COURT FILE NO.: CV-22-00687209-0000
DATE: 20230526
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
LI YANG (CANADA) HOLDINGS CO. LTD. and DANIEL EXECUTIVE (CANADA) HOLDINGS CORP.
Plaintiffs
– and –
LYSR MANAGEMENT LTD., 2708042 ONTARIO INC., RINA SHINCHI, YANGGUANG LIN, ZI MU LI, RENXIANGYU ZHANG, LOCATION WAY INC., WEI ZHENG, JOHN DOE, JANE DOE and OTHER PERSONS UNKNOWN WHO HAVE CONSPIRED WITH THE NAMED DEFENDANTS
Defendants
Ford Wong, for the Plaintiffs
Nadia Condotta, for the Defendants, Wei Zheng and Location Way Inc.
William Murray, for the Defendant, Lin
Samuel Eng, for the Defendants, LYSR Management Ltd., 2708042 Ontario Inc., 2786584 Ontario Inc., Rina Shinchi and Yangguang Lin
HEARD: May 26, 2023
papageorgiou j.
DECISION
[1] By reasons dated May 1, 2023, I granted a Mareva injunction as against the defendants Yuangguang Lin (“Lin”), Rina Shinchi (“Shinchi”), 2708042 Ontario Inc. (“270Ont.”) and 2786584 Ontario Inc. (“278Ont.”), LYSR Management Ltd. (“LYSR”), Wei Zheng (“Zheng”) and Location Way Inc. (“Location Way”).
[2] The Mareva injunction required these defendants to provide affidavits setting out the particulars of their assets with supporting documentation within four days. I also ordered that the defendants noted therein submit to examinations under oath in respect of these affidavits within four days of delivery of the affidavits or such time on two days-notice as required by the plaintiffs.
[3] I also directed that the parties may return before me to address limits on the Mareva injunction, as well as living expenses which the defendants required and indicated that I would make myself available on an urgent basis for this.
[4] The parties arranged to attend before me today which was the date all counsel agreed upon.
[5] The following issues were addressed:
• The plaintiffs’ alleged deficiencies with the affidavits the defendants provided on their assets;
• Living expenses and the plaintiffs’ position that the parties’ affidavit materials were deficient;
• Potential limits on the Mareva injunction; and
• A request by the plaintiffs for an expansion of the Mareva injunction based upon the affidavit materials which were provided.
Deficiencies in the materials as to assets
The Zheng defendants
[6] The Zheng defendants have retained new counsel who submitted that this was a very complicated case, they were just getting up to speed and have put together the information that they have thus far on these issues.
[7] The defendant Zheng provided sworn affidavits as to his and Location Way’s assets dated May 15, 2023 and May 25, 2023.
[8] I am satisfied that the Zheng and Location Way’s affidavit materials do not properly particularize their assets. For example, while Zheng provides sworn evidence as to the value of his home and his mortgage, he has not provided any back-up such as a copy of the mortgage. He does not provide back-up as to the car he owns, the 2009 Spyker. He also does not provide any statement that he does not own any other assets, in Canada or worldwide.
[9] While there is information provided as to Location Way’s assets and liabilities, the only back up is a balance sheet for Location Way dated April 30, 2023. He does not provide any bank balances.
[10] One of the issues raised by the plaintiffs today as to both Zheng and Location Way’s affidavit materials is that they have advised that they were required to close their TD Bank accounts in February 2023 because of other litigation they have going on in Quebec which made them a risky client. As such they have opened new accounts which he then disclosed but they did not provide any proof from TD Bank that this was the case. The plaintiffs want proof of bank balances in these closed accounts. Counsel for the Zheng defendants argue that they were free to move assets around as they wished before the Mareva injunction was ordered and that they are not required by the Order to provide this information as to bank balances from closed TD accounts.
[11] In my view, given that they did not provide any proof from TD Bank as to the requirement that these accounts be closed, they should provide such documentary proof from TD Bank as well as bank statements for these closed accounts as of January 1, 2023.
