Executive Summary: Key Legal and Evidentiary Issues

• Defendants sought to invoke the doctrine of ex turpi causa based on allegations of criminal activity by Mr. Zhang Sr. in China, which the Court rejected as insufficiently connected to the cause of action.

• A mid-trial application to withdraw an admission regarding the existence of an oral agreement (the Surrey Project Agreement) raised questions about prejudice to the plaintiff and the proper identity of the contracting party.

• Central to the dispute was whether Mr. Zhang Jr. or his father, Mr. Zhang Sr., was the true party to oral investment contracts with Mr. Yin involving approximately $40 to $45 million in funds.

• Multiple changes in defence counsel led to a pleading admission being overlooked for years, complicating the procedural history and prompting a contested mid-trial amendment.

• The plaintiff was ultimately the successful party at trial, with the judgment against the other defendants totaling approximately $18,230,000 and a $3,900,000 equitable lien imposed against 1084960 B.C. Ltd.

• Costs were awarded at Scale B rather than the requested Scale C with uplift, as the Court found the plaintiff's failure to use solicitor-drafted agreements and to register interests in the Land Title Office contributed to unnecessary litigation complexity.

The background and parties involved

This case arises from the Supreme Court of British Columbia and involves a dispute over real estate investments in the province. The plaintiff, Junjie Tao, acts as the Executor of the Estate of Tong Zhang, also known as Tony Zhang ("Mr. Zhang Jr."), who passed away from leukemia on July 24, 2022. The defendants include Hang Yin, his wife Yan Chun Liu, his daughter Yu Yin, and several numbered British Columbia companies. The plaintiff's father, Chunli Zhang ("Mr. Zhang Sr."), is named as a defendant by way of counterclaim. The matter was heard before the Honourable Mr. Justice Funt across three separate rulings spanning from March 2025 to March 2026.

The alleged investment scheme

The plaintiff's claim centers on allegations that commencing in 2015 and continuing between 2015 and 2018, Mr. Yin developed a scheme to convert the plaintiff's investment funds to his own use. According to the pleadings, while Mr. Zhang Jr. was resident in China, Mr. Yin invited him to invest in real estate projects in British Columbia, representing that the funds would be used in profitable investments, that the investments would be secured and protected, and that profits would be divided as agreed. The plaintiff alleges these representations were false. Rather than segregating the plaintiff's funds, Mr. Yin allegedly commingled them with other assets and funds and converted them for his own benefit. Additionally, Mr. Yin's wife and daughter are alleged to have actively participated in the scheme through their involvement in establishing and controlling British Columbia companies created to hold real estate assets acquired with the entrusted funds. The total investment funds at issue amount to approximately $40 to $45 million.

The defendants' position and the identity dispute

The defendants consistently maintained throughout the litigation that at no time did they invite, induce, or discuss real estate investment opportunities with the plaintiff, Mr. Zhang Jr. Their core defence was that all discussions regarding investment opportunities, all representations, and all fund transfers were made with and by Mr. Zhang Sr., the plaintiff's father, not Mr. Zhang Jr. The defendants denied owing any duty to the plaintiff and denied that the plaintiff suffered any loss caused by them. This dispute over the identity of the true investing party — father or son — became one of the central issues at trial.

The pre-trial ruling on ex turpi causa

In the first ruling dated March 19, 2025, the defendants applied to amend their response to plead the doctrine of ex turpi causa non oritur actio, arguing that Mr. Zhang Sr. was the subject of an investigation in China for bribery, corruption in office, and money laundering, and that an arrest warrant had been issued against him for embezzlement, accepting bribes, misappropriating public funds, and giving money and goods to government employees. The defendants further alleged that the funds Mr. Zhang Sr. contributed to the projects originated from these illegal sources, and that allowing the plaintiff to succeed would effectively legitimize ill-gotten funds. Justice Funt dismissed this amendment, relying on the BC Court of Appeal's decision in Bang v. Kim, 2024 BCCA 88, which requires the illegality to be "closely connected to the cause of action." The Court found this threshold was not met because the cause of action involved an investment dispute, and the key defences — that Mr. Zhang Jr. did not advance any funds for investment, or alternatively that Mr. Yin fulfilled the terms of any oral contract — did not support closely connected illegality. Furthermore, the Court noted that Mr. Zhang Sr. was the subject of an arrest warrant, not a conviction, and held that an unproven charge is not sufficient to bring any possibly related funds within the closely connected test. Minor, unopposed amendments were permitted.

