Henenghaixin Corp v Deng, 2021 ABQB 168

Court of Queen’s Bench of Alberta Citation: Henenghaixin Corp v Deng, 2021 ABQB 168 Date: 20210303 Docket: 2001 03353 Registry: Calgary Between: Henenghaixin Corp. Plaintiff/ Respondent - and - Tianzhou Deng, Xiaobo Deng aka Lake Deng, Michael Lam, Calgary Sinoenergy Investment Corp., Long Run Exploration Ltd., John Doe and ABC Corporation Defendants/ Applicants _______________________________________________________ Reasons for Decision of the Honourable Madam Justice B.E. Romaine _______________________________________________________ I.

Introduction [ 1 ] On April 23, 2020, the Plaintiff, Henenghaixin Corp. (H Corp.) applied ex parte for an attachment order/Mareva injunction/disclosure order against the Defendants Tianzhou Deng, Xiaobo Deng aka Lake Deng, Michael Lam, Calgary Sinoenergy Investment Corp. and Long Run Exploration Ltd. The application was made in accordance with the common law requirements for a Mareva order and the requirements for a pre-judgment attachment order under the Civil Enforcement Act , RSA 2000, c C-15 . The order

was granted on April 24, 2020. [2] The Defendants now seek to set the attachment order/Mareva injunction order aside. II. Applications of Tianzhou Deng, Lake Deng and MichaelLam [3] Mr. and Ms. Deng submit that the attachment order should be lifted as against them because:

a) the evidence adduced against them at the application did not meet the test for a Mareva injunction;

b) new evidence indicates that H Corp cannot establish a strong prima facie case;

c) H Corp failed in its duty to be candid and give full disclosure; and

d) the application was deficient for other reasons. [4] Mr. Lam submits that:

a) H Corp has filed to establish a strong prima facie case or a reasonable basis for its claim and failed to make full and frankdisclosure of critical facts when it obtained the attachment order;

b) there is no evidence to establish that Mr. Lam received any of the funds transferred out of H Corp or that there is a risk of thedissipation of assets by Mr. Lam;

c) there is no irreparable harm to H Corp;

d) the balance of convenience favours setting aside the attachment order; and

e) H Corp delayed significantly in applying for the relief sought. [5] H Corp submits that it met, and meets, the appropriate tests and that the pertinent facts considered by the Court in grantingthe order have not been negated or disproved. A. Tests for obtaining a Mareva injunction/ attachment order [6] As I noted in my oral reasons, the six-part test for obtaining a Mareva injunction has been described by the Ontario Court ofAppeal in Chitel v Rothbart (1982), (ON CA), 39 O.R. (2d) 513 (Ont. C.A.).

This test, with small variations inwording, has been endorsed in many cases since then, including in Alberta: Chu v Twin Cities Power-Canada ULC, 2012 ABCA 47,(Alta C.A.); Athabasca Minerals Inc. v Syncrude Canada Ltd., 2017 ABQB 47 , 2017ABQB 47. [7] The requirements of the Mareva test are as follows:

i) The applicant must establish that it has a strong prima facie case on the merits by making full and frank disclosure of all materialfacts within its knowledge, including providing particulars of the claim against the defendant, the grounds of its claim and the amount,and fairly stating the points made against it by the defendant. ii) The applicant should give some grounds for believing the defendant has assets in the jurisdiction.

As much precision as possibleregarding those assets is required so that the injunction can be directed towards a specific asset. iii) The applicant should give some grounds for believing that there is a risk of the assets being removed before the judgement oraward is satisfied.

The evidence must persuade the Court that the defendant is removing or that there is a real risk that it is about toremove its assets from the jurisdiction to avoid a judgement or that the defendant is otherwise disposing of its assets out of the ordinarycourse of business, so as to render a future tracing impossible or remote. iv) The applicant must satisfy the Court that it will suffer irreparable harm if the relief is not granted.

v) The applicant must show that in all circumstances the balance of convenience favours the granting of the injunction pending trialof the issue between the parties. vi) The applicant must give an undertaking as to damages. [8] The parties do not disagree about these requirements but disagree about whether they have been met. [9] In addition, specific requirements apply to an attachment order granted under the Civil Enforcement Act, as set out in section17 and 18 of the Act. [10] Subsection 17(2) of the Act states that the Court may grant an attachment order if it is satisfied that

a) there is a reasonablelikelihood that the applicant’s claim will be established; and

b) there are reasonable grounds for believing that the defendant is dealing orlikely to deal with its exigible property

i) otherwise than for the purpose of meeting the defendant’s reasonable and ordinary or living expenses; and

ii) in a manner that would be likely to seriously hinder the claimant in the enforcement of a judgement against the defendant. [ 11 ] Subsections 18 (4) and (6) of the Act stipulate that:

a) the Court, on application on notice to the defendant, may direct an ex parte attachment order remain in effect until terminated in accordance with

section 19 or as directed by the Court;

b) the onus of establishing that the order should be continued is on the applicant;

c) the Court shall not continue the attachment order unless circumstances that exist at the time of the application on notice justify the continued existence of the order; and

d) the Court may terminate the order if satisfied that the applicant failed to make full and fair disclosure of material information at the time of the ex-parte application. B. A strong prima facie case [ 12 ] With respect to the Mareva requirement of a strong prima facie case, and the attachment order requirement of a reasonable likelihood that the applicant's claim will be established, Mr. Deng and Ms. Deng submit that H Corp's claims rest on the untenable assumption that H Corp's directors and officers were "tricked into entirely abrogating their duties as directors and officers".

However, this is not H Corp's entire case. The evidence before me, which has not been negated by more recent evidence, is as follows: 1) A translation of the relevant portions of the investment agreements among the general partners of the Chinese entities that funded H Corp, indicate that the scope of the investment is the purchase of assets held by Twin Butte. Mr. Deng and others undertook in the agreements not to impair the investment.

One of the agreements provides that any investment decision must be approved by a majority of an investment strategy committee made up of representatives of the various investors. The other requires approval by two-thirds majority of the committee with a veto available to one party. The investment agreements provide that Mr. Deng and his spouse, another individual and his spouse, and Quingdao Zhangtian Capital Management Co. are subject to certain commitments to purchase the equity interests of the Chinese limited partners that funded the investment in H Corp.

