COURT FILES NO.: 00-CL-3835; 05-CL-5945 (formerly 98-CV-156217)
DATE: 20120709
ONTARIO SUPERIOR COURT OF JUSTICE
Court File No.: 05-CL-5945 (formerly 98-CV-156217)
BETWEEN:
KOREA DATA SYSTEMS CO. LTD., a.k.a. K.D.S. KOREA AND KOREA DATA SYSTEMS (USA) INC.
Plaintiffs
-AND-
AAMAZING TECHNOLOGIES INC. carrying on business as AJAY AMAZING TECHNOLOGIES INC., JAY CHIANG a.k.a. JAY TIEN CHIANG a.k.a. TIENCHIEH CHIANG JULIUS CHIANG AND CHRISTINA CHIANG a.k.a. CHRISTIAN CHIANG a.k.a. SUH MEI TSAI
Defendants
Aaron A. Blumenfeld & Alessandra Nosko, for the Plaintiffs
J. Thomas Curry & Anne Posno, for the Defendant, Jay Chiang
Hilary Book & Scott McGrath, for the Defendant, Christina Chiang
-AND-
Court File No.: 00-CL-3835
B E T W E E N:
MENDLOWITZ & ASSOCIATES INC.
in its capacity as trustee in bankruptcy of JAY TIEN CHIANG, and KOREA DATA SYSTEMS (USA), INC.
Plaintiffs
-AND-
JAY TIEN CHIANG, aka JAY CHIANG, aka TIENCHIEH CHIANG, CHRISTINA CHIANG, also known as SUH MEI TASI, aka CHRISTIAN CHIANG aka SUH MEI TSAI, aka CHRISTINA SUH MEI TSAI, aka SUH MEI TASI CHIANG, aka CHRISTINA SUH-MEI CHIANG aka SUH-MEI CHIANG, CHUN CHUN WU, JIE CHU WU, CHEN CHENG-YUEH TSAI, YU CHANG CHIANG also known as Y.C. CHIANG, EN FU CHIANG, BRENDA CHANG, SAMSON CHANG, DAVID CHENG, EVERVIEW INC., 961266 ONTARIO INC., 1204360 ONTARIO INC., 1243723 ONTARIO INC., AAMAZING TECHNOLOGIES INC., WEN HUANG CHIANG aka WEN CHIANG aka WEN HUANG, CRYSTALVIEW TECHNOLOGY CORP., E.C. HOLDINGS LTD., TELEPOWER INTERNATIONAL (CANADA), INC., BEST BUY ELECTRONICS INC., SU FENG TSAI aka TSAI SU FENG, TSAI ZHENG LI, TSAI ZHENG YING, ASIA PACIFIC GATEWAY (H.K.) LTD., CENTURY GROUP HOLDINGS LTD., ALBANY INVESTMENTS LTD., MEI HUANG, WINNER INTERNATIONAL GROUP LIMITED, HUANG CHI LUNG, MIN HUANG, WAINWRIGHT VENTURES LTD., NEW GLOBAL INVESTMENT LIMITED and FLORATINO LIMITED
Defendants
Aaron A. Blumenfeld & Alessandra Nosko, for the Plaintiffs
J. Thomas Curry, Anne Posno & David Vitale, for the Defendant, Jay Chiang
Hilary Book & Scott McGrath, for the Defendant, Christina Chiang
Douglas Gordon Garbig, for the Defendants, Chen Cheng-Yueh Tsai, Su Feng Tsai, Zheng Li Tsai & Zheng Ying Tsai
David T. Woodfield & Brent J. Arnold, for the Defendants, Samson Chang & Brenda Chang
Jeffrey S. Leon & Rebecca Huang, for the Defendants, Mei Huang and Winner International Group Limited
HEARD: February 22, 23, 24, 25, 28, March 1, 2, 3, 15, 16, 17, 18, 21, 22, 23, 24, 25, 28, 29, 30, April 5, 6, 8, 13, 14, 20, June 23, July 4, 5, 6, 7, 8, 11, 12, 13, 14, 15, October 3, December 5, 6, 7, 8, 9, 12, 13, 14, 15, 16, 19, 20, 21, 2011
MARROCCO J.:
The Nature of this Proceeding
[1] There are two actions being tried.
[2] The first is an action commenced October 5, 1998 by the plaintiffs, Korea Data Systems (USA) Inc. and Korea Data Systems Co. Ltd., to enforce a California judgment against Jay Chiang in the equivalent of (US)$17 million. The plaintiffs also seek pre-judgment interest commencing April 20, 1998 at the rate of 10% or, in the alternative, interest in accordance with the Courts of Justice Act, R.S.O. 1990, c. C-43.
[3] Korea Data Systems Co. Ltd. assigned its interest in the 1998 judgment to the plaintiff, Korea Data Systems (USA) Inc.
[4] The second is an action commenced August 28, 2000, but not served on Jay Chiang and Christina Chiang until September 25, 2000. The Statement of Claim in this action has been amended four times. At the commencement of this trial, this claim was against Jay Chiang, Christina Chiang, Chun Chun Wu, Jie Chu Wu, Chen Cheng-Yueh Tsai, Su Feng Tsai, Zheng Li Tsai, Zheng Ying Tsai, Brenda Chang, Samson Chang, Winner International Group Limited, Mei Huang, New Global Investment Limited, Wainwright Ventures Limited, and Floratino Limited for participating in the fraudulent conveyance of property, conspiracy, spoliation and unjust enrichment. The plaintiffs also sought several declarations and an equitable tracing order. It should be noted that this is not an exhaustive list of the defendants listed on the four times amended Statement of Claim.
[5] The plaintiffs’ claim against Chun Chun Wu and Jie Chu Wu was settled on or about March 15, 2011.
The Factual Context
[6] There is considerable history to this matter in both California and Ontario. This history is helpful in understanding how it is that this matter has come before our courts.
[7] Korea Data Systems Co. Ltd. was owned by two brothers, Jung Koh and Dae Soo Koh. The precise way in which they owned Korea Data Systems Co. Ltd. was not disclosed in the evidence. Korea Data Systems Co. Ltd. manufactured computer monitors. In 1995, Korea Data Systems Co. Ltd went public in Korea. In November 2001, Korea Data Systems Co. Ltd. went bankrupt. It stopped supplying computer monitors a few months earlier in May or June, 2001.
[8] Korea Data Systems (USA) Inc. purchased monitors from Korea Data Systems Co. Ltd. and sold them in North America.
[9] John Hui was a friend of the Koh brothers; he was also, since 1984, in the business of selling computer monitors in California. He had been selling Korea Data Systems Co. Ltd. monitors since late 1987 or early 1988.
[10] John Hui first met Julius Chiang, the brother of the defendant, Jay Chiang, in 1987. He was introduced to Julius Chiang by a mutual friend. In 1989, John Hui, Julius Chiang and another man formed a company called Amazing Technologies Corp. Their purpose was to create a brand-name computer monitor using monitors manufactured by various monitor manufacturers.
[11] Within one year of starting Amazing Technologies Corp., John Hui heard about a company called Aamazing Tehnologies Inc. when a supplier of monitors refused to supply to companies with which he was associated. The supplier complained that Amazing Technologies Corp. was not paying, or insisting on paying less, than the contract price. Mr. Hui could find no record of the contentious shipments and subsequent investigation revealed that the monitors had been shipped to Canada to a company variously called “Ajay Amazing Technologies Inc.” or “Aamazing Tehnologies Inc.” The supplier believed this company was controlled by Mr. Hui and, as a result, would not ship to any company controlled by Mr. Hui. Mr. Hui knew nothing of Aamazing Tehnologies Inc. He eventually found out that it was owned by Julius Chiang's brother, Jay Chiang.
[12] Discovery of this information caused a rift between Mr. Hui and Julius Chiang. Mr. Hui gave up his shareholding in Amazing Technologies Corp a short time later.
[13] In 1992, Mr. Hui assisted the Koh brothers in incorporating a company known as Korea Data Systems (USA) Inc. He had no further involvement with this company from 1992 until 1994.
