Zhou v. Dragon E-Bikes Ltd., 2022 NSSC 257

SUPREME COURT OF Nova Scotia Citation: Zhou v. Dragon E-Bikes Ltd. , 2022 NSSC 257 Date: 20220913 Docket: Halifax , No. 488352 Registry: Halifax Between: Yin Zhou and Ning Wang Plaintiffs v. Dragon E-Bikes Ltd. Defendant DECISION Judge: The Honourable Justice Ann Smith Heard: February 17, 2022, in Halifax, Nova Scotia March 10, 2022, in Halifax, Nova Scotia Oral Decision: March 10, 2022 Counsel: Robert Michael Richards, for the Plaintiffs Edward Schijns, for the Defendant By the Court: Introduction [ 1 ] On February March 10, 2022, this Court granted the Plaintiffs’ motion for

summary judgment on evidence in the amount of $132,000 plus interest and costs. The Court indicated that written reasons would follow these are those reasons. [ 2 ] The Plaintiffs were represented by solicitor Michael Richards. The Defendant was represented by its recognized agent, M. Edward Schijns. The Motion Documents [ 3 ] The Plaintiffs filed a Notice of Motion seeking

summary judgment on evidence, a brief of law, the Affidavit of Yin Zhou, the Affidavit of Ning Wang and a Book of Authorities. [ 4 ] The Defendant filed a written brief and the Affidavit of Edward Schijns. The Underlying Action [ 5 ] The Plaintiffs filed a Notice of Action and Statement of Claim with this Court on May 22, 2019. [ 6 ] The Statement of Claim provides: 1. The Plaintiffs are individuals residing in Montreal, Quebec. 2. The Defendant is a body corporate pursuant to the laws of Nova Scotia and at all material times carried on business as a

seller of electronic bikes and accessories. 3. In March 2016 the Plaintiffs entered into a business venture agreement (the “Business Venture”) with R.E. Imports Exports, a business operated by Ra (Rui) Ma (“R.E. Imports” and “Ma” and PMV Mobility House Sales and Service (“PMV”), a business operated by Edward Schijns and PMV. 4. The Business Venture provided for the creation of Dragon E-Bikes Ltd. as a new business entity. Pursuant to the Business Venture, Dragon E-Bikes would purchase certain assets of R.E. Imports and PMV and thereafter operate as a seller of electronic bikes and accessories. 5.

Pursuant to the Business Venture, and to facilitate the creation and operation of Dragon E-Bikes Ltd., the Plaintiffs agreed to collectively invest $150,000.00 in Dragon E-Bikes in return for which they would collectively own 35% of the shares in Dragon E-Bikes Ltd. (the “Plaintiffs’ Investment”). The Plaintiffs’ Investment was characterized as a shareholder loan to the company. 6.

In January 2018, the Plaintiffs entered into a loan repayment agreement with Dragon E-Bikes Ltd. which provided for Dragon E-Bikes to repay the full amount of the Plaintiffs’ Investment by way of monthly instalments of a minimum amount of $3,000.00, commencing at the end of April 2018 and continuing until the Plaintiffs’ Investment was repaid in full (the “Reimbursement Agreement”). Pursuant to the Reimbursement Agreement, after the Plaintiffs’ Investment was repaid in full, the Plaintiffs’ shares in Dragon-E-Bikes Ltd. would be surrendered. 7.

Pursuant to the Reimbursement Agreement, Dragon-E-Bikes rendered a $3,000.00 payment to the Plaintiffs in May 2018. Dragon E-Bikes failed to render a $3,000.00 payment during June 2018. Dragon E-Bikes then rendered further $3,000.00 payments in each of July, August, and September 2018. In totality, Dragon E-Bikes Ltd. has repaid a principal amount of $12,000.00 in respect of the Plaintiffs’ Investment, leaving a principal amount of $138,000.00 owing to the Plaintiffs. 8.

Since September 2018, and despite repeated demands by the Plaintiffs, Dragon E-Bikes Ltd. has filed to render any further installment payments pursuant to the Reimbursement Agreement. As such, Dragon E-Bikes has breached the Reimbursement Agreement. [ 7 ] Dragon E-Bikes filed a Defence to the Statement of Claim which provides as follows: 1. Agree with Statements 1, 2, 3, 4. 2. Disagree with Statement 5, 6, 7, 8. Money was sent to R & Exports not Dragon E-bikes. It was an investment not a shareholders loan. 3.

