Court File and Parties

COURT FILE NO.: CV-20-636746 DATE: 20220406 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: THE CALBOT GROUP LTD. AND 2649106 ONTARIO INC. COB SYNERGY CAPITAL, Plaintiffs AND: NSR HOLDINGS LTD., NSR CANADA DEVELOPMENT LTD., NEW SILK ROAD CULTURALTAINMENT LTD., DAPENG WANG, SHA HUANG AKA SAM HUANG, SUNNY COMMUNITIES (MARKHAM GOLD) INC., PATRICK O’HANLON, CHRISTOPER O’HANLON, SUNNY DEVELOPMENT HOLDING INC., 11105639 CANADA INC., BILL K. CHEN, AND WUZHENG ZHANG AKA JIAN ZHANG, Defendants

BEFORE: W.D. Black J.

COUNSEL: Antonio Conte, for the Plaintiffs Nadia Campion and Lars Brusven, for the Defendants, NSR Canada Development Limited, New Silk Road Culturaltainment Limited and Sha Huang aka Sam Huang Howard Borlack and Ben Tustain, for the Defendants, Sunny Communities (Markham Gold) Inc., Christopher O’Hanlon, Sunny Development Holdings Inc., 11105639 Canada Inc., Bill K. Chen and Wuzheng Zhang aka Jian Zhang Gary D. Graham, for the Defendant, Patrick O’Hanlon

HEARD: March 7, 2022

Endorsement

Overview

[1] There are two motions before me in this matter.

[2] The plaintiff, The Calbot Group Ltd. (“Calbot”), moves for an Order or Orders to secure the sum of $5 million plus HST from sale proceeds that have been paid or are being paid in a sale of certain lands in connection with a development (the “Project”) in Markham, Ontario (the “Preservation Motion”).

[3] The defendants, NSR Canada Development Limited and New Silk Road Culturaltainment Ltd. (the “Foreign NSR Defendants”), move for an Order staying the action as against them on the basis that this Court lacks jurisdiction simpliciter (the “Jurisdiction Motion”).

[4] The remaining defendants (the “Sunny Group”) resist the plaintiff’s Preservation Motion and take no position in the Jurisdiction Motion.

[5] It was agreed among the parties that I should deal with the Jurisdiction Motion first since, if I find for the Foreign NSR Defendants on that motion, it has significant implications for the Preservation Motion. That said, the underlying facts are largely common to both motions and I will address those facts, at least in summary fashion, below.

Initial Matter: Justice Ferguson’s Release of NSR Toronto

[6] As an initial matter, it is important to note that on June 25, 2021, Justice Ferguson struck the plaintiffs’ claims as against the former defendants NSR Toronto Holdings Ltd. (“NSR Toronto”) and Dapeng Wang, without leave to amend.

[7] In addition, in his endorsement of October 22, 2021, Justice Sharma (then the case management judge for these proceedings) confirmed that:

“I made it clear to [Calbot’s counsel] that in his client’s motion, he shall not engage in a collateral attack of Justice Ferguson’s decision releasing the NSR Toronto defendants from this action. If as [counsel for the Sunny Group defendants] argues — that his clients can only become subject to the equitable relief the plaintiff is seeking if the NSR Toronto defendants remain in this action - then the plaintiff will have to convince the court otherwise to obtain the relief it seeks against the Sunny Group defendants. Alternatively, after cross-examinations on affidavits [Calbot’s counsel] may choose to withdraw this motion, or adjourn it until the Court of Appeal releases its decision. Until and if the Court of Appeal concludes that Justice Ferguson’s decision is overturned, all parties are bound by that decision.”

[8] Calbot made the determination to proceed with its motion while the appeal from Justice Ferguson’s decision remains pending. As discussed in more detail below, Calbot’s choice to do so has significant implications for my decision on the Preservation Motion in particular.

Relevant Facts

(A) The Parties

[9] Calbot is an Ontario corporation owned and controlled by Catherine Headon.

[10] The plaintiff 264106 Ontario Inc., carrying on business as Synergy Capital (“Synergy”), is an Ontario corporation owned and controlled by Onis Bell, who also goes by “Joe Bell”. Despite an Order of this Court on June 15, 2021 requiring Synergy to appoint counsel within 30 days or to seek leave to appoint a non-lawyer representative, Synergy remains unrepresented by counsel, and both Synergy and Mr. Bell were conspicuously absent from the motions before me. They did not respond to a summons in connection with this motion, despite the Court’s direction, and have filed no evidence. In fact I am told that Mr. Bell cannot be located.

[11] New Silkroad Culturaltainment (“New Silkroad”), one of the two parties defined herein as the Foreign NSR Defendants, is a limited liability company incorporated in Bermuda and domiciled in Hong Kong. Subject to the discussion below about subsidiary companies, it does not hold any assets or carry on any business in Ontario or elsewhere in Canada.

[12] NSR Canada Development Limited (“NSR Canada”), the other entity defined as part of the Foreign NSR Defendants, is 100% owned by New Silkroad and is incorporated under the laws of and domiciled in Hong Kong. It operates as a holding company and special investment vehicle and, subject to the same discussion below about subsidiaries, does not hold any assets or carry on any business in Ontario or anywhere in Canada.

[13] The Foreign NSR Defendants operate within a group of companies controlled by Macrolink Culturaltainment Development Company Limited (the “Macrolink Group”), which is a global company involved in a wide variety of industries and which is not a party to this action.

[14] The defendant Sam Huang is a resident of Toronto and a former employee of the Macrolink Group. It is asserted that Mr. Huang has never been employed by nor had authority to act on behalf of the Foreign NSR Defendants or NSR Toronto, and there is no substantive evidence to the contrary. From 2016 to 2019 Mr. Huang served as president of CIM Global Development Inc. (“CIM”), a company with involvement in the Project.

[15] The former defendant NSR Toronto is a British Columbia corporation and a subsidiary of the Foreign NSR Defendants. The former defendant Dapeng Wang was at all relevant times the sole officer of NSR Toronto.

[16] The Sunny Group purchased the Project from NSR Toronto as part of a securities purchase transaction (the “Sunny SPA”), on October 10, 2019.