[14] By 1993, lawsuits had been commenced by Korea Data Systems Co. Ltd., Korea Data Systems (USA) Inc., Jung Koh and Dae Soo Koh against Amazing Technologies Corp., Aamazing Technologies Inc., Julius Chiang and Jay Chiang.
[15] In September 1993, Korea Data Systems Co. Ltd., Jung Koh, Dae Soo Koh, Amazing Technologies Corp., Ajay Amazing Technologies Inc., Julius Chiang and Jay Chiang entered into an agreement purporting to settle the outstanding litigation. This agreement was handwritten and signed by all the parties. All outstanding litigation ended.
[16] In 1994, Mr. Hui, who has an MBA and a background in accounting, was asked by the Koh brothers to assist them with an employee theft problem. Mr. Hui did so. As a result of assisting the Koh brothers, Mr. Hui gained a great deal of insight into the business of Korea Data Systems (USA) Inc.
[17] In 1994, it also became clear that the 1993 handwritten Settlement Agreement was not holding. In May 1994, Korea Data Systems Co. Ltd., Korea Data Systems (USA) Inc., Jung Koh and Dae Soo Koh sued Amazing Technologies Corp., Aamazing Technologies Inc., Julius Chiang and Jay Chiang in California.
[18] Mr. Hui was not directly involved with Korea Data Systems (USA) Inc. at this time, but he did give the Koh brothers advice about commencing the litigation.
[19] In June 1995, Mr. Hui purchased Korea Data Systems (USA) Inc. from the Koh brothers. Mr. Hui continued the litigation.
[20] Julius Chiang defended the California case and testified at the trial.
[21] Jay Chiang initially defended the action, but then effectively dropped out of the proceedings. He retained counsel and filed an Answer to the Complaint of Korea Data Systems Co. Ltd. and Korea Data Systems (USA) Inc. In February 1996, Korea Data Systems Co. Ltd. and Korea Data Systems (USA) Inc. filed an amended Complaint in the California proceeding and Jay Chiang filed an Answer to that document. In October 1996, Jay Chiang's counsel filed a Notice of Operative Pleadings in the California proceeding. Finally, in October 1996, Jay Chiang's attorneys of record withdrew from the proceedings because Jay Chiang owed them approximately $50,000 for unpaid legal fees. It is important to note that the plaintiffs filed a Hongkong Bank statement of account, dated November 5, 1996, which indicated that Jay Chiang had approximately $700,000 on deposit with that bank.
[22] I am satisfied that Jay Chiang was able to pay counsel in California, but for reasons of his own, decided against it. Jay Chiang did not appear for his pre-trial deposition in California. He also did not appear at the trial. Korea Data Systems Co. Ltd. and Korea Data Systems (USA) Inc. obtained judgment against Jay Chiang and Julius Chiang and others in California.
[23] Jay Chiang's failure to defend the California action was a serious strategic error.
[24] In the California action, Korea Data Systems Co. Ltd. successfully sued for breach of the handwritten Settlement Agreement. Judge Tully H. Seymour, of the California Superior Court for the County of Orange, found that, pursuant to the terms of the Settlement Agreement, Korea Data Systems Co. Ltd. was owed $8.5 million by Amazing Technologies Corp., Aamazing Technologies Inc. a.k.a. Ajay Amazing Technologies Inc., Julius Chiang personally and Jay Chiang personally. His Honour found that approximately $4 million of this amount had been paid and gave judgment in favour of Korea Data Systems Co. Ltd. in the amount of approximately $4 million. The Judgment provided for simple interest at the rate of 10% from January 1, 1994 to January 31, 1998.
[25] In the same action, Korea Data Systems (USA) Inc. successfully sued Aamazing Technologies Corp. for monitors that it had received but not paid for. Justice Seymour awarded Korea Data Systems (USA) Inc. approximately $2,150,000 in damages. His Honour gave judgment against Jay Chiang personally and Julius Chiang personally for this same amount because they were the alter egos of Amazing Technologies Corp. and, thus, personally responsible for its debts. The Judgment provided for simple interest at the rate of 10% from January 1, 1994 to January 31, 1998.
[26] Korea Data Systems Co. Ltd. and Korea Data Systems (USA) Inc. began the California litigation in 1994 and obtained a judgment from Justice Seymour on April 20, 1998. On April 30, 1998, the Statement of Decision of Justice Seymour was served on Jay Chiang. Jay Chiang did not appeal the decision.
[27] Jay Chiang filed for bankruptcy in Ontario on September 28, 1998. He declared the California judgment to be a liability in his Statement of Affairs.
[28] In Korea, Korea Data Systems Co. Ltd. went bankrupt in November 2001. At some point, Jung Koh and Dae Soo Koh, on behalf of Korea Data Systems Co. Ltd., purported to assign its interest in Justice Seymour’s Judgment to Korea Data Systems (USA) Inc. The purported Assignment Agreement is undated and one page in length; the copy produced was only signed by the Koh brothers.
[29] On April 8, 2008, Justice Seymour's Judgment was renewed for ten years. Jay Chiang had notice of the renewal. He took no steps to vacate or modify the Judgment.
[30] On August 18, 2008, a further Assignment Agreement was, according to Mr. Hui, entered into between Korea Data Systems Co. Ltd. and Korea Data Systems (USA) Inc. John Hui signed on behalf of Korea Data Systems (USA) Inc.; the signature on behalf of Korea Data Systems Co. Ltd. is in the name of Jung – Hyun Cho. This document is five pages in length. It is more complete than the one-page, undated Assignment to which I previously referred. This document provides that Korea Data Systems (USA) Inc. will continue to pursue the prosecution of certain outstanding lawsuits and collection of the judgment of Justice Seymour at its discretion and that any monies recovered will be divided among the parties.
The Ownership of Korea Data Systems Co. Ltd., Korea Data Systems (USA) Inc., Amazing Technologies Corp. & Aamazing Technologies Inc.
[31] Korea Data Systems Co. Ltd., had been owned by Jung Koh and Dae Soo Koh, although the precise manner in which they owned it was not disclosed in evidence. Korea Data Systems Co. Ltd. went through a form of bankruptcy protection in Korea and, when it emerged from bankruptcy in 2002, it was owned by an arm’s-length purchaser. Jung Koh and Dae Soo Koh no longer had any interest in it.
[32] Korea Data Systems America Inc., also known as KDS America, is a 100%-owned subsidiary of Korea Data Systems Co. Ltd. It was incorporated in August, 1994.
[33] Until June 18, 1995, Korea Data Systems (USA) Inc. was owned by Konix Corporation. The agreement to sell all of the common stock of Korea Data Systems (USA) Inc. to John Hui was signed by Jung Koh, on behalf of Konix Corporation. The receipt of payment for this stock of Korea Data Systems (USA) Inc. was signed by “Jung Koh, Director and Shareholder of Konix Corporation”. The minutes of a special meeting of the Board of Directors and shareholders of Konix Corporation approving the sale of the common stock of Korea Data Systems (USA) Inc. was signed by Jung Koh, Dae Soo Koh and Uhn Kyung Koh. There is no evidence suggesting that Jay Chiang was ever a shareholder or director of Konix Corporation and I find that he never held such positions.
[34] Subsequent to June 18, 1995, a certificate of the shareholder, dated September 22, 1997, and signed by John Hui, stated that John Hui, Ben Wong and Alison Chow were the directors of Korea Data Systems (USA) Inc. The Certificate of the President of Korea Data Systems (USA) Inc. is signed by John Hui as President. The Certificate of the Secretary of Korea Data Systems (USA) Inc., dated October 9, 1997, purports to be signed by Ben Wong.
[35] There is no evidence that Jay Chiang was ever a shareholder, director or officer of Korea Data Systems (USA) Inc. and I find that he never held such positions.
