An alleged scheme to allow Vancouver’s mostly Chinese foreign buyers to avoid tax on real estate purchases there has been described in legal action following the disintegration of a business partnership involving some of the Canadian city’s top realtors. Under the supposed scheme, depicted in a British Columbia Supreme Court pleading, buyers and sellers who were both based overseas would understate the amount being paid for a property and exchange only that portion in BC – thus reducing the property transfer tax – while the remainder of the true price would change hands outside Canada. If true, such an arrangement would also help buyers of Canadian real estate dodge China’s cash export limits. The alleged technique is described in a response to a lawsuit, over the collapse of a partnership between Layla Zi Ya Yang and fellow realtors Kathy Wan Jun Xu and Melissa Kam Nong Wu. The trio founded Maxcel Westcoast Realty in 2017 - but Yang and other agents departed the firm in acrimony that is described in the legal action. Maxcel’s lawyer strongly denied the existence of the alleged scheme. All others involved in the legal action have also denied wrongdoing, and no claims of wrongdoing in the lawsuit, the responses or counterclaims have been proven in court. Maxcel is suing Yang and others for their supposed “sabotage” of Maxcel, via rival firm Dracco Pacific Realty, which was established by Yang’s sister, Ava Liu Yang, in November 2018. The defendants are accused of poaching Maxcel’s agents and listings worth more than C$52 million (US$38 million), as well as breaching confidentiality and falsifying records. “[The] Dracco Companies, in particular Dracco Pacific, [were] incorporated solely for the purpose of stealing Maxcel’s business assets and real estate agents, to the sum of at least 20 listings, and for the purpose of causing Maxcel to cease its operations,” says Maxcel’s lawsuit, lodged in December 2018. The lawsuit claims Maxcel’s former managing broker Tim Teng Teng Xu worked with Layla Yang to undermine the firm. It says Tim Xu was fired on November 26, 2018, for failing to fulfil his duties, insubordination and falsifying records. But a response filed on January 29 by Tim Xu, Yang and co-defendant Edward Yang Zhang says Maxcel “dismissed Tim wrongfully, because he fulfilled his duty to instruct against participation in transactions using the Scheme.” Tim Xu and his codefendants describe a November 23, 2018 meeting between him and the three Maxcel directors - Layla Wang, Kathy Xu and Melissa Wu - at which he says he warned against having anything to do with the scheme “to evade property transfer tax”. Under the supposed arrangement, the buyer and seller of a BC property would agree to understate the true price on transfer documents. “[The] buyer then pays the Altered Price on closing in British Columbia, but pays the difference between the Altered Price and the True Price outside Canada,” the response says. Kathy Xu is accused in the response of telling Maxcel brokers “she had had three deals closed using the Scheme”, and that “the key of success” was that licensees for the buyer and the seller “must be able to trust each other”. “Kathy and Melissa, who were on close terms, appeared to be offended by Tim at the November 23 meeting and refused to sign the meeting minutes,” the response says. The description of the scheme says the transactions would be completed “outside Canada”. China has an annual cash export limit of US$50,000 per person. A scheme such as the one described in the lawsuit could allow Chinese buyers to reduce risks associated with breaching the limit. Maxcel says it once had 101 real estate agents and team leaders, and that the firm’s monthly share of the commissions it split with agents peaked at C$70,210 (US$51,900) in July 2018. But the firm’s website now lists 52 agents, and the lawsuit says Maxcel’s share of commissions fell to C$19,804 (US$14,640) in November 2018, blaming the decline on the “concerted efforts of the defendants”. The response says the decline “if any” was due to Maxcel’s mismanagement and a slump in the Vancouver real estate market. Dracco and Ava Yang are also defendants in the original lawsuit, but filed a separate response denying wrongdoing. All parties reject the others’ claims for damages and other relief measures. Layla Yang is one of Vancouver’s most well-known realtors. Kathy Xu and Melissa Wu market themselves as being among the top 1 per cent of realtors in the city, as does Layla Yang. Lawyers for Tim Xu, Layla and Ava Yang, Zhang, Maxcel and Dracco were asked by the SCMP for comment on the lawsuit. Glen Forrester, representing Maxcel, said on May 30 that “any allegations set out in the response to civil claim of impropriety regarding payment or reporting of taxes are frivolous and vexatious and are strongly denied by my client”. A few hours later, the SCMP received a letter from a law firm representing Kathy Xu that demanded this article be deleted. Lawyer Song Xue, representing Tim Xu, Layla Yang and Zhang, said on May 31 it was inappropriate for him or his clients to comment on ongoing litigation. No trial date has been set. To give this @fumano piece some more context, Metro #Toronto is $44 bn (4% of total value) to Metro #Vancouver 's $75 bn / 8% "A $75-billion snapshot of foreign-owned Vancouver real estate" https://t.co/4HdRgSUqyd #vanre #vanpoli — Andy Yan (@Ayan604) March 27, 2019 According to data released by the Canada Mortgage Housing Corporation in March and analysed by academic Andy Yan, about C$34 billion (US$25 billion) worth of residential real estate in the City of Vancouver has at least one foreign owner, representing 10 per cent of the total value of residential property in the city. In a brief period of data collection in mid-2016, Chinese people made up 77 per cent of all foreign buyers in the province. After the release of the data, the centre-right BC Liberal government introduced a 15 per cent tax on foreign buyers in Vancouver; the subsequent left-leaning NDP government increased it to 20 per cent and extended the areas affected by the tax. Editor's note: This article has been amended and republished after a legal review.