While the agreements provide that they are subject to Chinese law and governed by dispute resolution provisions that may require an arbitration in China, the reference to the scope of investment in this application is not meant to invoke the jurisdiction of this Court in dispute resolution, but to provide context and evidence of investment intent. 2) In 2016, H Corp incorporated a wholly-owned subsidiary, West Lake, for the purpose of acquiring the Twin Butte assets. The Twin Butte assets were eventually acquired from its Receiver for approximately $231,000,000 on March 30th, 2017. 3) Mr.

Deng was a Director of H Corp from November 2016 to September 2017 during the period when the Twin Butte transaction was undertaken. He was a Director of West Lake. He is a limited partner of Wuhan LP, one of the Chinese entities that contributed funds to purchase the assets of Twin Butte. He was also a Director of Calgary Sinoenergy and Long Run Exploration, two of the Defendants, during the relevant period. New evidence indicates that Mr. Deng ceased to be a director of Calgary Sinoenergy and Long Run on November 18, 2019. 4) Mr. Deng's daughter, Ms.

Deng, became a Director of West Lake in April of 2017 and remained a Director until April 2018. She was a Director of Long Run until January 27, 2020, according to new evidence. The Defendant Mr. Lam was described as an associate of and advisor to the Dengs. Nothing in the new evidence contradicts this, and in fact establishes that Mr. Lam had a great deal to do with the impugned transfer of funds and operations at H Corp and West Lake, despite a lack of formal role. Ms. Deng confirmed on cross-examination on her affidavit that her father, Mr.

Deng, needed someone to provide directions on his behalf in relation to H Corp, West Lake, Calgary Sinoenergy and Long Run during the period in issue, and she was that person with respect to the day-to-day business and operations of the company. She also confirmed that, although she resigned as a director of West Lake on April 19, 2018, she continued to attend board meetings on Mr. Deng's behalf and provided directions on his behalf. While Ms.

Deng attempts to minimize her involvement with West Lake, it is apparent from an email to West Lake's lawyers dated April 11, 2017, that she was giving instructions to them. H Corp alleges that the Dengs and Mr. Lam are the primary actors in an alleged misappropriation and diversion of funds from H Corp and West Lake. 5) In early 2018, the two Chinese investor parties became concerned that Mr. Deng would not be able to fund the acquisition of their equity interests and sent Mr. Zhang and two other representatives to Calgary to investigate West Lake's operations. 6) At a meeting in Calgary in October 2018 with Ms.

Deng and Mr. Lam, these representatives were shown West Lake Financial Statements for the period ended December 31st, 2017 purporting to be audited that indicated that the share capital portion of shareholders' equity in West Lake was approximately $345,000,000, and that cash was about $31.5 million. Total current assets were approximately $61,000.000 and non-current assets were approximately $546,000,000. They were also shown bank statements indicating that West Lake had received about $80,000,000 from H Corp. [ 13 ] While Mr.

Lam denied knowing anything about the false financial statements and bank statements, he admitted that he provided them to Mr. Zhang and his colleagues. He says in his affidavit that he did not create or review the documents. However, on

cross-examination, Mr. Lam admitted that he had received the real audited year-end financial statements of West Lake on April 24, 2018, included in Audit Committee minutes and a board resolution that needed to be signed by Mr. Deng and another director. He sent unaudited quarterly financial statements to Mr. Zhang in a "WeChat" document that were clearly inaccurate in their shareholder equity number.

He could not explain the discrepancy, but relied on the fact that the quarterly figures were unaudited. [ 14 ] The Defendants submit that there is insufficient evidence to establish that the financial statements and bank records given to the representatives of the Chinese investors in October, 2018 are false, but Mr. Lam confirmed the accuracy of the audited financial statements and bank records obtained later in January, 2019, thus indirectly confirming that the documents are false. [ 15 ] Mr. Zhang admitted on cross-examination that he received what turned out to be false financial statements from “Mr.

Deng’s team” on WeChat about two months before the meeting, but only received what turned out to be false bank account statements at the meeting. This does not affect the fact that the statements were false, and that Mr. Zhang had no reason to suspect that until he received the actual financial statements and bank records in January, 2019. [ 16 ] Mr. Lam submits that there is no expert evidence that establishes that the financial statements initially produced by Mr. Deng’s team and Mr. Lam were false.

However, given that the audited financial statements of West Lake were later produced and verified as accurate by the directors of West Lake and Mr. Lam, it is apparent on their face that the previously produced statements are false and misleading. It is no answer to submit, as Mr. Lam does, that they were signed by two directors of West Lake.

They may appear to be signed by these directors, but there is no evidence that these signatures are real. 7) The evidence of H Corp is that it later discovered that both the financial statements and the bank statements were false, that the share capital portion of the shareholders' equity number was materially overstated and that West Lake had not actually received the cash represented in the bank statements.

However, at the time it was satisfied with the status of H Corp. 8) The representatives returned to Calgary on January 16th, 2019 and met with two West Lake directors, David Middleton and Steven Neu and West Lake officer, Mr. Steele.

At that meeting, they were shown the actual audited financial statements and informed that West Lake had received only about $42,000,000 after the acquisition of the Twin Butte assets. 9) Evidence submitted at the time of the application indicated that actual audited financial statements showed materially lower values for cash, exploration and evaluation and thus, the share capital portion of shareholders' equity was lower than the false financial statements by about $40,000,000.

The actual H Corp bank statements obtained from the bank showed lower in-flows of cash from H Corp to West Lake and transfers of cash to other entities, among them later established to be Calgary Sinoenergy. 10) The bank delivered statements to the investigators that revealed that Mr. Lam had approved a number of transfers from H Corp to Calgary Sinoenergy and a company called Canadian Advantage Petroleum Corporation. [ 17 ] These statements indicate that Mr. Neu, a director of H Corp, and the President of West Lake, had also approved some of these transfers. Mr.

Zhang’s affidavit of November 20, 2019 stated that Mr. Neu admitted to the transfers but advised that Mr. Lam had directed them and advised that Mr. Deng wanted the transfers done. Counsel for H Corp was candid about Mr. Neu’s position at the time of the application, specifically referring to the approval of the transfers, and referring to Mr. Neu’s position and evidence that tends to corroborate his understanding. [ 18 ] On cross-examination on affidavit, Mr. Lam confirmed that he had approved a number of transfers of funds to Calgary Sinoenergy.