[36] Justice Seymour found, in his Statement of Decision, dated April 20, 1998, that Jung Koh and Dae Soo Koh owned 50% of Amazing Technologies Corp., which was a company incorporated under the laws of the State of California. His Honour found that Julius Chiang owned the other 50%. Justice Seymour also found in the same Statement of Decision that Amazing Technologies Corp. had four directors: Jung Koh, Dae Soo Koh, Julius Chiang and Jay Chiang. Finally, His Honour found that Jay Chiang and Julius Chiang were officers of Amazing Technologies Corp., although he did not specify their positions.
[37] In July 2009, Korea Data Systems Co. Ltd. and Korea Data Systems America Inc., a wholly-owned subsidiary of Korea Data Systems Co. Ltd., commenced litigation in California claiming that John Hui transferred all of his stock in Korea Data Systems (USA) Inc. to Korea Data Systems America, Inc. in 1997. Korea Data Systems Co. Ltd. and Korea Data Systems America Inc. claimed that, as a result of the change in ownership of Korea Data Systems Co. Ltd. due to the bankruptcy in 2002, the present owners of Korea Data Systems Co. Ltd. did not know Korea Data Systems America Inc. owned Korea Data Systems (USA) Inc. until the spring of 2009.
[38] Aamazing Technologies Inc. was founded in 1989 by Jay Chiang. Sam Chang, who was married to Jay Chiang’s sister (Brenda) joined the company in 1989. Originally, Jay Chiang held 80% of the shares with 10% each held by Sam Chang and Frances Chiang, who was Jay Chiang's other sister. In 1992, the shares of Aamazing Technologies Inc. were transferred to a holding company, 961266 Ontario Ltd., and, on October 31, 1993, Jay Chiang became the sole shareholder of 961266 Ontario Ltd.
Enforcement of the Superior Court of California Judgment of Justice T. Seymour
[39] The plaintiff, Korea Data Systems (USA) Inc., seeks judgment against Jay Chiang in an amount in the equivalent of (US)$17 million. The plaintiff seeks judgment in this amount to enforce the debt owed to it as a result of Justice Seymour's Judgment of April 20, 1998 and renewed by the Superior Court of the State of California for ten years in 2008.
[40] The plaintiff, Korea Data Systems (USA) Inc., also seeks a second order or declaration that the debt or liability described in the Judgment of Justice Seymour is a debt or liability arising out of fraud or misappropriation while Jay Chiang was acting in a fiduciary capacity within the meaning of s. 178(1)(d) of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 (the “BIA”).
[41] It is not necessary for me to make this second order in order to enforce the debt; however, both counsel for the plaintiff and for Jay Chiang have asked me to decide the matter.
Justice Seymour's Reasons for his Decision
[42] Some consideration of the decision of Justice Seymour of the California Superior Court is necessary.
[43] According to Justice Seymour, the trial encompassed two issues: whether Jay Chiang and his brother, Julius Chiang, were alter egos of Amazing Technologies Corp.; and whether Jay Chiang and Julius Chiang, as signatories to a contract, were personally responsible for the payments required by that contract.
[44] At trial, Justice Seymour heard from the Receiver of Amazing Technologies Corp., whose evidence he accepted, and from other witnesses. Julius Chiang also testified. However, he was not believed.
[45] In deciding the alter ego issue, Justice Seymour referred to two general requirements of California law: there must be a unity of interest in ownership such that the separate personalities of the corporations and the individuals no longer exist; and, if the acts are treated as those of the corporation alone, an inequitable result will follow.
[46] Justice Seymour found that Jay Chiang and Julius Chiang acted in bad faith and that it would, therefore, be inequitable for them to hide behind the corporate veil. Justice Seymour found that Jay Chiang and Julius Chiang manipulated Amazing Technologies Corp. to take advantage of their control of it. Justice Seymour found that Jay Chiang and Julius Chiang controlled Amazing Technologies Corp. and used it for their own benefit to the detriment of the corporation and the other shareholders. Justice Seymour found that Jay Chiang and Julius Chiang violated the fiduciary duties they owed as officers and directors of Amazing Technologies Corp., because they acted for their self-interest rather than the corporation’s interest. Justice Seymour found that Jay Chiang and Julius Chiang used Amazing Technologies Corp. as their “personal piggy bank” and converted corporate assets for their personal use. Justice Seymour also found that Jay Chiang and Julius Chiang colluded together to manipulate the corporation to defraud Dae Soo Koh and Jung Koh and that they wrongfully used their control of Amazing Technologies Corp. to further their fraudulent scheme.
[47] Justice Seymour set out the evidence upon which he relied. His Honour relied upon a Supply Agreement between Amazing Technologies Corp. and a Canadian company controlled by Jay Chiang known as Aamazing Technologies Inc. His Honour concluded that the Supply Agreement was not in the best interests of Amazing Technologies Corp. and referred specifically to a $3 million liquidated damages provision in that agreement. His Honour also took into account the fact that Amazing Technologies Corp. maintained a $16 million life insurance policy on the life of Julius Chiang and that Julius Chiang concealed from Dae Soo Koh and Jung Koh that his sister, mother and father were paid high salaries by Amazing Technologies Corp. Justice Seymour also found that Julius Chiang prevented Dae Soo Koh and Jung Koh from examining the financial books and records of Amazing Technologies Corp. even after they obtained a court order permitting them to do so, and that this was not in the best interests of Amazing Technologies Corp. Justice Seymour accepted the Receiver’s evidence to the effect that Amazing Technologies Corp. sold monitors and directed the payments to Aamazing Technologies Inc.− the Canadian company owned by Jay Chiang.
[48] Justice Seymour accepted the Receiver’s evidence that there were insufficient business records and that computer parts had been removed from Amazing Technologies Corp. Justice Seymour concluded that Julius Chiang had destroyed or concealed key corporate records. The court found that Julius Chiang took these actions in collusion with Jay Chiang to conceal his misuse of corporate assets and his other wrongful acts from Dae Soo Koh and Jung Koh.
[49] Justice Seymour found that Julius Chiang converted corporate assets for the benefit of companies owned by him. Specifically, Justice Seymour found that Julius Chiang used $425,000 of the corporation’s money to pay for his defence in the very lawsuit that Justice Seymour was deciding.
[50] Significantly, from Jay Chiang's perspective, Justice Seymour found that Aamazing Technologies Corp. was 50% owned by Dae Soo Koh and Jung Koh and 50% owned by Julius Chiang. Accordingly, Jay Chiang was not a shareholder of Amazing Technologies Corp. There is no finding that Jay Chiang was a beneficial shareholder of Amazing Technologies Corp.
[51] It is clear that Justice Seymour's Judgment is for a debt or definite sum of money. There is no dispute that it is final and conclusive. The Superior Court of the State of California was a court of competent jurisdiction, in part because the defendant, Jay Chiang, appeared through counsel, took steps and then voluntarily withdrew from that proceeding.
The Principles Surrounding Enforcement of a Foreign Judgment for a Definite sum of Money
[52] The principles surrounding the enforcement of a foreign judgment for a definite sum of money were set out in Beals v. Saldanha, 2003 SCC 72, [2003] 3 S.C.R. 416. According to that decision, there must be a real and substantial connection between the cause of action or the parties and the foreign court. A defendant in a foreign action can reasonably be brought within the jurisdiction of the foreign court where he or she has participated in something of significance or was actively involved in the foreign jurisdiction (see: para. 32).
[53] In the present case, Jay Chiang was a director and officer of Amazing Technologies Corp., a California Corporation, which imported millions of dollars’ worth of computer monitors into that state and then sold those monitors to customers that were both in and outside of California. In addition, the California action was launched, in part, to enforce a written Settlement Agreement entered into in California which purported to settle a series of outstanding California court actions. Jay Chiang retained counsel in California and entered a defence to the California action. The firm representing Jay Chiang removed itself as counsel of record because Mr. Chiang refused to pay their outstanding accounts ($49,000 approximately). Jay Chiang admitted, on discovery, that he took no steps to appeal the decision or prevent its renewal.
[54] Accordingly, I am satisfied that the Judgment of the California Superior Court, which Korea Data Systems (USA) Inc. seeks to enforce, has a real and substantial connection to California and the Superior Court of California and that the judgment, which the plaintiffs seek to enforce, is final and conclusive.
