to this law in her evidence in chief, but she agreed that the company was formed under this law and subject to it. This law provides, in Article 2, that “[a]n industrial enterprise owned by the whole people (hereinafter referred to as the enterprise) shall be a socialist commodity production and operation unit which shall, in accordance with law, make its own managerial decisions, take full responsibility for its profits and losses and practice independent accounting”. This article also states that “[t]he enterprise may, in accordance with the decision of the competent department of the government, adopt contract, leasing or other forms of the system of managerial responsibility”. This law, in Article 6, provides that “[t]he enterprise must effectively utilize the property which the state has authorized it to operate and manage and realize the multiplication of its assets; the enterprise must, according to law, pay taxes and fees and hand in profits.”
[106] It was pointed out to Ms. Jia that the characteristics of the company upon which she had relied to support her conclusion that it had adopted a contract system of managerial responsibility were not particular to enterprises which had adopted this mode of operations, and that all enterprises owned by the whole people which were formed under and subject to the Law of the People’s Republic of China on Industrial Enterprises Owned by the Whole People had these characteristics, whether or not they had adopted a contract system of managerial responsibility. Ms. Jia responded that even enterprises which did not adopt a contract system of managerial responsibility can have contracts, but the provisions would not be as detailed as those required in contracts for enterprises which adopted the contract system of managerial responsibility.
[107] The evidence given by Ms. Jia concerning the law of China does not allow me to find that the company had adopted a contract system of managerial responsibility. The three characteristics upon which Ms. Jia relied for her opinion were shown to apply in the same way to any enterprise owned by the whole people under the Law of the People’s Republic of China on Industrial Enterprises Owned by the Whole People. This law, to which Ms. Jia did not refer in her reports or in her evidence in chief, directly conflicts with Ms. Jia’s opinion that these characteristics are particular to enterprises which adopted the contract system of managerial responsibility. Ms. Jia acknowledged that she had not seen any contract between the State department and the enterprise. She could not say whether such a contract exists.
[108] When Steel Pipe Sales Centre was formed, it was legally possible in China to incorporate a privately owned corporation with private shareholders. If the family intended to operate a business which would be owned equally by each family member, this would be the natural way to do so. Yet, Steel Pipe Sales Centre was formed as a state-owned enterprise. This does not support the plaintiff’s contention that she was to be a ¼ owner of Steel Pipe Sales Centre.
[109] The plaintiff has failed to prove that the company adopted a contract system of managerial responsibility or that it is or was subject to the Interim Regulation. The plaintiff has failed to prove that the defendant company operated under a management contract by which she is entitled to any share of the profits of the company. I reject the plaintiff’s submission that I should find that her father and brother intentionally failed to disclose management contracts under which the defendant company and Steel Pipe Sales Centre operated.
Evidence about the plaintiff’s stock trading and assets of the company
[110] The plaintiff testified that in 2010 and 2011 the main business of the company was investments and she was responsible for this investment activity. She testified that investments were made through two accounts in the name of the company and that there were also separate investment accounts of the names of each family member. She testified that investments in all of these accounts were to be considered as assets of the company and equally owned by the four family members. The plaintiff testified that she was successful in her investments.
[111] The plaintiff also testified that the company invested in eight condominium units on the same floor of a condominium building in Shanghai and that four of the units were put into the names of the four family members. The plaintiff testified that this real estate was also considered to be part of the assets of the company which was equally owned by the four family members. The plaintiff testified that she sold the condominium unit which was registered in her own name and used the proceeds of sale to fund this litigation.
[112] The defendants dispute that the company engaged in investment activity. Jiaming Zhang testified that the investment accounts were personal accounts, not company accounts. The defendants also deny that the real estate is part of the assets of the company.
[113] The plaintiff did not produce any documents to support her assertions that the company had investment accounts. These documents could have been obtained from the investment dealers through which the accounts were held. If they were not provided voluntarily, the plaintiff could have taken steps to compel these companies to provide the statements. Under cross-examination, the plaintiff testified that she has information that would show the IPO trading account numbers and individual account numbers from which she could tell whose names the accounts are under. If true, this would show that there is additional relevant documentary information available to the plaintiff which she did not disclose or produce prior to trial. Counsel advised that he was not aware of such documents.