Plaintiff didn’t answer until March 2018 on agreement which was past the date to order product for new season. Making agreement invalid. 4. Dragon E-bikes had some left over inventory to sell which is why payments totalling $15,000. Was make to investors. 5. This is an ongoing investment and will be paid out as cash flow allows. The Evidence on the Motion [ 8 ] The Affidavit of Mr. Zhou stated that on January 2, 2018, Dragon E-Bikes wrote to Mr. Ma, Mr. Wang and Mr. Zhou, to discuss the future direction of the company. Mr.

Schijns stated, on behalf of Dragon E-Bikes, as follows: To: Rui Ma, Yin Zhou and Ming Wang I am sending this email to discuss the direction of Dragonebikes Ltd. We need to move forward with this Company as we have been stationary for two years. I need to know how you want to proceed? Dragonebikes Ltd have approximately 1,000,000.00 in sales commitment from our Canadian dealers that will need to be delivered starting in March 2018. With Investment Dragonebikes Ltd would achieve 3-5 million in sales for the 2018 season.

We have 3 options to discuss and I need to have an answer by January 3, 2018 so that Dragonebikes Ltd. won’t miss another season. If you want to grow with Dragonebikes and have the proper accounting and inventory management system with monthly reporting, the investment needs to be approximately $50,000 for infrastructure. This will include a warehouse in Toronto with a new accounting and inventory software and control system. Website and social media development will increase our on line sales in North America.

We would also need approximately $500,000 invested in new product purchases for delivery starting in March 2018. If you decide to move forward with Dragonebikes we can discuss a more detailed plan. Dragonebikes can repay your $150,000.00 investment over time. We will pay a monthly guaranteed amount of $3000.00 a month starting the end of April 2018 and continue until your investment is paid in full with shares being returned to Dragonebikes Ltd. upon agreement.

During positive cash flow months payment will be increased to pay off your investment as soon as possible. [referred to herein as the “Repayment Option”] On the same basis of the above payout of 2% a month, until paid in full, you can buy PMV Mobility out of their investment in the company, and any salary and expenses still owed to Ed Schijns will need to be paid in a lump sum. [ 9 ] Dragon E-Bikes concluded this January 2, 2018, email as follows: Any Questions you have please call me Before January 3 2019 as this is the deadline for your decision. Dragonebikes Ltd. will need to

start to order product for delivery in March 2018. If you DO NOT answer by January 3, 2018 I will assume it is the second option that you have chosen and I will proceed with a payout letter and send it to you so that Dragonebikes Ltd. can move forward with our sources. [Emphasis in original] [ 10 ] In his Affidavit, Mr. Zhou says that after receiving this email, he and Mr. Wang advised Mr. Ma that they had elected to proceed with the Repayment Option and that it was his understanding that Mr. Ma conveyed that selection to Dragon-E-Bikes. [ 11 ] On April 20, 2018, Mr. Schijns sent an email message to Mr. Ma, Mr.

Zhou and Mr. Wang which incorporated the contents of his January 2, 2018, email and acknowledged that Mr. Ma had advised that they had chosen the second option. Mr. Schijns states as follows in this email of April 20, 2018: To: Rui Ma, Yin Zhou and Ming Wang I am sending this email to discuss the direction of Dragonebikes Ltd. We need to move forward with this Company as we have been stationary for two years. I need to know how you want to proceed? Dragonebikes Ltd have approximately 1,000,000.00 in sales commitment from our Canadian dealers that will need to be delivered starting in March 2018.

With Investment Dragonebikes Ltd would achieve 3-5 million in sales for the 2018 season. We have 3 options to discuss and I need to have an answer by January 3, 2018 so that Dragonebikes Ltd. won’t miss another season. As per Rui Ma you have chosen the second option Dragonebikes can repay your $150,000.00 investment over time. We will pay a monthly guaranteed amount of $3000.00 a month starting the end of April 2018 and continue until your investment is paid in full with shares being returned to Dragonebikes Ltd. upon agreement.