[55] I am also satisfied that the California Judgment is for a definitive sum of money; namely, (US)$4,550,000 for the unpaid monitors, plus simple interest at the rate of 10% from January 1, 1994 to January 31, 1998, and (US)$2,150,000 for breach of the Settlement Agreement, plus simple interest at the rate of 10% from January 1, 1994 to January 31, 1998.
[56] Once the real and substantial connection test is found to apply, the defences of fraud, lack of natural justice and public policy are available to the party resisting enforcement of the foreign judgment (see: Beals, at para. 40). Fraud means a fraud going to the jurisdiction of the issuing court or the kind of fraud that misleads the foreign court into believing that it has jurisdiction over the cause of action. It also means a fraud based upon new and material facts which the party resisting enforcement could not have discovered and brought to the attention of the issuing court through the exercise of due diligence (see: Beals, at paras. 44 and 50). The fraud must lead to the conclusion that the judgment of the foreign court was obtained by fraud. The defence of natural justice means that the foreign proceedings were contrary to Canadian notions of fundamental justice (see: Beals, at para. 59). The defence of public policy prevents the enforcement of a foreign judgment which is contrary to the Canadian concept of justice or contrary to our view of basic morality (see: Beals, at para. 71).
[57] There has been no suggestion of a fraud of the type described in Beals. There has been no suggestion that the foreign proceedings were contrary to our view of basic morality. The California proceeding was directed towards the payment of a debt owed for goods supplied and breach of a Settlement Agreement. It is true that Jay Chiang's lawyers withdrew from his defence, but they did so because they had not been paid in circumstances where Mr. Chang had sufficient resources to pay them.
[58] Jay Chiang has taken the following positions. The California Judgment is based on two overriding and patent errors of law: first, Mr. Chiang was a director with no shareholding in Amazing Technologies Corp. and, as a result, could not, under California law, be the alter ego of Amazing Technologies Corp.; and second, that a plain reading and proper interpretation of the 1993 two-page handwritten Settlement Agreement contains no personal covenant by Jay Chiang.
[59] To demonstrate that Jay Chiang could not be found under California law to be the alter ego of Amazing Technologies Corp., counsel for Jay Chiang called Ragesh Tangri as an expert witness. Mr. Tangri has been practicing litigation in California since 1992. He clerked at the United States Court of Appeal and he has, during the course of his professional life, argued cases dealing with the doctrine of alter ego. Mr. Tangri testified that, in the State of California, you could not be the alter ego of a corporation unless you were a shareholder of that corporation.
[60] The plaintiffs called their own expert, Mr. David Cook. Mr. Cook also practices law in California, having been admitted to the bar in 1974. He specializes in Creditors’ Rights. Apparently, at one point, his website address was “squeezebloodfromturnip.com”. Mr. Cook also has a motto “Winning is nothing. Collection is everything”.
[61] As I understood Mr. Cook's evidence, an individual could be found to be an owner despite not being on the corporate shareholder register, if that person exercises control over corporate assets and self-deals in those assets.
[62] Mr. Cook relied upon and repeatedly referred to the decision of Logix Development Corporation v. Faherty, 2007 WL 3358745, a decision that was specifically designated by the California Court of Appeal as “unpublished” or “not citable”. Mr. Cook suggested that unpublished cases better represent the state of law than law reviews, treatises and practice guides because the authors are Justices handing down an opinion disposing of a genuine controversy. In the People v. Williams, 2009 98 Cal. Rptr. 3d 770 (3rd Dist. 2009), the Court of Appeal for the Third District of the State of California stated, in paras. 11, 12 & 13, that counsel, under no circumstances, should cite an unpublished opinion except as permitted by the California Rules of Court. The 2011 California Rules of Court were tendered by counsel for Jay Chiang. They provide that an opinion that is not certified for publication or ordered published may not be cited or relied on by a court or a party in any other action (see: Rule 8.1115). Some exceptions are permitted which do not apply to this proceeding. In addition, in People v. Williams, the court indicated that the persistent use of unpublished authority may be a cause for judicial sanction.
[63] Mr. Cook agreed, on cross-examination, that he would not have relied upon this authority in the State of California. The evidence established that there are a variety of reasons why a court might designate an authority as “unpublished, de-published or not citable”. For example, the court may be signalling that it is dangerous to rely on the decision because it is being reviewed by a higher court.
[64] Mr. Cook’s reliance on this decision affects the extent to which I can rely on his evidence.
[65] I found the evidence of Mr. Tangri more helpful and to the point on the question of the alter ego doctrine. Justice Seymour considered the shareholding of Amazing Technologies Corp. Justice Seymour made a clear finding concerning the shareholding of Amazing Technologies Corp. He found that it was owned 50% by Dae Soo Koh and Jung Koh and 50% by Julius Chiang. This is not a case where the shareholders of the corporation are unknown or where the legal and beneficial owners of the corporation have been found to be different persons. His Honour made no finding that anyone else was a beneficial shareholder.
[66] Despite my factual finding that Mr. Tangri has accurately set out the law of California as far as the doctrine of alter ego is concerned and my acceptance of his evidence, Mr. Chiang cannot benefit from that conclusion.
[67] Jay Chiang did not, for all practical purposes, defend the action in California. His attorneys withdrew because he did not pay them. The evidence established that, at the time when Mr. Chiang owed his attorneys in California $50,000, he had approximately (US)$740,000 on deposit in a bank account in Hong Kong. Mr. Chiang made a serious strategic error in failing to defend the California action. He cannot correct that error in a proceeding to enforce the California judgment because Beals does not permit me to review the legal conclusions in a foreign judgment when deciding whether to enforce it.
The 10% Simple Interest Rate
[68] Justice Seymour’s decision, which is dated April 20, 1998, provided for pre-judgment simple interest at the rate of 10% from January 1, 1994 through January 31, 1998. His Honour calculated that the pre-judgment interest owing on account of the dishonored Settlement Agreement was $1,850,916. His Honour calculated that the pre-judgment interest owing for the monitors that were shipped but not paid for was $877,918. Accordingly, His Honour calculated that, on the date of his judgment, Jay Chiang owed Korea Data Systems (USA) Inc. $6,407,916 on account of the dishonored Settlement Agreement and owed $3,270,916 on account of the monitors that were shipped but not paid for.
[69] Neither Justice Seymour’s Judgment nor His Honour’s Statement of Decision made provision for post-judgment interest.
[70] Justice Seymour’s Judgment was binding for ten years, after which time it would expire unless it was renewed. The Judgment was renewed in February 2008, at which time it appears that the Application for Renewal included post-judgment interest calculations at the rate of 10%. It is not clear whether Justice Seymour or another judge of the Superior Court of the State of California or an administrative clerk renewed the 1998 Judgment.
[71] I decline at this point to give effect to the post-judgment interest calculations included in the renewal of the Judgment because post-judgment interest is not provided for in the April 20, 1998 Judgment or in His Honour’s Statement of Decision.
[72] Accordingly, Korea Data Systems (USA) Inc. will be entitled to enforce the Judgment of Justice Seymour in the amount of (US) $9,678,832, which is the total of the amount owing on account of the dishonored Settlement Agreement and the monitors that were shipped and not paid for, plus post-judgment interest from the date of my order in this matter at the rate provided for in the Courts of Justice Act.
[73] The plaintiffs and the defendant, Jay Chiang, will make submissions on the question of post-judgment interest from April 20, 1998.
Does this Decision Enforcing the California Judgment Survive Jay Chiang's Discharge in Bankruptcy?
[74] Korea Data Systems (USA) Inc. seeks a declaration that any order of discharge from bankruptcy of the defendant, Jay Chiang, will not release him from liability to the plaintiff.
[75] Section 178(1)(d) of the BIA provides that an order of discharge does not release the bankrupt from “any debt or liability arising out of fraud, embezzlement, misappropriation or defalcation while acting in a fiduciary capacity…”. Accordingly, the question is whether the judgment which this court is enforcing arises out of fraud, embezzlement, misappropriation or defalcation while Jay Chiang was acting in a fiduciary capacity.
