IN THE SUPREME COURT OF BRITISH COLUMBIA
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Citation: |
Li v. Rao, |
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2018 BCSC 47 |
Date: 20180112
Docket: E170206
Registry: Vancouver
Between:
Peipei Li
Claimant
And
Lu Hua Rao
Respondent
Before: The Honourable Mr. Justice Funt
Reasons for Judgment
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Counsel for the Claimant: |
J. Cudmore |
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Counsel for the Respondent: |
K. Loo |
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Place and Dates of Hearing: |
Vancouver, B.C. January 10 and 11, 2018 |
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Place and Date of Judgment: |
Vancouver, B.C. January 12, 2018 |
[1] The claimant applicant, Ms. Li, seeks an order for the respondent, Mr. Rao, to take all necessary steps to withdraw his related proceedings before the China International Economic and Trade Arbitration Commission (“CIETAC”), namely Case No. SXS20170099. In the alternative, Ms. Li seeks to enjoin Mr. Rao from taking further steps or requiring Ms. Li to take any steps in the CIETAC Arbitration.
[2] In the current action, among other relief, Ms. Li seeks a 100% apportionment in her favour of family property located in British Columbia. She says that the parties’ marriage in Las Vegas was void ab initio.
[3] Mr. Rao says that at no time did he live in a marriage-like relationship with Ms. Li. He agrees that their marriage was void ab initio. Mr. Rao denies that Ms. Li is entitled to any relief other than a declaration that their marriage was void ab initio.
[4] Mr. Rao says that under a contract between the parties, he deposited approximately $17,650,000 in the accounts of a corporation of which Ms. Li and he were to be equal shareholders. He says that Ms. Li has breached the contract and the contractual aspects should be determined by CIETAC, as contemplated under the parties’ contract.
[5] Ms. Li is a B.C. resident in her early 30s. Mr. Rao is a resident of China in his early 50s.
[6] In August 2015, Ms. Li and Mr. Rao met and, subsequently, became romantically involved.
[7] Ms. Li says she fell in love with Mr. Rao and that they discussed having children. She says that Mr. Rao told her that he was divorced.
[8] On April 8, 2016, Ms. Li says that Mr. Rao came to Vancouver and asked her to marry him, as soon as possible. Ms. Li says she agreed. They went to Las Vegas to get married.
[9] On or about April 10, 2016, they were married in Las Vegas.
[10] By late November 2016, the parties’ relationship was one of animosity. Ms. Li says she had become suspicious as to whether Mr. Rao was, in fact, divorced. She says that she then learned from a lawyer in China that Mr. Rao was not divorced.
[11] On January 24, 2017, Ms. Li filed her notice of family claim.
[12] Mr. Rao describes his relationship with Ms. Li as brief and intermittent. He says he was usually attending to his business interests in China, only making infrequent trips to Vancouver. He agrees that he and Ms. Li met in August 2015. He says that they spent approximately four days together in mid-September 2015 in Vancouver and Seattle and then again from April 8 to April 12, 2016 in Vancouver and Las Vegas. Mr. Rao says that he also saw Ms. Li for approximately five days in May 2016 and five days in June 2016 when he says Ms. Li was visiting her mother in China. He says that Ms. Li did not stay with him when she was in China. Mr. Rao says that he and Ms. Li next spent approximately five days together in August 2016 in San Francisco, Vancouver and Victoria.
[13] Mr. Rao says that Ms. Li “talked about getting married in Las Vegas”. He swears: “I specifically told her that I was already married in China. However, she told me that a Las Vegas marriage had hardly any effect.” Mr. Rao also says that he told Ms. Li that he would not divorce his wife.
[14] Mr. Rao does not deny that they were married in Las Vegas on or about April 10, 2016.
[15] On December 5, 2016, Mr. Rao commenced a civil action in this Court against Ms. Li and the parties’ corporation for the return of the $17,650,000 (the “disputed funds”).
