The credibility, or lack thereof, of a Richmond family, was crucial to a court decision on a “convoluted” chain of events stemming from a series of investments between two families.
A Richmond couple was taken to court by their investment partners (and former friends) for breaching their duties as trustees for the partners’ shares and causing losses of more than $6 million.
The couple, along with their son, tried to counterclaim for damages by alleging their investment partners had induced the couple into making investments with fraudulent misrepresentations.
At the beginning of his 84-page decision, B.C. Supreme Court Justice Gordon Weatherill described the case as “an illustration of the level to which some people will descend to extract retribution when money is lost.”
He added that the case is also an example of how some lawyers are willing to advocate for clients despite their argument being “untethered from the truth.”
The court “was left to weave as best it could through a labyrinth of irrelevant evidence and dealings that defied common sense,” wrote Justice Weatherill, listing allegations of document fabrication, fraudulent misrepresentation, denials of obvious fact, poorly articulated questions and difficulties with translating and capturing nuances of the Chinese language as some of the challenges to the case.
Friendship and business relationship turned sour
The story began when Ming (Myles) Zhang and Xiaoqin (Rose) Yang, a couple who founded and owned a commercial LED lighting product manufacturer in China met Guang Ning (Nick) Zhang and Ping Hui (Helen) Lu. Nick owns a Richmond business, Can-Pacific Enterprises Ltd. (which also goes by Dynasty Fireplaces), which imports fireplaces from China and sells them in North America.
The two families became friends after meeting around 2014 and went into the LED lighting business together in 2015 to sell plant-based LED lighting products to the horticultural industry in North America. The business, called Lumenari, is also based in Richmond.
Yue (Jack) Zhang, Nick and Helen’s son, also joined the LED lighting business along with his parents.
During 2016, Myles learned of an investment opportunity for a B.C. company manufacturing electric vehicles, and decided, along with his wife Rose, to make the investment through Helen. The decision was partly because Myles was trying to immigrate to Canada at the time.
The two families incorporated various companies for investment purposes and continued to make other investments. During this time, Myles had legal problems in China in relation to his businesses, which he allegedly disclosed to Nick, Helen and Jack.
Myles, Rose and their two youngest children were later granted permanent residency in Canada in 2018.
The two families’ relationship deteriorated in 2019, and Nick and Helen were “very angry about the lack of Lumenari sales and that all of their shareholders’ loan monies had been spent,” according to Justice Weatherill.
After the two families’ relationship broke down, Nick and Helen spent Myles and Rose’s share of investment proceeds. Nick and Helen also demanded they be repaid for shareholder loans made to Lumenari and accused Myles of trying to “defraud” and “scam” Helen. Finally, Nick and Helen neglected to sell Rose’s shares in the electric vehicle company despite Myles’ requests.
In response to Myles and Rose’s claims, Nick and Helen claimed they were “unknowing victims” of Myles and Rose’s scheme to immigrate to Canada to hide their assets from Chinese creditors. Justice Weatherill pointed out that such claims were “based on speculation.”
Nick and Helen, along with their lawyer, also denied the existence of a trust they held for Myles and Rose when investing in the electric vehicle company in 2016, claiming their signatures were forged. But they finally “conceded the obvious” that the trust existed after 16 days of trial, “in the face of overwhelming evidence of their participation in and knowledge of the trust.”
Credibility of witnesses crucial to outcome of the case
In his judgment, Justice Weatherill said the outcome of the case would “turn on the credibility of the parties.”
He concluded that Myles was “a person who will say anything he perceives is necessary to achieve what in his view would result in justice for him and his family,” noting that Myles was “evasive, argumentative and uncooperative” when asked about his business dealings. He found that Myles’ debts in China were at least in part the “impetus” for how he structured the investments in this case.
However, Justice Weatherill noted that Helen’s testimony was “replete with unabashed lies” and it was “rambling, contradictory and devoid of veracity.”
“I have no difficulty finding that virtually everything Helen uttered during her testimony was deliberately contrived and false,” he wrote.
He concluded that he could not accept Helen’s evidence where it contradicts with others due to her “false testimony and demeanour as a witness.”
Justice Weatherill added that it was apparent that Nick “feared telling the truth” during his testimony, while Jack’s was “plainly scripted to align Helen and Nick’s theory of the case.”
The only person left unscathed by the judge’s verdict was Myles’ partner Rose, who gave her evidence in an “honest, consistent and credible manner.” But Justice Weatherill did note that Rose had followed her husband’s instructions and “knowingly participated in Myles’ scheme to make investments by way of trust in order to avoid creditors.”
Justice Weatherill also noted in his judgment that he was left with “little confidence” in the reliability of submissions by Nick and Helen’s lawyer, who “misstated the evidence and attempted to spin case authorities as support for propositions that they did not.” The lawyer also declined to explain why his clients’ testimonies should be believed despite making “extensive submissions” on how Myles and Rose were not credible.
Ultimately, he ruled in favour of Myles and Rose and dismissed Nick and Helen’s case. He also decided that punitive damages, which are imposed “where the compensatory damages are insufficient to express the court’s repugnance at the misconduct in question,” are necessary as Nick and Helen caused a “significant” loss to Myles and Rose and a message needs to be sent.
“(Nick and Helen) and Jack viewed Lumenari as a ‘get rich quick’ scheme and are now attempting to blame Myles and Rose for its failure, concocting alleged misrepresentations in the process,” he wrote.
Justice Weatherill also decided that Nick and Helen should pay Myles and Rose special costs, as Myles’ “untruthful” conduct when discussing the intent behind the investment structures “pales in comparison to (Nick and Helen’s) conduct throughout these proceedings.” Special costs resemble reasonable fees charged by lawyers and are awarded by the court to “address the conduct of the parties."
Helen and Nick were ordered to pay Rose around $6 million plus interest for breaching two separate trusts. They will also have to pay Myles and Rose RMB 298,900 (around $58,000) for unjust enrichment plus interest, $100,000 in punitive damages, as well as special costs. Relevant trading accounts will also be frozen.