[76] Korea Data Systems (USA) Inc. was incorporated in 1992. John Hui, who is now the sole owner of Korea Data Systems (USA) Inc., was one of the original incorporators, along with Dae Soo Koh and Jung Koh, and assisted with the details of incorporating the company.
[77] The intention was that Korea Data Systems (USA) Inc. would sell computer monitors under its own name or as a private label. Korea Data Systems (USA) Inc. imported monitors manufactured by Korea Data Systems Co. Ltd. and sold them to distributors.
[78] At first, Mr. Hui had no role in Korea Data Systems (USA) Inc. However, in late 1994 or early 1995, Dae Soo Koh and Jung Koh had a problem with the company. Specifically, one group of employees accused another group of employees of theft. Dae Soo Koh and Jung Koh asked Mr. Hui to figure out what happened. As a result of dealing with this problem, Mr. Hui learned a great deal about Korea Data Systems (USA) Inc.
[79] After dealing with the employee theft problem, he was approached by Dae Soo Koh and Jung Koh and asked to be the CEO of the company. Mr. Hui refused. Discussions continued and, eventually, Mr. Hui testified that he purchased the company in June 1995.
[80] The terms of the purchase ultimately were that, for three years, Korea Data Systems (USA) Inc. would buy monitors from Korea Data Systems Co. Ltd. In fact, the exclusive supply arrangement continued until 2001. In 1999, Korea Data Systems (USA) Inc. began seriously selling computers in addition to computer monitors. By 2001, Korea Data Systems Co. Ltd. could not supply enough monitors and so Korea Data Systems (USA) Inc. began, with the consent of Korea Data Systems Co. Ltd., to source monitors from others.
[81] Mr. Hui knew that there was a dispute between Korea Data Systems (USA) Inc. and Amazing Technologies Corp. in 1993 and he knew that, as a result of that dispute, there was a Settlement Agreement. Mr. Hui was not a party to the dispute. Mr. Hui was also aware that, in 1994, Korea Data Systems (USA) Inc. commenced an action against Amazing Technologies Corp., Julius Chiang and Jay Chiang claiming that the Settlement Agreement had been broken. Mr. Hui had no direct involvement in the litigation.
[82] John Hui incorporated Amazing Technologies Corp. He did this in May 1989. There were two other shareholders, Arthur Hsiao and Julius Chiang. The intent of the three shareholders at the time of incorporation was to create a brand-name computer monitor known as Amazing. To achieve this goal, John Hui brought in a number of major suppliers as shareholders, including Korea Data Systems Co. Ltd.
[83] John Hui left Amazing Technologies Corp. in 1992. Prior to leaving, he found out that there was a company in Canada known as Aamazing Technologies Inc. and he learned that this company was owned, at least in part, by Jay Chiang, who was the brother of Julius Chiang. Mr. Hui objected to the Canadian company being owned by someone other than Amazing Technologies Corp. He was assured by Arthur Hsiao that Julius Chiang was trustworthy and so he carried on at first with Amazing Technologies Corp. Later on, he heard from various suppliers about delays in payment that were being attributed to Amazing Technologies Corp. but were really caused by Aamazing Technologies Inc. One of the suppliers of monitors would not ship to a company owned by Mr. Hui because it was having trouble collecting from Aamazing Technologies Inc. These difficulties were created without Mr. Hui's knowledge. A rift developed between Mr. Hui and Julius Chiang with the result that Mr. Hui left Amazing Technologies Corp. as a shareholder in 1992.
[84] Mr. Hui testified that Amazing Technologies Corp. and Aamazing Technologies Inc. owed approximately $10 million to Korea Data Systems Co. Ltd. and the failure to pay this money had, in his opinion, a significant impact on the survival of that company. In 2002, when Korea Data Systems Co. Ltd. emerged from bankruptcy in Korea, it was owned by persons who were at arm’s-length from the Koh brothers.
Jay Chiang's Bankruptcy
[85] Jay Chiang completed a Statement of Affairs, dated September 25, 1998. Jay Chiang filed an Assignment in Bankruptcy on September 28, 1998. The plaintiff, Mendlowitz & Associates Inc., was appointed Trustee of his estate. Korea Data Systems Co. Ltd. and Korea Data Systems (USA) Inc. both filed Proofs of Claim in the bankruptcy. On August 18, 2008, Korea Data Systems (USA) Inc. entered into an agreement with Korea Data Systems Co. Ltd. relating to the division of the proceeds from the litigation against Jay Chiang and others and, in return, received an assignment of Korea Data Systems Co. Ltd.’s interest in that litigation.
[86] Failure to prove a claim disentitles a creditor to share in any distribution (see: s. 124(1) of the BIA). Accordingly, Korea Data Systems (USA) Inc. is entitled to share in any distribution of Jay Chiang’s estate.
[87] As set out earlier, the California Judgment was given against Jay Chiang personally because it was found that he had personally promised to pay the September 8, 1993 handwritten global settlement of all outstanding California litigation with the Koh brothers, and because he was the alter ego of Amazing Technologies Corp. and, therefore, personally responsible for its debts.
[88] Jay Chiang was a director of Amazing Technologies Corp. Justice Seymour found that Jay Chiang and his brother, Julius, used Amazing Technologies Corp. for their own benefit and to the detriment of the corporation. Justice Seymour found that Jay Chiang violated the fiduciary duty that he owed to Amazing Technologies Corp. Justice Seymour found that Jay Chiang colluded with his brother to manipulate Amazing Technologies Corp. in order to defraud Dae Soo Koh and Jung Koh and to conceal his misuse of corporate assets. It was upon this basis that Justice Seymour found that Jay Chiang was the alter ego of Amazing Technologies Corp. and, therefore, personally liable for that corporation’s financial obligations to Korea Data Systems Co. Ltd. and Korea Data Systems (USA) Inc.
[89] Jay Chiang was never a director or officer of Korea Data Systems (USA) Inc. Jay Chiang was never a director or officer of Korea Data Systems Co. Ltd. As a director of Amazing Technologies Corp., Jay Chiang did not owe a fiduciary duty to Korea Data Systems Co. Ltd. or Korea Data Systems (USA) Inc. (see: BCE Inc. v. 1976 Debentureholders, 2008 SCC 69, [2008] 3 S.C.R. 560, [2008] S.C.J. No. 37, at para. 37).
[90] Jay Chiang did owe a fiduciary duty to Amazing Technologies Corp. and he may have owed a fiduciary duty to Dae Soo Koh and Jung Koh as shareholders of the corporation. Dae Soo Koh and Jung Koh do not own Korea Data Systems Co. Ltd. They have not owned it since it emerged from bankruptcy in 2002. Korea Data Systems Co. Ltd. is now controlled by persons at arm’s-length from Dae Soo Koh and Jung Koh.
[91] Jay Chiang raises two other issues concerning the survivability of his debt to Korea Data Systems (USA) Inc.
[92] First, Jay Chiang contends that, in order to meet the BIA s. 178(1)(d) exception, Korea Data Systems (USA) Inc. relies upon the findings of Justice Seymour. Therefore, when considering this exception, the court must consider the correctness of those findings. Counsel for Jay Chiang relies upon the decision of Paulin v. Paulin, [1994] O.J. No. 2783. In Paulin, the plaintiff sued for (US)$488,000 on a debt. The plaintiff also asked for a declaration that this debt was owed due to a fraud. The defendant had made an Assignment in Bankruptcy in Arizona and had been discharged. The defendant maintained that the debt was non-dischargeable in the defendant’s bankruptcy because it was based on fraud.
[93] The court held that, when enforcement of the judgment was sought in Ontario, the court was entitled to scrutinize the judgment for manifest error and not simply blindly enforce it. This decision was rendered prior to the decision in Beals and, in my view, is dubious authority for that reason.
