SUPERIOR COURT OF JUSTICE – ONTARIO

COURT FILE NO.: CV-18-00609372-0000

DATE: 20211130

RE: HONG YING, Plaintiff

AND:

LEMINE INVESTMENT GROUP INC., LEMINE DEVELOPEMENT CORP. and TONG LIU, Defendants

BEFORE: S.F. Dunphy J.

COUNSEL: James Coristine, for the Plaintiff/Moving party

Tong Liu, acting in person

HEARD at Toronto: November 29, 2021

REASONS FOR JUDGMENT

[1] The plaintiff moves for judgment against all three defendants who have been noted in default. Although noted in default, the defendants were given an opportunity to take steps to set aside the noting in default and defend the action and were notified of this motion for default judgment. Prior to today, no steps were taken to set aside the noting in default or to place evidence before the court contesting any of the allegations made by the plaintiff. At today’s hearing, Mr. Liu appeared in person without counsel and asked for thirty days to present further evidence. For the reasons set forth below, I declined to adjourn the hearing and proceeded to award default judgment as against the second two defendants without prejudice to the plaintiff moving for judgment as against the first defendant as well if evidence to substantiate the involvement of the first defendant in a more substantive manner than simply being part of a generally pleaded “joint enterprise” arises.

[2] This claim arises from an “investment” presentation made by Mr. Liu to the plaintiff in Beijing in 2015 pursuant to which the plaintiff invested a total of $607,000 for the ostensible purpose of receiving permanent residency status in Canada through guaranteed investments in high-end Canadian real estate.

[3] The plaintiff’s dealings were with Mr. Liu personally. She signed a “contract” with “Lemine Investment Group” on January 8, 2016. “Lemine Investment Group” is a registered trade name of the second defendant, Lemine Development Corp. (or “LDC”). Mr. Liu is the sole recorded director or officer of LDC.

[4] I have no hesitation in concluding that the “contract” is a contract in name only. It lacks all of the essential features of contract in that the obligations undertaken by LDC are stated in only the vaguest and most general of terms. It was intended to look like more than it was and succeeded in that effort.

[5] The agreement is described as “Ontario Immigrant Nominee Program Service and Unit Reservation Agreement”. LDC purported to agree to inform the plaintiff about Canadian immigration law, to have licensed and experienced professionals to provide all services, to provide an immigration assessment and within three months of receiving the first payment provided to “appoint a proposed business project” for the plaintiff and thereafter to assist the plaintiff in completing the necessary immigration documents. The total planned “investment” was $1.2 million which amount LDC agreed to “protect and indemnify” the plaintiff “from any potential loss” with such investment being described as “a secured investment with full amount guaranteed back upon completion of this Agreement”. Funds were directed to be deposited to a designated account of LDC at TD Canada Trust and were to be paid “in trust”. The contract provided a space to identify a particular building unit number that was left blank.

[6] The plaintiff paid $7,000 to Mr. Liu via credit card after their initial meeting in Beijing in October 2015. Between March 14 and March 24, 2016, the plaintiff deposited a further $600,000 with LDC and received a receipt for such amount from LDC dated March 24, 2016.

[7] The promised immigration consulting services were never forthcoming nor did the plaintiff receive any further information about the investment that she had supposedly made. She was not informed of the nature of the investment (shares in a corporation or direct land ownership?), its amount nor any terms thereof. Attempts over the next two years to try to obtain some information from Mr. Lui were met with no reply or deflection.

[8] Mr. Liu appeared at the hearing of this summary judgment motion. He filed no material on the motion but provided a limited amount of (unsworn) information. The information was not particularly helpful, but I shall address the procedures that preceded this hearing to place Mr. Liu’s late intervention in context.

[9] The statement of claim was issued in November 2018 and a statement of defence was initially filed on January 4, 2019. The defendants’ lawyers were later removed from the record in November 2019. Thereafter, no lawyer was appointed by any of the defendants nor did any of the defendants take steps to represent themselves (or, in the case of the corporate defendants, to seek leave to have a non-lawyer represent them). On March 3, 2020, an order was made striking the statement of defence.

[10] The plaintiff moved for summary judgment. On May 27, 2021, A.P. Ramsay J. as triage judge ordered the plaintiff to provide a “last chance” for the defendants to participate in this lawsuit by serving notice of a case conference upon them along with her endorsement. A date for a case conference to set the timetable for the intended motion for judgment was obtained for August 26, 2021. The defendants missed this “last chance” to participate in the suit. Glustein J. as case conference judge set a timetable that nevertheless provided a window for the defendants to file material prior to the hearing of the motion for summary judgment fixed for November 29, 2021. The plaintiff was directed to serve its motion record by email and by regular mail by September 23, 2021 with the defendants being given a deadline of October 14, 2021 to serve either a responding motion record or a motion to set aside the noting in default. October 14 came and went with no word from the defendants.

[11] Mr. Liu appeared on the motion without counsel. He had no explanation for why every opportunity to participate in the proceeding had come and gone without response. He admitted to having known of this hearing for “a couple of weeks”.