[17] The defendant Patrick O’Hanlon was employed by Compass Hill Developments Inc., an Ontario corporation that was part of the Liberty Group (a Toronto real estate development group that for a brief time was a prospective purchaser of the Project). Mr. O’Hanlon took no part in the motions before me.

(B) The Project

[18] On May 30, 2017, NSR Toronto acquired a 51% interest in the Project (which was a residential real estate development in Markham). The owners of the minority interest in the Project were CIM companies (the “CIM parties”) that are not affiliated with the Macrolink Group and not parties to the action.

[19] In June of 2018, the CIM parties defaulted on development conditions for the Project. NSR Toronto exercised its resulting right under an option agreement to sell the Project, and in early 2019 began marketing the Project for sale.

(C) Initial Involvement of Calbot, Ms. Headon and Mr. Bell

[20] Ms. Headon’s evidence is that she became involved with the Project when she was asked by the CIM parties to find investors (a mandate she did not ultimately take on). Ms. Headon professes experience and expertise in “putting together difficult real estate projects”.

[21] Ms. Headon deposes that at some point around the time that she became aware of the Project, she also learned that Mr. O’Hanlon was interested in purchasing the Project on behalf of the Liberty Group. She says that with this information she approached Mr. Bell, who had previously worked for the CIM parties, and who was acquainted with Mr. Wang and Mr. Huang. She invited Mr. Bell to work with her as the contact person for the vendors, and he agreed.

[22] Ms. Headon deposes that each of CBRE and Cushman & Wakeman had been involved before her in an effort to sell the Project, but that neither had ultimately secured a buyer or a deal satisfactory to the vendors.

[23] She says that throughout May of 2019, there were a number of emails and discussions between Mr. Bell and Mr. Wang, in which Mr. Wang advised what the vendors required from a sale and allegedly promised that if such a sale were achieved, the vendors would pay a “success fee” of $5 million to Ms. Headon and Mr. Bell (in circumstances where they brought the buyer and the deal).

[24] Ms. Headon alleges that she brought in Mr. O’Hanlon and the Liberty Group as potential purchasers and that it was Ms. Headon, and not Mr. Bell, who had the contacts and details about this potential purchaser.

(D) The MOU

[25] Ms. Headon says that as a precondition for securing a Letter of Intent from the Liberty Group purchaser, she insisted on receiving a signed Memorandum of Understanding (“MOU”). A form of MOU was prepared, and is in evidence. That MOU is the subject of considerable controversy, as discussed below.

[26] From the outset of this action, Calbot put considerable weight on the MOU. In its amended statement of claim, the relevant portions of which are largely unamended from the original version of the claim, the MOU is defined as the “Mandate”, and Calbot extensively pleads and relies upon various alleged breaches of various terms of the MOU/Mandate.

[27] Despite its prominence and central importance in the original (and persisting) version of Calbot’s claim, the MOU has become increasingly problematic for Calbot as evidence has emerged.

[28] The plaintiff’s original narrative regarding the MOU begins with the assertion touched on above: that it was prepared in order to confirm the all-important agreement that Ms. Headon and Calbot would only introduce their potential purchaser (or, it is alleged, any potential purchaser), on the basis that Calbot would be entitled to the “success fee” of $5 million.

[29] Ms. Headon’s evidence is that this term (along with other terms memorialized in the MOU) was agreed to during discussions with Mr. Wang and Mr. Huang throughout May of 2019. The results of these discussions were then recorded in the MOU, which was allegedly executed by Mr. Huang on May 31, 2019.

[30] It is specifically alleged that Mr. Bell met with Mr. Wang and Mr. Huang during their lunch break on May 31, 2019, at which point Mr. Huang executed the MOU on behalf of the NSR Defendants. Ms. Headon deposes that Mr. Bell emailed her a copy of the MOU containing the signatures of Mr. Huang and Mr. Bell that evening, and that she then signed the MOU and returned it to Mr. Bell the next morning.

(E) Various Problems with the MOU

(i) Hearsay Issues

[31] It has become apparent that much of Ms. Headon’s evidence about the above events is based largely or entirely on hearsay evidence from Mr. Bell. She admitted in cross-examination that she had had no communication with Mr. Huang and had not met him until June 19, 2019, almost three weeks after the MOU was allegedly executed.

[32] As such, the details and assertions in Ms. Headon’s affidavits about the circumstances in which the MOU was agreed upon and executed are not based on first‑hand involvement or observations. Rather, Ms. Headon relies entirely on what Mr. Bell told her, in person and by email. Given Mr. Bell’s disappearance and abandonment of these proceedings, none of what he told Ms. Headon and what she in turn based her assertions on can be verified or tested. Moreover, for reasons discussed below, there is reason to be concerned about the credibility and reliability of evidence said to originate from Mr. Bell.

[33] It seems clear enough that Mr. Bell met with Mr. Wang and Mr. Huang in early May of 2019 to discuss the Project. They discussed the type of financing required for the Project, but did not discuss any consulting agreement or fee arrangement.

[34] It is also apparent that on May 30, 2019, after CBRE’s exclusive listing agreement expired, Mr. Bell met with Mr. Wang again about Mr. Bell’s (and Ms. Headon’s) potential purchaser, and that following the meeting, Mr. Wang emailed Mr. Bell information about NSR Toronto’s intended sale price for the Project.

[35] That evening (May 30, 2019), Mr. Bell emailed Mr. Wang a copy of the MOU which identified “NSR Inc.” as the contracting party. (There is no “NSR Inc.”; it does not exist, a fact that will become important to my analysis later on.) In his covering email, Mr. Bell asked Mr. Wang to review and sign the MOU so that Mr. Bell could present it to the potential purchaser in order to move forward with the offer.

(ii) Concerns re Evidence of Alleged Deal

[36] The next morning (May 31, 2019), Mr. Wang responded to Mr. Bell’s email. He did not accept the proposed MOU. He said, “Like I talked to you a couple of months ago, we cannot sign an agent agreement yet”. Mr. Wang also pointed out that Mr. Bell’s fees were higher than other agents with which NSR Toronto had worked, and, importantly, suggested that Mr. Bell adopt and follow the industry practice of providing a letter of intent from an interested buyer, together with an agency agreement.