[94] Counsel for Jay Chiang also relies upon the case of Perciasepe v. Smith, 2003 CanLII 64259 (ON SC), [2003] O.J. No 6043; aff’d 2004 CanLII 4763 (ON CA), [2004] O.J. No. 3110, in which the plaintiff, in August 1995, obtained default judgment against, among others, one Janet Smith. Janet Smith filed for bankruptcy. The plaintiff filed the Proof of Claim in the bankruptcy. Janet Smith received a Certificate of Discharge on September 16, 1998. After her discharge, Ms. Smith obtained a mortgage and purchased real property. The plaintiff learned of this purchase and attempted to enforce its judgment on the basis that the judgment survives because it was a debt arising out of fraud as described in s. 178(1)(d) of the BIA.
[95] Justice Eberhard concluded, in part, that a determination under s. 178(1)(d) can be made after discharge from bankruptcy. Her Honour also held that the court can look behind the face of a judgment to determine whether the debt or liability is one arising out of fraud, embezzlement, misappropriation or defalcation. The question whether the debt or liability arose while Ms. Smith was “acting in a fiduciary capacity…” did not arise. In principle, however, Her Honour's decision would seem to support the conclusion that one can look behind the face of the judgment to determine this question as well.
[96] It is appropriate to note at this point that both Korea Data Systems (USA) Inc. and Jay Chiang want the court to go behind the Judgment of Justice Seymour. The Judgment of Justice Seymour makes no reference to a debt or liability arising out of fraud, embezzlement, misappropriation or defalcation while acting in a fiduciary capacity.
[97] In this case, we not only have the Judgment from Justice Seymour, but we also have what is referred to as a Statement of Decision, which we would call His Honour's Reasons for Judgment.
[98] Assuming the court can go behind the Judgment, it raises the question of whether, for the purposes of a declaration concerning the applicability of s. 178(1)(d) of the BIA, the court can consider what counsel for Jay Chiang claims to be an incorrect application of the California law of alter ego. Counsel for Mr. Chiang submits that this incorrect application of the law made Jay Chiang personally responsible for the debt owed by Amazing Technologies Corp. to Korea Data Systems (USA) Inc. and Korea Data Systems Co. Ltd. Counsel also claims that Justice Seymour’s misinterpreted the two-page, handwritten Settlement Agreement, and these combined errors led Justice Seymour to the erroneous conclusion that Jay Chiang had personally promised to pay the California settlement money.
[99] If counsel for Jay Chiang is correct, the judgment which Korea Data Systems (USA) Inc. seeks to enforce in Ontario should not have been found against Jay Chiang and, therefore, it is not a debt or liability arising out of fraud, embezzlement, misappropriation or defalcation while acting in a fiduciary capacity.
[100] Justice Eberhard looked behind the Ontario decision, with which she was confronted, to see how it should be characterized. Her Honour did not purport to review the correctness of the decision. At the same time, it should be observed that Her Honour was dealing with a default judgment and the circumstance that the defendant, Janet Smith, had not placed the merits of the default judgment in issue. Jay Chiang offered evidence challenging the correctness of the California judgment.
[101] The Judgment of Justice Seymour is evidence of the debt or liability that is owed to Korea Data Systems (USA) Inc. by Jay Chiang (see: Pro Swing Inc. v. Elta Golf Inc., 2006 SCC 52, [2006] 2 S.C.R. 612, [2006] S.C.J. No. 52, per Deschamps J., at para. 11). The nature of the debt is described in the Statement of Decision, not in the Judgment. Accordingly, one is compelled to consider the Statement of Decision to see whether the debt arises out of a fraud, embezzlement and misappropriation or defalcation while acting in a fiduciary capacity.
[102] According to the Statement of Decision, part of the debt arises because Jay Chiang is liable for the cost of the monitors ordered by Amazing Technologies Corp. from Korea Data Systems Co. Ltd. and Korea Data Systems (USA) Inc. He is liable because he was the alter ego of Amazing Technologies Corp.
[103] According to the Statement of Decision, the balance of the debt arises because Jay Chiang, in his personal capacity, promised, on September 8, 1993, to pay Korea Data Systems Co. Ltd. a sum of money to settle all outstanding litigation involving Korea Data Systems Co. Ltd., Amazing Technologies Corp. and Aamazing Tehnologies Inc.
[104] The Ontario Superior Court of Justice is being asked to assist Korea Data Systems (USA) Inc. by allowing it to use this Court's enforcement mechanisms. One of this Court's enforcement mechanisms is s. 178(1)(d) of the BIA because that section does not release a bankrupt, which Jay Chiang is, from certain kinds of debts or liabilities. This court has to determine whether that enforcement mechanism is available to Korea Data Systems (USA) Inc. In order to make that determination, the court has to examine Jay Chiang’s debt owed to Korea Data Systems (USA) Inc. to determine whether it arises out of a fraud, embezzlement, misappropriation or defalcation while acting in a fiduciary capacity.
[105] The notion of fraud, embezzlement, misappropriation or defalcation that has to be applied is that of the Ontario Superior Court of Justice because it is the Court deciding whether to make its enforcement mechanism available. For the same reason, whether Jay Chiang was acting in a fiduciary capacity for the purposes of s. 178(1)(d) of the BIA has to be determined by applying this Court’s notion of fiduciary relationships.
[106] Typically, when a court has to make a determination, it is able to consider any evidence that is helpful and not otherwise inadmissible. I see no reason why the same principle should not apply when the court is being asked to make a declaration concerning the applicability of s. 178(1)(d). This appears to me to be consistent with the approach taken by Justice Eberhard in Perciasepe − a decision that was subsequently affirmed by the Court of Appeal.
[107] One next has to determine whether the phrase “while acting in a fiduciary capacity”, as it appears in s. 178(1)(d), applies only to the word “defalcation” or whether it applies to the words “fraud, embezzlement and misappropriation” as well. This appears to have been implicitly decided by the Ontario Court of Appeal in Simone v. Daley, (1999), 1999 CanLII 3208 (ON CA), 43 O.R. (3d) 511, 1999 CarswellOnt 551, at para. 29.
[108] Blair J.A., in Simone, makes the following observation, at para. 52: “I am not persuaded that the exception to a release of liability upon a bankruptcy discharge which is provided for in s. 178(1)(d) of the BIA should be extended to conduct which does not display at least some element of wrongdoing or improper conduct on the part of the fiduciary in question in the sense of a failure to account properly for moneys or property entrusted to the fiduciary in that capacity or inappropriate dealing with such trust property.”
[109] Mr. Hui was, for some time, completely unaware of the existence of Aamazing Technologies Inc. After becoming aware of its existence, Mr. Hui testified that, for a time, he tolerated the company’s existence because he received separate assurances about the integrity of Julius Chiang. There was no relationship between Korea Data Systems (USA) Inc. and Aamazing Technologies Inc. Mr. Hui, at no time, entrusted property to Aamazing Technologies Inc.
[110] As indicated earlier, a portion of Jay Chiang’s indebtedness to Korea Data Systems (USA) Inc. arises from his failure to personally honour a Settlement Agreement that he entered into. Such conduct could be fraudulent if Jay Chiang entered into the Settlement Agreement to induce Korea Data Systems Co. Ltd. to continue shipping monitors with no intention of honouring the Agreement. Justice Seymour did not make this finding. Rather, His Honour found that Jay Chiang and Julius Chiang paid approximately (US)$4 million to Korea Data Systems Co. Ltd. pursuant to the Settlement Agreement. They were required to pay (US)$8.5 million and, accordingly, His Honour gave Korea Data Systems Co. Ltd. judgment for the difference.
[111] The balance of Jay Chiang’s indebtedness to Korea Data Systems (USA) Inc. arises from Amazing Technologies Corp.’s failure to pay for monitors sold to it by Korea Data Systems Co. Ltd. and from the fact that Jay Chiang was found to be the alter ego of Amazing Technologies Corp.
[112] Subsequent to the written Settlement Agreement of September 8, 1993, Korea Data Systems Co. Ltd. resumed shipping monitors to Korea Data Systems (USA) Inc. in response to purchase orders issued by Amazing Technologies Corp. According to the complaint, Amazing Technologies Corp. once again failed to make timely payments with the result that Korea Data Systems Co. Ltd. began shipping on a collect-on-delivery (COD) basis after October 26, 1993.
