Certain contempt cases deserve special recognition. A case that has been dubbed “one of the worst cases of civil contempt ever brought before the Ontario Court of Appeal” recently came to a hearing when the defendants, Jay and Christina Chiang, appealed a finding of a civil contempt and consequent sentences.
In the early 1990’s Korea Data Systems Co. Ltd. and Korea Data Systems (USA) Inc. (“KDS”) supplied over $10 million worth of computer monitors to Amazing Technologies Inc. (“Amazing”), a company owned and operated by Jay Chiang and his brother, Julius. Amazing refused to pay for the monitors. The dispute was settled when Jay and Julius personally agreed to pay KDS $8.5 million; however, litigation ensued when the brothers refused to pay.
What followed was 15 years of concerted efforts designed to frustrate KDS’ efforts at collection. Jay and his wife Christina (who was later named as a defendant) established an impressive track record of deliberately disobeying court orders for disclosure, while at the same time transferring millions of dollars of assets out of the province in breach of those orders.
By 2003, Jay had declared bankruptcy along with his wife, and had admittedly breached a remarkable six court orders. Some highlights include: failing to comply with an order to be examined under the Bankruptcy Act and instead, placing a $642,000 mortgage on a house and wiring $600,000 to Christina’s father-in-law; refusing to produce documents when being examined and instead transferring almost $750,000 out of a lucrative telecom business to Jay’s father and over $1 million to accounts in Christina’s name in Singapore; failing to disclose Jay’s interest in his telecom businesses in an affidavit of assets; falling to comply with an order to produce statements and records of accounts controlled by Christina in Taiwan; transferring over $1.7million to Jay’s parents and in-laws leading up to a Mareva injunction; failing to comply with the Mareva injunction and days later emptying out a safety deposit box and wiring $800,000 to Christina’s mother-in-law. This conduct appears at odds with the Chiangs' repeated claims of being impecunious and the fact that throughout the proceedings they continued to live in a 10,0000 square foot mansion, drive expensive cars, and spent over $50,000 annually on their children's private school tuition.
The Chiangs' unscrupulous conduct resulted in a motion for contempt in which the Chiangs acknowledged on consent that they were in breach of six court orders. The Chiangs were given the chance to purge the contempt by providing KDS with certain undertakings, but despite being granted several extensions, failed to comply. The terms of the consent order provided for a seven day period of incarceration followed by further periods of incarceration if they did not provide the required undertakings within 90 days.
After more inadequate disclosure, KDS moved successfully for a declaration that the Chiangs remained in contempt. Jay was sentenced to twelve months in prison while Christina was sentenced to eight. When Jay was granted parole, after serving the first four months of his sentence, a replacement warrant of committal was imposed to ensure that he served his entire sentence. The defendants argued that the trial judge misunderstood the proceedings before her and erroneously placed upon them the burden of proving that they had purged their contempt.
In dismissing the appeal, the Ontario Court of Appeal was of the view that the trial judge did not misapply the onus of proof. The trial judge embarked on an inquiry to determine two interconnected matters. First, whether contempt had been purged and second, if the defendants had not purged their contempt, what sanctions were warranted under the terms of the consent order. The Ontario Court of Appeal agreed that the defendants had not demonstrated compliance with their undertakings. As such, the trial judge was entitled to impose sanctions in accordance with the terms of the consent order. However, the period of incarceration could not exceed a sentence of seven days, as the terms of the consent order provided that the defendants were required to serve a seven-day sentence before a longer period of incarceration could be imposed. Therefore, the sentences were set aside and replaced with a seven day sentence for each defendant.