Metrotown development mired by lawsuit over $1M service fee

A lawsuit over an agreement regarding a parcel of land in Metrotown that a company wants to develop may hinge on the court’s interpretation of rules around who can accept fees for real estate services.

Vandev Consulting and Pacific Maple Manufacture entered into a contract, which was “drafted in Chinese and apparently without legal assistance,” in early 2018 for the purchase and sale of two Metrotown lots, according to a ruling from BC’s highest court.

The lots, at ​​6622 and 6688 Willingdon Ave, currently are occupied by a pair of 1960s-built three-storey buildings, which combine for 72 units, according to a June 2021 report to city council.

Richmond-based developers IDS Group put forward a rezoning application on behalf of a numbered company, 1147979 BC LTD.

On those lots, the developers want to build a highrise residential strata tower and a low-rise market and non-market rental building, according to the city report.

The project was still in the very early stages, with city staff only asking for council approval to work with the developers and return with a more fleshed-out proposal for rezoning and public hearing.

The proposal does not yet appear to have advanced to a full rezoning application.

The $1-million service charge

In order to develop the property, the two companies came together to launch the numbered company behind the development proposal, for which Jiangming Zhu, a director of Vandev, held all shares.

Vandev had paid the initial deposits on the property purchases, on behalf of the numbered company, according to the BC Appeals Court ruling, and as part of the contract, was to be paid a $1-million service charge by Pacific Maple.

Vandev transferred shares in the numbered company to Pacific Maple as it was reimbursed for the initial deposits, with 95% of the shares eventually transferred to Pacific Maple, the court noted.

Zhu reportedly held back the remaining 5% of the shares until Pacific Maple paid the $1-million service fee.

But Pacific Maple did not pay the fee, according to the ruling, which overturned an earlier BC Supreme Court decision that tossed out Vandev’s lawsuit.

At the heart of the dispute is a rule in the Real Estate Services Act (RESA), which states that unlicensed individuals cannot impose fees for real estate services.

The BC Supreme Court judge found that the services provided by Vandev were, in fact, real estate services and, because it is not licensed, could not charge a fee.

As a result, the court tossed out the lawsuit.

Judge wrong to dismiss lawsuit

But the bar for turning down a lawsuit before it can go to trial requires that it be “plain and obvious” that the claim has no reasonable cause of action.

And the case does not appear to have cleared that bar, with the BC Appeals Court agreeing with Vandev that the lower court had failed to adequately consider whether Vandev, in this case, was exempted from the rule.

The top court noted that there are two questions the BC Supreme Court judge should have considered:

• whether Vandev was exempt from RESA rules around collecting fees, since it was providing real estate services to itself, and

• whether the services were provided by a non-licensed individual

“I have concluded that the judge was unfortunately led astray by the confusing and inarticulate submissions made on behalf of the appellant’s then counsel,” wrote BC Appeals Court Justice Patrice Abrioux.

“This resulted in him considering only the second question and not the first.”

According to the RESA, unlicensed individuals may charge fees for real estate services if they are exempt.

And Vandev argued that it is exempt, as it was providing a real estate service for itself, as a beneficial owner of the numbered company, rather than providing a service as a third party.

Abrioux said he was satisfied with the information put forward by the appellant, Vandev, to overturn the lower court’s decision.

“[The trial judge] did not consider whether the fundamental question—whether the appellant, as controlling shareholder of the numbered company, was acting on its own behalf as the beneficial owner of the properties—constituted a genuine issue of material fact requiring trial,” Abrioux said.