[113] According to the complaint, which began the action on May 9, 1994 and which led to the judgment which Korea Data Systems (USA) Inc. now wishes to enforce, Korea Data Systems (USA) Inc. assisted Korea Data Systems Co. Ltd. in invoicing and distributing the monitors.
[114] In his Statement of Decision, Justice Seymour found that it was undisputed that the monitors “were shipped to AAmazing California and AAmazing California did not pay”. Justice Seymour found that “AAmazing California was indebted to KDS-USA for the goods shipped…”. In Justice Seymour's Statement of Decision, “AAmazing California” was an acronym for Amazing Technologies Corp. and “KDS-USA” was an acronym for Korea Data Systems (USA) Inc. Thus, the computer monitors were entrusted to Amazing Technologies Corp. and shipped to Aamazing Technologies Inc. pursuant to the direction of Amazing Technologies Corp.
[115] Accordingly, it is not possible to conclude that there was a misappropriation or defalcation in respect of the monitors, as those words are used in s. 178(1)(d) of the BIA, because those monitors were never entrusted to Jay Chiang or Aamazing Technologies Inc.
Does Jay Chiang's Debt to Korea Data Systems (USA) Inc. Arise out of a Fraud in Respect of the Unpaid Monitors while he was acting in a Fiduciary Capacity?
[116] Justice Seymour found that Jay Chiang colluded with his brother to manipulate Amazing Technologies Corp. to defraud the Koh brothers and Korea Data Systems (USA) Inc.
[117] One of the important purposes of bankruptcy legislation is to encourage the rehabilitation of an honest but unfortunate debtor (see: Simone, at para. 27). This purpose is not dependent upon Mr. Chiang personally being an honest but unfortunate debtor, which he is not. The existence of a fiduciary relationship is a question of fact for determination in each case (see: Simone, at para. 13). A fiduciary obligation is grounded in the nature of the relationship that exists between the parties; it is not grounded in the result which it is sought to reach (see: Simone, at para. 16).
[118] Finally, the plaintiffs’ four times amended Statement of Claim, at paragraph 44, particularizes that the fiduciary capacity upon which they rely flows from the fact that Jay Chiang was an officer and director of Amazing Technologies Corp.
[119] Justice Seymour found that a debt existed between Korea Data Systems (USA) Inc. and Jay Chiang because Jay Chiang was the alter ego of Amazing Technologies Corp. His Honour found that Jay Chiang and his brother:
- controlled Amazing Technologies Corp.;
- used Amazing Technologies Corp. for their benefit to the detriment of that Corporation and the Koh brothers;
- violated their fiduciary duties as officers and directors of Amazing Technologies Corp.;
- acted for their self-interest rather than Amazing Technologies Corp.’s self-interest; and,
- used Amazing Technologies Corp. as their personal piggy bank, converting corporate assets for personal use as well as taking actions that benefited them rather than Amazing Technologies Corp.
[120] Jay Chiang was not an officer, director or shareholder of Korea Data Systems (USA) Inc. His presence, as well as the existence of his company, Aamazing Technologies Inc., in Canada was concealed from John Hui.
[121] Because Jay Chiang was a director of Amazing Technologies Corp., he owed a fiduciary duty to that company. He did not owe a fiduciary duty to the creditors of Amazing Technologies Corp. (see: BCE, at para. 37). One false indicator of a fiduciary obligation is the presence of conduct that attracts judicial sanction (see: Hodgkinson v. Simms, 1994 CanLII 70 (SCC), [1994] 3 S.C.R. 377, [1994] S.C.J. No. 84, per Sopinka and McLachlin JJ., at para. 121).
[122] Korea Data Systems (USA) Inc. had a simple way to protect itself from the failure of Amazing Technologies Corp. to pay for its monitors. It simply had to ship the monitors on a COD basis which, according to the complaint, it did after October 26, 1993. Justice Seymour, in his Statement of Decision, did not find any unpaid invoices dated later than “the fall of 1993”.
[123] Accordingly, s. 178(1)(d) of the BIA should be interpreted as requiring that the fiduciary duty referred to in that subsection is owed to the creditor who is seeking a declaration that its debt survives the bankrupt’s discharge. Such an interpretation is also consistent with ss. 172(2) & 173 of the BIA, which require the court to refuse a discharge, suspend a discharge or order a conditional discharge when it is of the view that “the bankrupt has been guilty of any fraud”.
[124] I am not satisfied that Jay Chiang owed a fiduciary duty to Korea Data Systems (USA) Inc.
[125] Accordingly, Korea Data Systems (USA) Inc.’s application for a declaration that the debt owed to it by Jay Chiang will survive his discharge from bankruptcy, as a result of the application of s. 178(1)(d) of the BIA, is refused.
Do the Plaintiffs Possess the Requisite Corporate Authority to Pursue the Enforcement Action or the Fraudulent Conveyances Action?
Mendlowitz and Associates Inc.
[126] A portion of this argument can be dealt with in a relatively straightforward manner. Mendlowitz and Associates Inc. is the Trustee of the estate of the bankrupt, Jay Chiang. Benny Mendlowitz testified as a witness in these proceedings. His evidence was, in part, that he is the founder and owner of Mendlowitz and Associates Inc. There was never any suggestion that Mr. Benny Mendlowitz lacked the authority to instruct Mendlowitz and Associates Inc. to initiate the action claiming that Jay Chiang and others engaged in fraudulent conveyances and other actionable conduct. Accordingly, even if, as was argued, John Hui lacked the authority to instruct Korea Data Systems (USA) Inc. to enforce its California judgment or to challenge transactions as fraudulent conveyances, the action alleging fraudulent conveyances and other actionable conduct would, nevertheless, continue with Mendlowitz and Associates Inc. as plaintiff.
Korea Data Systems (USA) Inc.
[127] Korea Data Systems (USA) Inc. is the only plaintiff in the action to enforce the Judgment of Justice Seymour.
[128] Throughout the multiplicity of proceedings before this court for the past thirteen years, John Hui has always represented himself as the owner of Korea Data Systems (USA) Inc. Mr. Hui is a successful businessman. He is a Canadian citizen with an MBA from McMaster University, and he is also a permanent resident of the United States living in California.
[129] Apart from commencing proceedings to enforce its judgments and to allege fraudulent conveyances and other actionable conduct, Korea Data Systems (USA) Inc. participated in proceedings that resulted in Jay Chiang and Christina Chiang being committed to jail for contempt of court. Korea Data Systems (USA) Inc. has funded and indemnified Mendlowitz and Associates Inc.'s pursuit of the assets of Jay Chiang and Christina Chiang in this jurisdiction, as well as in Hong Kong, Taiwan and the United States.
[130] In July 2009, Korea Data Systems America Inc., or KDS America, commenced an action in California against John Hui asking for an order declaring it to be the owner of Korea Data Systems (USA) Inc. and enjoining John Hui from acting on behalf of Korea Data Systems (USA) Inc. Subsequent to Korea Data Systems America Inc. commencing that litigation, Jay Chiang and Christina Chiang amended their defences seeking an order that John Hui did not have the authority to cause Korea Data Systems (USA) Inc. to commence or continue these proceedings. The California proceedings were scheduled to be tried in June 2012.
[131] Mr. Hui testified in these proceedings and, in the course of so doing, explained how he came to be the owner of Korea Data Systems (USA) Inc. He testified that, after assisting Jung Koh and Dae Soo Koh with internal difficulties at Korea Data Systems (USA) Inc. in 1994 and early 1995, the two brothers asked him to operate that company. Mr. Hui declined their offer because he viewed himself as an entrepreneur rather than a manager. Despite his refusal, discussions with the Koh brothers continued and, eventually, according to Mr. Hui, they sold him their shares in the company. Mr. Hui testified that he purchased the shares from a U.S. company incorporated in Rhode Island (Konix Corporation).
