Chiang (Trustee of) v. Chiang, 2009 ONCA 3

Mendlowitz & Associates Inc. in its capacity as Trustee in Bankrupcy of Chiang et al. v. Chiang et al. [Indexed as: Chiang (Trustee of) v. Chiang]

93 O.R. (3d) 483

Court of Appeal for Ontario,

Laskin, Simmons and R.P. Armstrong JJ.A.

January 7, 2009

Contempt of court -- Purging contempt -- Appellants given opportunity to purge their contempt by complying with undertakings -- Trial judge subsequently holding inquiry into whether appellants had complied with undertakings and what sanction would be appropriate if they had not complied -- Trial judge correctly finding that onus was on appellants to show on balance of probabilities that they had purged their contempt -- Respondent not required to show fresh contempt.

Contempt of court -- Sentence -- Parole -- Parole board not having jurisdiction to grant parole to offender serving custodial sentence for civil contempt of court if sentence includes requirement that offender be brought back before court upon release from custody -- Trial judge not exceeding her jurisdiction in issuing replacement warrant containing requirement that offender be returned to court where replacement warrant merely gave effect to her original sentence.

Contempt of court -- Sentence -- Quantum -- Judge A making consent order in 2003 finding appellants in breach of six previous court orders and giving them opportunity to purge their contempt by complying with undertakings -- Judge A ordering appellants to be incarcerated for seven days if they did not comply -- Judge A subsequently finding that appellants had not complied but giving them further 90 days to comply and warning them of more severe consequences if they failed to do so -- Trial judge finding in 2007 that appellants had not purged their contempt by complying with undertakings and imposing custodial sentences of one year on male appellant and eight months on female appellant -- Appellants' appeal from sentence allowed -- Trial judge limited by 2003 order to sentencing appellants to seven days' imprisonment -- Sentences imposed by trial judge appropriate in absence of 2003 order.

In July 2003, Farley J. found the appellants in contempt of six previous orders of the Superior Court relating to an unsatisfied judgment debt. That finding was made on consent. Under the terms of the consent order, the appellants were given an opportunity to purge their contempt by complying with undertakings which required disclosure of financial information. Failing compliance, they were each to be incarcerated for seven days, and faced the prospect of further sanctions for continued non-compliance. In 2005, Farley J. found that the appellants had complied with some of the undertakings but that they still had a long way to go. He gave them a further 90 days to answer their undertakings and warned them of severe consequences if they did not comply. In 2007, the trial judge found that the appellants had not complied with the undertakings which they gave in July 2003. She found that she was not limited by the July 2003 order to sentencing the appellants to seven days' imprisonment, as Farley J. had effectively varied that order in 2005 by balancing the 90-day extension with a potentially more serious period of incarceration, thereby reopening the remedy that the court could grant in a future hearing. She sentenced the male appellant to one year's incarceration [page484] and the female appellant to eight months' incarceration. When Ontario's Parole and Earned Release Board granted the male appellant parole, the trial judge quashed the order of the Board and issued a replacement warrant of committal to ensure that he would serve his entire sentence in custody. The appellants appealed all orders of the trial judge.

Held, the appeal should be allowed in part.

The respondent was not required to establish a new contempt at the hearing before the trial judge, nor was the trial judge hearing a fresh motion for contempt. She was conducting an inquiry into the appropriate sanction. She analogized the proceeding to sentencing in criminal proceedings and treated purging one's contempt by showing compliance with an undertaking as equivalent to providing a mitigating factor on sentence. She correctly found that, as an accused in a sentencing proceeding bears the onus of establishing a mitigating factor on a balance of probabilities, the appellants had to show on a balance of probabilities that they had purged their contempt.

The trial judge did not err in finding that the appellants had not fulfilled their undertakings. Especially in the context of the close relationship between the appellants and their family, the undertakings were not best efforts undertakings; they were undertakings that unequivocally required the appellants to declare the whereabouts of the assets they sent to their family members in California and Taiwan. The appellants' claim that they had done their best and that their family was not cooperating was irrelevant. Failing all else, they were obliged to take court proceedings to compel members of their family to assist them. Moreover, the trial judge's conclusion that the appellants directly controlled the actions of their family was supported by the evidence.

Absent the July 2003 order and the 2005 proceeding before Farley J., the sentences imposed by the trial judge were fit. There were a large number of aggravating factors which, taken together, demonstrated a long record of deliberate disobedience of the court. However, the trial judge was limited by the July 2003 order to imposing sentences of seven days' incarceration on each appellant. Although Farley J. could have varied that term in 2005, he did not do so. His stern warning of severe consequences did not amount to a variation of the consent order. The appellants were not on fair notice in 2007 that for their continued non-compliance they faced a term of imprisonment greater than seven days. The sentences were set aside, and each appellant was sentenced to seven days' incarceration (which the male appellant had already served).

The trial judge did not err in concluding that the Parole Board did not have jurisdiction to grant parole to the male appellant. A parole board has no jurisdiction to grant parole to a person serving a custodial sentence for civil contempt of court if the sentence includes a requirement that the offender return to court. The original warrant of committal under which the male appellant was sent to custody did not include that requirement. The trial judge did not exceed her jurisdiction in issuing a replacement warrant which included that requirement. The issuance of a warrant is an administrative act. The issuing judge can amend the warrant after it has been issued to ensure that it reflects the judge's original intention. That was what happened here.

APPEAL from orders of Lax J. dated April 17, 2007, reported at [2007] O.J. No. 1409, 2007 CanLII 12203 (S.C.J.); May 14, 2007, reported at (2007), 2007 CanLII 82789 (ON SC), 85 O.R. (3d) 425, [2007] O.J. No. 1866 (S.C.J.); April 30, 2007; and September 26, 2007 that appellants had not purged their contempt and from sentence.