[114] During the trial, counsel for the plaintiff advised that the plaintiff had provided a document to the defendants which was relevant to the issues involving the investment accounts. There was no cross-examination about this document, and it was not put into evidence. The plaintiff never asked for leave to tender into evidence any documents, or other information, which she said would support her claim.
[115] The plaintiff has the onus of proving that the investment accounts were in the name of the company as part of proof of her claim to damages. I am not satisfied that the plaintiff has proven that the company engaged in investment activity or that investments in any investment accounts through which the plaintiff made investments constituted company assets, or that she has proven that investment accounts in the names of the family members or real estate in Shanghai are assets of the company.
[116] Even if I had concluded that paragraph 1(a) of the amended statement of claim can be read and understood as the plaintiff suggests, I would not accept the plaintiff’s claim that the company adopted the contract system of managerial operation under the Interim Regulation and she had a contractual entitlement to receive excess profits of the company under the terms of a management agreement between the company and the government of China. This claim has not been proven.
Disposition
[117] For the foregoing reasons:
a. The plaintiff’s action against the defendants Renjie Zhang and Ruqiu Zhang and against the defendant company for default judgment is dismissed. I make no order with respect to the order dated July 12, 2018 for partial default judgment. This must be addressed, if at all, by a motion.
b. The Plaintiff’s action against the defendants Jiaming Zhang and Yuming Yang is dismissed.
[118] The defendants Jiaming Zhang and Yuming, who are unrepresented, may make written submissions with respect to costs of this action. The defendants Renjie Zhang and Ruqiu Zhang, although they were noted in default, are granted leave to make submissions with respect to costs, if they so choose. I suggest that the individual defendants seek legal advice with respect to the question of costs. I ask these defendants to contact me through the civil trial office within 30 days to provide a date when they will be able to make their written costs submissions, which may need to be translated. I will then set a date for the plaintiff’s responding costs submissions.
Cavanagh, J.
Released: December 20, 2019
COURT FILE NO.: CV-11-420294
DATE: 20191220
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Zheng Zhang
Plaintiff
– and –
Hua Hai Li Steel Pipe Co. Ltd., Renjie Zhang also known as Ren Jie Zhang, Ruqiu Zhang also known as Ru Qiu Zhang, Jiaming Zhang also known as Jia Ming Zhang, and Yuming Yang also known as Yu Ming Yang
Defendants
REASONS FOR JUDGMENT
Cavanagh, J.
Released: December 20, 2019
[^1]: At trial, I made an order amending the title of proceeding to add names for the company which the plaintiff says the company used. At the conclusion of trial, counsel for the plaintiff agreed to provide a form of order for me to sign to amend the title of proceedings to add additional names. No new parties were added. These names are not included in the title of proceedings shown in these reasons. The title of proceedings can be amended separately, if necessary.
[^2]: Jiaming Zhang and Yuming Yang moved to set aside this order at the opening of trial. The plaintiff’s counsel asked for an adjournment of the trial in order to properly respond to this motion, including through examinations of the plaintiff’s father and mother as witnesses on the motion. He submitted that the plaintiff would suffer prejudice if she was forced to respond to this motion and proceed with the trial of her action at the same time. I indicated that I was considering granting an adjournment to ensure that the plaintiff had a fair opportunity to respond to this motion. The moving parties decided to withdraw their motion rather than have the trial adjourned and delayed.
[^3]: The parties agree that this is the same enterprise as the company, when it was using a different name.
[^4]: The plaintiff’s evidence is that when it ceased carrying on business, the company’s assets were comprised of investments in the company’s name, investments in the names of family members, and real estate assets in Shanghai.
[^5]: During the closing submissions of plaintiff’s counsel, the plaintiff moved for leave to amend her amended statement of claim to claim damages for breach of contract. This motion was withdrawn after I declined to make an order dispensing with service of the further amended statement of claim on the defendants who had been noted in default which, unless the court orders otherwise, is required by rule 26.04 of the Rules of Civil Procedure.
[^6]: 2013 ONSC 4790 at para. 31.