Toronto lawyer ordered to pay more than $1M after clients said he kept money from real estate, business deals

July 30, 2024 Canuck

A now-suspended and retired Toronto lawyer hasn’t paid two sets of clients more than $1 million the courts have ordered he pay after they sued him for keeping the proceeds from the sales of their home and business.

Xiaolong Zhang and his wife sold their auto parts distribution business in Vaughan, Ont., at the end of last year to fund their retirement.

They said they hired Ping-Teng Tan to handle the sale because they trusted him after using him for previous legal work.

The business sold for more than $520,000 and the money was transferred to a trust account set up by Tan’s law firm, Tan & Associates.

But, despite calls, texts, an in-person visit and a legal demand, Tan hasn’t transferred the money to Zhang and his wife.

“Instead of peaceful days and financial security, we are living a nightmare,” Zhang said. “We felt deep anguish and betrayal as someone we trusted with our future had deceived us.”

Tan did not respond to CBC Toronto’s requests for comment for this story on his personal email and cellphone. His law firm email has been shut down and the phone number is not in service.

A large home on a corner lot in a residential neighbourhood is pictured from above. — Tan acted as the lawyer for a couple who sold this home in Markham in January 2023. A judge has ordered he pay them more than $550,000 after they accused him of keeping some of the proceeds of the sale. (Patrick Morrell/CBC )

Zhang and his wife sued Tan in March and because he didn’t file a statement of defence, an Ontario Superior Court judge found him in default and ordered he pay Zhang and his wife more than $534,500 for the money owed plus legal costs.

But Zhang hasn’t received the money.

“Ping-Teng Tan’s actions robbed us of our money and our dream of the retirement we worked so hard to achieve,” he said.

Tan, who Zhang says is well-known in Toronto’s Chinese community, is facing two other lawsuits from clients who claim he kept proceeds from two real estate transactions. In one, another default judgment was ordered that Tan has also yet to pay. The second is still before the courts.

In her decision in Zhang’s case, Ontario Superior Court Justice Jill Cameron said it’s clear Tan is in breach of contract, trust and fiduciary duty.

“It appears as though Mr. Tan has been dishonest, having likely misappropriated or dealt with the transaction proceeds, which were to be held in trust for the applicants,” the decision reads.

Zhang has also filed a report with York Regional Police.

Tan retires, license suspended

In February, Zhang filed a complaint with the Law Society of Ontario (LSO), which regulates lawyers in the province.

During the LSO’s investigation, Tan was not providing documents the investigator required such as bookkeeping, according to LSO documents.

Instead, through his lawyer, he informed the LSO in April that he retired and closed his practice — 17 years after opening it and 47 years after being called to the Ontario bar.

The LSO investigator told Tan’s lawyer that despite retiring, he is still required to hand over the required information for the investigation and urged Tan to co-operate.

As of April 12, Tan had not handed over the requested documents, according to the investigator’s affidavit.

In June, the LSO suspended Tan’s licence, saying there is a risk of harm to the public.

“Allegations of misappropriation of trust monies raise serious concerns about a licensee’s integrity,” the LSO decision reads. “If ultimately proven, they would fall within the category of misconduct to which presumptive revocation would apply.”

Tan consented to the suspension but did not admit guilt. He can still contest the allegations at a disciplinary hearing.

2 other lawsuits filed

Three months after the proceeds of Zhang’s business sale went into Tan’s trust account, the lawyer was sued for keeping the proceeds of a real estate transaction.

A couple sold their home in Markham for $2.8 million in January 2023 and they hired Tan, whom they had a long-standing client and lawyer relationship with, to handle the transaction, according to a lawsuit they filed.

Because they aren’t Canadian residents, the couple had to hold back a quarter of the sale proceeds for tax purposes — more than $700,000 was held in a trust account through Tan’s firm.

Once the taxes were paid and the Canada Revenue Agency issued certificates of compliance, the remaining $547,000 was to be released to the couple.

However, Tan did not hand over the money, according to a lawsuit, which was filed against Tan in March.

Once again, he didn’t file a statement of defence and a judge ordered he pay the couple more than $550,000.

The lawyer now representing the couple, Michael Lesage, said the situation has had a “significant effect” on his clients, particularly when it comes to trust.

“People implicitly trust their lawyers,” he said. “They just assume that once they give their lawyers money for safekeeping, that their lawyers will not abuse that trust. And obviously in this case, that trust has been shaken.”

The entrance to a condo building is pictured. — A couple sold their unit in this North York condominium building and used Tan as the lawyer for the sale. They’ve since sued him for more than $400,000, claiming he’s kept some of the sale proceeds. (Patrick Morrell/CBC )

Just last month, another couple sued Tan after they sold their unit in a North York condominim building for more than $800,000.

The couple also had to hold back a quarter of the sale proceeds for tax purposes in Tan’s trust account. But this time, Tan didn’t release the funds to pay the taxes, and the couple had to come up with the money in order to pay the taxes, according to the lawsuit.

It also says they haven’t been able to contact or locate him.

The couple is suing him for more than $400,000 and asking a judge to grant a tracing order, if required, to track down “all of the trust funds wrongfully taken and diverted.”

Tan has yet to file a statement of defence in that case.

Avenues for recovery

If a client is in a fight to get funds from their lawyer, Lesage said the most common situation is when a lawyer makes an error and their insurance, which is mandatory for all Ontario private practice lawyers, will cover the claim.

Lesage is a former LSO bencher, which means he helped govern the LSO and set policy. He said insurance doesn’t kick in if the lawyer intentionally took the money, if they don’t co-operate with their insurance company or if they don’t report the claim to the insurance company.

A man with a suit and tie and a beard smiles at the camera. — Greater Toronto Area litigation lawyer Michael Lesage says his clients’ trust has been affected after their dealings with Tan. (Robert Nowell)

Clients can file a civil claim against the lawyer, as Tan’s clients have, but that costs more money.

If the clients win, but the lawyer doesn’t comply with an order to pay, the courts can go after their assets, but in Tan’s case, Lesage and Zhan say they aren’t aware of any property Tan owns in Ontario, and it’s more difficult for the court to garnish his wages since he’s no longer working.

Tan’s clients could seek relief through the LSO’s compensation fund, which the society calls “a last resort.”

It’s funded by fees that lawyers and paralegals pay to the LSO each year and is set up to help clients who have lost money because of the dishonesty of a lawyer or paralegal.

The fund, which has a $500,000 cap per claim, paid out approximately $2.7 million for claims against 13 lawyers last year, the LSO said.

The LSO wouldn’t say how many applications were made to the fund involving Tan, but Lesage confirmed his clients applied, as did Zhang.

Zhang said he expects the application process to take about a year and is hopeful he’ll be awarded funds from the compensation fund so he and his wife can finally enjoy their retirement.

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