Cases referred to Braun (Re), [2006] A.J. No. 52, 2006 ABCA 23, 262 D.L.R. (4th) 611, [2006] 6 W.W.R. 240, 55 Alta. L.R. (4th) 18, 384 A.R. 80, 17 C.B.R. (5th) 26, 205 C.C.C. (3d) 22, 68 W.C.B. (2d) 246, 147 A.C.W.S. (3d) 799, distd [page485] Other cases referred to 642947 Ontario Ltd. v. Fleischer (2001), 2001 CanLII 8623 (ON CA), 56 O.R. (3d) 417, [2001] O.J. No. 4771, 209 D.L.R. (4th) 182, 152 O.A.C. 313, 16 C.P.C. (5th) 1, 47 R.P.R. (3d) 191, 110 A.C.W.S. (3d) 568 (C.A.); Country Style Food Services Inc. (Re), 2002 CanLII 41751 (C.A.); Dickie v. Dickie, [2007] 1 S.C.R. 346, [2007] S.C.J. No. 8, 2007 SCC 8, 279 D.L.R. (4th) 625, 357 N.R. 196, J.E. 2007-362, 221 O.A.C. 394, 43 C.P.C. (6th) 1, 39 R.F.L. (6th) 30, 153 A.C.W.S. (3d) 851, 72 W.C.B. (2d) 23, EYB 2007-113671; Ewing v. Mission Institution, 1994 CanLII 2390 (BC CA), [1994] B.C.J. No. 1989, 92 C.C.C. (3d) 484, 24 W.C.B. (2d) 547 (C.A.); Illidge (Trustee of) v. St. James Securities Inc. (2002), 2002 CanLII 44971 (ON CA), 60 O.R. (3d) 155, [2002] O.J. No. 2174, 159 O.A.C. 311, 34 C.B.R. (4th) 227, 114 A.C.W.S. (3d) 657 (C.A.); Kefeli v. Centennial College of Applied Arts and Technology, 2002 CanLII 45008 (C.A.); Korea Data Systems, Co. v. Chiang, [2000] O.J. No. 3784, 20 C.B.R. (4th) 264, 100 A.C.W.S. (3d) 329 (S.C.J.); Leader Media Productions Ltd. v. Sentinel Hill Alliance Atlantis Equicap Ltd. Partnership (2008), 90 O.R. (3d) 561, [2008] O.J. No. 2284, 2008 ONCA 463, 237 O.A.C. 81, 167 A.C.W.S. (3d) 896; Oakwell Engineering Ltd. v. Enernorth Industries Inc. (2006), 2006 CanLII 31809 (ON CA), 82 O.R. (3d) 500, [2006] O.J. No. 3658, 215 O.A.C. 91, 151 A.C.W.S. (3d) 756 (C.A.); Pro Swing Inc. v. Elta Golf Inc., [2006] 2 S.C.R. 612, [2006] S.C.J. No. 52, 2006 SCC 52, 273 D.L.R. (4th) 663, 354 N.R. 201, J.E. 2006-2235, 218 O.A.C. 339, 41 C.P.C. (6th) 1, 52 C.P.R. (4th) 321, 152 A.C.W.S. (3d) 70, EYB 2006-111169; R. v. Coutts (1998), 1998 CanLII 4212 (ON CA), 40 O.R. (3d) 198, [1998] O.J. No. 2555, 110 O.A.C. 353, 126 C.C.C. (3d) 545, 16 C.R. (5th) 240, 39 W.C.B. (2d) 43 (C.A.) [Leave to appeal to S.C.C. refused [1998] S.C.C.A. No. 450]; R. v. Malicia (2006), 2006 CanLII 31804 (ON CA), 82 O.R. (3d) 772, [2006] O.J. No. 3676, 270 D.L.R. (4th) 280, 216 O.A.C. 252, 211 C.C.C. (3d) 449, 36 M.V.R. (5th) 1, 70 W.C.B. (2d) 844 (C.A.); R. v. Palmer, 1979 CanLII 8 (SCC), [1980] 1 S.C.R. 759, [1979] S.C.J. No. 126, 106 D.L.R. (3d) 212, 30 N.R. 181, 50 C.C.C. (2d) 193, 14 C.R. (3d) 22, 17 C.R. (3d) 34; R. v. Taillefer, [2003] 3 S.C.R. 307, [2003] S.C.J. No. 75, 2003 SCC 70, 233 D.L.R. (4th) 227, 313 N.R. 1, J.E. 2004-84, 179 C.C.C. (3d) 353, 17 C.R. (6th) 57, 114 C.R.R. (2d) 60, 61 W.C.B. (2d) 432; Ryan v. Maljkovich, [2001] O.J. No. 1268 (S.C.J.); Sengmueller v. Sengmueller (1994), 1994 CanLII 8711 (ON CA), 17 O.R. (3d) 208, [1994] O.J. No. 276, 111 D.L.R. (4th) 19, 69 O.A.C. 312, 25 C.P.C. (3d) 61, 2 R.F.L. (4th) 232, 45 A.C.W.S. (3d) 1101 (C.A.); Shapiro, Cohen, Andrews, Finlayson v. Enterprise Rent-a-Car Co. (1998), 1998 CanLII 1043 (ON CA), 38 O.R. (3d) 257, [1998] O.J. No. 727, 157 D.L.R. (4th) 322, 107 O.A.C. 209, 18 C.P.C. (4th) 20, 80 C.P.R. (3d) 214, 77 A.C.W.S. (3d) 1089 (C.A.); Turkawski v. 738675 Alberta Ltd., [2006] A.J. No. 629, 2006 ABQB 360, 402 A.R. 150, 70 W.C.B. (2d) 166, 149 A.C.W.S. (3d) 409; United Nurses of Alberta v. Alberta (Attorney General), 1992 CanLII 99 (SCC), [1992] 1 S.C.R. 901, [1992] S.C.J. No. 37, 89 D.L.R. (4th) 609, 135 N.R. 321, [1992] 3 W.W.R. 481, J.E. 92-658, 1 Alta. L.R. (3d) 129, 125 A.R. 241, 71 C.C.C. (3d) 225, 92 CLLC Â14,023 at 12118, 13 C.R. (4th) 1, 9 C.R.R. (2d) 29, 32 A.C.W.S. (3d) 910, 16 W.C.B. (2d) 18; Vidéotron Ltée v. Industries Microlec Produits Électroniques Inc., 1992 CanLII 29 (SCC), [1992] 2 S.C.R. 1065, [1992] S.C.J. No. 79, 96 D.L.R. (4th) 376, 141 N.R. 281, J.E. 92-1458, 50 Q.A.C. 161, 76 C.C.C. (3d) 289, 45 C.P.R. (3d) 1, 35 A.C.W.S. (3d) 792, 17 W.C.B. (2d) 220; Visagie v. TVX Gold Inc. (2000), 2000 CanLII 5749 (ON CA), 49 O.R. (3d) 198, [2000] O.J. No. 1992, 187 D.L.R. (4th) 193, 132 O.A.C. 231, 6 B.L.R. (3d) 1, 97 A.C.W.S. (3d) 124 (C.A.); Werner v. Warner Auto-Marine Inc., 1996 CanLII 925 (ON CA), [1996] O.J. No. 3368, 93 O.A.C. 145, 3 C.P.C. (4th) 110, 65 A.C.W.S. (3d) 964 (C.A.); Zesta Engineering Ltd. v. Cloutier, [2007] O.J. No. 2495, 2007 ONCA 471, 158 A.C.W.S. (3d) 576 Statutes referred to Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 Corrections and Conditional Release Act, S.C. 1992, c. 20, ss. 99(1) [as am.], 112(1) [as am.] [page486] Courts of Justice Act, R.S.O. 1990, c. C.43, ss. 96 [as am.], (1) [as am.], 134(4)(b) Criminal Code, R.S.C. 1985, c. C-46, s. 724(3) [as am.] Ministry of Correctional Services Act, R.S.O. 1990, c. M.22, ss. 27(1) [as am.], 35, 36 Prisons and Reformatories Act, R.S.C. 1985, c. P-20, s. 7.3(1) [as am.] Rules and regulations referred to Alberta Rules of Court, Alta. Reg. 390/1968, rule 704(1) [as am.] Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rules 60.11, (1), 60.11(5)(a), 60.11(8) Authorities referred to Sharpe, Robert J., Injunctions and Specific Performance, 3rd ed. (Aurora, Ont.: Canada Law Book, 2000)

J. Thomas Curry and Marguerite Ethier, for appellants. Christopher D. Bredt and Aaron A. Blumenfeld, for respondents. Malliha Wilson and Christopher Thompson, for intervenor, the Attorney General of Ontario.

BY THE COURT: -- A. Introduction

[1] This is one of the worst cases of civil contempt to come before this court. In 1993, Jay Chiang acknowledged that he owed the respondents, Korea Data Systems Co. Ltd. and Korea Data Systems (USA) Inc. ("KDS"), over $8 million. Since that time, he has not paid any money to KDS. Instead, over the past 15 years he and his wife, Christina Chiang, have engaged in a concerted course of conduct to frustrate KDS's efforts to collect its debt.

[2] The Chiangs' conduct has included transferring millions of dollars to their parents in California and Taiwan; receiving money back from their parents when needed to maintain their lavish lifestyle in Toronto; and continually breaching court orders requiring them to disclose the whereabouts of their assets.

[3] In July 2003, the Chiangs consented to a finding and a declaratory order that they were in contempt of six previous orders of the Superior Court. Under the terms of this consent order, the Chiangs were given an opportunity to purge their contempt by complying with a series of undertakings, each of which required disclosure of financial information. Failing compliance, [page487] they were each to be incarcerated for seven days, and faced the prospect of further sanctions for continued non-compliance.

[4] After a trial in 2005, Farley J. found that the Chiangs had answered some undertakings, but had not fully complied. He gave them a further 90 days to do so.

[5] In 2007, after a seven-day trial, Lax J. concluded that the Chiangs still had not fulfilled their undertakings and, therefore, remained in contempt of the previous court orders. She sentenced Jay Chiang to imprisonment for one year and Christina Chiang to imprisonment for eight months. When Ontario's Parole and Earned Release Board granted Jay Chiang parole, the trial judge quashed the order of the Board and issued a replacement warrant of committal to ensure that Jay Chiang serve his entire sentence in custody.

[6] The Chiangs appeal all orders of the trial judge. They submit that the trial judge misunderstood the nature of her inquiry and erroneously placed the burden on them to show that they had purged their contempt. They submit that they have used all reasonable means to answer their undertakings to disclose the whereabouts of their assets but that their family refuses to co-operate with them. They also submit that the trial judge err in imposing the sentences she did, either because the July 2003 consent order precluded her from imposing sentences of greater than seven days or because sentences of one year and eight months are excessive. Finally, the Chiangs submit that the Parole Board had jurisdiction to grant parole and that the trial judge had no jurisdiction to issue a replacement warrant of committal.

[7] KDS submits that this court should not even entertain the Chiangs' appeal until they have purged their contempt. This appeal, therefore, raises the following six issues: (1) Should this court hear the Chiangs' appeal? (2) Did the trial judge misunderstand the nature of the proceedings before her and misapply the onus of proof? (3) Did the trial judge err in finding that the Chiangs had not fulfilled their undertakings? (4) Did the trial judge err in sentencing Mr. Chiang to one year imprisonment and Mrs. Chiang to eight months' imprisonment? (5) Did the trial judge err in concluding that the Parole Board did not have jurisdiction to grant parole to Jay Chiang? [page488] (6) Did the trial judge err in issuing a replacement warrant of committal? B. Civil Contempt of Court

[8] To give context to the issues on this appeal, we briefly review the law of contempt of court. The parties agree on the main principles.

[9] Our law has distinguished between civil and criminal contempt of court. A person who breaches a court order, other than an order for payment of money, commits civil contempt of court: see rule 60.11(1) of the Rules of Civil Procedure, R.R.O 1990, Reg. 194. The contempt here is breach of orders requiring financial disclosure. Where the breach is accompanied by an element of public defiance or public depreciation of the court's authority, the contempt becomes criminal: see United Nurses of Alberta v. Alberta (Attorney General), 1992 CanLII 99 (SCC), [1992] 1 S.C.R. 901, [1992] S.C.J. No. 37.

[10] The distinction between civil and criminal contempt is not always clear cut. Both have a common root: only by having the ability to exercise the power of contempt can judges maintain respect for our courts and for the rule of law. Moreover, recent case law has recognized that even in purely private litigation, the breach of a court order and the resulting sanction for contempt invariably reflect public disrespect for the authority of the court: see Vidéotron Ltée v. Industries Microlec Produits Électroniques Inc., 1992 CanLII 29 (SCC), [1992] 2 S.C.R. 1065, [1992] S.C.J. No. 79 and Pro Swing Inc. v. Elta Golf Inc., 2006 SCC 52, [2006] 2 S.C.R. 612, [2006] S.C.J. No. 52. Nonetheless, the distinction persists and the case before us is undoubtedly a case of civil contempt of court.