During positive cash flow months payment will be increased to pay off your investment as soon as possible. Thanking you in advance of your first payment. Edward Schijns [ 12 ] The evidence before the Court disclosed that consistent with “option 2”, Dragon E-Bikes made the first prepayment on May 1, 2018, by e-transfer of $3000.00 to Mr. Zhou. The e-transfer’s message was “first installment”. [ 13 ] Mr.

Schijns states in his Affidavit, sworn February 3, 2022, that he doesn’t deny that he put forward the Loan Repayment option (2) and had sent a payment on May 1, 2018, pursuant to that option, but says, “I thought when they finally agreed to the terms I thought I could attract the investor and started to pay out their investment”. Mr. Schijns goes on to state in his Affidavit that an unknown investor had moved on to another investment and that he told the Plaintiff that he couldn’t afford to make the Loan Repayment because sales had fallen. He says the Loan Repayment Agreement is invalid.

Issues [ 14 ] The sole issue to be determined on this Motion is whether

Summary Judgment should be granted in favour of the Plaintiffs pursuant to Rule 13.04. Law & Argument [ 15 ] The Plaintiffs seek

Summary Judgment on their claim pursuant to Rule 13.04. [ 16 ] Rule 13.04 provides as follows: 13.04

Summary judgment on evidence in an action

(1) A judge who is satisfied on both of the following must grant

summary judgment on a claim or a defence in an action: (

a) there is no genuine issue of material fact, whether on its own or mixed with a question of law, for trial of the claim or defence; (

b) the claim or defence does not require determination of a question of law, whether on its own or mixed with a question of fact, or the claim or defence requires determination only of a question of law and the judge exercises the discretion provided in this Rule 13.04 to determine the question.

(2) When the absence of a genuine issue of material fact for trial and the absence of a question of law requiring determination are established,

summary judgment must be granted without distinction between a claim and a defence and without further inquiry into chances of success.

(3) The judge may grant judgment, dismiss the proceeding, allow a claim, dismiss a claim, or dismiss a defence.

(4) On a motion for

summary judgment on evidence, the pleadings serve only to indicate the issues, and the subjects of a genuine issue of material fact and a question of law depend on the evidence presented.

(5) A party who wishes to contest the motion must provide evidence in favour of the party’s claim or defence by affidavit filedby the contesting party, affidavit filed by another party, cross-examination, or other means permitted by a judge.

(6) A judge who hears a motion for

summary judgment on evidence has discretion to do either of the following: (

a) determine a question of law, if there is no genuine issue of material fact for trial; (

b) adjourn the hearing of the motion for any just purpose including to permit necessary disclosure, production, discovery,presentation of expert evidence, or collection of other evidence. [17] Rule 13.04 was amended in 2015. The test applicable to the amended Rule 13.04 was articulated by Justice Fischaud inShannex Inc. v. Dora Construction Ltd., 2016 NSCA 89, at paras. 33-34: [33] The amended Rule 13.04 frames, but does not materially change Burton’s tests.

On the first test, instead of the former Rule’s“genuine issue for trial”, the new Rule 13.04(1) speaks of a “genuine issue of material fact, whether on its own or mixed with a questionof law”. On the second, the amended Rule 13.04(3) repeats the former Rule 13.04(2), that the judge may grant judgment, dismiss aproceeding, and allow or dismiss a claim or defence.

These provisions remain consistent with Justice Saunders’ formulation in Burton. [34] I interpret the amended Rule 13.04 to pose five sequential questions: • First Question: Does the challenged pleading disclose a “genuine issue of material fact”, either pure or mixed with a questionof law? [Rules 13.04(1), (2) and (4)] If Yes, it should not be determined by

summary judgment. It should either be considered for conversion to an application under Rules13.08(1)(

b) and 6 as discussed below [paras. 37-42] or go to trial. The analysis of this question follows Burton’s first step. A “material fact” is one that would affect the result. A dispute about an incidental fact - i.e. one that would not affect the outcome - willnot derail a

summary judgment motion: 2420188 Nova Scotia Ltd. v. Hiltz, 2011 NSCA 74, para. 27, adopted by Burton, para. 41, andsee also para. 87 (#8). The moving party has the onus to show by evidence there is no genuine issue of material fact. But the judge’s assessment is based on allthe evidence from any source. If the pleadings dispute the material facts, and the evidence on the motion fails to negate the existence of agenuine issue of material fact, then the onus bites and the judge answers the first question Yes. [Rules 13.04(4) and (5)] Burton, paras. 85-86, said that, if the responding party reasonably requires time to marshal his evidence, the judge should adjourn themotion for

summary judgment.