[37] Notwithstanding Mr. Wang’s email, Calbot alleges, as set out above, that there was a meeting between Mr. Bell, Mr. Wang and Mr. Huang later that day around lunchtime, at which Mr. Huang signed the MOU. Again, Ms. Headon was not at this alleged meeting. Mr. Huang and Mr. Wang emphatically deny that any such meeting took place.

[38] In early June of 2019, Mr. Bell introduced Mr. Wang to potential purchasers from the Liberty Group, and presented a letter of intent from a numbered company affiliated with the Liberty Group.

[39] On June 13, 2019, having previously specifically rejected the proposed MOU, Mr. Wang sent Mr. Bell a new form of consulting agreement that NSR Toronto had prepared with the assistance of its legal counsel, Dentons. Notably, NSR Toronto’s proposed agreement expressly provided that it applied only to the potential sale of the Project to the Liberty Group. The proposed agreement was thus consistent with the standard approach described by Mr. Wang in his May 31, 2019 email to Mr. Bell (in which Mr. Wang rejected the MOU).

[40] Mr. Bell told Mr. Wang that he was prepared to sign NSR Toronto’s proposed consulting agreement, and he recommended to Ms. Headon that she do so as well. It does not appear that she did so.

[41] On June 19, 2019, Mr. Wang and Mr. Huang met with Mr. Bell, Ms. Headon and representatives of the Liberty Group, to discuss the Liberty Group’s letter of intent (in the name of an affiliated numbered company). The evidence confirms that this was the first time Ms. Headon had ever met (or communicated with) Mr. Wang or Mr. Huang, and they presented her with their business cards at that time. There is no suggestion that there was any discussion of the MOU at this meeting.

[42] Sometime soon after the June 19, 2019 meeting, the Liberty Group decided to discontinue further discussions about the Project inasmuch as a major stakeholder had lost interest.

[43] On June 27, 2019, after the Liberty Group had withdrawn from pursuing the Project, Mr. Bell presented Mr. Wang with a letter of intent from a Sunny Group affiliate using the form of letter of intent prepared by NSR Toronto’s lawyers relative to the potential purchase by the Liberty Group. Before doing so, Mr. Bell did not seek NSR Toronto’s permission to replace the Liberty Group (in the document or otherwise) with the Sunny Group affiliate numbered company. Nor did he ask NSR Toronto if it would agree to a consulting agreement relative to a sale of the Project to the Sunny Group. He simply changed the consulting agreement and sent a copy to Mr. Wang to sign.

[44] NSR Toronto did not sign back this consulting agreement. In cross-examination, Ms. Headon confirmed that she knew nothing about Mr. Bell’s attempt to orchestrate a consulting agreement for the sale of the Project to the Sunny Group.

[45] The defendants point to these events as confirming that the plaintiffs did not believe that the MOU was a binding contract. If they did, there would be no reason for Mr. Bell to sign the consulting agreement prepared by NSR Toronto’s counsel (in the context of a potential purchase by the Liberty Group), and no reason to modify that consulting agreement to create a new consulting agreement for a potential Sunny Group transaction.

[46] On June 28, 2019, Mr. Wang met with Mr. Bell and representatives of the Sunny Group, but negotiations did not progress at that time because the Sunny Group’s offer was well below what NSR Toronto would accept.

(iii) Additional Concerns About Mr. Bell

[47] In mid-July 2019, Mr. Wang learned that in an apparent effort to revive negotiations between NSR Toronto and the Sunny Group relative to the Project, Mr. Bell had lifted a signature from an NSR Toronto Director without authorization, applied it to a sign back of a Sunny Group letter of intent, and sent it to the Sunny Group, purporting it to be from NSR Toronto.

[48] When Mr. Wang learned of Mr. Bell’s deception, he wrote to Mr. Bell on July 16, 2019, to advise him that NSR Toronto was no longer prepared to work with him, saying, “We were really shocked and disappointed at your unprofessionalism and greediness. We [have] decided to stay away from your unethical team.”

[49] It should perhaps be noted at this juncture that Mr. Wang and NSR Toronto are not the only parties to have developed concerns about Mr. Bell’s conduct. There is uncontested evidence in the record that in 2019, the Toronto Police investigated and laid charges against Mr. Bell relative to an alleged forgery of a passport and business documents.

[50] I am not aware of the fate of these charges and whether or to what extent they are relevant to this action. As noted above, Mr. Bell seems to have gone missing and so cannot provide any context concerning the charges. Based on the evidence before me, I cannot conclude definitively that Mr. Bell forged what Calbot alleges to be Mr. Huang’s signature on the MOU, but as set out in more detail below, there is considerable reason for concern on this point.

[51] In July and August of 2019, NSR Toronto pursued independent discussions with other potential buyers for the Project. During this timeframe, in an email on August 2, 2019, Mr. Bell, evidently anxious to conclude a consulting agreement with NSR Toronto, advised Mr. Wang that the plaintiffs would accept a consulting fee of $2.65 million instead of the $5 million figure contemplated by the MOU. Ultimately, and subject to further discussion of the MOU, no consulting fee agreement was ever agreed to or executed by the parties.

[52] On September 18, 2019, the Sunny Group sent NSR Toronto a revised offer to acquire the Project based on draft terms prepared by NSR Toronto during its negotiations with other parties in July and August. This revised offer led to continued negotiations between the Sunny Group and NSR Toronto, culminating in the Sunny SPA on October 10, 2019.

[53] Other than Mr. Bell’s short-lived and ill-fated efforts in late June of 2019, about which Ms. Headon confirms she knew nothing, there is no indication that the plaintiffs played any role in the negotiations between NSR Toronto and the Sunny Group leading to the Sunny SPA.

