A wealthy West Vancouver real estate developer faces an unusual lawsuit involving a $10 million loan which was advanced in China with the key term that it must be repaid in B.C.
The suit was filed in B.C. Supreme Court on June 1 against Qiang Wang (also known as Edison Washington) by a Chinese businesswoman who claims he defaulted on the loan after making an initial interest payment. Also listed as defendants are Amy Barsha Washington (also known as Feng Yun Shao) and her company Chongye Developments Ltd.
The Washingtons live in a $7.3 million home on Eyremount Drive in West Vancouver.
They have been active players in Vancouver’s real estate scene. Since 2011 the couple, whose citizenship is not known, has purchased at least 10 Vancouver properties worth an assessed value of $152 million, according to land title documents. Among their deals were a number of land assembly purchases on Cambie Street, made in anticipation of rezoning.
And several weeks ago they put three empty lots up for sale on Belmont Drive, a street lined with mansions commanding some of the city’s highest prices. The three properties are believed to be the most expensive undeveloped single-family lots in Vancouver. MLS listings for the three properties asked for a total of $68.5 million.
In the lawsuit, Gui Hua Chen claims the “informal” $10 million loan was negotiated with Chongye Developments.
The money would be deposited in Chinese currency into a bank account in China with the key term that Chongye would repay $10 million in B.C., according to legal filings. It is not known if any of the money loaned in China actually made its way to Canada.
Ron Usher — a lawyer and member of the independent review panel that investigated practices in B.C.’s real estate industry — reviewed legal and land title documents relating to the case that were obtained by Postmedia.
Usher said the case has a number of financial and legal details that he has never seen before.
“It looks like you put some money down overseas and that gets you a credit in B.C., so there is no actual international wire transfer of money,” Usher said, of the transaction described in this lawsuit.
The case takes place in the context of a historic flight of capital out of China. The New York Times reported over $1 trillion has left China since early 2015, as the Chinese yuan is devalued to combat economic weakness.
China has strict rules barring citizens from transferring more than $50,000 out of the country. In Canada, funds over $10,000 must be reported to Canada’s border agents and large cash transfers must be reported to the government.
As tough as China’s capital flight rules are, individuals and companies attempting to transfer money into Chinese banks face equally strict rules. The Financial Times noted some investors employ “underground banks” in China which provide “matchmaking services.” These institutions connect Chinese citizens who want to move money abroad with offshore investors who want to move money into China, and no money crosses borders.
According to Gui Hua Chen’s claim, in June 2015 she loaned Chongye $10 million with a “promissory note” that stated “the borrower promises to pay the plaintiff in British Columbia,” by May 1, 2016.
Interest would be 10 per cent, with $875,000 interest due to be paid in December 2015.
The loan was guaranteed by “personal assets including but not limited to real properties,” the claim says. Chen claims that the defendants paid interest in December 2015, but failed to pay back $10-million that was due May 1, 2016.
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Chen asks the court to declare the defendants in default and to order a mortgage charge against seven Vancouver properties in the Cambie Street area and the West Vancouver home owned by the defendants. The three empty Belmont Drive properties — which were purchased in February 2015 for $26.5 million through three numbered companies — were not among those listed in the court case.
The defendants do not dispute that Chongye Developments borrowed $10-million in China to be repaid in B.C.
But they contest Chen’s version of the terms and agreement behind the loan, according to court filings. In a statement of defence filed July 8, the defendants claim B.C. courts have no jurisdiction over this case.
“The contract between the plaintiff and the defendants was an oral contract made in China,” the documents state. According to the defendants, Chen resides in China, is not a citizen of Canada, and has no connection to British Columbia or Canada.
The loan was negotiated in China for Chongye Developments by Edison Washington with an agent for the lender only identified as “Mr. Tian,” according to the defendants. They say the loan did not have any fixed date of repayment and interest.
One “specific term” was that the “the loans were demanded by Mr. Tian to be advanced in China but to be repaid in Canada … the lender in China could deposit funds to an account in China as an advance of a loan. The funds advanced to the borrower in China would come to Canada and be received in Canada.”
The defendants say Chinese currency funds were advanced to Chongye Developments in a Chinese bank account from May 27 to June 19, 2015.
On November 18, 2015, there was a meeting in Vancouver between Amy Washington and Edison Washington, Mr. Tian and an accountant named Jonathan Wang, the defendants claim. A promissory note was drafted by Wang “at the direction of Mr. Tian,” the defendants state. They claim they have never dealt with Gui Hua Chen and were not aware she was the person to be repaid in B.C. until the meeting with Mr. Tian in Vancouver.
“Mr. Tian demanded that the lender be Gui Hua Chen, the plaintiff. Mr. Tian gave no reason to Mr. and Mrs. Washington for this request,” the defendants state.
Richmond lawyer John L. Leathley, counsel for Chen, was asked if he could provide any information about Chen and the case.
“I can’t comment because anything I know is privileged for my client,” he said.