Summary judgment isn’t an ambush. Neither is the adjournment permission to procrastinate. Theamended Rule 13.04(6)(

b) allows the judge to balance these factors. • Second Question: If the answer to #1 is No, then: Does the challenged pleading require the determination of a question of law,either pure, or mixed with a question of fact? If the answers to #1 and #2 are both No,

summary judgment “must” issue: Rules 13.04(1) and (2). This would be a nuisance claim withno genuine issue of any kind – whether material fact, law, or mixed fact and law. • Third Question: If the answers to #1 and #2 are No and Yes respectively, leaving only an issue of law, then the judge “may” grant ordeny

summary judgment: Rule 13.04(3). Governing that discretion is the principle in Burton’s second test: “Does the challengedpleading have a real chance of success?” Nothing in the amended Rule 13.04 changes Burton’s test. It is difficult to envisage any other principled standard for a

summaryjudgment. To dismiss summarily, without a full merits analysis, a claim or defence that has a real chance of success at a later trial orapplication hearing, would be a patently unjust exercise of discretion. It is for the responding party to show a real chance of success. If the answer is No, then

summary judgment issues to dismiss the ill-fatedpleading. • Fourth Question: If the answer to #3 is Yes, leaving only an issue of law with a real chance of success, then, under Rule 13.04(6)(a): Should the judge exercise the “discretion” to finally determine the issue of law? If the judge does not exercise this discretion, then: (1) the judge dismisses the motion for

summary judgment, and (2) the matter with a“real chance of success” goes onward either to a converted application under Rules 13.08(1)(

b) and 6, as discussed below [paras. 37-42],or to trial. If the judge exercises the discretion, he or she determines the full merits of the legal issue once and for all. Then the judge’sconclusion generates issue estoppel, subject to any appeal. This is not the case to catalogue the principles that will govern the judge’s discretion under Rule 13.04(6)(a). Those principles willdevelop over time. Proportionality criteria, such as those discussed in Hryniak v. Mauldin, 2014 SCC 7 , [2014] 1 S.C.R. 87, willplay a role. A party who wishes the judge to exercise discretion under Rule 13.04(6)(

a) should state that request, with notice to the other party. Thejudge who, on his or her own motion, intends to exercise the discretion under Rule 13.04(6)(

a) should notify the parties that the point isunder consideration. Then, after the hearing, the judge’s decision should state whether and why the discretion was exercised. The reasonsfor this process are obvious: (1) fairness requires that both parties know the ground rules and whether the ruling will generate issueestoppel; (2) the judge’s standard differs between

summary mode (“real chance of success”) and full-merits mode; (3) the judge’s choicemay affect the standard of review on appeal.

[ 18 ] This Rule must be interpreted consistently with Justice Karakatsanis’ comments in Hryniak v. Mauldin , 2014 SCC 7 , where, while speaking for the Supreme Court of Canada, Justice Karakatsanis reiterated that

summary judgment motions must be adjudicated with a view towards promoting proportionality in resolving disputes. In particular, Justice Karakatsanis called for: [2] …a culture shift is required in order to create an environment promoting timely and affordable access to the civil justice system. This shift entails simplifying pre-trial procedures and moving the emphasis away from the conventional trial in favour of proportional procedures tailored to the needs of the particular case.

The balance between procedure and access struck by our justice system must come to reflect modern reality and recognize that new models of adjudication can be fair and just. [ 19 ] Under the first question set out in Shannex , the moving party must demonstrate that there is no genuine issue of material fact. If it fails to do so, the motion for

summary judgment should be dismissed. This was the case in Hatch Ltd. v. Atlantic Sub-Sea Construction and Consulting Inc. , 2017 NSCA 61 , in which the Court of Appeal stated, at para. 23: [23] The role of the motions judge on a

summary judgment motion is to determine whether the challenged claim discloses a genuine issue of material fact (either pure or mixed with a question of law). The onus is on the moving party to show there is no genuine issue of material fact. If it fails to do so the motion is dismissed.