[16] During the amicable period of the parties’ relationship, it is not contested that Mr. Rao contributed significant sums to the corporation of which the parties were to be equal shareholders. Mr. Rao’s contribution of the disputed funds were as follows:
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January 2016 |
$2,200,000 |
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February 2016 |
$6,400,000 |
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May 2016 |
$9,050,000 |
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Total |
$17,650,000 |
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[17] In September 2015, LPP Properties Inc. (formerly, Zoe Commercial Real Estate Inc.) (“LPP Inc.”) was incorporated under the Business Corporations Act, S.B.C. 2002, c. 57 by Ms. Li.
[18] In or about October 2015, the parties executed an agreement, called the “Capital Increase and Share Expansion Agreement” (the “Agreement”). According to the Agreement, Mr. Rao agreed to invest $20 million in LPP Inc. and would become a 50% shareholder. Ms. Li had invested $1,000 and would become a 50% shareholder after Mr. Rao’s $20 million contribution had been made.
[19] The Agreement included the following provision:
ITEM SEVENTEEN Dispute Resolution
The laws applicable to this agreement are Canadian laws and regulations.
Should there be any dispute arising during the performance of the agreement, each party shall try to resolve through discussion and consultation. If such discussion and consultation fail, parties shall submit such dispute to Shenzhen branch of the Chinese International Economic and Trade Arbitration Commission for an arbitration. Such arbitration is final and legally binding for both parties.
[20] As noted, Mr. Rao subsequently contributed $17,650,000 to LPP Inc. Of the $17,650,000, approximately $7 million was used, directly or indirectly, to purchase a home. Approximately $9 million was deposited in a Canadian bank account of Ms. Li, or a joint account of Ms. Li and Mr. Rao. I understand that there may also be some funds in a Canadian bank account in LPP Inc.’s name. The assets have been frozen pending resolution of the litigation.
[21] In his December 5, 2016 notice of civil claim (not prepared by his current counsel), Mr. Rao claimed $17,650,000 as against Ms. Li and LPP Inc. He also sought a declaration that Ms. Li held such funds in trust for him. In his notice of civil claim, Mr. Rao did not disclose that he was (or was to be) a shareholder in LPP Inc. He also did not disclose his past romantic relationship with Ms. Li.
[22] Various steps were taken in the civil proceedings by the parties, including the filing of a summary judgment application by Ms. Li.
[23] On December 13, 2017, an application brought by Mr. Rao for leave to discontinue his action was granted upon the payment of special costs to Ms. Li (approximately $240,000). As a result, Ms. Li’s previous application for summary judgment was not ruled upon.
[24] Mr. Rao, in his amended counterclaim (filed July 27, 2017) in this action (the family law proceedings), pleads with respect to property in B.C. (in part):
… in the event this Honourable Court determines that it has jurisdiction to divide family property and family debt, then, in that event, the Respondent claims that the property alleged by the Claimant in her Notice of Family Claim is not family property within the meaning of the family property under the Family Law Act or, alternatively, in the event such property qualifies as family property then it ought to be wholly divided and reapportioned in favour of the Respondent. Additionally, all of the property or any property derived therefrom referred to by the Claimant in her Notice of Family Claim is the excluded property of the Respondent and he ought to have full ownership and full right of possession of all such property without any division whatsoever or payment of compensation to the Claimant whether excluded or family property.
… title to any real property derived from funds of the Respondent whether characterized as non-family property, family property or excluded property be transferred to the Respondent and vested in him absolutely.
And further,
… an interest in the following property
Legal and beneficial ownership in the funds referred to in Schedule 5 of the Notice of Family Claim and any property, including financial assets, real property or shareholdings derived therefrom, by way of a declaration of resulting trust in favour of the Respondent on the basis that at all material times the Respondent maintained the beneficial interest in the foregoing funds, real property, including, without limiting the generality of the foregoing, real property with an address of [address redacted] Hudson Street, Vancouver, British Columbia, and financial assets or shareholdings of the Claimant derived from the foregoing funds.
