A Plaintiff commenced an action in British Columbia to enforce a judgment against two individuals obtained in China. The Chinese judgment was related to loan agreements that were entered into between the plaintiff and a company named Fenghui Ltd. The two individual defendants agreed to guarantee the loans to Fenghui Ltd. After Fenghui Ltd. defaulted in its repayment of the loans, the plaintiff commenced a lawsuit against Fenghui Ltd and the guarantors in China.
The guarantors defended the Chinese action and thereby attorned to the jurisdiction of the Chinese court. While the Chinese lawsuit was still pending, the Chinese court conducted a mediation in which the plaintiff attended along with a representative of Fenghui Ltd. and the guarantors. The mediation resulted in a settlement that required an amount to be paid by June 14, 2014. Any remaining balance was subject to default payments calculated at 0.2% of the unpaid balance for each day that the balance remained outstanding, which amounts to an annual interest rate of 73%. The settlement agreement was subsequently formalized into a Chinese judgment and later confirmed to be fully enforceable by the Chinese court in a second judgment.
In a summary trial that lasted four days in the Canadian enforcement action, one of the individual defendants pursued a fraud defence that, amoung other things, alleged that the representative of the defendants did not have authority to bind the defendants to the settlement. The fraud defence was rejected by the B.C. court. The B.C. court found that the overwhelming evidence showed that the defendants participated in the mediation through their representative.
The B.C. court ordered that the Chinese judgment be enforced, subject to the modification that to the extent that the interest on the Chinese judgment exceeds 60%, then it is not recoverable.