Court File and Parties

COURT FILE NO.: CV-24-4015 DATE: 20241119

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

TIANZHU LI Plaintiff – and – SONG BAI, JIE CHEN, FEIYAN GAO and EASYLINE MORTGAGE INC., CYD INVESTMENT INC. and CY CAPITAL INC. Defendants

Counsel: Ran He, Counsel for the Plaintiff Li He, Yan Wang, and Louis Liu, Counsel for the Defendants, Song Bai, Jie Chen, Feiyan Gao and Easyline Mortgage Inc. Yixin Wang, Counsel for the Defendants, CYD Investment Inc. and Cy Capital Inc. (not appearing)

HEARD: November 15, 2024

REASONS FOR DECISION

S.E. FRASER J.:

I. Nature of the Motion

[1] On October 23, 2024, this Court granted a Mareva injunction as against the Defendants which I varied on October 30, 2024, and November 13, 2024.

[2] On November 15, 2024, I heard and dismissed, with reasons to follow, the Defendants’ motion to remove Plaintiff’s counsel as solicitor of record for the Plaintiff. My reasons for dismissing the motion are set out below.

[3] The Defendants, Jie Chen (“Chen”) and Feiyan Gao (“Gao”), move to lift the Mareva injunction as against them. By Endorsement dated November 18, 2024, I ordered that for reasons which were to follow, the Order of Justice de Sa made October 30, 2024, varied by my Orders of October 30, 2024 and November 13, 2024, shall continue in force until further order of this Court. This decision sets out my reasons for denying Chen and Gao’s motion.

[4] The Defendants Bai, Chen, Gao and Easyline seek to discharge the certificate of pending litigation (CPL) which I grant. My reasons for discharging the CPL are set out below.

II. Issues

[5] This issues on this motion are:

a. Should Ran He (“the Plaintiff’s solicitor”) be removed as solicitor of record? b. Should the Mareva injunction be lifted as against Chen and Gao? c. Should the certificate of pending litigation be discharged?

III. Analysis

[6] I will briefly outline the facts in this case before addressing the issues.

A. Facts

[7] This is a brief overview of the relationship between the parties. I will set out additional facts as required as they apply to each issue.

[8] Tianzhu Li (“Li”) and Song Bai (“Bai”) were friends. Li gave money to Bai to invest on her behalf through mortgages.

[9] Easyline Mortgage Inc. (“Easyline”), is a corporation organized under the laws of Ontario with its head office at Bai’s home in Toronto, the property that is the subject of the CPL.

[10] CYD Investment Inc. and CY Capital Inc. are Ontario corporations with head offices in York Region which Bai used to advance mortgages.

[11] Bai and Gao are married. Chen is Bai’s mother. Bai and Chen jointly own a property for which leave to issue a CPL was granted. Bai is 1% owner and Chen 99%.

[12] Chen lives part-time in Canada and part-time in China. While in China, she permitted her bank account to be used by Bai who used the account for his own personal use and for business.

B. Should the Plaintiff’s Solicitor Be Removed?

[13] I will address the facts, the governing principles, and then apply the facts to the principles.

(a) Facts

[14] The Defendants alleges that the Plaintiff’s solicitor is in a direct conflict of interest. As detailed in the affidavit of Song Bai, Bai commenced a different action against Jian Liu and Metasigns Inc. The Plaintiff’s solicitors represent Jian Liu and Metasigns Inc. in the separate action.

[15] Mr. Bai alleges that he connected with Liu and Metasigns Inc. in respect of currency conversion services when he needed to convert funds in Renminbi (RMB) to Canadian dollars (CAD). Bai alleges that Liu, operating through Metasigns, told Bai that Metasigns could bypass strict foreign exchange controls imposed by China to convert and transfer RMB from China to CAD in Canada.

[16] Bai completed several successful transactions with Metasigns and Liu and received a commission for so doing.