[12] I am directing that Zheng and Location Way provide a further and better affidavit setting out complete information as to their assets. This should include a statement confirming his worldwide assets, the information ordered in the Mareva injunction in paragraph 5, and supporting documents as to other assets set out in his affidavits as set out in paragraph 5 of the Order. For example, while the estimated value of the home is set out as well as the mortgage, there are no back up documents which shows the information required in paragraph 5 which would include backup documentation on the amount of the outstanding mortgage for example, the mortgage granted, who is the mortgagor and the account from which the mortgage is paid. As well, as stated above, this should include the bank statements for these closed TD Bank accounts beginning January 1, 2023 when the Mareva injunction was first brought until they were closed.
The Lin defendants
[13] Shinchi provided an affidavit as to her assets dated May 5, 2023. Lin provided an affidavit as to his assets dated May 13, 2023. Lin provided an affidavit as to 270Ont’s assets dated May 13, 2023. Lin also provided an affidavit as to LYSR’s assets dated May 23, 2023. Lin’s affidavit of May 13, 2023 indicates that he does not have access to 278Ont’s asset information.
[14] There is a note in Lin’s affidavit that there are liens registered on certain cars which are subject to the financing which they obtained but they did not provide the financing that is outstanding to be able to understand what the value of these cars is. Plaintiff counsel submits that the affidavit material from the Lin defendants is sufficient apart from this and as such I am ordering that this information be provided within seven days to the extent they have any such documents. If they do not have this information, then they shall provide an affidavit which sets out their best information on this issue.
[15] The further affidavit from the defendants shall be submitted within seven days and all defendants shall attend for cross examination on their affidavits at a date and time to be mutually acceptable.
Living expenses and business operating expenses
The Lin defendants
[16] The defendants Lin and Shinchi did not provide any affidavit material on living expenses. They also did not provide any affidavit material on the operating expenses of the defendants 270Ont, 278Ont, and LYSR.
[17] As noted above, the affidavit materials they provided on their worldwide assets showed that they have little or no assets apart from a condominium which is under power of sale. These affidavits also disclose no source of income.
[18] Their counsel submitted that Lin’s father had arrived from China and had made their last months’ rent payment. He said that they have no income and that they have two children, one of which was born in January 2023. He also says that as they are not Canadian residents, they cannot be employed in Canada. They can only run a business.
[19] He says that their business involved the purchase and sale of vehicles and that the effect of the Mareva injunction is to stop them from operating their business. However, no information was provided on the operating expenses required by these businesses.
[20] Counsel for the plaintiffs submits that in principle he has no difficulty with an Order for living expenses or business operating expenses but argues that it is premature to make any such given the materials filed.
[21] Given that their bank accounts currently contain no funds, the materials filed, as well as the submission that they have another source of income which is Lin’s father, I understand the plaintiffs’ argument that it is premature to make any order. As well, given that they submit that they have no income, and counsel’s submission that they cannot legally work because of their status, it would make no difference to make an order permitting living expenses or operating expenses.
[22] The Lin defendants argue that they would like to unfreeze one of the bank accounts so that they can borrow money to use to continue to operate their business with a monthly accounting provided each month to the plaintiffs as to their operations. Ms. Shinchi attended and requested that she be allowed to speak. She explained the current situation is very difficult because she cannot support her children.
[23] Plaintiffs’ counsel was sympathetic and acknowledged that if they had a monthly accounting from the business, then there may be no harm to them since there is nothing in these accounts at present in any event.
[24] For the next month, given the financial circumstances I am making an interim interim order that the National Bank account in Ms. Shinchi’s name is unfrozen and that for the next month, they may operate this business through this account with a full accounting to the plaintiffs at the end of the month, as well as full particulars provided anytime they enter into an agreement to obtain financing or purchase or sell a vehicle. As well, they may use up to $5,000 of any funds generated through these transactions for living expenses.
The Zheng defendants
[25] The defendant Zheng also provided a sworn affidavit regarding his and Location Way’s required expenses dated May 10, 2023.
[26] Zheng says that these are his living expenses:
• Mortgage expenses in the amount of $8,000 per month—there is documentary support in the record for this.
