Court File and Parties

NEWMARKET COURT FILE NO.: FC-22-1168-00 DATE: 20230824 ONTARIO SUPERIOR COURT OF JUSTICE FAMILY COURT

BETWEEN: Xiaohua Yu Applicant – and – Zhiyuan Xiao Respondent

Counsel: Judith Holzman, for the Applicant Jason Huang, for the Respondent

HEARD: August 16, 2023

Ruling on RETURN OF urgent motion

A. Himel J.:

[1] On August 2, 2023, Bruhn J. heard an urgent motion, in writing, that was brought by the Applicant wife. The relief sought is as follows:

(a) for specified disclosure related to the sale of Trehaven, Bloomington, and Back 9, as set out in the Applicant’s Notice of Motion dated August 1, 2023;

(b) enforcing of Justice Daurio’s Order of July 19, 2022, and this Court’s Order of September 23, 2022;

(c) that any future sales of any properties under those Court Orders include representation by a mutually agreed upon real estate brokerage and agent;

(d) that the funds received from the Trehaven Golf and Country Club (“Trehaven Golf”) sale and Project 2 (the “Back 9”) sale as well as any interest or principal repayments on VTB mortgages be held in trust through the real estate lawyer, Kent Parsons;

(e) that the Respondent husband be prohibited from selling the business, which includes the outside enclosed dome for inside golf run on the Back 9 property and the clubhouse hole;

(f) providing disclosure and tracing regarding any material changes to the husband’s companies since the start of separation date; and

(g) prohibiting the husband from restructuring his companies' shares, liabilities and assets under the Court Orders of July 19, 2022, and September 23, 2022 (collectively the “non-dissipation orders”).

[2] Bruhn J. made the requested order on a temporary without prejudice basis, on the basis of the affidavits sworn by the wife and Alice (the “adult child”).

[3] The matter was adjourned to enable the husband to respond. He relies on an affidavit sworn on August 9, 2023, that also responds to the long motion for spousal support and disclosure. The wife filed a reply affidavit sworn on August 13, 2023.

[4] This is now the fourth motion attendance to address concerns relating to the husband’s dissipation of assets, and concerns that he may be removing assets from Canada and/or from the wife and the Court’s control.

[5] The Canadian corporations are owned by Chinese companies. The structures and holdings of the various corporations are complicated and ever-changing.

[6] At the first urgent ex parte motion on June 19, 2022, Daurio J. considered the relevant caselaw [1] and made non-dissipation orders on a temporary without prejudice basis. She named specific corporate entities in the schedule attached to the order.

[7] The original urgent motion returned before Bruhn J. on September 22, 2022. A consent order was obtained once again preventing the husband from dissipating or disposing of the properties (described as Projects 1 to 7), as set out in the schedule.

[8] The act of consenting to the order directly contradicts the husband’s evidence that he has no access to information and no control over the corporate entities. The husband’s father (the “father”) allegedly owns and controls the family’s weather (the “financial empire”) in Canada and in China. De Ming Chen (the “husband’s brother”), Flora (the “husband’s partner”) and Yo Bo Liu (the “Flora’s brother”) are now the named shareholders and/or directors. The husband works the father and acknowledges that he receives monetary gifts from him (and other relatives) to cover his expenses.

[9] Until early March 2022, the husband was the sole/majority shareholder of various corporations that controlled 6 projects (and, collectively with the wife he held 100% of the shares in Project 1). The corporations also have holdings in China. The shares were subsequently transferred to the husband’s cousin and Flora’s brother, who reside in China. Flora holds 1% of the shares in a corporation(s).

[10] In support of the motion addressed by Bruhn J. on August 2, 2023, the wife submitted evidence that the husband is in breach of the two non-dissipation orders. The consent Order restrains the husband from dealing with the properties by mortgaging or selling them without her consent (a term that is also included in the 2022 orders).

[11] The wife’s uncontradicted evidence is that the Trehaven Golf has been sold without her consent. The wife, who was previously employed at Trehaven Golf, believes that the property was sold for approximately 50% of its value. The wife is concerned that the husband has (and continues to) take steps to sell other properties at below market value, with additional payments being made “under the table.”

[12] The wife states that the person who purchased Trehaven Golf (as evidenced by the signature on the land transfer tax) is the same person who purchased (with the wife’s involvement and consent) an asset commonly referred to as Project 2, the “Back 9.” Therefore, he knew (or ought to have known) about the court order requiring her consent.

[13] As the husband is no longer a shareholder or director of any of the corporate entities, I am concerned that the structural changes are designed to defeat the wife’s claims. I am also concerned that the husband, his father, his cousin, and/or Flora’s brother may be taking steps to re-organize the corporate structures and put the assets beyond the reach of the Court.

[14] Having now had the benefit of hearing from the husband, I agree with the statements made by Bruhn J. in her August 2, 2023 endorsement, as follows:

[9] Based on the evidence provided by the Applicant, this Court is very concerned that the Respondent has engaged in significant financial transactions contrary to the July 19, 2022 and September 23, 2022 Orders and that he has been restructuring corporations in which he and/or the Applicant have an interest, in order to move assets and funds out of the country and out of reach of the Applicant and this Court.

