A Richmond realtor's attempt to recover $431,000 lost in a currency exchange transaction has hit an obstacle after the courts dismissed his lawsuit against one of the currency exchange employees.
"This case addresses issues arising from the murky underworld of currency conversions between Canada and China," wrote B.C. Supreme Court Justice Briana Hardwick in her judgment dated May 22.
An Dong Pan, a realtor, filed a lawsuit in 2020 against the owners of Jindinglai Holding Ltd. Jia Hao Dong and Xu Dong Liu, as well as employee Jing Cai, claiming they breached a currency exchange agreement and failed to repay him.
China’s State Administration of Foreign Exchange regulations limit Chinese nationals to an annual foreign exchange quota equivalent to US$50,000.
Jindinglai was based out of Parker Place on No. 3 Road in Richmond.
Pan had referred a client to Cai, but the client never received the promised CA$445,000 after depositing 2,371,850 RMB (renminbi, the official name of China's currency) into a designated bank account.
Pan then reimbursed his client from his personal funds and took over the debt. According to Pan, he received $14,000 from Dong between March and July 2020.
Only Cai responded to the lawsuit and denied liability. As a result of Dong and Liu's failure to respond, Pan obtained a default judgment against Dong on Nov. 18, 2021 for $431,000 and costs.
Dong and Liu did not appear at trial.
Following a 10-day trial that took place over January and March this year, Hardwick ultimately found Pan failed to prove Cai was responsible for his loss.
Payment in 'satchel of cash' demonstrates 'murky nature' of currency exchange: justice
During the trial, Pan told the court he met Cai through his wife, who had previously purchased "bird's nests" (a Chinese delicacy) from Cai.
He recalled his first successful currency exchange transaction with Cai's help for $100,000, a portion of which was paid to him via a cheque and the other by cash.
"Pan, despite being a commercial real estate agent, apparently did not conclude it was odd to receive a satchel of cash. This ties back into my opening statement about the murky nature of these currency exchanges," wrote Hardwick.
According to Cai, he arranged for his client's funds to be deposited on Jan. 7, 2020 and payments in Canadian dollars for the transaction were scheduled to be received over three days in January 2020.
He told the court he followed up with Cai when none of the money came through and Cai subsequently provided him with Dong's number.
WeChat messages submitted as evidence confirmed both Pan and Cai were acting as intermediaries.
According to Pan, he entered into a repayment plan with Dong in August 2020 and Dong agreed to pay him $10,000 per month until the debt was fully repaid. However, in the end, he would only recover $14,000.
He also detailed his attempts to collect funds from Dong and Cai since commencing the lawsuit, which included registering certificates of pending litigation against properties owned by Dong, Cai and Liu's parents.
The court also heard from Shu Leon Sun and Xiaoling Wang, who both previously entered into currency exchange transactions with Cai's help.
Sun's transaction for $100,000 was unsuccessful and he managed to recover some of the funds from Dong and by acting as a listing agent for the sale of Dong's property in Richmond.
Sun told the court Cai had told him the reason for his unsuccessful transaction was that a wire transfer of funds from Hong Kong was "stuck in Hong Kong for some unknown or unexplained reason."
Wang, on the other hand, wanted to exchange renminbi for $1,000,000 and only received a total of $100,000. She told the court Cai told her the delay was "due to issues with the funds in Hong Kong."
Although Cai provided her with screenshots of conversations explaining the delay, Wang said she "believed these screenshots contained fake information designed to defraud her."
Failed transactions due to 'turmoil' in Hong Kong: employee
During the trial, Cai told the court there were two primary ways of exchanging currency. The first was a faster, "face-to-face" transaction where the customer would deposit RMB into a Chinese bank account and receive the Canadian dollars the same day or shortly after.
The second and slower method which had a "more favourable exchange rate" involved providing Canadian banking details for payment approximately 15 days after the RMB funds were exchanged and deposited into a bank account in China.
According to Cai, the transactions all took place "without issue" until May 2019 and Liu told her "there were issues with the banks in Hong Kong due to 'turmoil' at the time and that the funds were 'stuck' in Hong Kong."
"Whether this was true is unknown," wrote Hardwick, who noted the explanation was consistent with what was told to Sun, and Cai was relying on what she was told by Liu, who did not testify at trial.
Cai told the court Liu was her customer for her "bird's nest" business. She then became involved with Dong and Liu's business after exchanging funds on behalf of some of her customers.
Hardwick rejected Cai's claim that she received no direct financial benefit from her role as an intermediary, pointing out Cai continued to facilitate the exchange after her own unsuccessful transaction.
"Rather, I conclude that Cai was continuing to facilitate these currency exchanges in an attempt to recover some or all of the funds that she personally had lost in her currency exchange transaction with Dong and Liu," wrote Hardwick.
According to Cai, she knew or believed the wire transfer method was "unstable" by the time she discussed currency exchanges with Pan and his wife in December 2019 and advised them not to proceed by wire transfer. She also told them it was more secure to deposit RMB in China and receive Canadian dollars via a bank draft issued by a Canadian bank.
Cai told the court Liu informed her in January 2020 that three tranches of funds would become available in bank drafts in the same month and Cai asked Pan if he wanted to purchase the three bank drafts.
She claimed Pan, who agreed to buy the bank drafts, paid the full amount despite her suggestion to make three payments "one step at a time."
Employee's credibility questioned by judge
Hardwick noted in her judgment that Pan represented himself "very capably" and saw him as a "sympathetic plaintiff" who was credible most of the time.
Cai, on the other hand, presented "as a rather naive and somewhat unsophisticated individual who was notably uncomfortable testifying."
While Cai attempted to answer questions truthfully, Hardwick questioned Cai's credibility because Cai had transferred ownership of her primary residence to her spouse within a month after the removal of the certificate of pending litigation.
"The allegation of a fraudulent conveyance... was not before me at trial, but I have absolutely no doubt that the timing of these events was not purely coincidental," wrote Hardwick.
After considering the circumstances of the case, Hardwick concluded Cai acted as an agent for Dong, and Pan has "no cause of action" against her.
Furthermore, while Pan was entitled to claim against Cai and Dong, he has already obtained a default judgment against Dong. Since there is no separate cause of action set out against Cai, Dong cannot seek the same judgment from Cai for the same cause of action.
Hardwick also dismissed Pan's claims for negligent and fraudulent misrepresentation.
She acknowledged Pan had suffered a "significant loss" and "there is faint hope" for him to recover his funds though it is possible.
"Pan was a victim, there is no denying that. However, Cai was, I accept, also a victim and she likewise suffered her own significant loss," wrote Hardwick.
Since Cai was the "substantially successful party at trial," she is entitled to costs. However, Hardwick declined to award special costs because it would be "unduly punitive" against Pan, whose allegation of fraud was not "meritless, vexatious or scandalous."
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