He confirmed that he had requested certain of these transfers, and that Mr. Neu had approved them. He also confirmed instructions from Mr. Neu to H Corp’s lawyers December 4, 2018 indicating that the lawyers were entitled to continue to rely on instructions received from Ms. Deng and Mr. Lam as “team members” of H Corp until further written notice. [ 19 ] On at least one occasion, money was subsequently transferred by Calgary Sinoenergy to Long Run. The statements also revealed some subsequent transfers of funds from Calgary Sinoenergy to H Corp. but overall, much more money flowed the other way. [ 20 ] Mr.

Lam indicated in an affidavit sworn in September, 2020 that the purpose of the transfer was in part to pay back the deposit and to allow Calgary Sinoenergy and Long Run to become sufficiently profitable such that they could contribute, along with Mr. Deng and others, to the buyback guarantee set out in the investment agreement with the Chinese investors. [ 21 ] This does not, as submitted by the Defendants, provide a valid business purpose for the funds claimed by H Corp to have been misappropriated, but only evidence of a motive that benefits Mr. Deng with respect to his buy back obligation. [ 22 ] Mr.

Lam on cross-examination on his affidavits was evasive about who had directed the transfers. When asked whether Mr. Deng had directed them, he said “not that I am aware of”. He then indicated that if Mr. Deng, as a director of H Corp, was in Calgary or “if Mr. Neu would have access to Mr. Deng at that particular time, then I believe we would include Mr. Deng in that particular discussion”. [ 23 ] There is nothing in Mr. Lam’s evidence that negates the strong prima facie case against Mr. Lam. Mr.

Neu’s involvement, and how it may affect the validity of the order, is discussed later in this decision. 11) On January 22nd, 2019, the investigators and Mr. Middleton met with Mr. Neu, who Mr. Zhang says disclosed that Mr. Lam had directed the transfers and had advised him that Mr. Deng wanted the transfers done. According to Mr. Zhang’s affidavit, Mr. Neu admitted that he had been hired as a consultant for Sinoenergy by Mr. Deng in 2016, and that he had been appointed as a Director of H Corp. and president of West Lake in 2016 at Ms. Deng's direction. He thought Ms.

Deng had authority to act as a Canadian representative of her father and knew that Mr. Lam was Mr. Deng's close associate. Therefore, he assumed that Mr. Lam and Ms. Deng had full authority to act for Mr. Deng, even though they had no formal titles at H Corp. [ 24 ] As noted previously, evidence exists to indicate that this understanding was reasonable with respect to Mr. Lam. It was also reasonable with respect to Ms. Deng, as Ms. Deng does not deny that she hired Mr. Neu as a consultant for Calgary Sinoenergy, and was

involved in his appointment as president of West Lake. Ms. Deng denies that she told Mr. Neu that Mr. Deng was going to buy Twin Butte, but not that she was very involved in the Twin Butte acquisition “at the request of my father and the two LP’s”. It is also clear from her affidavit that she was very involved on her father’s behalf in West Lake, including setting up bank signing authority for Mr. Neu and Mr. Lam and participating in executive-only meetings. 12) Mr. Middleton advised Mr. Zhang, according to his affidavit, that he was of the impression that Mr. Lam and Ms.

Deng had authority to act as representatives of Mr. Deng, that Mr. Deng was the ultimate owner of West Lake or had the authority to conduct business for West Lake on behalf of a group of investors. Mr. Middleton referred to a translation agreement which gives Mr. Lam and Ms. Deng the ability to give instructions on behalf of Mr. Deng and the officers of West Lake, and also gives the officers of West Lake authority to rely on those instructions. [ 25 ] Although Mr. Deng and Mr.

Lam submit that the translation agreement only gives them limited authority, it includes the following paragraphs: AND WHEREAS pursuant to an agreement dated May l, 2018 (the "Original Agreement") each of Mr. Deng and Mr.

Huang appointed Xiaobo (Lake) Deng and Michael Lam (the "Translators") as their due and authorized translators for the purposes of communicating their views, decisions and opinions from time to time in respect of the Corporation to the Corporation's other directors and its officers. employees and other agents in the English language and to receive communications, in the English language, with such persons. ...

By acceptance of this Agreement, [West Lake] and all other directors, officers, employees and other agents of [West Lake] are hereby authorized and entitled to rely on the communications of the Translators as the true and authorized communications (written or oral) of each of Mr. Deng and Mr. Huang, as applicable, without any further act of inquiry or investigation and all of such third parties are hereby authorized to provide any and all communications to the Translators. in the course of any intended communication to either Mr. Deng or Mr.

Huang, as applicable, in the English language in the course of any communications required to be given to said directors, in their capacities as directors of the Corporation. [ 26 ] It is therefore apparent that the authority given to Ms. Deng and Mr. Lam by the agreement extends beyond mere translation. 13) Mr. Zhang provided emails to indicate that Ms. Deng was giving instructions to counsel for West Lake in April 2017 on the Twin Butte transaction. Mr. Neu gave Mr. Zhang copies of Mr.

Lam's instructions with respect to the transfer of money out of H Corp. 14) Ultimately, H Corp retained PricewaterhouseCoopers to conduct a “forensic” investigation with respect to this matter, supplying it with all of the banking documents, letters, closing documentation and emails that they had gathered in their investigation. [ 27 ] The Defendants object to the characterization of the PricewaterhouseCooper’s report as a “forensic” investigation. Mr. Zheng’s affidavit states that H Corp’s counsel engaged PWC to provide “forensic assistance”.

The evidence before me at the initial application was not misleading with respect to the nature and limitations of the report: those limitations are clear on its face and counsel for H Corp pointed them out at the ex parte application. My oral decision, when using the term “forensic investigation”, does not suggest that the report was less limited than it is. [ 28 ] The report indicates the following: H Corp ultimately received $353,978,331 from entities through which the Chinese investors flowed the funds.

From H Corp's bank accounts for the period from December 16 th , to December 31 st , 2018, PWC identified and quantified payments made to and/or received from entities that could not be associated with the Twin Butte acquisition and capital injections into West Lake. [ 29 ] $276,938,102 was used in connection with the purchase of Twin Butte assets and other operational related purposes. [ 30 ] PWC identified $77,006,491 in net payments from H Corp’s bank accounts that were paid to or received from entities unrelated to the above-noted investment purpose. PWC notes that Mr.