[54] Nonetheless, in November of 2019, after learning of the Sunny SPA, the plaintiffs wrote to NSR Toronto demanding payment of $5 million plus HST, relying entirely and solely on the MOU. Importantly, the demand letter makes no reference to a verbal agreement, unjust enrichment or any causes of action other than a breach of the MOU, and makes no reference to the Foreign NSR Defendants.

[55] The plaintiffs’ demand letter in fact enclosed a copy of the MOU. According to the Foreign NSR Defendants and Mr. Huang, this was the first time that Mr. Huang or any of the defendants saw the MOU with Mr. Huang’s purported signature.

[56] Through its counsel, NSR Toronto not only rejected the plaintiffs’ demand, but advised the plaintiffs and their counsel that the purported signature of Mr. Huang on the MOU was not in fact his signature, but a forgery.

(iv) Summary of Concerns re MOU

[57] Much of the evidence tends to support the notion that Mr. Huang’s alleged signature on the MOU is not genuine:

(a) The MOU records Mr. Huang signing in his capacity as President/CEO of “NSR Inc.”. There is in fact no such entity as NSR Inc., and Mr. Huang has never served as President or CEO of any of the corporate defendants in this action, including the Foreign NSR Defendants and NSR Toronto.

(b) The only person with authority to sign a consulting agreement was Paul Ng, a director of NSR Toronto. Mr. Ng’s name does not appear on the MOU.

(c) Ms. Headon’s evidence was that Mr. Huang would have physically signed a paper version of the MOU when Mr. Bell met with him on May 31, 2019, whereas Mr. Huang’s purported signature on the MOU is electronic (a fact that Ms. Headon could not explain).

(d) Mr. Huang’s uncontroverted evidence is that he did not sign the MOU and in fact never saw the MOU before the demand letter written by Calbot’s counsel in November of 2019.

(e) Neither Calbot nor anyone else has ever produced the fully executed original version of the MOU. It is apparent from Calbot’s answers to undertakings that Calbot’s counsel made multiple requests of Mr. Bell to provide an original copy, but no such document was provided.

(f) Mr. Huang’s affidavit attaches numerous examples of documents he signed around the time of the MOU, including both his traditional Chinese signature and his anglicized signature. While the Court has no expertise in forensic handwriting analysis, on the face of it, the samples of Mr. Huang’s signatures from the relevant timeframe bear little resemblance to his purported signature on the MOU.

(g) Certain statements made by Mr. Bell following the alleged signature of the MOU appear to confirm Mr. Bell’s ongoing understanding that the MOU was not signed on May 31, 2019 as alleged. For example, on June 7, 2019, Mr. Bell sent to Mr. Wang an unsigned copy of the MOU asking Mr. Wang to “have the principal signs [sic] in both place and return to me”.

(h) On June 13, 2019, Mr. Bell and Mr. Wang exchanged a series of text messages about the version of the consulting agreement prepared by NSR Toronto and its counsel and provided to the plaintiffs. This exchange appears to confirm that there never was an executed MOU as alleged by the plaintiffs. The exchange was as follows:

“JB (Joe Bell): Hello Michael [referring to Mr. Wang; although his legal name is Dapeng Wang, he uses the name Michael]. Just got off the phone with Cathy [referring to Ms. Headon] and our attorneys. They suggest that we don’t sign ur consultant agreement you sent us. The language is defining us as a realtor and positions us in a way where a real estate license is required. We are near closing this deal. So, let’s not kill it because a lawyer is trying to earn his fees.

DW (Mr. Wang): [Beijing] won’t sign ur agreement either

JB: Here is what I propose. Have [Beijing] sign the Agreement and LOI. And send it to me by 4:00. I am going to meet with Cathy now to see what can be done.

DW: I[t] says consulting. LOI signed. I am waiting ur consulting agreement.

JB: Just sign the one you sent us.

DW: I am on it.

JB: I’ll sign and Cathy to sign afterwards.”

This text message exchange caused Calbot’s counsel to remonstrate in an email to Mr. Bell dated November 28, 2021 (produced in answer to an undertaking):

“I have now received very convincing evidence by way of text messages on June 13 between you and Dapeng that Sam never did sign the MOU!! Why did you lie to Cathy?? She relied on you!”

(i) The above suggestion by Calbot, via its counsel, that Huang never signed the MOU, is a further compelling indication that the MOU is not genuine or binding, and that not even Calbot believes that it is, despite placing singular reliance on the MOU in its demand letter and pleadings.

(F) Changes in Calbot’s Position and Concerns re Same

[58] No doubt based on the revelations about Mr. Bell and the MOU, Calbot has developed and/or emphasized late-breaking alternative positions in support of its claim.

[59] The main alternative position is that even if Huang’s signature is forged and the MOU not genuine, there is a verbal contract between the plaintiffs and the NSR Defendants.

[60] In my view, this position is problematic for Calbot in that, among other concerns:

(a) There is no reference to a verbal contract in the demand letter or the statement of claim, and there are no material facts pled to support such a claim.

(b) Ms. Headon admitted on cross-examination that she has no knowledge of the alleged verbal contract; was not present during any discussions allegedly giving rise to it; had no contact with the NSR Defendants during the relevant timeframe when the verbal contract is alleged to have formed; and in fact, did not know Mr. Huang and did not meet him until sometime later.

(c) The only evidence to which Calbot points in support of the verbal agreement is hearsay evidence from Mr. Bell. Even leaving aside apparent potential issues with Mr. Bell’s credibility and reliability, his disappearance means his evidence cannot be tested in cross-‑examination. This Court has held that hearsay evidence, while sometimes admissible, generally cannot carry the weight of central and contentious facts in a proceeding (Jacobson v. Atlas Copco Canada Inc., 2015 ONSC 4, at para. 27; Mitusev v. General Motors Corp., 2014 ONSC 2342, at para. 20; Slimmon‑Weber v. Racco, 2021 ONSC 3108, at para. 20).

(G) Other Alleged Causes of Action and Concerns re Same

[61] The amended Statement of Claim also includes claims based on oppression remedy, civil conspiracy and unjust enrichment (or quantum meruit). Each of these potential causes of action suffers from deficiencies. For example, the oppression remedy claim is premised on Calbot being creditor of one or more of the defendant corporations, which would seem to start from a conclusion that the evidence does not support at this point.