[11] In civil contempt, the court's emphasis is less about punishment and more about coercion -- attempting to obtain compliance with the court's order. Still, civil contempt bears the imprint of the criminal law. Civil contempt must be made out to the criminal standard of proof beyond a reasonable doubt. And, a person found in civil contempt of court may be committed to jail or face any other sanction available for a criminal offence, such as a fine or community service: see Pro Swing, at paras. 34-35. C. Background Facts

[12] The history of these proceedings is extensively reviewed in the reasons of the trial judge. Here, we summarize the main events. (1) Origins of the dispute

[13] In the late 1980s, Jay Chiang (in Canada) and his brother Julius Chiang (in the United States) started a computer monitor [page489] business, Aamazing Technologies Inc. In less than five years, Aamazing's sales exceeded $40 million.

[14] KDS was Aamazing's largest supplier. In the early 1990s, KDS delivered over $10 million worth of computer monitors to Aamazing. However, Aamazing refused to pay for them. In 1993, to settle the dispute, Jay and Julius Chiang personally agreed to pay KDS $8.5 million. But they did not do so. Their refusal to pay KDS spawned litigation both in California and Ontario. (2) The California proceedings

[15] KDS obtained two California judgments against the Chiang family. The first arose from an action that KDS began in 1994 against Jay and Julius Chiang, and Aamazing. Soon after being served with the complaint in that action, Jay Chiang transferred $390,000 in securities and US$240,000 to his mother-in-law, $310,000 to his father and a house that he owned to an aunt and uncle.

[16] In 1998, after a trial at which Julius Chiang testified and Jay Chiang did not but defended through counsel, KDS obtained a judgment against all three defendants for $9.7 million. The California court made findings of fraud and breach of fiduciary duty against Jay Chiang and his brother.

[17] Soon after KDS obtained this judgment, Jay Chiang filed for bankruptcy in Ontario, and Julius Chiang did the same in California. Both claimed to have no assets or income. As Jay Chiang remains an undischarged bankrupt, his property remains vested in his trustee in bankruptcy, the respondent Mendlowitz & Associates.

[18] The second California judgment arose from an action KDS started in 1999 against Jay and Julius Chiang's parents. In early 2000, Christina Chiang was added as a defendant. In 2004, KDS obtained a judgment against the three defendants for $5 million. The court found that Jay and Christina Chiang and some of their family had transferred money and assets among each other to frustrate KDS's attempts to collect on its judgment.

[19] The Chiangs appealed the 2004 judgment. The California Court of Appeals upheld the trial court on liability; the sole issue still under appeal is the basis for the $5 million damages award.

[20] KDS has obtained judgments in Ontario enforcing its 2004 California judgment against Christina Chiang and Jay Chiang's parents. Over $6 million is now owing on this judgment. (3) The Ontario proceedings

[21] Over a period of eight years of litigation in this province (1999-2007), Jay and Christina Chiang have established a long [page490] and unenviable track record of deliberately disobeying court orders for disclosure, and at the same time transferring millions of dollars of assets out of the province in breach of those orders. They have done so for one purpose only: to frustrate KDS's attempt to collect the debt it is legitimately owed.

[22] By July 2003, the Chiangs had admittedly breached six previous orders of the Superior Court: -- On September 28, 1999, Ferrier J. ordered that Jay and Christina Chiang be examined under the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 and produce documents relating to their business and financial affairs. They did not comply. Instead, a few days after the order was made, Christina Chiang placed mortgages of $642,000 on her house and wired $600,000 to her father-in-law. -- On November 1, 1999, Farley J. also ordered the Chiangs to be examined and produce documents. Although they were examined, they refused to produce any documents. Instead, Jay Chiang took US$742,000 out of a lucrative telecom business that he controlled and wired it to his father. Then he transferred over $1 million to accounts in his wife's name in Singapore. -- On September 22, 2000 [[2000] O.J. No. 3784, 20 C.B.R. (4th) 264 (S.C.J.)], Farley J. granted a Mareva injunction and an Anton Piller order against Jay and Christina Chiang and their parents. The order (i) required the Chiangs to permit KDS to search their house; (ii) precluded the Chiangs and their parents from dealing with their assets, wherever located; and (iii) required the Chiangs and their parents to provide affidavits of their assets. -- On October 5, 2000, Swinton J. continued the September 22, 2000 order of Farley J. It remains in force today. -- In the months leading up to the Mareva order, Jay Chiang had transferred over US$1.7 million to his parents and his mother-in-law. -- After the Mareva order was made, the Chiangs did not comply with it. Instead, the very next day, Jay Chiang emptied a safety deposit box, and a few days later, Christina wired the remaining $800,000 in her bank account in Singapore to her mother. Jay Chiang did file an affidavit of assets, but made no mention of his interest in the telecom business. [page491] -- On May 7, 2003, Farley J. ordered Christina Chiang to produce account statements and records of transactions of all accounts that she controlled in Taiwan. He also ordered her to produce documents relating to a specific transfer in February, 2000 of US$340,000 to another relative. Christina Chiang did not comply with this order either. -- On June 24, 2003, Farley J. ordered Christina Chiang to disclose the whereabouts of over US$500,000 transferred from her accounts immediately after she was added as a defendant in California or immediately after the Mareva order. This order was made on consent but, again, Christina Chiang did not give any meaningful disclosure.

[23] The Chiangs' breach of these six orders formed the basis for KDS's motion for contempt. (4) The July 16, 2003 contempt order and the Chiangs' undertakings

[24] On July 16, 2003, Farley J. found the Chiangs in contempt of the six court orders. That finding was made on consent. The Chiangs acknowledged their contempt and negotiated terms under which they could purge their contempt. They gave 17 undertakings to disclose to KDS financial information about them and their families. The consent order provided that if they did not comply with their undertakings within 90 days, they would each be incarcerated for seven days. If they continued not to comply, they faced a further period of incarceration. The terms of this consent order are especially relevant on this appeal.

[25] Two trials have now been held to determine whether the Chiangs have answered all their undertakings: the first before Farley J. in 2005, and the second before Lax J. in 2007. (5) The 2005 trial before Farley J.

[26] After the Chiangs had given answers to the undertakings, KDS sought a declaration that they still had not complied. The Chiangs brought a cross-motion to set aside or vary the July 16, 2003 order on the ground that their families had refused to co-operate in disclosing financial information.

[27] Farley J. heard the motions by conducting a trial of the issue. He found that the Chiangs had complied with some of the undertakings but that they still had a long way to go. He gave them a further 90 days to answer their undertakings. He did not incarcerate them, but warned of severe consequences if they did not comply within 90 days. He dismissed the Chiangs' cross- motion. [page492] (6) The 2007 trial before Lax J.

[28] In February 2007, Lax J. tried the issue whether the Chiangs had finally complied with all of the undertakings that they gave in July 2003. In her decision dated April 17, 2007, she concluded that the Chiangs had not complied.

[29] The trial judge's decision is detailed, well written and well reasoned. She focused principally on the undertakings the Chiangs gave to disclose the flow of money from them to their parents and back, and what happened to the assets of the lucrative telecom business Jay Chiang controlled. She made strong findings that in neither case did the Chiangs make meaningful disclosure of their assets. (7) The 2007 sentencing decision

[30] On May 14, 2007 [(2007), 2007 CanLII 82789 (ON SC), 85 O.R. (3d) 425, [2007] O.J. No. 1866 (S.C.J.)], the trial judge sentenced Jay Chiang to imprisonment for one year and Christina Chiang to imprisonment for eight months. She gave lengthy reasons for her sentencing decision. She concluded that the Chiangs' "wilful and deliberate contempt" and their "total disrespect and disregard for the justice system" disentitled them to leniency. As the Chiangs have young children, she ordered the sentences to be served consecutively. She directed that upon Mr. Chiang's release, both he and his wife are to be brought back before her. If the trial judge was satisfied that each of the undertakings had been fulfilled, she would consider releasing Christina Chiang earlier. (8) The stay motions before Doherty J.A.

[31] The Chiangs appealed both the trial judge's finding that they had not fulfilled their undertakings and their sentence. They sought a stay of Jay Chiang's sentence pending their appeal. Juriansz J.A. granted an interim stay. However, two days later, on May 18, 2007, Doherty J.A. heard and dismissed the motion for a stay pending the appeal. He concluded that "the public interest in the integrity of the justice system strongly favours immediate enforcement of the committal order against Jay Chiang". The Chiangs then gave further answers to their undertakings, and in July, renewed their motion for a stay. On July 12, 2007, Doherty J.A. dismissed this motion. He concluded that the new answers did not demonstrate substantial compliance. (9) The September 2007 proceedings before Lax J.

[32] In July 2007, the Ontario Earned Release and Parole Board granted Mr. Chiang parole for the last eight months of his [page493] sentence. KDS immediately applied before Lax J. for an order quashing the Parole Board's decision for lack of jurisdiction, and for a replacement warrant of committal to implement her intention that Jay Chiang serve his entire sentence in custody. Lax J. quashed the Parole Board's decision and signed a replacement warrant. (10) The Chiangs' lifestyle

[33] Throughout these proceedings, the Chiangs have filed affidavits claiming to be impecunious. Their claim stands in stark contrast of the lavish lifestyle they maintain. They still live in a 10,000 square-foot house on which they pay a large mortgage. They still drive expensive cars. And they still spend $50,000 annually to send their children to a private school. D. Analysis

Issue 1: Should this court hear the Chiangs' appeal?