Additionally and alternatively, the Claimant holds such funds, financial assets, real property or shareholdings derived therefrom in trust in favour of the Respondent as the Claimant would be unjustly enriched without juristic reason in the event she obtained any benefit or portion therefrom.
[25] Mr. Rao relies heavily upon the leading authority regarding anti-suit injunctions: Amchem Products Inc. v. British Columbia (Workers’ Compensation Board), [1993] 1 S.C.R. 897.
[26] Mr. Rao says that an anti-suit injunction may not be brought until there is a ruling in the foreign proceedings on jurisdiction. In this regard, he cites the decision of Justice Leask in McMillan v. McMillan, 2012 BCSC 32, where he stated:
[17] The definitive law in British Columbia is that an anti-suit injunction may not be brought until the foreign court has had an opportunity to rule on an application for forum non conveniens. In R.P.C. Inc. v. Fournell Estate, [2003] B.C.J. No. 1390; aff’d 2004 BCCA 30, Ross J. stated at para. 19:
... an anti-suit injunction should be granted only where the foreign court has assumed and retained jurisdiction in a manner that departs from our own test of forum non conveniens as to justify our courts refusing to respect that assumption of jurisdiction and where that assumption of jurisdiction amounts in the circumstances to a serious injustice. [Emphasis in original]
[27] In Amchem, Justice Sopinka, writing for the majority, adopts the following definition of comity at 913–914:
In assessing the role of comity in the formulation of the principles which should inform the exercise of this power, I adopt the definition of comity approved by La Forest J. in Morguard Investments Ltd. v. De Savoye, [1990] 3 S.C.R. 1077, at p. 1096:
“Comity” in the legal sense is neither a matter of absolute obligation, on the one hand, nor of mere courtesy and good will, upon the other. But it is the recognition which one nation allows within its territory to the legislative, executive or judicial acts of another nation, having due regard both to international duty and convenience, and to the rights of its own citizens or of other persons who are under the protection of its laws ... .
[28] With respect, in my view, Amchem has limited application to the case at bar. The CIETAC is not a foreign court. It is an arbitration commission with its jurisdiction to hear a matter arising from contract (and not, for example, from the domicile, residency, citizenship, or presence of a party in the jurisdiction).
[29] Mr. Rao argues that an anti-suit injunction is “simply unavailable to [Ms. Li] in this case, as there are not two parallel actions dealing with the same claims”.
[30] In the case at bar, there are many connections to B.C. Ms. Li is a resident of B.C. LPP Inc. is a corporation incorporated under the laws of B.C. The disputed funds were contributed to LPP Inc. in B.C. The disputed funds and related traceable funds and property are also located in B.C., which have been frozen using the process of this Court and the laws of B.C. Mr. Rao also filed his December 5, 2016 notice of civil claim seeking the return of the disputed funds in this Court, without first choosing to invoke an arbitration before CIETAC. The Agreement also provides that the applicable law is Canadian law.
[31] The Agreement was also not typical of an arm’s length agreement. An arm’s length party would not agree to contribute a large sum to a corporation in return for 50% of the shares in the corporation’s capital which has no assets other than a $1,000 contribution by the other shareholder.
[32] As the Supreme Court of Canada stated in Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, the interpretation of contracts has evolved. Writing for the Court, Justice Rothstein stated:
[47] Regarding the first development, the interpretation of contracts has evolved towards a practical, common-sense approach not dominated by technical rules of construction. The overriding concern is to determine “the intent of the parties and the scope of their understanding” (Jesuit Fathers of Upper Canada v. Guardian Insurance Co. of Canada, 2006 SCC 21, at para. 27 per LeBel J.; see also Tercon Contractors Ltd. v. British Columbia (Transportation and Highways), 2010 SCC 4, at paras. 64-65 per Cromwell J.). To do so, a decision-maker must read the contract as a whole, giving the words used their ordinary and grammatical meaning, consistent with the surrounding circumstances known to the parties at the time of formation of the contract. Consideration of the surrounding circumstances recognizes that ascertaining contractual intention can be difficult when looking at words on their own, because words alone do not have an immutable or absolute meaning:
No contracts are made in a vacuum: there is always a setting in which they have to be placed... . In a commercial contract it is certainly right that the court should know the commercial purpose of the contract and this in turn presupposes knowledge of the genesis of the transaction, the background, the context, the market in which the parties are operating.