[10] This Court is also very concerned regarding the participation of third parties in these transactions in the face of the freezing Orders, and notes that this may necessitate their involvement in these proceedings and/or expose them to personal liability.

[12] This Court also notes that there appears to be a pattern to the Respondent’s behaviour.

[13] In July 2022, the Applicant brought an urgent motion of a freezing order and in her July 19, 2022 Endorsement Justice Daurio noted her concern that between May and July 2022, the Respondent engaged in a number of significant financial transactions that could have the effect of significantly depleting his assets and shielding them from this litigation. This led to the July 19, 2022 freezing Order which was continued by this Court’s Order of September 23, 2022.

[14] This Court is sufficiently concerned with the Respondent’s conduct that it may consider the appointment of a receiver- manager to operate and manage the Respondent’s business interests until the family law proceedings are resolved.

[15] The wife has now registered the non-dissipation orders on title of the relevant properties. That is an appropriate and reasonable step to take (although it should not have been necessary).

[16] The husband is in breach of the non-dissipation orders. Failing compliance within 14 days, the wife may bring a regular one-hour motion (with 12 pages of evidence, double space, font 12 and 10 pages of exhibits, and in compliance with the Practice Directions and Family Law Rules) to strike out the husband’s pleadings.

[17] The husband is also in breach of the disclosure portion of the Bruhn J. order.

[18] The husband has had counsel (and currently he is represented by his fifth family lawyer) during these proceedings. Mr. Huang has represented the husband since approximately May 2023.

[19] Disclosure respecting the sale of Trehaven Golf, Project 7 (“Bloomington”), and the Back 9 is required to enable the wife to understand the transactions and the financial consequences. This disclosure should have been provided before today as that order was made more than 22 days ago. The information/documentation should be readily available (from the husband and/or the father, the husband’s cousin or Flora’s brother).

[20] I note that the father and the corporate entities have counsel (who attended this motion to observe), and that they were served the Bruhn J. August 2, 2023 endorsement and order.

[21] The relief ordered by Bruhn J. on August 2, 2023, is reasonable and necessary to protect the wife’s claims in this litigation, and to ensure that assets are not dissipated, and funds are not moved out of Ontario.

[22] As the matter has now been heard on its merits with the benefit of a fulsome record and argument, there shall be a temporary order to go in accordance with the wife’s Notice of Motion, and as signed by me.

[23] The wife seeks costs, and she is presumptively entitled to costs as per Sections 24(1), (5) and (12)(a) and (b) of the Family Law Rules. I am required to consider whether the husband has acted reasonably in respect of this motion, and I must consider the following:

24 (5) In deciding whether a party has behaved reasonably or unreasonably, the court shall examine,

(a) the time properly spent on the case, including conversations between the lawyer and the party or witnesses, drafting documents and correspondence, attempts to settle, preparation, hearing, argument, and preparation and signature of the order;

(b) expenses properly paid or payable; and

(c) any other relevant matter.

[24] In arriving at an award of costs, I am mindful that this court must exercise a discretion based on principles of reasonableness and proportionality. [2]

[25] The principles guiding the court’s exercise of its discretion pursuant to the Rules are well-established. The primary objective, of course, is to enable the court to deal with cases in a fair and timely manner. Four fundamental purposes are served: (1) to partially indemnify successful litigants for the cost of litigation; (2) to encourage settlement; (3) to discourage and sanction inappropriate behaviour by litigants; [3] and (4) to ensure that cases are dealt with justly. [4]

[26] This urgent motion and the return of the urgent motion were entirely unnecessary. There were already two orders in place that clearly prohibit the sale of any of the specific assets without the wife’s consent. The husband’s facilitation of the sale breached the order and necessitated the two attendances on this motion. While the husband had over three weeks to comply with the recent Bruhn J. disclosure order, he opted not to do so. Instead, he chose to attend at Court and to present an ineffective and not credible argument that he has no information and no control. The husband’s actions and the positions taken on this motion are unacceptable.

[27] The husband’s position that costs be adjourned to the trial judge fails to comply with the directive that costs be assessed at each step, and that the successful party is presumptively entitled to costs.

[28] In contrast, the wife’s decision to bring the urgent motion is entirely reasonable. The motion was required to protect the further dissipation of the corporate assets and to obtain relevant disclosure.

[29] However, the wife’s requested costs of $12,500 for an urgent motion, with two relatively short attendances (with this attendance forming part of an already scheduled long motion) is excessive. There was some overlap between the affidavit relied upon in the urgent motion and the long motion (which was drafted months ago).

[30] I find that a reasonable and proportionate amount of costs is $7,500 inclusive, and payable within 14 days.

[31] Order to go as signed by me.

The Honourable Justice A. Himel Date: August 24, 2023