[34] KDS submits that we should refuse to hear Mr. and Mrs. Chiang's appeal until they have purged their contempt by answering their outstanding undertakings.

[35] Undoubtedly, this court has discretion to refuse to hear the appeal of a party who continues to deliberately flout court orders by refusing to provide any meaningful financial disclosure: see Dickie v. Dickie, 2007 SCC 8, [2007] 1 S.C.R. 346, [2007] S.C.J. No. 8. However, we decided to entertain the Chiangs' appeal for three reasons.

[36] First, whether the Chiangs have complied with their undertakings and provided meaningful disclosure is an important issue on this appeal. We cannot resolve that issue without hearing the appeal itself.

[37] Second, we decided to consider the Chiangs' appeal because their liberty interests are at stake. They have appealed their sentences of imprisonment.

[38] And finally, by hearing this appeal we can bring a measure of certainty, if not finality, to what, on any objective assessment, have been unduly protracted proceedings.

Issue 2: Did the trial judge misunderstand the nature of the proceedings before her and misapply the onus of proof?

[39] The Chiangs submit that the trial judge misunderstood the proceedings before her, and consequently failed to apply the correct onus of proof.

[40] In essence, the Chiangs say the trial judge failed to recognize that their contempt ended with the consent order in July 2003. [page494] Instead, she conducted an inquiry into whether the Chiangs were still in contempt of the 2003 order. That inquiry, however, according to the Chiangs, should have required KDS to establish a fresh contempt to the accepted standard of proof beyond a reasonable doubt. Yet, the trial judge placed the onus on the Chiangs to show on a balance of probabilities that they had purged their contempt. In support of this submission, the Chiangs rely on the judgment of the Alberta Court of Appeal in Braun (Re), 2006 ABCA 23, [2006] A.J. No. 52, 262 D.L.R. (4th) 611 (C.A.).

[41] We do not accept the Chiangs' submission. The trial judge embarked on an inquiry to determine two interconnected matters: first, whether the Chiangs had answered their undertakings, thus purging the contempt they agreed, in 2003, that they had committed; and second, if they had not purged their contempt, what sanctions were warranted under the terms of the July 2003 order. There could have been no confusion about the nature of the trial judge's inquiry. The parties agreed to it.

[42] The Chiangs' submission really amounts to a misunderstanding of the 2003 order in which they consented to a declaration and finding beyond a reasonable doubt that they were in contempt of six previous court orders and to the implication of appropriate sentences. In the hearing before the trial judge, the Chiangs were given an opportunity to purge their contempt by demonstrating compliance with their undertakings. Until they did so, they remained in contempt of the earlier court order and subject to additional sanctions in accordance with its terms.

[43] We accept that Braun (Re) appears to reject the idea that a civil contempt may warrant successive orders imposing incremental penal sanctions. In that case, Ms. Braun was repeatedly sentenced to periods of incarceration for civil contempt arising from her failure to provide an affidavit and attend examinations for discovery as ordered by the court. The Alberta Court of Appeal found these repeated penal sanctions to be wrong. Berger J.A., writing for the panel, held that the continued failure to comply amounted to one contempt, which cannot be the subject of repeated periods of incarceration. In effect, Ms. Braun's contempt crystallized at the moment of her non-compliance. Further penal sanctions would be warranted only if a fresh contempt order was obtained. Berger J.A. did, however, allow for further non-penal sanctions if the contempt continued after the period of imprisonment and [at para. 28] "if the unpurged contempt affects the fair adjudication of the suit".

[44] We are reluctant to endorse the reasoning in Braun (Re) for two reasons. First, its reasoning seems at odds with the coercive purpose of civil contempt. To permit only one penal [page495] sanction for the ongoing breach of an order deprives the court of the ability to impose measured, but incremental, sanctions to obtain compliance with that order. In other words, if the court can impose only one period of incarceration for a civil contempt, then it cannot address, in any meaningful way, a contemnor's continuing defiance. If repeated penal sanctions are permitted, the court can always address a concern that these sanctions may become oppressive.

[45] Second, and equally important, Ontario's Rules of Civil Procedure appear to provide more flexibility in sentencing for civil contempt than Alberta's Rules of Court, Alta. Reg. 390/ 1968. In Ontario, rule 60.11(5)(a) permits the court to impose a sentence of imprisonment "for such a period and on such terms as are just". This flexibility is incorporated into rule 60.11(5)(b), which provides that a contemnor may "be imprisoned if the person fails to comply with a term of the order".

[46] By contrast, in Alberta, rule 704(1) provides that a person in civil contempt is liable to "imprisonment until he has purged his contempt" or to "imprisonment for not more than 2 years". These provisions may restrict the sentencing power of the court to a single term of imprisonment for civil contempt.

[47] However, we need not decide whether to apply Braun (Re) because on this record it is distinguishable. Unlike the orders in question in Braun (Re), the July 16, 2003 order expressly provides for a further period of incarceration if the Chiangs continue to refuse to comply with their undertakings. Thus, the order itself gives the court the authority to impose an additional penal sanction if one is warranted.

[48] Moreover, the concern addressed in Braun (Re) -- repeated penal sanctions for the same contempt -- does not arise here. The sentences imposed by the trial judge were the first sentences of imprisonment for the Chiangs' admitted contempt. Whether the sentences should be seven days or longer, we address later in these reasons.

[49] Therefore, in our view, nothing in Braun (Re) suggests that KDS was required to establish a new contempt at the hearing before the trial judge -- or that the trial judge was hearing a fresh motion for contempt. As she correctly noted, at para. 33 of her reasons, she was conducting an inquiry into the appropriate sanction. A vital consideration on the appropriate sanction was whether the Chiangs had purged their contempt by answering their undertakings.

[50] A finding of contempt must be established beyond a reasonable doubt. That finding had already been made in 2003. The question the trial judge had to determine was who had the onus [page496] to show compliance with the undertakings, and to what standard of proof. In answering that question, the trial judge analogized to sentencing in criminal proceedings. She treated purging one's contempt by showing compliance with an undertaking as equivalent to proving a mitigating factor on sentence. As an accused in a sentencing proceeding bears the onus of establishing a mitigating factor on a balance of probabilities, she held that the Chiangs, too, had to show on a balance of probabilities they had purged their contempt.

[51] The trial judge recognized that little authority existed on this question. However, she drew support from the reasons of Cullity J. in Ryan v. Maljkovich, [2001] O.J. No. 1268 (S.C.J.) and from s. 724(3) of the Criminal Code, R.S.C. 1985, c. C-46. She wrote, at paras. 37-40:

Mr. Justice Cullity found that on its motion, the plaintiff had the onus of proving the defendant's contempt beyond a reasonable doubt. With respect to the defendant's cross- motion, however, he stated:

For the purpose of purging the contempt pursuant to paragraph 8 of the judgment of Juriansz J., the defendant must have shown that he has complied with -- among other things -- the orders made by the learned judge with respect to an itemized list of assets and the transfer of available funds from abroad. No authorities were cited on the question of the onus or standard of proof for this purpose but compliance must, I believe, be demonstrated by the defendant on at least a balance of probabilities.

Because purging contempt is a mitigating factor, the onus and standard of proof used for mitigating factors under the sentencing provisions of the Criminal Code can be of some guidance. This court has drawn from sentencing principles found in the Criminal Code when sentencing for civil contempt. For example, in Sussex Group Ltd. v. 3933938 Canada Inc., Mr. Justice Cumming relied on the provisions under the Criminal Code that govern the imposition of conditional sentences to fashion an appropriate remedy under Rule 60.11(5)(f).

Section 724(3) of the Criminal Code provides for the resolution of "disputed facts" in a sentencing hearing. Of particular relevance are subsections (b) and (d):

724(3) Where there is a dispute with respect to any fact that is relevant to the determination of a sentence . . . (b) the party wishing to rely on a relevant fact, including a fact contained in a presentence report, has the burden of proving it . . . (d) subject to paragraph (e), the court must be satisfied on a balance of probabilities of the existence of the disputed fact before relying on it in determining the sentence; and (e) the prosecutor must establish, by proof beyond a reasonable doubt, the existence of any aggravating fact or any previous conviction by the offender. [page497]

In addition to the clear language of section 724(3), judicial consideration of the above provisions confirms that a defendant has the onus to prove mitigating factors on a balance of probabilities. Further, it seems wrong that contemnors could require the victims of their contempt to prove beyond a reasonable doubt that they have not complied with their undertakings. This would not only require the plaintiffs to prove a negative, but it would tend to discourage contemnors from complying with their undertakings. (Footnotes omitted)

[52] We agree with the trial judge's approach and with her reasons. Accordingly, we decline to give effect to this ground of appeal.

Issue 3: Did the trial judge err in finding that the Chiangs had not fulfilled their undertakings?

[53] The trial judge found that Mr. and Mrs. Chiang had not fulfilled the six undertakings that were in issue at the trial, and therefore had not purged their contempt. The Chiangs submit that she erred in this finding. Alternatively, they seek leave to introduce fresh evidence to show that they have now complied with their undertakings.

[54] At the time of the hearing before the trial judge, the Chiangs still had not fulfilled six of their original 17 undertakings. These, however, were the critical undertakings because they focused on the two most important aspects of the Chiangs' unexplained conduct: the disappearance of approximately $4.6 million from the telecom business that Jay Chiang controlled, and the whereabouts of between $8 million to $10 million that the Chiangs had sent to their family members in California and Taiwan.