Zhang advised them that these net payments were made without the knowledge, approval or authorization of the partnership. [ 31 ] The ending balance in H Corp’s accounts as at December 31 st , 2018 was $33,738. [ 32 ] PW identified the following unrelated entities involved in a number of transactions: Calgary Sinoenergy, Long Run, Alberta Sinoenergy Petroleum Corporation, New Star Energy Ltd., and an unknown entity. [ 33 ] I found from evidence before me at the time of the ex-parte application that approximately $44,000,000 remained unaccounted for.

H Corp submitted that these funds were diverted without knowledge, approval or authorization and for purposes other than the acquisition of Twin Butte assets and the necessary capitalization of West Lake. [ 34 ] The unrelated entities all share common directors, Mr. Deng and Yongsheng Wu (phonetic). The documentation indicates that Calgary Sinoenergy received net $76,956,491 from H Corp., Long Run received net $150,000 from H Corp and $11.15 million of H Corp funds from Calgary Sinoenergy.

Long Run paid $1,462,292 into H Corp for its benefit. [ 35 ] It was on this basis that I found that H Corp had established a strong prima facie case. [ 36 ] Counsel for H Corp was candid and fulsome at the hearing, noting the possible defences the Defendants may have raised on the evidence as it had been presented. [ 37 ] Mr. Deng, Ms. Deng and Mr. Lam submit that there is new evidence that renders the finding of a strong prima facie case invalid. [ 38 ] These documents consist of a "Shareholders Declaration" made effective as of April 10 2017. The declaration states that it is

made by York City Enterprises Ltd. as the holder of all of the shares of H Corp, and it is signed by someone described as a director of York City. York City is one of the vehicles used to funnel the funds from China in order to avoid Chinese currency controls. The declaration states that York City wishes to make a declaration pursuant to

section 146 of the Alberta Business Corporations Act , which allows the restriction or amalgamation of the powers of the directors of a corporation by way of a unanimous shareholders agreement. [ 39 ] The declaration is described as relating to an agreement dated April 10, 2017 with respect to a loan in the amount of $58.76 million to Calgary Sinoenergy (described as the “Abrogated Actions”), and states that it relieves all of the directors of H Corp of their duties and liabilities to the fullest extent permitted by the ABCA as it relates to the Abrogated Actions. [ 40 ] The declaration restricts the powers of the directors of H Corp “to the fullest extent permitted by the act and by law as it relates to the Abrogated Actions”, and gives such powers to York City “as it relates to the Abrogated Actions”.

The declaration purports to approve the execution of the loan agreement by York City. [ 41 ] Specifically, Mr. Lam is appointed: ...as a special representative of [H Corp], authorized to handle banking matters and all actions taken by Mr. Lam in such capacity be approved and ratified, and Mr. Lam be specifically directed and authorized to carry out such actions as may be necessary or desirable in furtherance and pursuant of the performance of the transaction under the Loan Agreement. [ 42 ] The loan agreement, which is attached to the declaration, is between Calgary Sinoenergy and York City.

The loan is unsecured and bears interest at prime plus 100 bps. It is stated to be repayable on the “Termination Date”, which appears to be undefined. [ 43 ] In cross-examination on his affidavits, Mr. Zhang denied that the declaration and loan agreement are valid, and stated “that the current board of directors of H Corp and York City and even the two funds and all the investors think this loan agreement is a fake one”. He stated that the first time he and others from H Corp had heard about the loan agreement was from a public notice that Changchun Sinoenergy Energy distributed in China two months prior to Mr.

Zhang’s cross-examination. When he learned of the declaration, he was “shocked”. Mr. Zhang further indicated that the current board of H Corp believes that the loan agreement is fake not only because they had never heard of its existence until recently, but also because, based on H Corp’s internal controls, if anyone had signed a document of that nature, the parent companies and the investors would have been notified. [ 44 ] Changchun Sinoenergy is a majority shareholder in Sinoenergy Oil, which in turn holds 100% of the shares of Calgary Sinoenergy. As confirmed by Mr. Lam, Mr.

Deng is a “significant shareholder in Changchun Sinoenergy. [ 45 ] Mr. Lam states in an affidavit that Changchun Sinoenergy referred to the existence of the loan agreement in a press release dated June 5, 2020 in response to inquiries made by the Shanghai Stock Exchange with respect to H Corp’s claims. The loan agreement was not included in the press release. [ 46 ] Mr.

Lam says that the purpose of the loan to Calgary Sinoenergy was to repay Calgary Sinoenergy, Canadian Advantage Petroleum Corporation (a related company) and New Star for their contributions to the deposit that needed to be made to facilitate the purchase of the Twin Butte assets (which appears to be roughly $26 million). Ms. Deng says that the second reason for the loan was to fund a drilling program by Long Run that would allow it to create cash flow, boosting the price of Changchun Sinoenergy, and thereby facilitating the exit strategy of the Chinese investors under the investment agreements. Ms.

Deng suggests that the loan was therefore a benefit to H Corp. H Corp disagrees and submits that it only benefits Mr. Deng with respect to his buy-out obligation. [ 47 ] According to Mr. Lam, the Changchun Sinoenergy press release states that over $93 million was transferred from H Corp to Calgary Sinoenergy, despite H Corp not being the lender under the loan agreement, and $92.150 million of that was transferred to Long Run. [ 48 ] The amount of the transfers to Calgary Sinoenergy from H Corp are well in excess of the $58,760,000 loan facility in the purported loan agreement.

Although the purported loan agreement states the amount can be increased by York City, there is no evidence that York City ever did so. [ 49 ] According to Mr. Lam’s affidavit: Regarding the net amount owed to H Corp, Changchun Sinoenergy responded that CAD $46,984,593.88 was transferred from Calgary Sinoenergy to H Corp and York City and RMB $49,790,000.00 (approximately CAD $9.96 million) was paid by Long Run and affiliates for interest payments on behalf of York City and affiliates. [ 50 ] The only evidence of this other than Mr. Lam's statement is a Chinese document that Mr. Lam purports to translate.

Relying on a series of other untranslated documents attached to his affidavits, relating to other debts and payments involving third parties, Mr. Lam states in his September 11, 2020 affidavit that the amount owing to H Corp is approximately $16.5 million. [ 51 ] In his August 15, 2020 affidavit, he states that the amount owing to H Corp according to a December 6, 2019 analysis done by an employee of one of the Chinese limited partners is approximately $21.66 million. This he supports by reference to untranslated emails among representatives of Calgary Sinoenergy, H Corp and the Chinese investors. Mr.

