2018 QCCQ 4569, 2018 QCCQ 4569

Wang c. 9283-7178 Québec inc. (Zhongcheng International Education) 2018 QCCQ 4569 COURT OF QUÉBEC « Small Claims Division»

CANADA PROVINCE OF QUÉBEC DISTRICT OF MONTRÉAL No: 500-32-702469-174 DATE: July 4, 2018 ______________________________________________________________________ BEFORE THE HONOURABLE MARIE-JULIE CROTEAU, J.C.Q. ______________________________________________________________________ SISI WANG Plaintiff v. 9283-7178 QUÉBEC INC. (Zhongcheng International Education) Defendant ______________________________________________________________________ JUDGMENT ______________________________________________________________________ [ 1 ] Mrs.

Sisi Wang is seeking the reimbursement of her investment in 9283-7178 Québec inc., carrying on business under the trade name of Zhongcheng International Education (“ Zhongcheng International Education ”). [ 2 ] Essentially, she contends that she accepted to invest based on representations that she would become a shareholder of Zhongcheng International Education, which never happened. She is thus claiming $15,000.00 [1] . [ 3 ] Mr. Gang Cheng, President of Zhongcheng International Education, claims that Mrs.

Wang is a shareholder and alleges that she is not entitled to have her investment back since the company did not make any profit. QUESTION IN DISPUTE [ 4 ] The Court must determine whether Mrs. Wang is entitled to the reimbursement of the price she paid to Zhongcheng International Education because she never became a shareholder, contrary to the representations made by Mr. Cheng. CONTEXT [ 5 ] Mrs. Wang came to Canada to study. She met Mr. Cheng who acted as her agent and appl ied for her study permit. [ 6 ] The evidence concerning what led Mrs. Wang to invest her money is contradictory. [ 7 ] Mrs.

Wang explained that Mr. Cheng convinced her to invest $20,000.00 in the language school he operated by giving her three specific guarantees. Firstly, her investment would be at all times reimbursable. In other words, whether the company would be making or losing money, she would be able to recover her funds. Secondly, in return of her investment, she would get 25 % of the shares of the company. Finally, Mr. Cheng would later offer her a job within the language school. [ 8 ] Mr. Cheng claims that he specifically told Mrs.

Wang that each shareholder was to pay $20,000.00 for their participation in the business, that all the profits would be shared equally between the shareholders and that the same would apply in case losses were incurred. He explained that in addition to her personal investment, there would be three other investors: himself, Mr. Yuan Zhong and Mr. Chunyang Dong. He argues that Mrs. Wang knew the risks at stake and agreed to invest based on those terms. [ 9 ] On June 1, 2016, based on the representations made by Mr. Cheng, Mrs.

Wang made a check in the amount of $20,000.00 payable to Zhongcheng International Education . In the memo

section of the check, she wrote “ Shareholder Investment Reimbursable for Multi-Language School with 9283-7178 Quebec inc .”. She remitted the cheque directly to Mr. Cheng. [ 10 ] Again, the evidence concerning Mrs. Wang’s status in the company is contradictory. [ 11 ] Firstly, Mrs. Wang contends that a meeting was scheduled to confirm her shareholder status, but it never took place . [ 12 ] Although she paid $20,000.00 , Mrs.

Wang argues that she never became a shareholder as she never signed any shareholder ’s agreement and never receive d any certificate of shares or legal documentation confirming her shareholder status. Furthermore, she argues that she was never treated as a partner or a shareholder by Mr. Cheng . For example, she never participated to any shareholders’ meeting, if there was any, and never received any financial data concerning the company. [ 13 ] Mrs. Wang emphasizes that her name does not appear on the Quebec Enterprise Register ( Regist er ), although Mr. Cheng and

Mr. Zhong are respectively identified as president and majority shareholder , and as secretary and second shareholder of the company . [ 14 ] On the other hand, Mr. Cheng states that Mrs. Wang is a shareholder as she holds 25 % of the 100 shares issued by the company. He believes there is legal documentation supporting his position, but he cannot be more precise as to the nature of it, nor did he file any. Mr. Zhong testified and confirmed that the four investors contributed the same amount and that they hold an equal number of shares.

Although he did not receive any legal documentation confirming same, he entirely trusts Mr. Cheng. [ 15 ] As for the information published by the Register , Mr. Cheng explain s that Mrs. Wang specifically asked him not to m ention her name because she thought it could hurt her student application request . The same applies to Mr. Dong , since he did not have a legal status in Canada . [ 16 ] At one point in time, Mrs. Wang was informed that Mr. Cheng is not a Canadian citizen, contrary to what he had told her. She became very skeptical .