[55] The trial judge found that the Chiangs had not answered these undertakings because they had not given any real disclosure of their assets. The evidence overwhelmingly supports her finding. (a) The telecom business

[56] Mr. Chiang described the telecom business as a business that "moves voice traffic" between North America and the Far East, and sells that capacity to telephone companies. It was operated through two companies. The trial judge found that Jay Chiang was "the controlling mind and effective owner of the companies". In 2000, his interest in the telecom business was worth between $7.1 million and $12.1 million. The Chiangs do not challenge these findings.

[57] Undertaking 14 required the Chiangs to make full disclosure of documents and information in connection with the telecom business: [page498]

Provide to the plaintiffs full disclosure in regard to the telecom business (as defined in the Mendlowitz affidavit affirmed June 12, 2002), including: (a) Producing to the plaintiffs all records, books of accounts, contracts, correspondence, documents regarding equipment and assets owned, and all other documents; (b) Tracing the whereabouts, from the date of removal up until today, of all money removed out of the ordinary course of the telecom business, including the $2.12 million USD removed from the Asia Pacific Gateway account, consisting of the transfer of $720,000 USD to Y.C. Chiang on November 9, 1999, $900,000 USD to Tsai Chen Cheng Yueh on June 30, 2000 and $500,000 USD to Suzie Wu on April 7, 2000.

[58] Through the Anton Piller order permitting KDS to search the Chiangs' house, KDS discovered that Jay Chiang had been operating his telecom business since approximately 1996. The trial judge extensively reviewed the Chiangs' supposed efforts to comply with undertaking 14. She concluded that they had not complied. In support of that conclusion, she made these strong findings, which we quote verbatim [2007 CanLII 12203 (ON SC), [2007] O.J. No. 1409 (S.C.J.)]: -- Mr. Chiang admitted that no business records of the telecom business have been produced [para. 33]. -- The Chiangs' responses and production of documents with respect to the telecom business and alleged efforts in that regard are completely inadequate. They are nothing more than an appearance of compliance and are not bona fide [para. 138]. -- The second part of this undertaking, 14(b), required the tracing of the whereabouts of all money removed out of the ordinary course of the telecom business [over $6.7 million] . . . With one exception, it is not disputed that no information has been provided as to what happened with any of these sums [para. 139]. -- ... Mr. Chiang had a very lucrative telecom business. I find that he controlled and beneficially owned the telecom business. He had the ability to comply with the undertakings to produce its books and records and disclosed what became of it. He did not do this [para. 145]. -- Perhaps the most egregious example [of non-compliance] is the telecom business. Mr. Chiang was able to make an apparently successful multi-million dollar business disappear overnight by transferring its considerable assets into accounts in the names of family members and related parties. I believe [page499] that they continue to hold these assets somewhere for the benefit of Jay and Christina Chiang [para. 154].

[59] In this court, the Chiangs did not make a serious effort to overturn these findings. That is not surprising. The trial judge's findings and the evidence supporting them are unanswerable. What became of the telecom business remains a mystery. (b) Assets sent to family members

[60] The Chiangs have admitted to transferring over $8 million and perhaps as much as $10 million to members of their family, all of whom reside outside this court's jurisdiction. Some of that money was sent back to the Chiangs to support their obviously lavish lifestyle. Undertakings 7 and 13 provide that the Chiangs must:

Co-operate fully to provide absolute and complete detail and documentation of all assets in the names of family members and related entitles that the undersigned know about, whether the undersigned claim ownership thereof, or not, and including all such assets that the undersigned can identify having made reasonable inquiries and investigations of family members. The family members referred to herein include Christina Chiang's mother, her sister Su Feng Tsai, Jay Chiang's parents, his siblings, their spouses and their children.

Provide full disclosure with supporting documentation of all money or other assets received by Jay Chiang or Christina Chiang, or for the benefit of them or their family, from anyone including family members and related entities, since September 25, 2000.

[61] These undertakings must be read in conjunction with para. 4 of the consent order of July 16, 2003 and undertaking 17, each of which required the Chiangs to "use all reasonable means necessary to compel their family members to assist them" in complying with their undertakings:

4. THIS COURT ORDERS THAT Jay Chiang and Christina Chiang are to use all reasonable means necessary to compel their family members to assist them in complying with this order and the attached undertakings. It is this Court's expectation that Jay and Christina Chiang's family members will provide their full co-operation in assisting Jay and Christina Chiang in complying with the attached undertakings. This Court requests the assistance of all courts with jurisdiction over Jay Chiang and Christina Chiang and their family members and related entities to assist Jay Chiang and Christina Chiang in complying with their obligations hereunder. This Court stands ready to reciprocate in full.

5. The undersigned acknowledged that this Court has expressed its expectation that our family members will provide their full co-operation in assisting us in complying with the above undertakings. We intend to use all reasonable means necessary to compel our family members to assist us. [page500]

[62] The Chiangs contend that they have complied with undertakings 7 and 13 to the best of their ability -- in effect they have used their best efforts -- but that their family refuses to co-operate with them. The trial judge flatly rejected this contention. At para. 148 of her reasons [2007 CanLII 12203 (ON SC), [2007] O.J. No. 1409 (S.C.J.)], she said:

Throughout this lengthy proceeding, Mr. and Mrs. Chiang have selectively disclosed information so as to give the appearance of compliance with the undertakings and then relied on the supposed lack of family cooperation to explain their inability to go further. They have not provided any credible or admissible evidence to support this position. Their assertion that family members refuse to cooperate is designed to conceal their dishonest conduct. It is clear that they control and direct the actions of their family and the accounts in the names of family members and others and could disclose the whereabouts of the millions of dollars if they so chose.

[63] The Chiangs submit that the trial judge's rejection of their position reflects two legal errors: first, the trial judge misinterpreted the Chiangs' obligation under the term of the July 16, 2003 order by turning an obligation to use reasonable means into an unequivocal obligation to disclose; second, the trial judge wrongly equated her rejection of the Chiangs' evidence with proof of their control over the members of their family. We do not accept either submission.

[64] On the Chiangs' first submission, we agree with the trial judge. As she pointed out, the context in which the Chiangs gave the undertaking shows that they unequivocally agreed to disclose their assets and, in doing so, fully expected their family to co-operate. In the words of the trial judge, the "excuses of the past will no longer be accepted". Failing all else, the Chiangs were obliged to take court proceedings to compel members of their family to assist them, which they have never done.

[65] Further, the nature of an undertaking supports the trial judge's view of the Chiangs' obligation. Typically, an undertaking is a promise given by a party or his counsel to the court in the course of legal proceedings as a condition of obtaining a concession from the court or the opposite party. Here, the Chiangs gave these undertakings in order to avoid imprisonment or another sanction for their admitted contempt. When a party gives an undertaking to the court, that party implicitly represents to the court that it is able to fulfill its undertaking. Both the court and the opposite party are entitled to rely on that implicit representation: see 642947 Ontario Ltd. v. Fleischer (2001), 2001 CanLII 8623 (ON CA), 56 O.R. (3d) 417, [2001] O.J. No. 4771 (C.A.), at para. 63.

[66] Finally, this representation gains added force when the undertaking obliges the party giving it to obtain information [page501] from close family members. As Doherty J.A. said on the second stay motion before him:

The appellant continues to operate as though he has no control over his family members, particularly his parents. He wants the court to accept that premise. I do not. Lax J. made very strong factual findings to the contrary. In my view, steps to obtain the necessary information which may support a finding of compliance if a party was at arms' length cannot do so in a case like his where [there] is a close family personal and financial connection.

[67] We entirely agree with Doherty J.A.'s observations. Especially in the context of the admittedly close relationship between the Chiangs and their family, these undertakings were not best efforts undertakings; they were undertakings that unequivocally required the Chiangs to declare the whereabouts of the assets they sent to their family members in California and Taiwan.

[68] The Chiangs' relationship with their family, especially their parents, undermines their second submission: that the trial judge turned her rejection of their evidence into positive proof that they had control over their family. Had the trial judge done that, she may well have been in error: see R. v. Coutts (1998), 1998 CanLII 4212 (ON CA), 40 O.R. (3rd) 198, [1998] O.J. No. 2555, 126 C.C.C. (3d) 545 (C.A.), leave to appeal to S.C.C. dismissed [1998] S.C.C.A. No. 450. However, in our view, she did not do so.

[69] The trial judge's conclusion that the Chiangs directly controlled the actions of their family is supported by a large body of evidence. All of this evidence is unchallenged, and all of it has at its core the very close relationship that exists between the Chiangs and their family. This body of evidence includes the following: -- Both Jay Chiang and Christina Chiang admitted that they have a close and loving relationship with their parents. Indeed, over the two-year period leading up to the hearing before the trial judge, Christina Chiang called her mother daily. -- The Chiangs have sent millions of dollars to their parents. -- The Chiangs' parents and other family members are holding significant assets as nominees for the Chiangs. -- After the Mareva order, the Chiangs' parents have transferred hundreds of thousands of dollars back to the Chiangs to fund their daily expenses. For example, Mrs. Chiang's mother transferred over $900,000 to her daughter and son-in-law to fund their living and legal expenses. The Chiangs' parents paid over $300,000 for the education of the Chiang children. Jay Chiang's parents funded his credit card [page502] charges and permitted him to use over $65,000 in a bank account in their name. -- The Chiangs have met with their family for vacations and family events in Toronto, Mexico, Taiwan and California.

