In what's being described as a landmark case, a businessman accused of disappearing from China, after withdrawing a loan there equivalent to $10 million and reappearing in Vancouver in possession of several multi-million dollar Lower Mainland properties, has been ordered to repay the money.
In June 2016, lawyers for China CITIC Bank brought an application before a B.C. Supreme Court judge to freeze the assets of Shibiao Yan, who was accused of approving the withdrawal of a 50 million RMB line of credit extended to a company he controlled in China and never repaying it.
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According to court documents, Yan, who has been living in Vancouver with his wife and daughter, purchased three homes in Surrey worth $1 million, $2.3 million and $3.1 million, while his wife paid $2.5 million for a Vancouver house.
A China CITIC Bank officer said in an affidavit that one of the homes in Vancouver was bought following a withdrawal on the line of credit.
The China CITIC Bank took the issue to an arbitration tribunal in China in July 2015, which found Yan personally liable for payment of the debt.
The bank then filed a petition with a B.C. court in August 2016 seeking to recognize and enforce the Chinese arbitration award.
"There is some financial crime happening in Vancouver in the real estate market." - China CITIC bank lawyer Christine Duhaime
This week, a B.C. Supreme Court judge ruled in favour of upholding the Chinese arbitration hearing decision, which ordered Yan to repay the equivalent of nearly $10 million Canadian to the China CITIC Bank.
More cases to come
Foreign arbitration awards have been enforced in British Columbia before, but this is apparently the first time the avenue has been explored by a state-owned bank in China, involving a Chinese foreign national in Vancouver in the real estate sector.
"It's the first time that we're aware of where a state owned Chinese government entity has used an arbitration and come to a place like Canada to enforce a loan where the money has come into real estate in Vancouver." said China CITIC Bank lawyer Christine Duhaime.
According to the court documents, some of the information on Yan and his wife, Ms. Gao, was uncovered by the China CITIC Bank during a routine anti-money laundering review.
Duhaime, who is an expert in financial crime, says Chinese banks have been seeing people disappear with significant amounts of outstanding bank loans.
"I have seen lists of debts from other banks, and yes, there are other cases that other banks in the same situation are looking at to recover," said Duhaime.
She says in the past the banks have simply accepted these losses, but now because of the success of this case many more will look to recover their money.
"It is a good result for B.C. in the sense that I think it sends a positive message that to the extent there is some financial crime happening in Vancouver in the real estate market ... there is some recovery [possible]," said Duhaime.
Duhaime says the bank will now try to recoup the money from Yan, who was given 30 days to appeal the decision.