Lam also refers to other untranslated WeChat excerpts that he says suggest that the amount owing is between $17.32 million and $18.8 million. He also alleges that no-one in the WeChat discussion has suggested misappropriation. However, Mr. Lam is not a participant in these exchanges. [ 52 ] Mr. Lam in an affidavit states that, at a meeting on or about April 2017, he advised Mr. Neu and representatives of the Chinese investors of the declaration and loan agreement, and filed a copy in the H Corp minute book. [ 53 ] Mr.

Lam submits that the investors must have known about the funds flowing from H Corp to Calgary Sinoenergy because a 2017 PowerPoint presentation to West Lake investors identified “Capital Injection” of $42 million in one of the slides. Mr. Lam argues that since $42 million was approximately half of the $80 million contributed by the Chinese investors in excess of the purchase price of

the Twin Butte assets, it should have been clear that not all of the excess funds were being used to fund West Lake. It is not clear who the “investors” were who were given the presentation, and also not as clear from this isolated fact as Mr. Lam suggests that funds were being directed to Calgary Sinoenergy and Long Run. [ 54 ] Mr. Lam also refers to H Corp’s August 2017 Financial Statements in his affidavit, but again this document is untranslated. [ 55 ] As noted, H Corp and the investors deny knowledge of the documents.

This is a matter for trial. [ 56 ] However, given that the transfer of funds from H Corp to Calgary Sinoenergy exceed the amount authorized by the loan agreement, and given the issues relating to the declaration and loan agreement as described herein, the existence of these documents is not sufficient to negate the prima facie case that was established by H Corp at the ex parte application and that continues to be established in this application. [ 57 ] I continue to be satisfied, in accordance with the Mareva requirements set out in Chitel v Rothbart , that there is a serious issue to be tried. [ 58 ] With respect to the attachment order, as recently noted by the Court of Appeal in Bank of Nova Scotia v Five Star Motor Group Ltd . , 2020 ABCA 244 at para 17 : The substance of the test for an attachment order is found in s. 17(2) [ of the Civil Enforcement Act ] First there must be a "reasonable likelihood" the applicant's claim will be established.

The "reasonable likelihood" test under the statute is arguably lower than the test of a "strong prima facie case" that might be needed for a common law Mareva injunction : Cho v. Twin Cities Power​Canada U.L.C. , 2012 ABCA 47 (Alta. C.A.) at para. 5 , (2012), 522 A.R. 154 (Alta. C.A.). The applicant need not prove the claim on a balance of probabilities, but something more than mere suspicion is required. [ 59 ] H Corp has satisfied the “reasonable likelihood” case, particularly through the evidence of the falsified financial statements and bank records that were produced during the meeting in October, 2018.

Sufficient supporting evidence exists to establish such a reasonable likelihood beyond mere belief or speculation. The involvement of Mr. Dang, Mr. Lam and Ms. Deng in the events that give rise to the claim has also been established to a reasonable likelihood. C. Assets in the Jurisdiction [ 60 ] It is clear from their evidence that Mr. Lam and Ms. Deng have assets in Alberta. Mr. Deng did not file an affidavit.

However, as noted by H Corp, he is a significant shareholder in Changchun Sinoenergy which is the majority shareholder in Sinoenergy Oil, which holds 100% of the shares of Calgary Sinoenergy, although, as described later in this decision, his shareholdings in Changchun Sinoenergy may be frozen or diminished. As counsel noted in the ex-parte application, whether Mr. Deng has assets in the jurisdiction is less clear, but he has through Changchun Sinoenergy, and possibly through other entities in the complicated chain of its subsidiaries, an indirect interest in both Calgary Sinoenergy and Long Run. D.

Risk of Dissipation [ 61 ] The next part of the Mareva requirements is whether there are grounds for believing that there is a risk of assets being removed before a judgement is satisfied or, in the words of the Civil Enforcement Act , there are “reasonable grounds” that the defendants are likely to deal with their assets out of the ordinary course of business, and in a way that is “likely to seriously hinder the claimant” in recovering its claim. [ 62 ] The fact that the claim is in fraud or other similar misconduct, and if it is “reasonably likely” that the claim will be established under the first part of the tests may support an inference that the defendants are likely to deal with their assets in a way that will satisfy this part of the test: Osman Auction Inc. v Belland , 1998 ABQB 1095 (Alta.

Q.B.) at para 28 . [ 63 ] While in the Nova Scotia case, the potential inference identified in Osman Auction was not sufficient to overcome the gap in the factual record, this is not a case, as in Nova Scotia , where a receivership order could eliminate risk. [ 64 ] H Corp submits, based on Sibley & Associates LP v Ross , 2011 ONSC 295 , that dissipation can be inferred from the circumstances and the course of conduct undertaken by the defendants. [ 65 ] In Sibley , the evidence established that the defendant had made payments from the company to his mother over a period of several years, totaling in excess of $300,000.

Strathy, J. found that that the evidence established “a very strong prima facie case” of fraud, but there was no direct evidence of either the former employee or his mother’s financial circumstances or that they were dissipating their assets or proposing to remove them from the jurisdiction. [ 66 ] After review with cases dealing with the granting of a Mareva injunction, the Court concluded that where all the circumstances, including the circumstances of the alleged fraud, demonstrate a serious risk that the defendant will attempt to dissipate assets or put them beyond the reach of the plaintiff, the court may infer dissipation and/or removal of assets: para 62. [ 67 ] Mr.

Lam is a close associate of Mr. Deng and Ms. Deng is his daughter. They have acted as his representatives with respect to the events given rise to H Corp’s claim. It is clear from public notices from Changchun Sinoenergy described later in this decision that Mr. Deng may be subject to significant financial risks. It is clear from the investment agreement that he requires funds to buy-out the limited partners. Mr. Lam has significant investments in properties in Alberta and Ms. Deng is the director of a company incorporated to hold real estate in Alberta. Given their previous conduct on behalf of Mr.

Deng, the Osman Auction inference is warranted. [ 68 ] While Mr. Deng may no longer be a director of Calgary Sinoenergy or Long Run, he remains connected to these companies

through his involvement with Changchun Sinoenergy, although the extent of his involvement is unclear. Mr. Deng's involvement inChangchun Sinoenergy's subsidiaries is unknown. Given that the claim against Mr. Deng is in fraud, and given the strength of the primafacie against him, the Osman Auction inference is sufficient to satisfy the test in his case. E.