[70] From their evidence, the trial judge was reasonably entitled to infer that the Chiangs had control over their family and could obtain from them information about the assets they had received from Jay and Christina Chiang. To infer otherwise, to accept the Chiangs' claim that they have no control over their family and that their family refused to co- operate, would defy credulity. Accordingly, on the record before her, the trial judge was correct in concluding that the Chiangs have failed to fulfill their undertakings to disclose the whereabouts of the assets sent to their family.

[71] We turn now to the Chiangs' fresh evidence motion.

Should leave be granted to admit fresh evidence?

[72] In support of their appeal, the Chiangs sought leave of this court to introduce fresh evidence. The proposed fresh evidence consists of affidavits from their Ontario and California counsel and falls into three categories: the history of Jay Chiang's custody; some of the procedural background of the Ontario and California litigation; and the Chiangs' supposed efforts since the order of the trial judge to purge their contempt by answering their undertakings. The first two categories of proposed evidence, whether "fresh" or not, add nothing to this appeal. Even if admitted, they do not bear on any potentially decisive issue.

[73] The third category of proposed evidence -- the Chiangs' attempts to purge their contempt -- is contentious. Under s. 134(4)(b) of the Courts of Justice Act, R.S.O. 1990, c. C.43, this court "may, in a proper case, receive further evidence". In deciding motions under s. 134(4)(b), this court has used two different tests: either the test in R. v. Palmer, 1979 CanLII 8 (SCC), [1980] 1 S.C.R. 759, [1979] S.C.J. No. 126, which is the basic test for the admission of fresh evidence in criminal cases, or the test in Sengmueller v. Sengmueller (1994), 1994 CanLII 8711 (ON CA), 17 O.R. (3d) 208, [1994] O.J. No. 276 (C.A.). The Palmer test has four parts. The party seeking to introduce the fresh evidence must show: -- the evidence could not, through due diligence, have been adduced at trial; -- the evidence is relevant in that it bears on a decisive or potentially decisive issue; [page503] -- the evidence is credible; and -- the evidence, if believed and taken with the other evidence, could be expected to affect the result.

[74] See the following cases where this court has used the Palmer test: Oakwell Engineering Ltd. v. Enernorth Industries Inc. (2006), 2006 CanLII 31809 (ON CA), 82 O.R. (3d) 500, [2006] O.J. No. 3658 (C.A.); Leader Media Productions Ltd. v. Sentinel Hill Alliance Atlantis Equipcap Ltd. Partnership (2008), 2008 ONCA 463, 90 O.R. (3d) 561, [2008] O.J. No. 2284 (C.A.); Country Style Food Services Inc. (Re), 2002 CanLII 41751 (C.A.); Zesta Engineering Ltd. v. Cloutier, [2007] O.J. No. 2495, 2007 ONCA 471; Visagie v. TVX Gold Inc. (2000), 2000 CanLII 5749 (ON CA), 49 O.R. (3d) 198, [2000] O.J. No. 1992 (C.A.).

[75] The Sengmueller test has three parts. Under this test, the party seeking to introduce fresh evidence must show: -- the evidence is credible; -- the evidence could not have been obtained by the exercise of reasonable diligence before trial; and -- the evidence, if admitted, will likely be conclusive of an issue in the appeal.

[76] See the following cases where this court used the Sengmueller test: Kefeli v. Centennial College of Applied Arts and Technology, 2002 CanLII 45008 (C.A.); Illidge (Trustee of) v. St. James Securities Inc. (2002), 2002 CanLII 44971 (ON CA), 60 O.R. (3d) 155, [2002] O.J. No. 2174 (C.A.); Shapiro, Cohen, Andrews, Finlayson v. Enterprise Rent-a-Car Co. (1998), 1998 CanLII 1043 (ON CA), 38 O.R. (3d) 257, [1998] O.J. No. 727 (C.A.); Werner v. Warner Auto-Marine Inc., 1996 CanLII 925 (ON CA), [1996] O.J. No. 3368, 93 O.A.C. 145 (C.A.).

[77] On this appeal, it is unnecessary to decide which is the proper test. The two tests are quite similar, though the last branch of the Sengmueller test may be more stringent than the last branch of the Palmer test: see R. v. Taillefer, 2003 SCC 70, [2003] 3 S.C.R. 307, [2003] S.C.J. No. 75. On either test, the Chiangs' motion to introduce fresh evidence must fail.

[78] Although we doubt that the Chiangs can meet the due diligence requirement (which is common to both tests), we need not address it, or the second and third branches of the Palmer test, or the first branch of the Sengmueller test. Even if they are met, the proposed evidence fails to satisfy the last [page504] branch of the Palmer test: it could not be expected to affect the result. And, therefore, equally, the proposed fresh evidence fails the last branch of the Sengmueller test: it will not likely be conclusive of an issue in the appeal.

[79] As we have said, the critical undertakings relate to the disappearance of the telecom business and the disclosure of the whereabouts of assets sent to family members. None of the proposed evidence provides any new information about either of these undertakings.

[80] The Chiangs produced a file on the telecom business from a Hong Kong law firm. KDS already had the documents in this file. Moreover, most if not all of the documents were before Doherty J.A. on the second stay motion. He found that the production of these documents did not amount to meaningful compliance with the Chiangs' undertaking 14 "to provide a full disclosure in regard to the telecom business". We agree. These documents would not have affected the result at trial.

[81] In their proposed evidence, the Chiangs seek to show efforts to compel their family members to disclose the whereabouts of the assets sent to them. Yet the evidence shows that their efforts are pitiful or non-existent. Since the order of the trial judge the Chiangs have not examined a single family member. They took perfunctory steps to examine one member of the family and then abandoned the effort. Undoubtedly, most of the information about the whereabouts of the assets in the hands of the family members lies within the Chiangs' own knowledge. Tellingly, however, neither Jay nor Christina Chiang has filed an affidavit in support of the fresh evidence motion.

[82] The affidavits from the lawyers may present a picture of apparent compliance. But they show no real compliance. The motion to introduce fresh evidence is dismissed.

Issue 4: Did the trial judge err in sentencing Mr. Chiang to one-year imprisonment and Mrs. Chiang to eight months' imprisonment?

[83] This submission has two branches: the Chiangs contend that the trial judge was not entitled to exceed the sentence of seven days' imprisonment the parties agreed to in the consent order of Farley J. dated July 16, 2003. Alternatively, the Chiangs contend that even if the trial judge was entitled to impose sentences greater than seven days, the sentences that she did impose -- one year for Mr. Chiang and eight months for Mrs. Chiang -- are excessive. We will deal with the Chiangs' second contention first. [page505] (1) If the trial judge was entitled to impose sentences greater than seven days, are the sentences that she imposed excessive?

[84] The trial judge concluded that she was not confined to the sanction the parties agreed to in 2003. Instead, she concluded that she was entitled to impose a sanction appropriate to the circumstances existing at the time of the hearing before her.

[85] Assuming that she was right in that conclusion, we see no reviewable error in the sentences the trial judge did impose. Indeed, although sentencing is an exercise of judicial discretion and, therefore, a sentence imposed by the trial judge is entitled to deference from an appellate court, we need not rely on the principle of deference. But for the order of July 16, 2003, these sentences of one year for Mr. Chiang and eight months for Mrs. Chiang are entirely fit. In saying this, we can do no better than quote from the reasons of the trial judge.

[86] The trial judge recognized that a sentence for civil contempt like any sentence "must be proportionate to the gravity of the offence and the degree of responsibility of the offender". The Chiangs are in their 40s. Their conduct is not the product of "youthful exuberance". They bear full responsibility for what they have done. And, in the trial judge's view, the gravity of the Chiangs' contempt has been "significant". She summarized her view of their conduct at para. 38 of her reasons on sentence [(2007), 2007 CanLII 82789 (ON SC), 85 O.R. (3d) 425, [2007] O.J. No. 1866 (S.C.J.)]:

Mr. and Mrs. Chiang have repeatedly breached and frustrated the court orders. They have consistently undermined the objectives of the order in order to shield their assets. Their contempt is blatant, deliberate, wilful, and as I will come to, unrepentant. The gravity of their conduct is compounded by the repeated acts of contempt and the large number of orders breached, which have had serious adverse and prejudicial consequences for the plaintiffs and has impaired the dignity and integrity of the justice system. The gravity of their offence is significant. We agree with this paragraph of her reasons.

[87] The trial judge also recognized that both an apology and a guilty plea can be mitigating factors on sentence. However, she considered neither to be a mitigating factor in this case. Again, we agree with her. She correctly characterized the Chiangs' apology as "hollow and insincere", and she fairly viewed their 2003 consent to a finding of contempt not as an act of contrition, but as purely "tactical" [at para. 42]:

In my view, this is a case where the consent to the finding of contempt cannot be seen as an act of contrition and must be seen as one where the [plaintiffs] acquiesced due to the overwhelming evidence of their dishonesty that [page506] demonstrated, among other things, that they had lied during examinations, sworn false affidavits, transferred large sums of money from their accounts, provided no meaningful disclosure, dissipated assets by gambling, by unauthorized use of credit cards for travel, and by removal of the contents of safety deposit boxes. They were clearly in contravention of the six court orders. The finding of contempt was inevitable and their consent was purely tactical.

[88] Weighed against the absence of any mitigating factors, the trial judge listed an array of aggravating factors [at para. 45]:

I have already discussed some of the aggravating factors in this case in considering the gravity of the offence. They include the following:

(a) There was a deliberate course of conduct over a lengthy period of time.

