Executive Summary – Key Legal and Evidentiary Issues

• Dispute over whether approximately $45 million was invested by the deceased (Mr. Zhang Jr.) under oral agreements with Mr. Yin.

• Allegations that Mr. Yin misappropriated and comingled investment funds for personal use.

• Defendants argue the funds originated from Mr. Zhang Sr. and were tied to alleged criminal conduct in China.

• Attempt to invoke the ex turpi causa doctrine, claiming the investment stemmed from illegal proceeds, was rejected.

• No proven link between the alleged criminality and the actual civil claims, weakening the defense's argument.

• The court emphasized that unproven allegations and distant connections to illegality are insufficient to bar a civil claim.

Facts of the Case

This case arises from a civil dispute involving the Estate of Tong Zhang (also known as Tony Zhang), represented by his executor Junjie Tao, and several defendants including Hang Yin and related B.C.-numbered companies. The plaintiff alleges that Mr. Zhang Jr. invested approximately $45 million under oral contracts with Mr. Yin, who failed to keep the funds segregated as agreed. Instead, the funds were allegedly comingled with other assets and used for Mr. Yin’s personal benefit.

The plaintiff seeks damages, disgorgement of profits, and declaratory relief, asserting that the investment arrangement was breached and the funds mishandled.

The defendants argue that the investment transactions were actually between Mr. Zhang Sr. (Chunli Zhang) — the plaintiff’s father — and Mr. Yin. They further allege that Mr. Zhang Sr. was under investigation in China for crimes such as bribery, embezzlement, misappropriation of public funds, and money laundering. The defendants claim the investment funds came from proceeds of these alleged crimes, and therefore, the estate should be barred from recovery under the legal doctrine of ex turpi causa non oritur actio — a principle that prevents a party from profiting from their own wrongdoing.

Arguments and Court’s Analysis

The defendants applied to amend their pleadings to formally include the ex turpi causa defence. They asserted that the integrity of the justice system would be compromised if the estate were allowed to recover money that was allegedly the product of criminal activity in China.

The Court rejected this application, focusing on the “close connection” requirement articulated in Bang v. Kim, 2024 BCCA 88. Justice Funt emphasized that for the ex turpi causa defence to apply, the illegality must be closely connected to the cause of action itself — not merely background context or unproven allegations.

• There was no conviction against Mr. Zhang Sr., only an arrest warrant and allegations tied to the Chinese investigation.

• The court found no direct link between the allegedly illegal activity and the investment agreements that form the basis of the plaintiff’s claim.

• As such, the proposed amendment to plead ex turpi causa was deemed insufficient and dismissed.

The court also noted that the 45-day trial would proceed in open court, and any issues of broader public concern could be addressed through proper legal channels if new developments arose.

Outcome

• The court denied the defendants’ application to plead the ex turpi causa defence.

• All other minor amendments to the pleadings — which were unopposed — were allowed.

• The case is scheduled for trial to resolve the core dispute over the handling of the alleged investment.