[17] Bai alleges at paragraph 5 of his claim that:

On November 21, 2023, Bai and Liu reached an oral agreement whereby Bai would loan ¥6,820,500 RMB to Liu’s company, Metasigns, for his business and investment activities in Canada. It was agreed that Liu would convert RMB to CAD after Bai advances the loan to the bank accounts designated by Liu. It was further agreed that the loan repayment must be made in CAD and deposited to Bai's bank account in Canada on or before the due date.

[18] Bai alleges that after some time, he remitted money received from clients to Metasigns but he did not receive funds in return. He states that he gave money he received from Li and other funds to pay his money conversion clients when he did not receive payment from Liu. Bai states that he did so because Liu misrepresented to him that he had the money to pay, but that he was waiting for a bank hold to be lifted. Bai states that Liu and Metasigns owe him $1,311,634.61 and that Liu has now left Canada for China without paying him.

[19] Bai then commenced an action against Liu and Metasigns. They have defended the action denying the allegations. The Plaintiff’s solicitor acts for Liu and Metasigns.

[20] Bai alleges that he used some of Li’s money to pay Liu. He asserts that, as a result, Li’s interests are now directly adverse to the interests of Metasigns and Liu and that the Plaintiff’s solicitor’s interests are in conflict. He further asserts that he may bring a third-party claim in this action against Liu. He has not provided documentation of the transaction to support his allegation that Li’s money was given to Liu.

[21] In response, the Plaintiff asserts that there is no conflict, that she has been fully informed of the other claim, and that she and Mr. Liu are working together as at this point their interests align.

[22] The Plaintiff has tendered evidence that a potential conflict was discussed with both clients.

(b) Governing Principles

[23] In Canadian National Railway Co. v. McKercher LLP, the Supreme Court of Canada set out that the lawyer’s duty of loyalty has three key components: a duty to avoid conflicting interests, a duty of commitment to the client’s cause, and a duty of candour.

[24] There is a bright line rule that a law firm cannot act for a client whose interests are adverse to those of another existing client unless both clients consent. This rule relates to the immediate interests of the client that are directly adverse in a legal interest, which is to be distinguished from a strategic or commercial interest. It does not apply to unrelated matters. See McKercher, supra, at paras. 33-37.

[25] One of the dangers is a concern that confidential information of one party could be abused.

[26] Other relevant principles are set out in Tiffin v. Teplitsky Colson LLP, 2018 ONSC 5122, at paras. 29-32:

The law is clear that a litigant’s counsel of choice may not be removed lightly. The decision to disqualify is a discretionary one, to be made only in the clearest of cases: MacRae v. Santa, [2002] O.J. No. 4231 at paras. 29-32, Karas et al. v. Her Majesty the Queen et al., 2011 ONSC 5181, [2011] CarswellOnt 8946 at para. 26.

The overarching test to be applied on a motion to remove a lawyer from the record is whether a fair-minded, reasonably informed member of the public would conclude that the proper administration of justice requires it. This determination is fact-specific and based on an examination of all of the factors in the case and the specific reason why the motion is being brought. The task of the court is to uphold and preserve the integrity of the justice system while ensuring that litigants are not deprived of their counsel of choice without good cause.

A court should be reluctant to make what may result in orders preventing solicitors from continuing to act. This is in view of the expense of litigation and the enormous waste of time and money and the substantial delay which can result from an order removing solicitors. The jurisprudence provides that courts should do so only in clear cases.

The motivation of the party seeking removal is a factor in the determination of such a motion. A court will not remove counsel if the moving party has brought the motion for tactical rather than principled reasons. There must be a “genuine” concern with respect to the merits of the alleged conflict: Sabean v. Aikman, 2016 ONSC 6130 at para. 59.

(c) Application

[27] I find that the actions are not related and that the bright line rule does not apply. At present, Li and Liu are united against Bai. There is no evidence to support Bai’s assertion that he used Li’s money to pay Liu.