(b) There were numerous breaches of six court orders.

(c) The Chiangs were found in contempt of fresh orders made while the contempt motion was pending.

(d) The Chiangs have benefited financially from their contempt and have caused extreme prejudice to the plaintiffs.

(e) The Chiangs have shown disrespect to the court by lying to it, offering an insincere apology, and giving only the appearance of complying with the courts' orders.

(f) The Chiangs have been given numerous opportunities and a lengthy period of time to demonstrate their obedience to court orders, but continue to act in breach of the courts' orders.

(g) The Chiangs have continued with a lifestyle of relative luxury and comfort in spite of and in defiance of orders that restrict the use of their assets.

[89] Each of these aggravating factors is fully supported by the record. Together they demonstrate, in the trial judge's words, "a long and woeful record of deliberate disobedience to the court". The Chiangs' disobedience -- their wilful disobedience -- has left the court and KDS without any explanation for what happened to the $4.6 million gone from the telecom business or the $8 million to $10 million siphoned off to family members.

[90] Custodial sentences for civil contempt are rare. Lengthy custodial sentence are even rarer. Canadian courts have tended to punish contempt of court leniently. Ordinarily, the mere conviction for contempt together with a modest fine suffices to obtain compliance and protect the court's authority. Ordinarily, incarceration is a sanction of last resort: see Robert J. Sharpe, Injunctions and Specific Performance, 3rd. ed. (Aurora, Ont.: Canada Law Book, 2000), at para. 6.120.

[91] In the trial judge's view, however, the Chiangs' contempt was not deserving of leniency. Both to denounce their actions and [page507] to deter others by showing that the court will not tolerate this kind of conduct, the trial judge concluded that lengthy periods of incarceration were required [at para. 48]:

This is not a case deserving of leniency. There are no mitigating factors. There has been no genuine apology and no compliance. The contempt has not been purged. The conduct of Mr. and Mrs. Chiang must have concrete consequences in order to 'repair the depreciation of the authority of the court' and to send a message to litigants and the public that this kind of conduct will not be tolerated. Undertakings given to a court are to be fulfilled; apologies tendered to a court are to be genuinely remorseful; court orders are to be obeyed in every respect. Mr. and Mrs. Chiang have made a mockery of the system of justice. The prospect of a short period of incarceration did not deter them in 2003. The strong and denouncing language of the court and the prospect of a lengthier period of incarceration did not deter them in 2005.

[92] But for the terms of the July 16, 2003 consent order and the 2005 proceeding before Farley J., we would agree with the trial judge and with the sentences that she imposed. (2) Was the trial judge entitled to impose sentences greater than seven days?

[93] The trial judge delivered three excellent and persuasive sets of reasons. We entirely agree with all of her reasons, save on this one issue. Our disagreement has its roots in the terms of the July 16, 2003 order and the court's failure to amend that order in 2005.

[94] The July 16, 2003 order was a consent order. In para. 1 of that order, the court found both Jay and Christina Chiang in contempt of six previous court orders. In para. 2, the court ordered that the Chiangs be given the opportunity to purge their contempt by apologizing to the court and fulfilling the undertakings they gave. Paragraph 3 of the consent order addressed the court's sanction if the Chiangs failed to fulfill their undertakings. Its terms are instructive:

3. THIS COURT ORDERS THAT

(a) failing the fulfillment of each of the undertakings within 90 days hereof, each of Jay Chiang and Christina Chiang shall be incarcerated for a period of seven days, to be served consecutively, beginning with Jay Chiang, followed by Christina Chiang.

(b) If there is a finding that the undertakings have not been fulfilled, then after the above incarceration, Jay Chiang and Christina Chiang will have a further period of time in which to purge their continuing contempt (the length of such additional time to be then determined at a further hearing).

(c) If this Court then finds that Jay Chiang and/or Christina Chiang have still not purged their contempt by the conclusion of the additional time referred to in paragraph 3(b) above, then they may be incarcerated for a [page508] further period or time, if same is then warranted, as determined at that further hearing.

[95] In short, para. 3 contemplates that failing compliance within 90 days, the Chiangs will each be incarcerated for seven days. Only if they have first served a seven-day sentence and still have not complied with their undertakings will they face a longer period of incarceration.

[96] The Chiangs did not fulfill their undertakings within 90 days. Indeed, on May 13, 2005, nearly two years after the consent order, Farley J. found that the Chiangs still largely had not purged their contempt. Yet, he did not, as contemplated by para. 3(a) of the July 16, 2003 order, incarcerate the Chiangs for seven days. Instead, he gave them a further 90 days to comply. In doing so, he did warn them that they could not expect similar treatment in the future and that he would deal with their continued failure to fulfill their undertakings "severely":

With respect to the sincerity of apologies, I trust that the apology was sincere but the proof of that will be in the eating of the pudding, not in their words. And if I determine later that there is no effective compliance with purging of the contempt or the fulfillment of the undertakings in any way then I would have to assume that the apologies were insincere, hollow, and in fact making a mockery of the system of justice. And therefore would have to be severely dealt with.

[97] Still, Farley J. did not amend the terms of the July 16, 2003 order or issue a new order signalling to the Chiangs that they could face a period of incarceration greater than seven days. In saying this, we intend no criticism of Farley J. He was trying to coerce compliance, and hoped that he could do so by giving the Chiangs both more time and a strong warning. Regrettably, his "carrot and stick" approach failed to achieve its purpose. Thus, another two years later, when the hearing came on before the trial judge, the Chiangs still had not purged their contempt.

[98] The trial judge quite properly concluded that the Chiangs' continued refusal to fulfill their undertakings merited jail sentences. But, in sentencing the Chiangs to imprisonment for the first time, the trial judge was faced with the argument that she was limited by para. 3(a) of the July 16, 2003 order to a seven-day sentence. She rejected this argument. In the trial judge's view, in 2005, by his "carrot and stick" approach, Farley J. effectively varied the 2003 consent order. She wrote, at para. 11 of her reasons [(2007), 2007 CanLII 82789 (ON SC), 85 O.R. (3d) 425, [2007] O.J. No. 1866 (S.C.J.)] on sentence:

The underlying premise of the 2003 order, which was carefully crafted, was: (a) to encourage the Chiangs through fulfillment of the undertakings to purge their contempt; and (b) to coerce them through the prospect of [page509] incarceration if they did not. In submissions, Mr. Blumenfeld characterized what Mr. Justice Farley did in 2005 as a "carrot and stick" approach. This is an apt characterization. He extended the time for the Chiangs to answer the undertakings by a further 90 days but he also gave the Chiangs a stern warning in the event of continued non- compliance. In effect, he varied paragraph 3 of the order by balancing the 90-day extension with a potentially more serious period of incarceration than the initial seven days in the order, thereby reopening the remedy that the court could grant in a future hearing. This was quite clearly Mr. Justice Farley's intent. . . .

[99] Moreover, the trial judge said that having obtained a further extension to answer their undertakings, the Chiangs could not claim that she was limited by the terms of the 2003 order. Rule 60.11(5)(a) of the Rules of Civil Procedure gave her the discretion to imprison a contemnor "for such period and on such terms as are just". Thus, she concluded that [at para. 15] "[t]he court is not deprived now of the ability to impose a sanction that is appropriate to the circumstances" of the case.

[100] Respectfully, we do not agree. In our opinion, the trial judge was bound by the terms of the order the parties agreed to and the court approved on July 16, 2003. As we have said, that order was made on consent. KDS agreed, and the court agreed, that the first sentence of imprisonment the Chiangs would serve for failing to fulfill their undertakings would be seven days. Although Farley J. could have varied that term in 2005, he did not do so. We do not view his stern warning of severe consequences to amount to a variation of the consent order. He did not imprison the Chiangs at that time even though their non-compliance had extended well beyond 90 days, indeed for nearly two years.

[101] Put differently, we think it appropriate to ask whether in 2007 the Chiangs were on fair notice that for their continued non-compliance they faced a term of imprisonment greater than seven days. We do not think that they were. Paragraph (c) of the July 16, 2003 order contemplated a sentence beyond seven days only after the Chiangs had first served a seven-day sentence.

[102] Accordingly, we set aside the sentence imposed by the trial judge and substitute a sentence of seven days' imprisonment for each of Jay Chiang and Christina Chiang. In addition, Jay Chiang is entitled to a declaration that he has served this sentence.

[103] The Chiangs, however, should not view our order in any sense as a victory. Their undertakings remain unfulfilled. Their contempt of court remains shocking and disgraceful. They remain under the supervision of the court. The terms of para. 3(a) of the July 16, 2003 [order] have now been satisfied for Jay Chiang. Should the Chiangs' contempt continue, the Superior Court is free to impose on him whatever sentence it considers fit. [page510]

Issue 5: Did the trial judge err in concluding that the Parole Board did not have jurisdiction to grant parole to Jay Chiang?

[104] We will address this issue together with issue 6, because the two issues are interrelated.

Issue 6: Did the trial judge err in issuing a replacement warrant of committal?

[105] These two issues arise because in July 2007, the Ontario Earned Release and Parole Board granted parole to Jay Chiang. Parole was to begin on September 13, 2007, four months after the trial judge had sentenced Jay Chiang to one year imprisonment.

