Executive Summary: Key Legal and Evidentiary Issues

• Defendants sought to strike plaintiff's pre-settlement claims, arguing they were superseded by a 2014 Settlement Agreement where the plaintiff allegedly accepted promises to pay rather than actual performance.

• Central dispute concerns whether satisfaction under the Settlement Agreement required actual payment or merely the defendants' promise to pay.

• Plaintiff irrevocably accepted the defendants' repudiation of the Settlement Agreement in December 2015 after Mr. Sun advised he would no longer authorize Mr. Wang to facilitate settlement discussions with Coastal.

• Defendants deposited 13,000,000 RMB into a China Account instead of a Canadian bank account as required, which the Court found constituted a breach of the Settlement Agreement.

• No facts support the defendants' assertion of a "second settlement agreement" made orally in November 2018.

• Certificate of pending litigation against Ms. Hou's property remains valid as pre-settlement claims, including for breach of trust, continue against both defendants.

The underlying contract and dispute

In September 2011, Hongli Wang entered into a contract with Xue Jin Sun to provide certain services in relation to a real estate project in Liaoning Province, China, known as Dalian Jinrijunjian Park. In exchange, Mr. Wang was to receive a fee of 20,000,000 RMB, payable into a bank account in Canada (the "BMO Account"). Mr. Sun was the sole shareholder in a Chinese company that owned the property. The plaintiff alleged that Mr. Sun and his wife, Xiao Ri Hou, breached the services agreement when they received funds from the sale of the project but then failed to pay him the fee. On August 14, 2013, Mr. Wang commenced this action by notice of civil claim against Mr. Sun. The notice of civil claim also pleaded breach of trust, knowing assistance and receipt, and fraudulent conveyance claims in relation to the defendants' handling of the funds received into the BMO Account, including that they were used to purchase certain lands located in Richmond, British Columbia registered in the name of Ms. Hou. A certificate of pending litigation was registered against the lands on August 19, 2013.

The settlement agreement and its terms

On July 14, 2014, the parties entered into a settlement agreement, which was amended on July 22, 2014. Under this agreement, on or before July 24, 2014, Mr. Sun would pay to the plaintiff the sum of 7,000,000 RMB by cheque deposited to a bank account in China to be specified by the plaintiff (the "China Account"). Upon receipt of this payment, the plaintiff would provide a letter authorizing the release of the certificate of pending litigation. Mr. Sun, who had commenced legal proceedings in China against Coastal (the company that purchased the real estate project), would use best efforts to recover certain funds from Coastal and assist the plaintiff in his efforts to facilitate further payment by Coastal to Mr. Sun. Mr. Sun would, within seven days of receipt of payment or recovery in the Chinese legal proceedings, pay to the plaintiff the amount received up to the Canadian dollar equivalent of 13,000,000 RMB (the "Fee Balance"), by way of deposit to a bank account in Canada to be specified by the plaintiff. The agreement provided that upon fulfillment of all obligations, the parties would execute a mutual release of all claims and a consent dismissal order.

Initial performance and subsequent dispute

On July 23, 2014, in accordance with the Settlement Agreement, the defendants made the first payment of 7,000,000 RMB deposited into the China Account. The CPL Release Letter was provided, and on July 30, 2014, the certificate of pending litigation was discharged from title to the lands. In October 2015, through counsel, Mr. Wang wrote to Mr. Sun to advise that he attempted to contact Mr. Sun to fulfill his best-efforts obligations, and by failing to return Mr. Wang's calls, Mr. Sun had breached his best-efforts obligations.

Repudiation and the amended claim

In December 2015, through counsel, Mr. Wang wrote to Mr. Sun twice. The letter of December 15, 2015 disputed the assertion by the defendants' then-counsel that the pre-settlement claims could not be continued. The second letter, dated December 16, 2015, advised of Mr. Wang's position that during a previous conversation, Mr. Sun advised that, contrary to his best efforts obligations, he would no longer authorize Mr. Wang to facilitate settlement discussions with Coastal. Mr. Wang's counsel stated that such advice amounted to an anticipatory breach and repudiation of the Settlement Agreement, and that the plaintiff accepted Mr. Sun's repudiation with the effect that it was "now at an end." Mr. Wang also registered a new certificate of pending litigation against title to the lands. On February 12, 2016, the plaintiff filed an amended notice of civil claim pleading the pre-settlement claims, the Settlement Agreement, the anticipatory breach, the plaintiff's acceptance of the defendants' repudiation, and a claim for damages for breach of contract and judgment against the defendants in the amount of the Canadian dollar equivalent of 13,000,000 RMB.

The China payment and continued dispute

On June 29, 2018, Mr. Sun was awarded judgment against Coastal. On November 22, 2018, the defendants caused the sum of 13,000,000 RMB to be deposited into the China Account. On November 25, 2018, through counsel, Mr. Wang advised Mr. Sun that there were tax liabilities relating to the funds being paid in China, and Mr. Sun was refusing to pay those taxes. Mr. Wang gave Mr. Sun the choice to pay in Canada instead. There was no resolution. In July 2019, counsel for the defendants wrote to counsel for the plaintiff taking the position that the China Payment was made in full satisfaction of the Settlement Agreement and demanded removal of the certificate of pending litigation.

The defendants' application and arguments

The defendants applied to strike certain paragraphs of the amended notice of civil claim, dismiss claims against Ms. Hou, dismiss the plaintiff's counterclaim, and cancel the certificate of pending litigation registered against Ms. Hou's property. They argued that the pre-settlement claims were superseded by the Settlement Agreement because the plaintiff accepted the defendants' promises to pay as satisfaction, not their performance of those promises. Alternatively, they argued that the pre-settlement claims should be struck because the plaintiff's amended notice of civil claim seeks damages and thus constituted an election to accept Mr. Sun's repudiation of the Settlement Agreement and to sue in damages for its breach. They also asserted that the parties entered a "second settlement agreement" in November 2018, where Mr. Wang agreed to accept the China Payment in full satisfaction of any claims.

The court's analysis and ruling

The Court found the defendants' argument that the plaintiff agreed to accept the mere promises contained in the Settlement Agreement rather than the defendants' performance under it as satisfaction to be "creative but unpersuasive." Justice Gropper determined that the satisfaction under an agreement is a question of fact, not law, as established in Rumely Co. v. Gorham and Stewart v. Hawson. The Court was persuaded that the Settlement Agreement required the payment of the amount listed as satisfaction. Paragraphs 10 and 11 of the Settlement Agreement expressly provided for the release of the pre-settlement claims only after the defendants had fulfilled their obligations under it. The Court agreed that Mr. Wang's acceptance of the defendants' repudiation meant the parties were released of their obligations to enter a mutual release, and the plaintiff was released of his obligation to enter the consent dismissal order, but the pre-settlement claims continued to exist. As found in Dosanjh v. Liang, the plaintiff was at liberty to both continue to advance the pre-settlement claims and sue for damages under the Settlement Agreement. The Court found there are no facts that support the existence of a second settlement agreement, and that depositing the money into the China Account rather than a Canadian bank account was a breach of the Settlement Agreement. The defendants' application was dismissed, and the plaintiff is entitled to costs of this application. No specific monetary award was determined at this stage, as this ruling addressed only the defendants' preliminary application to strike claims.