Irreparable Harm [69] H Corp cites East Guardian SPC v Mazur, 2014 ONSC 6403 at para 41 with respect to the Mareva requirement that theapplicant must show that irreparable harm would occur if the order is not granted: The normal basis for irreparable harm in cases of this kind is that, if the respondent’s assets are not secured, there will be no way for theapplicant to collect on a money judgement. [70] This principle was affirmed in OPFFA v Paul Atkinson et al, 2019 ONSC 3877 at para 25. [71] The Court in Rana v Malik, 2014 ONSC 701, where the defendants had some assets in the jurisdiction and had family andbusiness ties in Pakistan, found irreparable harm in the risk that the defendants may transfer their assets beyond the reach of the plaintiff.The Court found such a risk to be “more than simply mere speculation” because the conduct of the defendants included creating forgeddocuments to hide or misrepresent their fraudulent conversion and because of “their ability and experience to transfer investmentsquickly in and out of Canada”: para 78.

While Canadian assets included a house registered in the name of one of the defendants, theCourt noted that a related defendant was the one likely in control of the business. The evidence in this case, including the allegations offraudulent financial statements and ability to transfer funds cross-border despite Chinese currency controls, is also sufficient to indicate arisk of irreparable harm that is more than mere speculation. [72] These authorities support a finding of irreparable harm with respect to Mr. and Ms. Deng, but Mr.

Lam submits that hissituation is similar to that of the defendants in HZC Capital Inc v Lee, 2019 ONSC 4622, where the Court found that there was noevidence of off shore assets or businesses or any indication the defendants may move their assets off shore to avoid judgement or thatthey would not be in a position to pay any judgement ordered. [73] However, in that case, the Court dismissed the application against most of the defendants on the basis that the applicant hadnot established a strong prima facie case, there was no evidence of risk of dissipation and it could not be concluded that the defendantswould not have assets sufficient to satisfy any judgement in respect of the alleged wrongful conduct.

In this case, I have found evidenceefficient to establish a strong prima facie case with respect to Mr. Lam and his involvement in the movement of funds into Canada. Ihave also found substantial evidence of his involvement in a strong prima face case of fraudulent conduct with respect to the provision ofmisleading financial statements to H Corp’s representatives. Given these factors, I find that H Corp has established a more thanspeculative case of risk of irreparable harm with respect to Mr.

Lam. [74] H Corp has established that there is a real risk that the defendants are able to move funds in and out of Canada. That risk isapparent from the complex means by which funds were moved out of China despite currency controls. That, plus the fact of forgeddocuments, establishes a risk of dissipation, and thus irreparable harm. F.

Balance of Convenience [75] The balance of convenience test requires the Court to consider whether the harm suffered by the applicant if the order is notmade exceeds the harm that will be suffered by the respondent if it is: RJR-MacDonald Inc. v Canada (Attorney General) (SCC), [1994] 1 S.C.R 311 at para 67. [76] H Corp submits that the balance of convenience favours granting the order, because, if the order is not granted, the defendantswill be able to put their assets beyond reach. H Corp also notes that it has consented to multiple orders amending the order in order toallow Mr. Lam and Ms.

Deng to continue to access funds for living expenses and to engage in ordinary business transactions, and thatthus any inconvenience to the defendants can be off-set by such orders, given H Corp's demonstrated willingness not to burden thedefendants more than necessary to achieve the purpose of which the order was granted. [77] I find that the balance of inconveniences favours H Corp. G. Other Issues A. Delay [78] The defendants submit that H Corp’s delay in seeking the order is fatal to this application.

The fact of delay by an applicant,quite apart from any question of prejudice to the defendant, may often indicate that the risk is not significant enough to warrantinterlocutory relief: Secure 2013 Group v Tiger Calcium Services Inc., 2017 ABCA 316 at para 126. [79] Counsel for H Corp addressed the issue of delay at the time of the ex-parte application.

He referred to the delay in release ofthe PWC report, delay caused by Covid-19 (conceding that the pandemic was not the cause of all of the delay) and the delay caused bythe fraudulent concealment of the true financial statements and bank statements. [80] As noted in ICI Americas Inc. v. Ireco Canada Inc. (1985),-7C.P.R. (3d) 1 (Fed. T.D.) at p. 10: In general it is the effect of delay, not the fact of delay that precludes a party from obtaining an interlocutory injunction.

For example,effects which make delay a reason for refusing an interlocutory injunction are: (1) the defendant has prejudiced his position during thetime of delay, as for example, through the expenditure of money in developing a business; or (2) delay is evidence that the plaintiff does

not consider interdiction of the infringement an urgent or pressing matter. [ emphasis added by the Court]. [ 81 ] H Corp refers to O2 Electronics Inc. v Sualim , 2014 ONSC 5050 , at paras 89-90 where the Court held: Similarly, the delay from December 2013 to July 2014 in taking steps to secure its own Mareva injunction is problematic, because a plaintiff's delay in seeking an equitable remedy may justify refusing the remedy. However, in the circumstances of the immediate case, Mrs.

Sualim knew the claim was coming, and I do not see how her position has changed detrimentally by the delay in 02 Electronics seeking the Mareva injunction. She remains entitled to apply for modifications to the Order for normal business and living expenses and for legal fees. [ 82 ] In Kingston Technology Co. v. Orr [2001] O.J. No. 2386 (Ont. S.C.J.) Swinton J. noted at paragraph 8: In my view, it would not be appropriate for me to dismiss the motion for a Mareva injunction despite the lengthy delay in bringing it on for a hearing on the merits.

While delay is clearly a factor that courts consider in determining whether a Mareva injunction should be granted, so, too, are the merits of the case and the prejudice to the plaintiff (R.J. Sharpe, Injunctions and Specific Performance, 3d ed. at para. 1.840). [ 83 ] In this case, the merits of the case clearly support the issuance of the Mareva inunction/attachment order. In the circumstances the delay is explicable, and there is no evidence that it has caused prejudice to the defendants.