The mid-trial ruling on withdrawal of an admission

The second ruling, dated May 20, 2025, was delivered on the 28th day of the 45-day trial. The defendants applied to withdraw an admission made in their original Response to Civil Claim filed December 1, 2020, and carried forward in their Amended Response filed March 31, 2025. The admission in question acknowledged the facts in paragraph 37 of the Notice of Civil Claim, which described the Surrey Project Agreement — an oral agreement for the purchase of a Surrey property for $6 million, with ownership and profits split equally between Mr. Yin and the plaintiff. The defendants argued that they never intended to admit Mr. Zhang Jr. was a party to this agreement, asserting the agreement was with Mr. Zhang Sr. They attributed the oversight to the admission having been made by their original counsel at a different law firm, with three subsequent sets of counsel at the same law firm all failing to identify the issue. Applying the factors from Sidhu v. Hothi, 2014 BCCA 510, and the mid-trial amendment criteria affirmed in Sperring v. Shutiak, 2023 BCCA 54, Justice Funt found that reviewing the pleadings holistically — particularly paragraphs 21 and 32 of the Amended Response, which consistently attributed the oral agreements to Mr. Zhang Sr. — there was not a clear admission by the defendants that Mr. Zhang Jr. entered into the oral contracts now at issue. The Court allowed the amendment, permitting the defendants to admit only the terms of the Surrey Project Agreement without admitting Mr. Zhang Jr. as a party. To mitigate any prejudice, the plaintiff was granted leave to recall any witness previously called by the plaintiff. Costs for a one-day hearing were awarded to the plaintiff in any event of the cause.

The costs ruling and the outcome

The third and final ruling, dated March 27, 2026, addressed costs following the trial, the reasons for which were indexed as Zhang Estate v. Yin, 2025 BCSC 2508. The plaintiff was recognized as the successful party and sought costs at Scale C with a 50% uplift based on the complexity of the litigation. However, Justice Funt applied two rules he had previously articulated in Zhang v. Lin, 2025 BCSC 1550. The first rule holds that where complexity in a significant commercial action would have been avoided had the successful party sought and followed legal advice — such as obtaining solicitor-drafted agreements — costs above Scale B will be denied. The second rule applies where the successful party's failure to register property interests in the Land Title Office contributed to unnecessary complexity. The Court found both rules applicable: Mr. Zhang Jr. made no attempt to have his financial arrangements with Mr. Yin documented by a solicitor until after he immigrated to Canada in August 2018, several years after the first advance of funds, and he failed to ensure that his interests in the subject properties were registered in the Land Title Office, which meant that mortgages such as a $1,925,000 BlueShore Financial Credit Union mortgage on the Surrey Coffee Shop Property and the Jin Ocean Mortgage (up to $5,000,000, approximately $4,600,000 drawn down) on the West 41st Project could be arranged by one or more of the defendants without his approval. Accordingly, costs were awarded at Scale B. The defendants, with the exception of 1084960 B.C. Ltd., were held jointly and severally liable for the total costs. With respect to 1084960 B.C. Ltd., the Court rejected its submission that it was fair to regard it as an "innocent recipient of funds," finding that its director, Ms. Liu, had contemporaneous knowledge of the source of the $900,000 it received as a portion of the proceeds from the BlueShore Financial Credit Union mortgage, and ordered it jointly and severally liable for 21.4% of the total costs — proportionate to the $3,900,000 equitable lien imposed against it relative to the overall judgment of approximately $18,230,000 awarded in favor of the plaintiff, Ms. Tao, as Executor of Mr. Zhang Jr.'s estate.