CHARLOTTETOWN -- Immigration fraud charges were stayed Friday against two Charlottetown motel owners after it was alleged hundreds of newcomers used their hotel as an address though they didn't intend to remain on the Island under a provincially sponsored program.

The federal prosecution service confirmed that it asked a provincial court judge to stay the charges because there wasn't sufficient evidence to proceed further against the siblings operating the Sherwood Motel.

The decision came after several days of testimony and cross examination of a federal investigator.

In May, the Canada Border Services Agency charged 60-year-old Ping Zhong with three counts of aiding and abetting misrepresentation under the Immigration and Refugee Protection Act, and five charges were laid against her 58-year-old brother, Yi Zhong.

Defence lawyer Lee Cohen said in an interview that the Crown failed to produce evidence that either of his clients assisted seven Chinese immigrants named in the charges to misrepresent themselves to immigration officials.

The lawyer said his clients had no knowledge of what those using the hotel intended to do after coming to Canada and using the hotel as a temporary, mailing address.

"They had no consultation with ... lawyers or consultants who were assisting these seven Chinese nationals to immigrate to Prince Edward Island," he said.

"They had no prior knowledge ... of anybody's intentions and so in the absence of being able to connect those dots, the Crown can't get a conviction."

The federal prosecutor was unavailable for comment on the reasons for seeking the stay, and a spokeswoman sent a statement saying it was due to a lack of sufficient evidence.

The siblings had been charged under section 126 of the Act, which requires the Crown to show they acted in a way that would "induce an error in the administration" of the federal immigration law.

Cohen said another problem with the case was the Charter of Rights and Freedoms allows the immigrants to move to other parts of Canada after they have come to the country under a provincial immigration system, and therefore there was nothing illegal in the newcomers' decision to leave the Island.

"They can live anywhere they want," the lawyer said, adding the provincial expectation the newcomers remain on the Island are outweighed by the constitutional rights of permanent residents.

The CBSA had alleged 566 immigrants used the same two addresses between 2008 and 2015 -- the Sherwood and Ping Zhong's Charlottetown home.

Cohen said he has no idea if that number was correct.

However, he said his clients had seen a legal business opportunity to provide the temporary address to newcomers as a mailing address, and that this use of a mailing address is not uncommon.

"There should never have been any charges against them. They have suffered considerable humiliation both in Canada and in the Chinese media. So, in China as well. As you know, honour is very important in Chinese culture and this family has been disgraced for reasons that never existed," he said.

Nearly all of the immigrants who used the address were eventually granted permanent residency under the provincial nominee program, which for many years was the Island's main business immigration program.

The Liberal government announced in September it was scrapping the controversial entrepreneur stream of the nominee program that is at the centre of the case.

A number of Canadian immigration lawyers have argued it was a flawed program because it granted permanent residency before there was proof the immigrants have actually stayed on the Island to create a business for a year.

Instead, the system nominated the would-be immigrants for permanent residency, and the status was awarded after federal vetting for health and security and after the newcomers were screened at a border entry point.

The immigrants did stand to forfeit application fees and a $150,000 escrow deposit, a price many were apparently willing to pay.

In 2017-18, there were 166 applicants under the nominee program who forfeited their business deposit and never opened a business, raising $17.6 million for the small province, slightly less than what it received in forfeitures the year before.

Cohen said the case has made clear that provincial programs calling for the residents to stay in the province may not mesh with the constitutional rights of permanent residents to leave.

"This case ... exposes the fact that federal law and the charter allows anybody in Canada who is a permanent resident to live anywhere in Canada. So when a province imposes a restriction or a term or condition that says you've got to live here for a year, there's an inherent conflict," said the lawyer.

"There's an inherent tension between what you're entitled to federally and what the province wants you to do."

Cohen said in researching the case he noted that the Island government itself seemed to realize that relatively few of the applicants to their program would stay.

"The application rate is very high, the deposit rate is high, the retention rate is very low. There seems to be behind the scenes this kind of sense that 'Well, if they choose not to stay, it's legal'. They don't have to stay. The charter doesn't oblige them to stay and we get to keep their ... dollars," he said.

-- By Michael Tutton in Halifax