A group of former property owners who sold a land assembly near the Langara Golf Course in December 2016 are suing the purported buyers of the lands, the real estate firm and the agent who brokered the deal over an alleged “secret agreement” that saw the properties flipped for a $1.6 million profit.
In a claim filed in BC Supreme Court on June 13, the former property owners sued Kunyuan Acquisition Ltd., 1105302 B.C. Ltd., HQ Real Estate Services Inc. and agent Ashley Osborn. The plaintiff in the case is Ash and 54th Avenue Litigant Co. Ltd., a corporate entity formed by the sellers in order to sue as a united block, according to its lawyer.
“They could’ve brought the action in their own names, but they elected to make an agreement and have a nominee company pursue the case, but it’s very much their case, the vendors’ case,” said D. Barry Kirkham of Owen Bird Law Corp. in a phone interview with Business in Vancouver. “We just issued the writ. We’re just serving. We fully expect to see a defence, and we’ll see if there is one.”
The four properties at issue in the lawsuit include 575 West 54th Avenue, 6928 Ash Street, 6968 Ash Street and 6908 Ash Street. They were sold to defendant Kunyuan for $4 million each, according to the claim, with HQ and Osborn working as the company’s agents. The single-family lots, after rezoning, are now zoned for townhouse developments, which saw the lands “increasing in value at a rapid rate as of the date of the purchase contracts,” the claim states.
According to the BC Assessment Authority, each property shot up in value significantly between 2015 and 2016. For example, the lands and buildings on 575 West 54th Avenue were assessed in 2015 at $2,313,000 and increased to $3,108,000 a year later. The former owner of that home, George Seslija, negotiated with Kunyuan on behalf of the owners, according to the claim, telling the company’s agent that they wouldn’t sell “if Kunyuan was going to flip the properties prior to closing and thereby earn a profit.”
The purchase contracts included a provision that Kunyuan couldn’t assign them prior to closing except to a subsidiary or affiliate and with the vendors’ consent, stipulating that any profits from assignments would be handed over to the vendors.
Later, the plaintiff claims, Osborn sent addendums to the contracts to the land owners’ solicitor with clauses assigning the contracts to the numbered-company defendant, claiming it was a “usual practice” for Kunyuan to set up a new subsidiary for “accounting and liability reasons.”
“The representation was made by Osborn for the purpose of inducing the vendors to believe that Kunyuan was not flipping the properties and that there would be no profit,” the claim states. “Contrary to the representation made by Osborn, 1105302 B.C. Ltd. was not a subsidiary of Kunyuan. Osborn misrepresented the purpose of the assignment. The actual purpose of the assignment was to enable Kunyuan to realize a profit from flipping the purchase contracts.”
The vendors’ company claims that the numbered company was “used as the vehicle for the flip” when Kunyuan “entered into a secret agreement with parties unknown” in a deal that allegedly netted a $1.6 million profit over the original purchase price. Moreover, the plaintiff claims that it was the numbered company or the “unknown principals” or “unknown third parties” using it as a vehicle who arranged the financing to close the deal.
“Kunyuan did not use any of its own funds to complete the purchase contracts,” the claim states.
Osborn did not reply to BIV’s repeated requests for comment, but HQ managing broker Dean Thomas sent an emailed statement in response.
“HQ Commercial cannot comment on the subject case at this time since it is ongoing and active before the court,” Thomas wrote. “Having said that, HQ Commercial has the utmost faith in all of its brokers, and it is confident that Mr. Osborn conducts himself in accordance with his professional duties and obligations as well as the rules and regulations governing the real estate industry.”
Kunyuan’s president Kevin Li did not respond to BIV’s request for comment. The numbered company’s address is listed at 5731 No. 3 Road in Richmond, which is part of Kunyuan International Group’s portfolio.
Ash and 54th Avenue Litigant Co. Ltd. seeks a judgment of $1.6 million against Kunyuan and the numbered company for breach of the purchase contracts and breach of warranty and misrepresentation, and unspecified damages against HQ and Osborn for misrepresentation. The allegations have not been tested or proven in court, and the defendants had not responded to the claim by press time. •