[106] KDS immediately brought an application before the trial judge seeking two things: an order quashing the decision of the Parole Board for lack of jurisdiction, and a replacement warrant of committal specifying that on his release from custody, Jay Chiang was to return to court to appear before the trial judge. The trial judge both granted the order and issued a replacement warrant. The Chiangs submit that she erred in doing so. They also submit that the trial judge's decision even to hear KDS's application raised a reasonable apprehension of bias. The allegation of bias is groundless and we do not propose to consider it further. (1) Did the Parole Board have jurisdiction to grant parole to Jay Chiang?

[107] The Parole Board is created under the Ministry of Correctional Services Act, R.S.O. 1990, c. M.22 ("MCSA"). Its decisions are protected by a strong privative clause in s. 36 of the MCSA:

36. The Board has exclusive jurisdiction to examine into, hear and determine all matters and questions arising under this Part and as to any matter or thing in respect of which any power, authority or discretion is conferred upon the Board, and the action or decision of the Board thereon is final and conclusive and is not open to question or review in any court and no proceedings by or before the Board shall be restrained by injunction, prohibition or other process or proceeding in any court or be removable by application under judicial review or otherwise into any court.

[108] Nonetheless, where the Board acts without jurisdiction, its decisions are reviewable. That, in our opinion, is the case here. In fairness to the Board, we point out that when it released Mr. Chiang on parole, it did not have the trial judge's reasons on sentence.

[109] Parole for inmates -- those serving a sentence in custody -- is statutorily authorized under the federal Corrections and [page511] Conditional Release Act, S.C. 1992, c. 20 ("CCRA") and the MCSA. Under these complementary statutory regimes, a provincial parole board has no jurisdiction to grant parole to a person serving a custodial sentence for civil contempt of court if the sentence includes a requirement that the offender return to court. (a) The federal regime

[110] Section 112(1) of the CCRA gives provincial parole board legislative authority to grant parole:

. . . a provincial parole board for a province shall exercise jurisdiction in accordance with this Part in respect of the parole of offenders serving sentences in provincial correctional facilities in that province . . .

[111] The Ontario Earned Release and Parole Board is a "provincial parole board", and Jay Chiang was serving his sentence in a provincial correctional facility. However, to be eligible for parole, he must be an "offender", and "offender" is a defined term. Section 99(1) of the CCRA states in part:

"offender" means (a) a person . . . who is under a sentence imposed before or after the coming into force of this section . . . . . . . . . . . (ii) on conviction for criminal or civil contempt of court if the sentence does not include a requirement that the offender return to that court . . .

[112] Thus, because Jay Chiang was convicted of civil contempt of court, under the federal statutory regime he would not be eligible for parole if his sentence included a requirement that he return to the Superior Court. The original warrant of committal under which he was sent to custody did not include this requirement. Its absence precipitated KDS's application for a replacement warrant of committal, which the trial judge issued. We will discuss the trial judge's authority to do so after discussing the provincial regime for granting parole. (b) The provincial regime

[113] The provincial regime achieves the same result as the federal regime, although by a different route. Section 35 of the MCSA authorizes the Parole Board to grant parole:

35. Subject to the regulations, the Board may order the release from custody on parole of any inmate convicted of an offence under any Act of the Legislature, any Act of the Parliament of Canada, or against a municipal by-law upon such conditions as the Board may determine. [page512]

[114] Jay Chiang is an "inmate". However, to be eligible for parole under this section he must be convicted of an "offence" under a provincial or federal statute. Even if civil contempt of court can be considered an "offence" under s. 35 -- a point we need not decide -- it is not a statutory offence.

[115] The Chiangs submit that civil contempt is an offence under s. 96(1) of Ontario's Courts of Justice Act: "[c]ourts shall administer concurrently all rules of equity and the common law". We do not agree. Section 96 does not create an offence. Indeed, civil contempt of court is not codified in any statute. It is a common-law offence: see United Nurses of Alberta. Thus, although civil contempt bears the imprint of the criminal law, it remains outside the ambit of s. 35 of the MCSA. Accordingly, Jay Chiang is not eligible for parole under the provincial statute.

[116] Both the federal and provincial regimes recognize that civil contemnors remain under the jurisdiction of the court, not the Parole Board. The court, not the Board, shall determine when a person convicted of civil contempt of court is eligible for release from custody: see Turkawski v. 738675 Alberta Ltd., [2006] A.J. No. 629, 2006 ABQB 360.

[117] Removing the Board's jurisdiction to grant parole for civil contempt of court has a sound rationale. It lies in the purposes of sentencing for civil contempt. One purpose is, admittedly, punishment for a breach of a court order. But the main purpose is coercive: to promote compliance with the court's orders. As Doherty J.A. said in his endorsement on the first stay motion, "[u]nlike a criminal case in which incarceration is imposed exclusively as a punishment for prior criminal conduct, Mr. Chiang's incarceration serves both as a punishment and as an incentive to purge his ongoing contempt". Parole is at odds with this coercive or incentive-based purpose of sentencing for civil contempt: see Sharpe, Injunctions and Specific Performance, at para. 6.100.

[118] The statutory regimes, which leave jurisdiction over a civil contemnor with the court, dovetail with the wide discretion given the court under rule 60.11 of the Rules of Civil Procedure. Under rule 60.11(5)(a), "where a finding of contempt is made, the judge may order the person in contempt, (a) be imprisoned for such period and on such terms as are just". And under rule 60.11(8), "a judge may discharge, set aside, vary or give directions in respect of an order under subrule (5)". These rules give to the court an ongoing supervisory role over a civil contemnor together with the discretion to vary or even discharge a contempt order if the contemnor purges the contempt.

[119] The legislative provisions that remove the Parole Board's jurisdiction to grant parole to a civil contemnor may be usefully [page513] contrasted with the provisions conferring on the Board jurisdiction to grant temporary absence permits. Both under s. 7.3(1) of the federal Prisons and Reformatories Act, R.S.C. 1985, c. P-20 and s. 27(1) of the MCSA, any inmate is eligible for a temporary absence permit. Unlike eligibility for parole, eligibility for a temporary absence permit is not qualified in any way. Jay Chiang was therefore eligible for a temporary absence permit and was given one to enable him to work.

[120] However, the trial judge was correct in concluding that the Board lacked jurisdiction to grant Jay Chiang parole. Because of the definition of "offender" in s. 99(1) of the CCRA, that conclusion depended, at least in part, on her requiring Jay Chiang to return before the court after serving his sentence. That requirement did not appear in the original warrant of committal. The trial judge added it in the replacement warrant that she issued. The Chiangs submit that she erred in doing so. (2) Did the trial judge err in issuing a replacement warrant of committal?

[121] In May 2007, the trial judge signed the original warrant committing Jay Chiang to custody. She used the form typically used for criminal warrants of committal. That form does not contain a provision that the contemnor be brought back before the court on release. The replacement warrant that the trial judge issued in September 2007 ordered all correctional officers "to return Jay Chiang to this court to appear before the Honourable Madam Justice Lax upon his release from custody".

[122] The Chiangs submit that the trial judge had no jurisdiction to issue a replacement warrant. They contend that by September 2007 she was functus officio -- that is, she had performed her function -- and that the new warrant improperly interfered with the intervening decision of the Parole Board. KDS submits that the trial judge did have jurisdiction to issue a replacement warrant and that she properly exercised her jurisdiction so that the warrant of committal would conform to her original intention in sentencing Jay Chiang to one year in custody. We agree with KDS's submission.

[123] The issuance of a warrant is an administrative act. The issuing judge can amend the warrant after it has been issued to ensure that it reflects the judge's original intention: see Ewing v. Mission Institution, 1994 CanLII 2390 (BC CA), [1994] B.C.J. No. 1989, 92 C.C.C. (3d) 484 (C.A.) and R. v. Malicia (2006), 2006 CanLII 31804 (ON CA), 82 O.R. (3d) 772, [2006] O.J. No. 3676 (C.A.), per MacPherson J.A. That is all that happened here.

[124] In her reasons on sentence, the trial judge rejected Mr. Chiang's request that he serve his sentence in the community. [page514] Instead, she sentenced him to one year in custody, and importantly for this ground of appeal, directed that upon his release he and his wife be brought before her with a view to deciding whether Mrs. Chiang should be released earlier. Obviously, the trial judge intended that Mr. Chiang serve his entire sentence in custody, and that once he had served his sentence, she would determine whether to make a further order.

[125] We accept that it would be inappropriate for a judge to issue a new or replacement warrant in order to change the sentence the judge had imposed. However, the replacement warrant issued by the trial judge in this case did not change her original sentence, but gave effect to it. Accordingly, we decline to give effect to these grounds of appeal. E. Conclusion

[126] Jay and Christina Chiang have appealed the trial judge's finding that they still have not fulfilled all their undertakings and, therefore, have not purged their contempt. They have also appealed their sentences of imprisonment of one year for Jay Chiang and eight months for Christina Chiang. Finally, they have appealed the trial judge's decision to quash Jay Chiang's parole and to issue a replacement warrant of committal.

[127] We set aside the sentences imposed by the trial judge, and in their place substitute a sentence of seven days' imprisonment for each of Jay and Christina Chiang. We also declare that Jay Chiang has served this sentence. We do so on the sole ground that the terms of the July 16, 2003 consent order did not entitle the trial judge to impose a first sentence of imprisonment greater than seven days. In all other respects, we dismiss the Chiangs' appeal.

[128] The parties may make written submissions on the costs of this appeal within 30 days of the release of these reasons.

Appeal allowed in part.