• Utility bills and maintenance in the amount of $5,000 per month—there is documentary support for approximately $3,000.
• Household car payments in the amount of $3,000 per month—there is no support for this and I note that in its materials, Zheng and Location Way have listed various cars that they currently have in stock as part of the business.
• Groceries in the amount of $8,000 per month—there is no documentary support for this although I acknowledge that they must purchase groceries.
• Childcare for a seven year old in the amount of $5,000 per month—there is documentary support in the amount of $880.
• Healthcare in the amount of $1,000 per month—there is no documentary support for this.
[27] The plaintiffs again take the position that it is premature to order these given that cross examinations have not yet taken place and given the failure of Zheng to provide any information as to other sources of income. For example, Zheng’s affidavit indicates that he has a seven year old and counsel for the plaintiffs argued that there is no information as to whether Zheng’s spouse (if he has one) could pay some of these expenses.
[28] I agree that the affidavit is deficient. There should be support for all of the expenses claimed if they are to be taken into account in a Court order. As well, Zheng should provide information on whether he has a partner, and as such, evidence as to his spouse’s contribution to living expenses.
[29] Nevertheless, given the evidence provided to date, I am satisfied that I may make an interim interim order for living expenses for one month only, in the amount of $15,000 together with an Order that Zheng provide a better affidavit on these issues. As set out below, this matter will return before me in one month, and if there are adjustments that need to made, either up or down, the parties may make submissions at that time.
[30] With respect to Location Way, Zheng claims that it spends the following:
• Rent in the amount of $1,000 per month—there is no documentary support for this.
• Utilities in the amount of $5,000 per month—there is no documentary support for this.
• Expenses for inventory in the amount of $150,000 per month—there is documentary support for approximately $111,000.
• Office supplies in the amount of $1,000 per month—there is no documentary support for this.
• Payroll in the amount of $20,000 per month—there is documentary support for approximately $14,500.
[31] The plaintiffs again take the position that it is premature to order living or operating expenses although they do acknowledge that they do not want to “kill the golden goose” with the Mareva injunction.
[32] I agree that the materials are deficient. However, based upon the materials, I am satisfied that I may make an Order for one month only that Location Way be permitted business operating expenses in the amount of $130,000 per month with a return date in one month.
Scope of Mareva Injunction
[33] As I set out in my reasons of May 1, 2023, the scope of a Mareva injunction should not be unlimited. At the time of the argument, there were no submissions by anyone on limiting the Mareva and I requested that the parties return to address this.
[34] No materials were filed on this issue.
[35] The plaintiffs’ position is that it is premature to address limitations in the Mareva injunction because the affidavit material in respect of assets is deficient and there have been no cross examinations.
[36] At this time, I agree that it is premature for these reasons.
[37] In order to limit the scope of the Mareva injunction there must be complete information on the assets which these parties have. I had suggested in my reasons that my assessment that the scope as against the Zheng defendants could be limited to $1,000,000. If the information as to Zheng’s home being worth $3,700,000 with a mortgage of $2,000,000 is validated by the further and better affidavit and cross examination, then subject to plaintiffs’ submissions, it may be that the Mareva can be limited to this asset but that will have to be determined at another time given the deficiencies in the Zheng defendants’ materials at this time.
[38] When this matter returns, I am directing that the parties be prepared to argue with case authorities as to how the Mareva injunction should be limited.
Expanded Mareva Injunction
[39] Given the defendants’ disclosure of additional bank accounts, I agree that the Mareva Injunction should be extended to these and an Order shall go in that regard with the carve outs for living and operating expenses.
Further Return
[40] This motion shall return before me on July 6, 2023, to address adjustments to living expenses and the scope of the Mareva injunction, as well as any other issues which arise after the additional affidavit material is provided and cross examinations take place. It may be that this date is not available from the Court office and if so, then the Court office may advise the parties and schedule it for another date as soon as possible, also subject to my availability.
[41] The plaintiffs may submit an Order for my execution. The defendants shall approve this as soon as possible and if it is not approved for any reason, the parties may request an urgent case conference.