I, therefore, would not dissolve the Mareva injunction on the grounds of delay and want of notice in seeking injunctive relief. [ 84 ] There is no reason to conclude that H Corp should have proceeded with its application on the basis of a “draft” PWC report, as suggested by Mr. Lam. B. Lack of Candour [ 85 ] The defendants submit that H Corp failed to be candid in its submissions to the Court in support of the ex-parte application. Some of these submissions have been referred to previously. The following are those that have not yet been noted:

a) The defendants suggest that H Corp failed to make full and frank disclosure with respect to Mr. Neu’s knowledge and approval of transfers out of H Corp. I cannot agree with this submission: counsel for H Corp advised me of this during the ex parte application, and the materials before me indicated that Mr. Neu had given his approval to many of the transfers. However, Mr. Zhang’s affidavit explains that Mr. Neu advised that Mr. Lam told him that Mr. Deng wanted the transfers done, and that he was under the impression that Mr. Deng controlled the funds behind H Corp. The issue of the hearsay nature of this evidence is addressed later in this decision.

b) The defendants allege that Mr. Zhang intended the Court to be misled by media reports about tax evasion and the financial situation of Long Run. The limited value of these reports was apparent on their face, and counsel for H Corp referred to the dated nature of the Long Run information. In my oral decision, I referred to this information as being “contextual” information, and described the dates of the report and the name of the individual who was investigated by the CRA.

c) It is submitted that Mr. Zhang failed to disclose that the parties had been discussing the claim in a WeChat virtual working group in December 2019, including discussions with respect to the correct amount of the claim. The issue is whether the fact that there were discussions and negotiations among the parties with respect to the claim is vital evidence that should have been disclosed to the Court.

While it may have been more complete to disclose these discussions at the time of the ex-parte application, I cannot say that they would have changed the outcome, or that they change the outcome of this application. Only a portion of the WeChat discussions have been provided by Mr. Lam, who is not a participant in the discussions, and they have not been properly translated.

d) The defendants allege that Mr. Zhang admitted in cross-examination on his affidavits that he asked the Court to draw an adverse inference against the defendants with respect to the $2 million payment from New Star, even though he could have asked for clarification from Mr. Neu. The transcript of Mr. Zhang’s cross-examination does not support this allegation. Mr. Zhang’s evidence on this issue is more nuanced than this and not an admission as alleged. At any rate, I did not draw such an adverse inference.

e) The defendants submit that the corporate diagram that Mr. Zhang says was relied upon by Mr. Middleton to support his belief that Mr. Deng was either the ultimate owner of West Lake or, at the least, had authority to conduct West Lake’s business on behalf of a group of investors, could not possibly lead anyone to believe that Mr. Deng controlled H Corp. I note first that Mr. Zhang does not say that Mr. Middleton relied upon this corporate diagram, but does say that it is inaccurate. Mr. Lam included a different ownership structure in his affidavit, and noted that the ownership diagram in Mr.

Zhang’s affidavit was “not entirely wrong”, but that there were some intermediate Chinese companies missing from the chart. Therefore, Mr. Zhang was not incorrect when he described the original diagram as inaccurate. Mr. Lam’s diagram discloses that, while Mr.

Deng may only be a 5% owner of Wuhan LP, one of the Chinese limited partners, Wuhan owns approximately 53% of Jingzhou Heping Energy Co Ltd. to Jingyin LP’s approximately 47%, that Jingzhou owns approximately 99% of Quingdao Sinoenergy Yuheng Co Ltd, which holds 100% of York City Enterprises, a British Virgin Islands company which holds 100% of H Corp, which holds 100% of West Lake. This indicates a far more complex structure than was indicated in the diagram that Mr. Zhang says was provided to Mr. Middleton by Mr. Lam. Whether or not the incorrect ownership structure that Mr. Middleton provided to Mr.

Zhang could support Mr. Middleton’s view of Mr. Deng’s authority is a matter for trial. However, the submissions on this issue by the defendants do not support a lack of candour or disclosure by H Corp.

f) It is alleged that Mr. Zhang’s evidence misrepresents Mr. Lam’s role. The evidence of Mr. Lam on this issue does not support any misrepresentation by Mr. Zhang. [ 86 ] In

summary, I do not find that H Corp or its counsel failed in their duty to provide full and frank disclosure in the ex-parte

application, or that Mr. Zhang misrepresented any facts or information. C. Other objections [ 87 ] The defendants submit that H Corp’s undertaking as to damages is without substance because Mr. Zhang acknowledged that H Corp does not have much cash as it is not an operating company. However, it owns the shares of West Lake, an operating company in Alberta with substantial assets. [ 88 ] The defendants submit that the order is deficient in that it does not stipulate that it expires automatically after 21 days.

While subsection 18(2) of the Civil Enforcement Act provides for an expiration date of not more than 21 days, subsection 18(3) provides that, if the court is satisfied that it would be inappropriate for an ex-parte attachment order to expire automatically after 21 days, the order may specify a later expiry date or specify that it remains in force and effect until it terminates in accordance with

section 19 . The order granted in this case provided for termination as set out in section 19(1) . H. Conclusion on the Application of Mr. Deng, Ms. Deng and Mr. Lam [ 89 ] The ex parte order is confirmed as it relates to Mr. Deng, Ms. Deng and Mr. Lam. [ 90 ] The defendants submit, correctly, that some of H Corp's evidence supplied in Mr. Zhang's affidavits is hearsay advice from Mr. Neu and Mr. Middleton, among others. I agree that Mr. Neu and Mr. Middleton's evidence is important and should be provided by them directly.

I therefore direct that the order will terminate three months from the date of this decision unless H Corp provides affidavits from Mr. Neu and Mr. Middleton. The order will otherwise terminate as set out in section 19(1), subject to further order of the Court. III. Application of Calgary Sinoenergy Investment Corp. and Long Run Exploration Ltd. [ 91 ] The defendants Calgary Sinoenergy and Long Run submit that the order should be set aside because: (

a) H Corp. failed to show a strong prima facie against Calgary Sinoenergy and Long Run; (

b) material information was not disclosed to the Court; (

c) H Corp. failed to demonstrate any urgency that required the order and was guilty of delay in applying for it; (

d) the order should have contained a expiry date; (

e) there were no financial caps in the order commensurate with the alleged amounts in issue included in the order; and (

f) there was no evidence of risk of dissipation or removal of assets as against Calgary Sinoenergy and Long Run and thus H Corp. did not show irreparable harm. [ 92 ] Calgary Sinoenergy and Long Run provided the following information: (

a) The defendant Tianzhou Deng stopped being a director of Calgary Sinoenergy and Long Run on November 18, 2019, two days before Mr. Zhang's affidavit of November 20, 2019 was sworn. It appears that the notification of change of directors was filed on November 19, 2019, the day before the affidavit was sworn. The affidavit stated that Mr. Deng was a director of Calgary Sinoenergy, Long Run and West Lake Energy Corp., a wholly owned subsidiary of the H Corp., which was true before November 18, 2019. (