[62] The way in which Calbot’s counsel pitched Calbot’s case on the motions was most akin to an unjust enrichment claim. That is, in broad strokes, he characterized Calbot and Ms. Headon as having done considerable work for the benefit of the various defendants, and having in fact set in motion or orchestrated the chain of events ultimately leading to the deal between NSR Toronto and the Sunny Group. Therefore, he argues, Calbot deserves compensation for its efforts, in an amount of $5 million as referenced in the evidence at various points, or in another amount, and that otherwise the defendants are unjustly enriched at Calbot’s expense.

[63] Apart from the problems already described with the aspects of the claim based on the alleged agreement (whether the MOU or a verbal agreement), and the plaintiff’s specific reliance on the concerning and untestable evidence of Mr. Bell, the removal of NSR Toronto from the action is itself a major impediment to Calbot’s potential success.

[64] That is, there is no doubt that the vendor for the Project, both during negotiations with various potential purchasers and then in the Sunny SPA transaction with the Sunny Group, was NSR Toronto.

[65] As discussed below, this central role of NSR Toronto, and its removal from the litigation, poses problems for the plaintiff in both the Jurisdiction Motion and the Preservation Motion. As noted above, Justice Sharma flagged this issue in his October 22, 2021 endorsement, at least tacitly (and arguably overtly) encouraging Calbot to apply the brakes pending the Court of Appeal’s decision in the appeal from Justice Ferguson’s Order releasing NSR Toronto from the action. Accordingly, Calbot must be taken to have made a specific and deliberate choice to proceed without awaiting the appeal, and must live with the consequences.

[66] It may be that, at a trial in this matter, Calbot will persuade the trial judge that equity requires it to be compensated for its efforts. For the reasons set out above, I currently have some doubts about that proposition, but I do not have the benefit of any additional evidence that may emerge at trial, nor any benefit arising from the ability to assess the witnesses in person (or virtually, as the case may be).

[67] However, in the meantime, for purposes of the motions before me, Calbot must address the specific technical and evidentiary elements of the issues arising in those motions, and cannot rest merely on an overarching suggestion that the plaintiff is in the right, that the plaintiff is hard done by, and that equity should ultimately be invoked to make the plaintiff whole.

The Jurisdiction Motion

[68] Turning to the details of the Jurisdiction Motion, the test for jurisdiction simpliciter provides that an Ontario court will have jurisdiction over a foreign defendant only where there is a “real or substantial connection” to Ontario, informed by certain presumptive factors including whether the defendant is domiciled in Ontario, whether the defendant carries on business in Ontario and whether a contract connected with the dispute was made in Ontario.

[69] The plaintiff bears the onus of demonstrating a good arguable case that there is a real and substantial connection between the foreign defendants and Ontario. Speculation as to a good arguable case does not meet this onus (Shah v. LG Chem Ltd., 2015 ONSC 2628, 125 O.R. (3d) 773, at para. 11). Where a plaintiff fails to establish a presumptive connecting factor, the Court will not have jurisdiction over the claim (Club Resorts Ltd. v. Van Breda, 2012 SCC 17, [2012] 1 S.C.R. 572, at para. 81).

[70] In this case, it is clear that the Foreign NSR Defendants are incorporated and domiciled in jurisdictions other than Canada.

[71] Accordingly, in order to establish jurisdiction simpliciter, the plaintiffs must show that the Foreign NSR Defendants are either a party to a contract made in Ontario or carry on business in Ontario.

Relevant Evidence and Analysis of the Jurisdiction Motion

[72] As set out above, Calbot effectively concedes that the MOU is not genuine. As such, Calbot must demonstrate, relative to a potential contractual connection to Ontario, that there is a verbal contract between the plaintiffs and the Foreign NSR Defendants. Calbot is considerably hampered by its pleading on this issue. The alleged verbal agreement is not pled, nor are the material facts that would have to be pled and shown in the evidence in order to establish such a deal. Moreover, the same evidence that undermines the alleged MOU also eviscerates the claimed verbal contract; most of the factors listed above as reasons why the alleged MOU is untenable apply equally to a purported verbal agreement.

[73] With respect to the assertion that the Foreign NSR Defendants carry on business in Ontario, there is uncontroverted and unchallenged evidence in the record from Philip Ng, the Company Secretary of New Silkroad, that none of the Foreign NSR Defendants hold assets or carry on business in Ontario. Mr. Ng was not cross-examined.

[74] Calbot’s position, which it offers in response to both the “contract in Ontario” and “carrying on business in Ontario” issues, is that the Foreign NSR Defendants operate through their subsidiary NSR Toronto, such that both tests are met by virtue of this ownership and alleged control.

[75] In this regard, the Foreign NSR Defendants point to this Court’s recent decision in Glycobiosciences v. Fougera Pharmaceuticals Inc., 2020 ONSC 2900. In that case, the Court noted, at paras. 81-82:

“It is irrelevant that [the Defendant’s] affiliate, GSK Inc., or its parent company GSK PLC, carry on business in Ontario. In Leon v. Volkswagen AG, Belobaba J., relying on Van Breda, found that a wholly-owned subsidiary of a corporation that operates in Ontario does not mean that its parent company carries on business in Ontario… In my view, the same analysis applies with respect to companies that are affiliated but operate in different countries.

I also concur with the reasons of Doi J. that it is improper to lump together related corporate defendants and collectively proceed against them based on bald allegations of enterprise liability. In this case, [the Plaintiff] is suggesting that the court ignore that [the Defendant]... is a separate legal entity. Where GSK Inc. or GSK PLC carry on business does not determine whether [the Defendant] also operates in that jurisdiction.”

[76] The Court of Appeal for Ontario has confirmed that in order for the activities of a subsidiary to be considered the acts of the parent corporation, a plaintiff must meet the test for piercing the corporate veil. This means the plaintiff must show that there is complete control of the subsidiary, such that the subsidiary is the “mere puppet” of the parent, and that the subsidiary was incorporated for an improper purpose or used by the parent as a shell for improper activity (10948420 Canada Inc. v. CY Best Group Inc., 2020 ONSC 6504, at para. 36, citing Yaiguaje v. Chevron Corporation, 2018 ONCA 472, 141 O.R. (3d) 1; O’Reilly v. ClearMRI Solutions Ltd., 2021 ONCA 385, 460 D.L.R. (4th) 487, at para. 46).