A material fact being one that would affect the result. [ 20 ] If there is no genuine issue of material fact, but the challenged claim or defence requires the determination of a question of law or mixed fact and law, the Court must then determine whether the claim or defence has a “real chance of success.” [ 21 ] At this stage of the analysis, both parties are required to put their “best foot forward” and raise evidence to demonstrate a genuine issue of material fact on the

summary judgment motion, or risk losing. The Supreme Court of Canada emphasized this point in Canada (Attorney General) v. Lameman , 2008 SCC 14 at paras. 11 and 19 : [11] … Each side must “put its best foot forward” with respect to the existence or non-existence of material issues to be tried … The chambers judge may make inferences of fact based on the undisputed facts before the court, as long as the inferences are strongly supported by the facts… … [19] … In the Court of Appeal and here, the case for the plaintiffs was put forward, not only on the basis of evidence actually adduced on the

summary judgment motion, but on suggestions of evidence that might be adduced, or amendments that might be made, if the matter were to go to trial. A

summary judgment motion cannot be defeated by vague references to what may be adduced in the future, if the matter is allowed to proceed. To accept that proposition would be to undermine the rationale of the rule. A motion for

summary judgment must be judged on the basis of the pleadings and materials actually before the judge, not on suppositions about what might be pleaded or proved in the future… [Emphasis added] [ 22 ] If the material facts are disputed on a motion for

summary judgment, the Court must then apply the law to those undisputed facts. In the absence of both a genuine issue of material fact and issue of law, Rule 13.04 requires that the Court grant

summary judgment. [ 23 ] In Smith v. Parkland Developments Limited , 2019 NSSC 74 , at para. 27 : [27] The issue for the Court to resolve is whether, pursuant to Civil Procedure Rule 13.04, the Town has met the burden of showing there is no genuine issue of material fact, whether on its own or mixed with questions of law, for trial and that the claim does not require the determination of a question of law. The Rule is clear I must grant

summary judgment in the absence of a genuine issue of material fact for trial and when there is an absence of a question of law, either on its own, or mixed with fact, requiring determination. Assessment and Findings [ 24 ] This Court finds that there are no material facts in dispute that require a trial. Nor is there a question of law, either on its own, or mixed with fact, that requires determination. The Defence has no real chance of success. [ 25 ] As set forth by the Nova Scotia Court of Appeal in 2420188 Nova Scotia Ltd. v. Hiltz , 2011 NSCA 74 , a material fact is a fact that is “essential to a claim or defence. I dispute over an incidental fact will not derail a

summary judgment motion at Stage 1.” (para. 27) [ 26 ] The evidence clearly establishes that in January 2018 the parties entered into the Loan Repayment Agreement. Under the terms of that agreement, Dragon E-Bikes was required to make guaranteed monthly payments of $3,000 to the Plaintiffs. Dragon E- Bikes made payments of $12,000 under the Loan Repayment Agreement. None of these facts are disputed. [ 27 ] At paragraph 19 of the Affidavit of Mr.

Schijns, Dragon E-Bikes acknowledges that the Plaintiffs are still owed $138,000 under the Loan Repayment Agreement. [ 28 ] I find that Dragon E-Bike’s defence has no real chance of success. The Defendant argues that because the Plaintiffs did not respond to his January email until March 2018, the Loan Repayment Agreement was “invalid”. [ 29 ] It was Mr. Schijns on behalf of Dragon E-Bikes who specified the terms of the Loan Repayment Agreement in his January 8, 2018 email. It was Mr.

Schijns who stated in that email that if the Plaintiffs did not respond by the next day, they would be deemed to have accepted the Repayment Option. Further, and as previously stated, Dragon E-Bikes made payments in accordance with the Repayment Loan Agreement on May 1, 2018, July 15, August 1 and September 2018.