[42] As well, as I advised the parties, if any other urgent issues arise because the form of the Order in terms of the carve out for living and operating expenses is not sufficient for the defendants’ bank purposes, the parties may either send me a revised Order which they have agreed to for my urgent execution and/or arrange a case conference with me through my assistant.
[43] Costs of this attendance are reserved to the next attendance.
Released: May 26, 2023 Justice Papageorgiou
Schedule A
2020 Bentley
Date of Retail Sale Agreement
Date of payments
Type of Payment
Amount
Sept 1, 2021 for $443,095
July 22, 2021
TD Debit Memo Transfer LYSR to Location Way supported by Deposit Account Financial Inquiry
$91,350
July 20, 2021
TD Debit Memo Transfer LYSR to Location Way supported by a Deposit Account History
$15,980.42
July 20, 2021
There are other amounts also shown in the amount of $64,000 and $20,000 but the recipient is “PEIH” who is unknown so I have not included these
Aug 9, 2021
TD Debit Memo Transfer LYSR to WEIZ (I infer this is Wei Zheng based upon Lin’s affidavit attaching these as payment to Zheng or Location Way for the Vehicles)
$49,000
Aug 17, 2021
Cheque to Zheng supported by a Deposit Account History
$17,400
Aug 23, 2021
Cheque to Zheng supported by a Deposit Account History
$5,000
Sept 1, 2021
Cheque to Zheng supported by a Deposit Account History
$24,000
Sept 24, 2021
TD Debit Memo Transfer LYSR to Location Way supported by a Deposit Account History
$5,250
$6,000
Sept 1, 2021
Check to Prime Leasing supported by a CIBC transaction record
$140,497.42
Total
If the amounts to PEIH are included the total is $438,477
$354,477.84
2018 Bentley
Nov 2, 2021 for $257,250
Nov 5, 2021
TD Debit Memo Transfer LYSR to WEIZ (Wei Zheng) supported by Deposit Account History
$50,000
Nov 9, 2021
TD Debit Memo Transfer LYSR to WEIZ supported by Deposit Account History
$24,432
Dec 6, 2021
TD Debit Memo Transfer LYSR to Location Way supported by Deposit Account History
$40,000
Dec 3, 2021
TD Debit Memo Transfer LYSR to Location Way supported by Deposit Account History
$50,000
Dec 3, 2021
TD Debit Memo Transfer to Location Way supported by Deposit Account History
$77,919.18
Jan 10, 2022
TD Debit Memo Transfer
illegible
Jan 1, 2022
Check to Zhongshi (not included because no information as to who Zhongshi is)
$30,000
TD Debit Memo Transfer LYSR to Location Way supported by Deposit Account History
$6,000
Total of legible amounts
$248,351.18
2018 Ferrari
Nov 15, 2021 for $491,400
Nov 2, 2021
Debit Memo Transfer LYSR to Location Way
$260,000
2022 McLaren
Nov 11, 2021 for $465,870
Dec 6, 2021
TD Debit Memo Transfer LYSR to Location Way
$40,000
Dec 16, 2021
TD Debit Memo Transfer LYSR to WEIZ
$61,883
March 17, 2022
Check to Location way
$200,000
March 30, 2022
TD Debit Memo transfer Shinchi to WEIZ
$20,000
TD Debit memo transfer LYSR to Zheng
illegible
May 13, 2022
TD Debit memo Transfer LYSR WEIZ
$100,000
Total
$421,883
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
LI YANG (CANADA) HOLDINGS CO. LTD. and DANIEL EXECUTIVE (CANADA) HOLDINGS CORP.
Plaintiffs
– and –
LYSR MANAGEMENT LTD., 2708042 ONTARIO INC., RINA SHINCHI, YANGGUANG LIN, ZI MU LI, RENXIANGYU ZHANG, LOCATION WAY INC., WEI ZHENG, JOHN DOE, JANE DOE and OTHER PERSONS UNKNOWN WHO HAVE CONSPIRED WITH THE NAMED DEFENDANTS
Defendants
REASONS FOR JUDGMENT
Papageorgiou J.
Released: May 26, 2023