[77] Calbot has neither pleaded nor demonstrated that NSR Toronto is a mere puppet for the Foreign NSR Defendants or that it was incorporated for an improper purpose.

[78] Calbot’s position on these issues is that, since the funding for NSR Toronto’s acquisition of its 51% interest in the Project at first instance was provided by way of a loan from New Silkroad, and since New Silkroad therefore has a receivable from NSR Toronto, that means New Silkroad has assets in Ontario. Calbot goes further to allege that since this acquisition was funded by this loan, NSR Toronto holds its interest in the Project in trust for New Silkroad.

[79] In my view, absent specific evidence to support them, these conclusory observations are far from self-evident.

[80] Calbot’s position assumes that NSR Toronto has no independent corporate existence or function, that the loan from New Silkroad is not and cannot be a commercial loan, and that the mere fact of the parent-subsidiary relationship means that this (or presumably any such) transaction involving these entities must be regarded as a sham. In my view, this position, purporting to obviate the need for evidence and analysis, and purporting to characterize NSR Toronto as a puppet simply because it is a subsidiary that received a loan from its parent to fund an investment, lacks the substance that this Court would require to reach for the significant remedy of piercing the corporate veil, particularly when Mr. Ng’s unchallenged evidence attests to the independent identities of the corporate entities in question.

[81] Calbot relies on the Court of Appeal for Ontario’s decision in Stubbs v. ATS Applied Tech Systems Inc., 2010 ONCA 879, 272 O.A.C. 386 for the proposition that if a wholly-owned subsidiary is operating in Ontario, this establishes that a foreign parent carries on business in Ontario.

[82] This argument ignores the details of Stubbs, in which the controlling mind of the foreign parent was directly involved in negotiating the employment contract at issue. The Court found that this direct involvement of the controlling mind of the foreign parent demonstrated that the foreign parent was carrying on business in Ontario. In the case before me, there is no evidence that the Foreign NSR Defendants had any communication with the plaintiffs at all, nor any suggestion that Mr. Wang or Mr. Huang had any control of the Foreign NSR Defendants nor any authority to bind them. The fact that Mr. Huang was appointed President of CIM and managed CIM’s operations does not, as Calbot argues, invest him with binding authority on behalf of the Foreign NSR Defendants.

[83] Calbot’s other alleged grounds for establishing jurisdiction similarly fall short of the mark.

[84] With respect to the assertion that the dispute relates to real property in Ontario, Calbot’s claim is clearly conceived as a breach of contract claim, either on the basis of the alleged MOU or, more recently, on the basis of the alleged verbal agreement. Calbot does not assert an interest in the Project lands, and makes no claim in respect of real property; there is no basis for it to do either.

[85] Regarding Calbot’s claim for a connection based on torts committed in Ontario, again Calbot’s pleading is wanting. It claims, in its factum on this motion, that the torts of conspiracy and fraudulent misrepresentation were committed in Ontario. However, in its statement of claim, it pleads conspiracy only as against the Sunny Defendants and does not plead fraudulent misrepresentation at all. There is no persuasive evidence in the record before me of any tort committed by any defendant.

[86] Similarly, Calbot’s argument that the primary place of dealings of a particular enterprise and the place where damages occurred are relevant and overriding considerations with respect to jurisdiction must also be rejected. Calbot relies on Brisbin v. Lunev, 2011 ONCA 15 and Paulsson v. Cooper, 2011 ONCA 150, 105 O.R. (3d) 28; however, in both cases, the language to which it points was in the context of alleged torts committed by the defendants. Moreover, in Brisbin both the plaintiff and the individual defendants who controlled the corporate defendants were physically present in Ontario, and Paulsson was a defamation case, in which the jurisdiction where the allegedly defamatory information was received was important to the Court’s analysis. In the absence of torts pleaded against the Foreign NSR Defendants (let alone any evidence to support such claims), or such additional factors as were evident in Brisbin and Paulsson, these authorities do not assist Calbot.

Conclusion on Jurisdiction

[87] I conclude that Calbot has failed to demonstrate that the Foreign NSR Defendants are sufficiently connected to Ontario in this action. The plaintiffs’ claim as against the Foreign NSR Defendants and Mr. Huang is hereby stayed for lack of jurisdiction simpliciter.

Evidence and Analysis on Preservation Motion

[88] Many of the same evidentiary shortcomings discussed above in the context of the jurisdiction motion are also problematic for Calbot’s Preservation Motion.

[89] In its Preservation Motion, Calbot seeks an Order requiring payment of a specific fund into Court pending the trial or other disposition of this action. It relies on Rule 45.02 or alternatively seeks Mareva relief. As a further alternative, it seeks a certificate of pending litigation (“CPL”) against the Project lands.

(A) Rule 45.02

[90] Having stayed the action as against the Foreign NSR Defendants and Mr. Huang, the relief sought in the Preservation Motion is not available against them. In any event, there is no cogent evidence in the record to suggest that they have possession of the funds in question. In fact there is uncontroverted evidence that they do not.

[91] Relative to the remaining defendants — essentially the Sunny Group (although my observations would largely apply to all defendants against whom the relief in the Preservation Motion is sought) — it is important to note at the outset that Calbot’s Amended Statement of Claim does not stake a claim to a specific fund. Rather, it claims damages.

[92] Moreover, the alleged “fund” at issue in Calbot’s Preservation Motion is notionally within the sale proceeds from the Sunny SPA. The only evidence before me about those sale proceeds is from the examination of Mr. Wang (who, having been released from the action by Justice Ferguson, was examined as a non-party). His evidence was that the proceeds from the Sunny SPA transaction were paid to and held by NSR Toronto (consistent with NSR Toronto’s role as the vendor in that transaction).