[28] The facts here do not meet the “clearest of cases” standard. I am of the view that a fair-minded reasonably informed member of the public would not conclude that the proper administration of justice requires removal.

[29] I agree that things could change, however, at present Li and Liu do not have directly adverse legal interests. A hypothetical action (the suggestion of a third-party claim) is not reason to remove the Plaintiff’s choice of counsel now.

[30] I decline to grant the relief sought.

C. Should the injunction be lifted as against Chen and Gao?

[31] Chen and Gao argue that the injunction should be lifted as against them. They assert that the Plaintiff has failed to establish a strong prima facie case against them and that the injunction has caused significant hardship against them and prevented them from meeting family obligations including mortgage payments, family expenses and the operation of the Gao’s businesses. Gao is a piano teacher and co-owns a pet store.

[32] I have not been persuaded that the injunction should be lifted. Money has been moved between the accounts of Bai and Chen and Bai and Gao and their joint accounts and it appears that Chen and Gao may have been the recipients of funds misappropriated by Bai.

[33] The Defendants’ accounts have been co-mingled and it appears that Bai gave money to Gao, that they have a joint account and that there have been transfers between all three accounts. Bai and Chen’s funds are also co-mingled.

[34] While both Chen and Gao have deposed that they did not have knowledge of Bai’s financial dealings, I find that the transfers to and from their accounts implicate them.

[35] I am prepared to consider the lifting of the injunction as against the pet store. However, this was not the focus of the parties’ submissions. If the parties can reach a consent on a term relating to the operation of the pet store, I will consider it by way of further written submissions limited to no more than two double-spaced pages to be delivered by November 26, 2024.

D. Discharge of the CPL

[36] Li has not demonstrated an interest in the property. The property was purchased by Chen and Bai in 2011. This is prior to when Li began investing with Bai.

[37] The Plaintiff’s original motion record filed in support of the CPL asserted that the property arrangement was a deliberate attempt to shield the property from creditors. In my view, the evidence that Bai and Chen purchased the property under this arrangement 13 years ago, undermines this argument.

[38] Looking at the factors set out in 931473 Ontario Ltd. v. Dhunna, [1987] O.J. No. 1073, I find that the Plaintiff has no interest in the land, that the land is not unique.

[39] In my view, the Plaintiff sought the CPL to ensure that the Defendants Bai and Chen could not make themselves judgment proof. However, without an interest in the land, the CPL should be discharged and I so order.

[40] I grant leave for the Plaintiff to register the CPL against the property.

IV. Order

[41] The motion to remove Ran He as the Plaintiff’s solicitor of record is dismissed.

[42] The motion to lift the Mareva injunction as against Chen and Gao is also dismissed.

[43] The parties shall consult to see if consent can be reached on a term relating to the operation of the pet store. If not, any party wishing to may file further written submissions on this issue alone, limited to no more than two double-spaced pages to be delivered by November 26, 2024.

[44] The motion to discharge the CPL is granted.

[45] The Plaintiff shall have leave to register the Mareva injunction as against the property against which the CPL was granted.

[46] The Order of Justice de Sa dated October 13, 2024, amended by my Orders of October 30, 2024, November 13, 2024 and November 18, 2024 shall continue until further Order of the Court. For clarity, the Mareva injunction remains in force until further court order.

[47] The parties shall attempt to agree on the terms of a draft order for my consideration.

V. Costs

[48] The parties are urged to resolve costs. If they cannot, I may be spoken to.

Justice S.E. Fraser Date: November 19, 2024

ONTARIO SUPERIOR COURT OF JUSTICE BETWEEN: TIANZHU LI Plaintiff – and – SONG BAI, JIE CHEN, FEIYAN GAO and EASYLINE MORTGAGE INC., CYD INVESTMENT INC. and CY CAPITAL INC. Defendants

REASONS FOR DECISION Justice S.E. Fraser

Released: November 19, 2024