In addition to this, the fact that she had not receive d any legal documentation led her, in December 2016, to ask Mr. Cheng for the reimbursement of her investment. She states that Mr. Cheng agreed to do so, but only when he would have enough money. [ 17 ] On June 7, 2017, Mrs. Wang sent a message to Mr. Cheng requesting the reimbursement of her investment . Mr. Cheng first responded that “ there is not much money left in the banking account of my company ” and then added “ as soon as I have the money, I will give it back to you .” [ 18 ] On July 11, 2017, Mrs.

Wang sent a letter of demand to Zhongcheng International Education , addressed to Mr. Cheng and Mr. Zhong , but to no avail . ANALYSIS [ 19 ] In civil matters, a person wishing to assert a right must prove the facts on which their claim is based [2] . The evidence will be weighed on a balance of probabilities [3] . [ 20 ] Based on the preponderance of evidence , the Court concludes that Mrs. Wang has demonstrated that she agreed to invest on the basis of the representations made by Mr. Cheng that her investment would be reimbursable at all times and that she would become a shareholder in the company.

She has also proven that Zhongcheng International Education cashed her investment, but failed to execute its counterpart. Indeed, the evidence indicates that she was never registered as a shareholder and that no shares were ever issued to her. Moreover, she was never treated by Mr.

Cheng as a shareholder and never participated in the company’s profits or debts. [ 21 ] Although every corporation is bound to prepare and maintain records [4] containing minutes of meetings, resolutions of shareholders as well as a securities register listing the names of the shareholders, the date and details of the issue of each share [5] , Mr. Cheng did not provide any documentation to support his position that Mrs. Wang is in fact a shareholder. In short, it appears that none of the legal requirements of running a company were respected by Mr.

Cheng for Zhongcheng International Education. [ 22 ] Moreover, despite the fact that any consideration that may have been given by Mrs. Wang for the purchase of the shares, as well as the rights attached to the shares, would have had to be inscribed in the company’s record, Mr. Cheng was not able to provide any details as to the shares he alleges were ever issued to Mrs. Wang. [ 23 ] The Court emphasizes that Mrs. Wang was very credible and prefers her recollection of the events to Mr.

Cheng’s, as to the content of the discussions that preceded and led to her decision to invest, and the fact that she never attended any shareholder meetings if any were ever organized. [ 24 ] Conversely, Mr. Cheng’s testimony was elusive and far less credible. Indeed, when asked when the shares were actually issued to Mrs. Wang, his testimony became evasive. Furthermore, while he states that he is the majority shareholder because he holds 51 % of the shares, he testifies at the same time that the four investors, including himself, each hold 25 % of the shares. [ 25 ] As for Mr.

Zhong’s testimony, it appeared to be aimed only at demonstrating his faith in Mr. Cheng’s business. Before looking up at the Register and although he is the secretary of Zhongcheng International Education, he was not able to confirm at the hearing who the president is. He also denied that there was a majority shareholder, which is contrary to Mr. Cheng’s affirmation. [ 26 ] Clearly, Mrs. Wang accepted to contribute her money based on Mr. Cheng’s representations that she would become a shareholder of the company.

It was a decisive factor in her decision, if not the most important one, along with the fact that her investment would be reimbursable at all times. However, the evidence indicates that Zhongcheng International Education never treated Mrs. Wang as a shareholder. In fact, it failed to issue and deliver the shares that Mrs. Wang paid for. Furthermore, the Court doubts that Zhongcheng International Education ever intended to make Mrs. Wang a shareholder. Consequently, Mrs. Wang is entitled to recover the funds she remitted to Zhongcheng International Education based on Mr. Cheng’s false representations [6] .

FOR THESE REASONS, THE COURT: GRANTS the demand of Mrs. Sisi Wang against 9283-7178 Québec inc., carrying on business under the trade name of Zhongcheng International Education; CONDEMNS 9283-7178 Québec inc., carrying on business under the trade name of Zhongcheng International Education, to pay Mrs. Sisi Wang $15,000.00 with interest at the legal rate and the additional indemnity foreseen by

article 1619 of the Civil Code of Québec , calculated from July 11, 2017, plus judicial costs of $200.00.

__________________________________ MARIE-JULIE CROTEAU, J.C.Q.