[93] Case law confirms that orders pursuant to Rule 45.02 are an extreme remedy, to be used sparingly and only in specific circumstances. As Justice Cavanaugh wrote in Brauti Thorning Zibarras LLP v. John Di Paola, 2016 ONSC 7708, at para. 12:

“It has been held that Rule 45.02, which allows a court to order that a ‘specific fund’ be paid into court pending trial, is an ‘extreme’ remedy that must be ‘exercised with caution’. The court has adopted a three-part test in deciding a Rule 45.02 request: (i) does the plaintiff claim a right to a specific fund? (ii) is there a serious issue to be tried regarding the plaintiff’s claim to that fund? and (iii) does the balance of convenience favour granting the relief sought by the plaintiff? See 3Genius Corp. v. Locationary Inc., 2016 ONSC 4092, at paras. 1-2.”

[94] The leading case from the Court of Appeal for Ontario, Sadie Moranis Realty Corporation v. 1667038 Ontario Inc., 2012 ONCA 475, 111 O.R. (3d) 401, at para. 20, provides that a plaintiff must show that it “has a serious prospect of ultimate success, and that there is something compelling on the plaintiff’s side of the scales”.

[95] As noted, the plaintiff’s claim here is in essence a breach of contract claim, seeking damages flowing from the alleged breach. The case began with a demand letter and a statement of claim relying almost entirely on the alleged MOU. Given the serious problems with the MOU and the likelihood that it contained a forged signature, Calbot has effectively conceded that it cannot rely on the MOU and instead now maintains that there was an oral agreement (although the Amended Statement of Claim does not provide a basis for this position). Calbot’s only witness, Ms. Headon, has no first-hand information about the alleged verbal agreement, but instead relies on hearsay evidence from Mr. Bell, who has disappeared, and whose evidence (about which there are reasons for concern) cannot be tested.

[96] In the circumstances, and having regard to the sparing and stringent operation of Rule 45.02, I do not find that Calbot meets any of the three requirements for a Preservation Motion. Its purported earmarking of a “specific fund” is not found in its claim nor in the evidence. The comparison to Sadie Moranis is apt here. Calbot’s claim for a consulting fee is most akin to a commission claim like that in issue in the Sadie Moranis case. At most, Calbot, like the agent in Sadie Moranis, has a contractual claim for damages as opposed to a clear interest in a specific fund (see also Affirmed Mortgage Group Ltd. v. Bridlewood Developments Ltd., [1994] B.C.J. No. 2765 (S.C.); White v. White (1981), 33 A.R. 64 (Q.B.) (Master)).

[97] Given the numerous shortcomings in the plaintiff’s claim, discussed above and summarized in paragraph 95, I am also hard-pressed to find, at this stage and on the record before me (which I acknowledge may be less fulsome than the trial record), that Calbot has demonstrated a “serious prospect of ultimate success” or other compelling factors on its side of the case.

[98] On the balance of convenience front, in my view the scope and consequences of granting the Preservation Order would be patently excessive. The Order would freeze assets (cash and/or property) of entities that are no longer parties to the action, that were not parties to the alleged contract and against which, in the case of the Sunny Group, the plaintiffs have not even asserted a cause of action. Indeed there is in evidence a signed “Acknowledgement and Undertaking” dated July 17, 2019, on which Calbot expressly relies in paragraph 43 of its Amended Statement of Claim, which states that “[the Sunny Group] will have no responsibility to pay any fees to any of the companies named in this acknowledgement and will be indemnified of any actions or understandings in this matter”. The “companies named” include both Calbot and Synergy.

[99] The only conceivable basis on which Calbot could presume to attach the funds in question is the premise that the Sunny Group owes money to NSR Toronto in connection with the Sunny SPA, which Calbot can intercept. Given Justice Ferguson’s Order dismissing the action against NSR Toronto (and Mr. Wang), and given Justice Sharma’s specific confirmation of the implications of that Order for Calbot’s Preservation Motion, Calbot seems to be attempting to skirt the court-ordered release of NSR Toronto from the action. In my view it is not entitled to do so, and had full and fair warning from Justice Sharma in this regard.

(B) CPL

[100] The claim for a CPL suffers some of the same shortcomings as the claim under Rule 45.02.

[101] As set out by Justice Dunphy in Rimon v. CBC Dragon Inc., 2021 ONSC 4170, at para. 2, the test boils down to three parts:

“The test for issuing a CPL requires the court to consider three questions: (i) whether the underlying claim is a claim for an interest in land for which evidence sufficient to establish a triable issue has been led; (ii) whether the moving party will suffer irreparable harm if the CPL is not issued or whether damages are an adequate remedy; and (iii) whether the balance of convenience favours issuing a CPL considering the interests of all affected parties.”

See also the decision of Master Glustein (as he then was) in Perruzza v. Spatone, 2010 ONSC 841.

[102] Calbot has failed to provide evidence establishing a triable issue as to its claim for an interest in the Project lands. While Calbot has pleaded a right to a constructive trust in those lands, it has not pled or furnished evidence of facts to support this remedy. The mere invocation of a constructive trust or a right to a CPL in a statement of claim is insufficient to ground a conclusion that a triable issue exists relative to an alleged interest in land. As noted in Sadie Moranis, Affirmed Mortgage, and White, commissions or fees payable to an agent or broker on the completion of a real estate transaction do not generate a secured interest in the real estate in question. What they generate is a cause of action for a contractual debt.

[103] Moreover, the Sunny Group’s interest in the Project lands is a shareholding interest in the company that actually owns the subject property. In John v. Millar, 2011 ONSC 3861 Justice Morawetz (as he then was) denied a request for a CPL on this very basis.

[104] There is also no reason to conclude that Calbot cannot adequately be compensated by an award of damages, nor that any alleged harm is irreparable. Calbot’s claim here is specifically quantified in monetary terms (a claim for $5 million). There is no evidence before me to suggest that the remaining Sunny Group defendants are impecunious or unable to pay an award of damages.