b) The defendant Lake Deng ceased to be a director of Long Run on or about January 27, 2020. She was a director of Long Run when the affidavit was sworn. She was never a director of Calgary Sinoenergy, but H Corp. does not allege that. (

c) The defendant Michael Lam was removed as the VP Finance of Calgary Sinoenergy “by” January 10, 2020. He was never a director or office of Long Run, but H Corp. did not allege that. Mr. Lam confirmed in his cross-examination of affidavit on September 17, 2020 that he had been VP Finance for Calgary Sinoenergy “from beginning to the end”, and also VP Finance for Alberta Sinoenergy “from beginning to the end” and that he was VP Finance for New Star Energy Ltd. and the CEO of New Star Energy. Thus, the November affidavit was not inaccurate with respect to Mr. Lam. (

d) New Star Energy Ltd. was not a subsidiary of Calgary Sinoenergy but of Alberta Sinoenergy Petroleum Corp. The November affidavit disclosed this. (

e) Mr. Lam in his subsequent cross-examination on affidavit refereed to what is described as a Shareholder Declaration of H Corp. signed by a director of York City Enterprises Ltd. on April 10, 2017, one of the intermediary companies involved in the transfer of funds from H Corp. to West Lake. This declaration has been described previously in this decision [ 93 ] It is correct that, in my reasons for decision, I relied on the information that Mr. Deng was a director of Calgary Sinoenergy and Long Run, and that Ms. Deng was a director of Long Run in granting the order against the corporate defendants.

Given that Mr. Deng and Ms. Deng are no longer directors of these two companies, I must consider if there is sufficent evidence to establish that either of them currently have the ability to move funds in and out of the jurisdiction or to dispose of assets through the corporate defendants Calgary Sinoenergy and Long Run, one of the essential requirements of both the test for a Mareva order and the test for an attachment

order. [ 94 ] There remains considerable evidence that Mr. Deng, Ms. Deng and Mr. Lam were involved with Calgary Sinoenergy and Long Run during the period of time that H Corp. alleges that it was wrongfully deprived of approximately $44 million. That issue, however, is a matter for trial. The evidence with respect to any current relationship they may have to the corporate defendants is as follows:

a) None of Mr. Deng, Ms. Deng or Mr. Lam are directors or officers of either Calgary Sinoenergy or Long Run.

b) Changchun Sinoenergy Corp is a majority shareholder in Sinoenergy Oil Investment Ltd., which in turn holds 100% of the shares of Calgary Sinoenergy. As Sinoenergy Oil is a British Virgin Islands company, it is not possible for H Corp to determine who its shareholders are, and Sinoenergy Oil has not disclosed this.

c) Mr. Deng is one of the founders of Changchun Sinoenergy, which is publicly traded on the Shanghai stock exchange. Until recently, Mr. Deng was the President of Changchun Sinoenergy.

d) On October 25, 2019, Changchun Sinoenergy issued a public notice advising that, pursuant to a court decision, the shares in Changchun Sinoenergy held by Mr. Deng, Quingdao Capital and another individual had been frozen for a period of three years.

e) On January 2, 2020, Changchun Sinoenergy issued a notice indicating that a portion of Mr. Deng's shares, which had been subject to various pledging and freezing orders by the court, were judicially auctioned, resulting in a significant decrease in Mr. Deng's shares in Changchun Sinoenergy.

f) On January 13, 2020, Changchun Sinoenergy issued a notice, confirming that the portion of Mr. Deng's shares that had been judicially auctioned had been transferred.

g) On January 21, 2020, Changchun Sinoenergy issued a notice that, due to its losses, the company faced being delisted from the Shanghai Stock Exchange.

h) On February 28, 2020, Changchun Sinoenergy issued a "second warning" notice, again warning stakeholders that, as a result of its losses, it may be delisted.

i) On September 9, 2020, Changchun Sinoenergy posted a press release advising that Mr. Deng was subject to a 5-year market ban on being a director or senior executive of companies listed on the Shanghai Stock Exchange. [ 95 ] All of these documents are in the Chinese language, but none of the parties have disputed their accuracy. [ 96 ] While it is possible that Mr.

Deng may still be a director or shareholder of an unlisted Changchun Sinoenergy or its subsidiaries despite his and the company's financial difficulty and may still be in a position to exert some control over Calgary Sinoenergy, H Corp has not adduced evidence sufficient to establish its burden of proof on this necessary requirement for an attachment order or Mareva injunction. [ 97 ] Therefore, the pre-trial attachment order against Calgary Sinoenergy and Long Run must be set aside. [ 98 ] With respect to the allegations of lack of candour by H Corp, while it would have been prudent to check the corporate registries of Calgary Sinoenergy and Long Run in the months leading to the application, counsel to H Corp. did not deliberately fail to disclose material information to the Court.

As noted, the change of directors took place only a day before the affidavit was sworn with respect to Mr. Zhang, and months afterwards with respect to Ms. Deng. Counsel did not misrepresent the Globe and Mail

article of 2018 about Mr. Yang, or misrepresent that date of the 2015

article about the financial condition of Long Run, nor did it misrepresent the time period of Mr. Deng, Ms. Deng and Mr. Lam’s involvement with the companies. My reasons identified the date of the Long Run

article and the date Calgary Sinoenergy acquired Long Run, as well as a correct reference to Mr. Yang’s involvement, which was not in any event material to my decision. [ 99 ] While information has arisen subsequent to the order that may be material, that evidence was not available to H Corp at the time of the application, or is disputed by H Corp.

As noted previously, I was not misled about the nature of the PricewaterhouseCoopers report, which I reviewed before giving my decision. [ 100 ] As I have decided that the attachment order of Calgary Sinoenergy and Long Run should be lifted, it is not necessary that I address the other alleged deficiencies in the application referred to by Calgary Sinoenergy and Long Run. Dated at Calgary, Alberta this 3 rd day of March, 2021. B.E. Romaine J.C.Q.B.A.

Appearances: Andrew Wilson and Erin Baker for the Plaintiff/ Respondent Henenghaixin Corp Lillian Pan Q.C. and Steven Latos for the Defendants/ Applicants, Calgary Sinoenergy Investment Corp and Long Run Exploration Ltd. Steven H. Leitl, Q.C. and Sunny Mann for the Defendants Tianzhou Deng and Lake Deng David J. Wachowich, Q.C. For the Defendant Michael Lam