[12] I gave Mr. Liu an opportunity to provide me with information as to what substantive defence if any he or his co-defendants may have and what explanation he had for failing to respond to prior invitations to defend the claim. He was able to impart no concrete information suggesting a substantive defence exists and primarily asked for thirty days to put together such information. He did not deny the lack of communication regarding the “investment” and offered no suggestion that the plaintiff had ever been advised of what specifically she had allegedly invested in or on what terms. I declined his request for an adjournment given the lengthy history of ignoring deadlines and the lack of any explanation for why this time might be different.

[13] Returning to the statement of claim and the evidence filed in support of the motion, I am satisfied of the following facts as regards LDC and Mr. Liu:

a. The “contract” was nothing of the sort being so vague and imprecise as to the obligations of the parties (beyond the payments due from the plaintiff) as to being incapable of enforcement;

b. The $607,000 paid by the plaintiff to LDC and Mr. Liu was to have been held in trust;

c. The funds were in fact received by LDC and Mr. Liu in trust and despite several years of efforts by the plaintiff to seek their return, have not been returned;

d. Mr. Liu was the controlling mind and will of LDC and made the representations attributed to him and to LDC in the statement of claim which were false and known to be false when made;

e. Mr. Liu was aware of the trust nature of the funds received and his knowledge was also that of LDC;

f. Mr. Liu and LDC both were fiduciaries of the plaintiff with respect to the $607,000 entrusted to them by her for services they never intended to render;

g. The defendants were not authorized to make any investment, directly or indirectly, on behalf of the plaintiff with her trust funds without her specific approval and informed consent;

h. No such informed consent was either sought or given;

i. The $607,000 advanced by the plaintiff has been misappropriated by Mr. Liu and LDC instead of being held in trust and returned to the plaintiff; and

j. The plaintiff is entitled to judgment for the return of the $607,000 from each of LDC and Mr. Liu and to an order permitting them to trace such misappropriated trust funds.

[14] I am not satisfied that judgment can or should issue against the first defendant. The only facts connecting Lemine Investment Group Inc. (or LIGI) to this claim are the common control and address (same address and Mr. Liu is also the officer and director of record) and general allegations in the statement of claim regarding a “common enterprise”. Those high-level allegations are, in my view, insufficient to support a blanket judgment.

[15] LDC was party to the “contract” such as it was and gave a receipt for all but $7,000 of the plaintiff’s funds. Mr. Liu received the first $7,000 of those funds and was the controlling mind and will of LDC. The participation of Mr. Liu and LDC in a dishonest scheme to misappropriate the plaintiff’s funds is clear. The same cannot be said for LIGI – at least not at this stage. However, I have found that the plaintiff is entitled both to judgment for the return of her funds and to the proprietary remedy of a constructive trust over those misappropriated trust funds. Should subsequent investigation reveal that some or all of the funds have transited through LIGI’s hands, then the basis for liability of LIGI will be clear given common direction and control. LIGI will be bound by my declaration of the plaintiff’s proprietary interest in her funds and to provide information relevant to tracing. I am adjourning sine die the balance of the motion as against LIGI.

[16] In summary therefore I am ruling as follows:

a. The plaintiff shall have a declaration as requested in paragraphs 1(j), (k) and (l) of the Statement of Claim as against all three defendants;

b. The plaintiff shall have judgment in the amount of $607,000 as against LDC and Mr. Lui personally together with prejudgment interest from September 28, 2018 at the pre-judgment interest rate and post-judgment interest from November 29, 2021 at the post-judgment interest rate.

[17] This leaves two further matters to be dealt with: costs and punitive damages.

[18] The plaintiff provided an outline of costs and seeks substantial indemnity costs in the amount of $38,125 inclusive of HST and disbursements. I have reviewed the Outline of Costs provided. In light of the nature of the allegations, I have no hesitation in awarding costs on the substantial indemnity scale. The claimed costs are reasonable in amount having regard to the complexities of conducting this proceeding with a plaintiff on the other side of the world. The judgment shall also order LDC and Mr. Liu to pay the plaintiff’s substantial indemnity costs fixed by me in the amount of $38,125.

[19] The plaintiff seeks $50,000 in punitive damages relying upon the decision of Brown J. (as he then was) in Elekta Ltd. v. Rodkin, 2012 ONSC 2062 where punitive damages were awarded in a default judgment.

[20] There are similarities and differences between the two cases. Both cases involve allegations – deemed admitted – of dishonesty. The plaintiff’s funds were solicited from her in China. The defendants took advantage of her and the obstacles that language and distance placed in her path to insulate them from having to account for the misappropriation of her money. The near complete radio silence apart from blandishments and deflections that followed the receipt of her funds in 2016 confirms the predatory nature of the relationship. I am not sure that the combination of the allegations made and the evidence filed rises to the level of malice or high handed conduct that punitive damages are intended to respond to. Punitive damages express the court’s outrage at the conduct while adding a degree of general and specific deterrence to prevent others from following in this path. It is a close-run thing and I have found this case to be right on the border of where punitive damages are appropriate. On balance, I have decided that general damages, a generous costs award and the availability of constructive trust tracing remedies if needed are an adequate response here. Punitive damages will not be awarded.

S.F. Dunphy J.

Date: November 30, 2021