[105] Finally, Calbot’s claim to obtain a CPL against the Project lands would disrupt construction financing and pre-construction sales with respect to the Sunny Group’s beneficial interest in the Project, for which it paid $83,000,000, with a view to protecting a claim worth $5 million. On the balance of convenience, such a measure seems disproportionate.

(C) Mareva Relief

[106] With respect to the further alternative relief sought, in the nature of a Mareva injunction, the same considerations set out above relative to the Rule 45.02 relief and the CPL also adhere and create serious impediments to the even more stringent requirements to establish a basis for Mareva relief.

[107] In Sibley & Associates LP v. Ross, 2011 ONSC 2951, 106 O.R. (3d) 494, at para. 11, Justice Strathy (as he then was) listed the elements of the test for an Order granting Mareva relief as follows:

“a. The plaintiff must make full and frank disclosure of all material matters within his or her knowledge;

b. The plaintiff must give particulars of the claim against the defendant, stating the grounds of the claim and the amount thereof, and the points that could be fairly made against it by the defendant;

c. The plaintiff must give grounds for believing that the responding party has assets in the jurisdiction;

d. The moving party must give grounds for believing that there is a real risk of the assets being removed out of the jurisdiction, or disposed of within the jurisdiction or otherwise dealt with so that the plaintiff will be unable to satisfy a judgment awarded to him or her; and,

e. The plaintiff must give an undertaking against damages.”

[108] Justice Strathy also noted the clear requirement from caselaw that a party moving for a Mareva injunction must generally show a strong prima facie case. On this latter proposition, Justice Cromwell, speaking for a unanimous Supreme Court of Canada in R. v. Canadian Broadcasting Corp., 2018 SCC 5, [2018] 1 S.C.R. 196, at para. 17, said of the requirement to show a strong prima facie case:

“[U]pon a preliminary review of the case, the application judge must be satisfied that there is a strong likelihood on the law and the evidence presented that, at trial, the applicant will be ultimately successful in proving the allegations set out in the originating notice.”

[109] There is also no cogent evidence before me of a risk that the defendants will dissipate assets or remove them from the jurisdiction. Indeed the evidence before me (from Mr. Wang’s non-party examination) is that NSR Toronto has $10,000,000 in its bank account. With respect to the Sunny Group there is no evidence nor even any attempt to show that it is dissipating or removing assets.

[110] Calbot has also failed to provide an undertaking as to damages. While its counsel stated during submissions that there is a willingness and ability to do so, this in my view is too late to satisfy the requirement.

[111] Whether or not I am correct in that opinion, the array of significant problems besetting Calbot’s claim for Mareva relief means that, even if a late-breaking expression of a willingness to give an undertaking meets the requirement, the other problems I have described mean that the relief will be denied in any event.

(D) Unilateral Contract

[112] Finally, and for the first time (i.e. not contained in the Amended Statement of Claim), Calbot argues in its factum that the alleged verbal agreement was a unilateral contract.

[113] In Sail Labrador Ltd. v. Challenge One (The), [1999] 1 S.C.R. 265, at para. 33, the Supreme Court of Canada pronounced that a unilateral contract occurs when “[t]here is no counter‑promise to perform [an] act or forbearance. In this way, a unilateral contract is a contract in which only one party undertakes a promise”.

[114] Calbot maintains that it meets this definition inasmuch as “there was an agreement to pay consulting fees and… this agreement did not depend on who the purchaser was”. Specifically it alleges that this occurred in May of 2019, when Mr. Wang “on behalf of the vendors of the [Project] promised to pay a success fee of $5 million to the plaintiffs if they presented a letter of intent that resulted in a sale of the project for the amount specified by Dapeng Wang”.

[115] It is not clear to me that the circumstances propounded by Calbot would in fact give rise to a unilateral contract. The alleged agreement described by Calbot would seem to require mutual consideration: the plaintiffs finding a buyer willing to purchase the Project on NSR Toronto’s terms, and NSR Toronto agreeing to pay a $5 million consulting fee to the plaintiffs for doing so.

[116] Moreover, Calbot appears to allege that the verbal agreement on which it relies effectively matched the terms of the MOU. The MOU, had it been genuine, clearly contemplated mutual consideration.

Conclusion on Preservation Motion

[117] For all of these reasons, I dismiss Calbot’s Preservation Motion.

Costs

[118] The Foreign NSR Defendants and the Sunny Group are each entitled to their costs.

[119] All parties have submitted bills of costs as required. Subject to being advised of any offers to settle, I see no reason not to award costs to each of the sets of defendants on a partial indemnity scale.

[120] The costs claimed by the Sunny Group are reasonably comparable to the costs outlined in Calbot’s bill of costs, whereas the costs claimed by the Foreign NSR Defendants are considerably higher. While the Foreign NSR Defendants were dealing with both the Jurisdiction Motion and the Preservation Motion, compared to the Sunny Group which only participated in the Preservation Motion, the Foreign NSR Defendants’ claimed costs on a partial indemnity scale are almost triple those of Calbot, which of course also participated in both motions.

[121] A significant part of the difference relates to the fact that the vast majority of the work on Calbot’s side was done by the senior counsel himself, whereas, for the Foreign NSR Defendants, the work was undertaken by and large by the two counsel, senior and mid-range, who appeared on the motion.

[122] I am not critical of the Foreign NSR Defendants for deploying two counsel. The matter was clearly a significant one for these defendants, and I do not find that the nature and extent of the work done was unreasonable.

[123] However, given the stark comparison to Calbot’s bill of costs, and the fact that the bill for the Foreign NSR Defendants is also roughly quadruple that of the Sunny Group (and again, noting that the Foreign NSR Defendants dealt with both motions whereas the Sunny Group only dealt with one), I exercise my discretion to reduce the costs award to the NSR Defendants to an amount closer to the amounts reflected in the bills of costs of the other parties.

[124] In sum, and subject to being advised of any offers to settle, I find that Calbot is obliged to pay the partial indemnity costs of the Sunny Group in the all-inclusive amount of $30,000, and to pay the partial indemnity costs of the Foreign NSR Defendants in the all-inclusive amount of $75,000. These costs are, in each case, payable within 30 days.

W.D. Black J. Date: April 6, 2022