[33] In my view, the contractual aspects from the Agreement are embedded and fully alive in the current action. It is not even readily apparent that the Agreement was a commercial contract in light of its non-arm’s length character.
[34] Mr. Rao pleads that the disputed property is not “family property” as defined under the Family Law Act, 2011 S.B.C. c. 25. With such plea Mr. Rao will still need to address the Agreement having regard to the surrounding circumstances of the parties’ then relationship. As I have noted, the Agreement has a non-arm’s length character.
[35] The plaintiff also pleads legal and beneficial ownership in the disputed funds and, additionally and alternatively, pleads that Ms. Li would be unjustly enriched without juristic reason if she were to obtain any benefit from the disputed funds. Again, in the context of this plea, the Agreement and its nature would be central to the claim because the disputed funds were contributed in relation to the Agreement.
[36] With respect, I cannot accede to Mr. Rao’s argument that the family law proceedings and the arbitration are “not two parallel actions dealing with the same claims”. The formation, interpretation and operation of the Agreement in the context of the parties’ then relationship will be central to Mr. Rao’s position that the disputed funds were not family property or that Ms. Li has, otherwise, been unjustly enriched.
[37] With respect to Mr. Rao’s argument that the Court should apply the rule in McMillan and require Ms. Li to apply to CIETAC for its determination of jurisdiction, the matter is not one of judicial comity. The CIETAC proceedings arise from the Agreement and not the relationship between nations. I will not apply the rule in McMillan for this reason.
[38] I am also satisfied that Mr. Rao is attempting to achieve an unfair tactical advantage. As noted, he first brought a civil claim without recourse to CIETAC. After a year of litigation, he received leave to withdraw his claim. His petition for arbitration does not refer to the parties’ romantic relationship or the current action (the family law claim before the Court or the civil claim).
[39] I will also add that there is a September 2017 agreement between counsel, stating that Mr. Rao would not take steps in the CIETAC Arbitration until the Court had ruled on Ms. Li’s application for summary judgment in the civil action.
[40] As a result of Mr. Rao’s withdrawal of his civil claim, there was never a ruling on Ms. Li’s summary judgment application. I agree with Ms. Li’s counsel that Mr. Rao’s discontinuance of his civil claim is not a breach of the September 2017 agreement but his proceeding with the CIETAC Arbitration is.
[41] It only became known to Ms. Li on December 8, 2017 that the arbitration was possibly proceeding on January 16, 2018 and only on December 20, 2017 did Ms. Li’s counsel receive materials from CIETAC. The current application was filed December 22, 2017. This timeline, in conjunction with the September 2017 agreement, defeats Mr. Rao’s argument that there has been delay by Ms. Li in bringing the current application. I was informed this afternoon that the January 16, 2018 proceedings have been adjourned to either January 25 or January 31, 2018.
[42] In my view, enjoining Mr. Rao from taking further steps in the CIETAC Arbitration or his requiring Ms. Li to take steps in the CIETAC Arbitration, without further leave of this Court, will serve to secure a just and efficient resolution of the matters that have arisen between the parties. The injunction will be granted under s. 39 of the Law and Equity Act, R.S.B.C. 1996, c. 253 and the general jurisdiction of the Court.
[43] Except with the leave of the Court, the Court will enjoin Mr. Rao from taking any further steps or requiring Ms. Li to take any steps in the CIETAC Arbitration.
[44] Having regard to the possible January 2018 proceedings before CIETAC, there is liberty to apply on short leave if there are matters which arise with which I may assist.
[45] Costs will be in the cause.
“Funt J.”