[ 30 ] There are no material facts before this Court which support Dragon E-Bike’s contention that the Loan Repayment Agreement was contingent on it “getting new investors”. Such a contention is entirely inconsistent with the actual terms of the Loan Repayment Agreement. Dragon E-Bike was the author of the Loan Repayment Agreement which was accepted by the Plaintiffs. It cannot, after the fact, insert new terms, which it thinks are favourable to it. Further, any such argument is undercut in that Dragon E-Bikes made four $3,000 payments under the terms of the Loan Repayment Agreement. [ 31 ] The Court grants

summary judgment to the Plaintiffs in the amount of $132,000. Costs [ 32 ] This Court sought submissions from the parties on costs but received submissions only from the Plaintiffs. [ 33 ] The Plaintiffs seek costs in the amount of $8,252.50 plus disbursements of $79.01. [ 34 ] The starting point in determining the quantum of costs is the Tariff of Costs and Fees under Rule 77. Costs on a motion are governed by Tariff C unless the judge orders otherwise. The Court may make any order that it determines will do justice between the parties (Rule 77.02(1)). [ 35 ] The hearing of the Plaintiffs’ motion for

summary judgment took place for a full half-day on February 17, 2022, and for approximately two hours on March 10, 2022. As such, the Tariff C costs fall in the range of $1,000 to $2,000. [ 36 ] This Court ordered

summary judgment to the Plaintiffs on March 10, 2022. Accordingly, paragraph 4(

c) of Tariff C is triggered. Paragraph 4 (

c) provides:

(4) When an order following an application in Chambers is determinative of the entire matter at issue in the proceeding, the Judge presiding in Chambers may multiply the maximum amounts in the range of costs set out in this Tariff C by 2, 3 or 4 times, depending on the following factors: (

a) the complexity of the matter, (

b) the importance of the matter to the parties, (

c) the amount of effort involved in preparing for and conducting the application. (such applications might include, but are not limited to, successful applications for

Summary Judgment, judicial review of an inferior tribunal, statutory appeals and applications for some of the prerogative writs such as certiorari or a permanent injunction). [ 37 ] This Courts sets the Tariff C basic amount at $1,800. I apply a multiplier of 3 to that amount. The matter was important to the individual Plaintiffs, and they were completely successful in obtaining a significant financial recovery on the

summary judgment motion. There was significant effort expended by counsel in preparing for the motion. I exercise my discretion to apply a multiplier of 3 to the amount of $1,800 resulting in costs of $5,400. [ 38 ] The Plaintiffs are also entitled to costs which result from the Defendant’s failure to file its responding motion materials within the timelines set by the Rules . [ 39 ] The

summary judgment motion was originally scheduled for February 1, 2022, by Notice of Motion filed November 10, 2021. The Plaintiffs filed their motion materials on January 17, 2022. The Defendant did not file its motion documents in accordance with the deadlines established by the Rules . On January 26, 2022, the Defendant provided some materials for the motion which consisted of an unsworn letter. Justice Keith of this Court convened a conference call with the parties on January 28, 2022. Justice Keith adjourned the

summary judgment motion to February 17, 2022, before this Court and determined that the Plaintiffs were entitled to reasonable costs incurred as a result of the adjournment. [ 40 ] The Plaintiffs provided affidavit evidence to this Court stating that they incurred $2,252.50 in wasted costs as a result of Dragon E-Bike’s failure to file its responding materials in accordance with the timeline under the Rules . [ 41 ] The

summary judgment motion was rescheduled and heard a little over two-weeks after its originally scheduled date of February 1, 2022. The Plaintiffs admit that they were not required to spend significant time re-preparing for the motion. The costs for which the Plaintiffs seek indemnity are for the costs expended in preparation for the conference call with Justice Keith, to ensure that he had a full appreciation of the correspondence exchanged between the parties. This was set out in an affidavit. The Plaintiffs’ counsel also participated in this conference call. [ 42 ] I award the Plaintiffs the sum of $1,500.00 resulting from the adjournment of the

summary judgment motion which include the reasonable costs incurred in preparing for and participating in the conference call with Justice Keith. I exercise my discretion not to award full indemnity for these costs. The Defendant is a self-represented party and did provide some materials in advance of the scheduled motion, although not sworn and eventually replaced. However, he made some effort. [ 43 ] The Plaintiffs are entitled to their proven disbursements of $79.01. Conclusion [ 44 ]

Summary judgment is granted to the Plaintiffs in the amount of $132,000 plus interest in the amount of $11,490.38. [ 45 ] The Plaintiffs are entitled to costs of $6,900 and disbursements of $79.01. [ 46 ] I ask Plaintiffs’ counsel to prepare the form of Order.

Smith, J.