[132] According to Mr. Hui, the original purchase price was $1.2 million. Mr. Hui paid $100,000 on account of the purchase price and signed a promissory note for the balance, namely $1.1 million. Mr. Hui testified that, after he took over the company, he realized that it was in much worse condition than he thought and so he re-negotiated the terms of the purchase with Dae Soo Koh and Jung Koh. According to Mr. Hui, they agreed to rescind the promissory note in return for an agreement that Korea Data Systems (USA) Inc. would exclusively purchase monitors from Korea Data Systems Co. Ltd. for a three-year period ending September 30, 1998. There was a written supply agreement which confirmed that Korea Data Systems Co. Ltd. was to be the sole supplier of monitors for Korea Data Systems (USA) Inc. The agreement did not speak to the shareholding of Korea Data Systems (USA) Inc.
[133] Mr. Hui testified that, after he took over Korea Data Systems (USA) Inc., he dramatically increased its sales. Subsequent to the 1995 purchase, Mr. Hui functioned, for all purposes, as the sole owner of Korea Data Systems (USA) Inc. He managed its affairs, sold its assets and funded its expenses when necessary. Mr. Hui testified that Korea Data Systems (USA) Inc. ceased active business in 2003 and, since that time, he has used Korea Data Systems (USA) Inc. to enforce the judgments it holds against Jay Chiang and others and has personally funded its efforts in that regard. Mr. Hui also provided his personal undertaking to be responsible for damages resulting from the injunction granted to the plaintiffs in 2009. Mr. Hui has instructed counsel in a number of jurisdictions on behalf of Korea Data Systems (USA) Inc.
[134] Korea Data Systems America Inc., a wholly-owned subsidiary of Korea Data Systems Co. Ltd., asserted its ownership of Korea Data Systems (USA) Inc. by passing a resolution in July 2009 to remove all previous directors and appoint a new director. The new director promptly passed a resolution removing all previous officers and appointing a new officer. In response, in July 2011, Mr. Hui and his associate passed a resolution as directors of Korea Data Systems (USA) Inc. retroactively authorizing all steps taken in these proceedings.
[135] In July 2009, Korea Data Systems America Inc. commenced an action in California for a declaration that it was the sole owner of Korea Data Systems (USA) Inc. and for an order enjoining John Hui from acting on behalf of Korea Data Systems (USA) Inc. In that action, Korea Data Systems America Inc. alleged that, in 1995, Jung Koh wanted to list Korea Data Systems Co. Ltd. on the Korea Stock Exchange. The Korea Stock Exchange required listed companies to have a certain minimum level of revenue. Korea Stock Exchange rules provided that revenues of corporations affiliated with or subsidiaries of the company wishing to be listed would not be considered for purposes of its minimum revenue requirement. As a result, Korea Data Systems Co. Ltd. did not have sufficient revenues to qualify for listing. Accordingly, Jung Koh, it was alleged, engaged in a “straw sale” of Korea Data Systems (USA) Inc. to John Hui. A secret term of the sale was that John Hui would sell his shares of Korea Data Systems (USA) Inc. back to Jung Koh and Dae Soo Koh upon request. Korea Data Systems America Inc. claimed that, on April 30, 1997, pursuant to a request from Jung Koh, John Hui re-conveyed his shares in Korea Data Systems (USA) Inc. to Korea Data Systems America Inc. In consideration of the sale, Mr. Hui's $100,000 payment was returned to him and the $1,100,000 promissory note, executed by John Hui at the time of the “purchase”, was cancelled. The claim alleged that the $100,000 payment was returned to John Hui by a cheque issued by Korea Data Systems America Inc. and that the cheque was negotiated by Mr. Hui. Accordingly, Korea Data Systems America Inc. claimed that, from April 30, 1997, it owned all of the shares of Korea Data Systems (USA) Inc. Finally, in the pleading, Korea Data Systems America Inc. claimed that, when Korea Data Systems Co. Ltd. emerged from bankruptcy protection in 2002, it had new ownership that was at arm's-length from the Koh brothers. Korea Data Systems America Inc. pleaded that the new ownership first became aware of its ownership of the shares of Korea Data Systems (USA) Inc. in May 2009 when that fact was disclosed by a witness in unrelated litigation in California.
[136] In December 2010, both Jay Chiang and Christina Chiang obtained orders allowing them to amend their Statements of Defence. Jay Chiang amended his defences to both the enforcement action and the fraudulent conveyances action to include these allegations. Christina Chiang, who had already pleaded that the action alleging fraudulent conveyances and other misconduct was an abuse of process, amended her defence to that action to include the factual allegations concerning the alleged “straw sale” as further evidence of that abuse of process.
[137] While this matter was proceeding, John Hui settled the California action challenging his ownership of Korea Data Systems (USA) Inc. Mr. Hui testified in these proceedings about the details of that settlement. The written Settlement Agreement was made an exhibit in these proceedings.
[138] The written Agreement provides that it is a compromise of disputed claims and that the settlement terms of payment are not to be construed as an admission of liability, relationship or responsibility.
[139] Mr. Hui indicated that he settled two lawsuits with Korea Data Systems America Inc., one of which alleged that he was not the owner of the shares of Korea Data Systems (USA) Inc. As part of that settlement, Mr. Hui:
- Paid $400,000 to Korea Data Systems America Inc. Mr. Hui testified that he in fact made this payment.
- Agreed to amend the Assignment Agreement, dated August 18, 2008, between Korea Data Systems Co. Ltd. and Korea Data Systems (USA) Inc. to provide that 40% of any money recovered from an E*TRADE account in California in the name of Winner International Group Limited was to be paid to Korea Data Systems Co. Ltd. without deduction for any costs including legal fees. This 40% payment was in addition to a requirement already in the Assignment Agreement by which 60% of any proceeds recovered from the action alleging fraudulent conveyances and other misconduct was to be paid to Korea Data Systems Co. Ltd.
- Agreed that the 40% payment would be applied to reduce the outstanding balance of Korea Data Systems Co. Ltd.’s unpaid legal fees at the date of the agreement which totalled approximately $380,000.
[140] In return, Korea Data Systems America Inc. agreed to execute whatever documents were necessary to show that John Hui owns 100% of the shares of Korea Data Systems (USA) Inc.
[141] Mr. Hui indicated that the Settlement was arrived at after a settlement conference mandated by the Rules of Procedure of the Superior Court of the State of California.
[142] The Settlement provides an antecedent authority, if one was required, for the instructions which Mr. Hui gave, throughout these proceedings, on behalf of Korea Data Systems (USA) Inc. (see: Dumart Packing Co. v Dumart, [1927] O.J. No. 140 (High Ct.), at para. 5).
Does Jay or Christina Chiang have Standing to Challenge Mr. Hui's Authority to Instruct Korea Data Systems (USA) Inc.?
[143] Due the fact that the settlement of the litigation in California challenging Mr. Hui's authority to give instructions on behalf of Korea Data Systems (USA) Inc. was resolved with a settlement that confirmed his authority to give instructions in these proceedings, it is not necessary for me to decide whether Jay Chiang and Christina Chiang have standing to challenge Mr. Hui's authority.
[144] Authority was cited to the court that stands for the proposition that a defendant in an action by a corporation has no standing to engage in this issue (see: Dumart, at para. 9; and Bozzo v. Giampaolo, [2002] O.J. No. 5382), which stand for the proposition that “where proper authorization from the board of directors of a corporate plaintiff is shown, it does not lie in the mouth of a defendant to go behind that authorization and dispute its regularity” (Bozzo, at para. 15).
[145] In this case, Jay Chiang and Christina Chiang were, at the instigation of Korea Data Systems (USA) Inc., committed to jail for violating interlocutory orders issued in these proceedings. This circumstance did not present itself in the cases to which the court was referred.
[146] Section 7 of the Canadian Charter of Rights and Freedoms, Part I of the Constitution Act, 1982, being Schedule B to the Canada Act 1982 (U.K.), 1982, c.11, provides that everyone has the legal right not to be deprived of their liberty except in accordance with the principles of fundamental justice. Section 24(1) provides that anyone whose rights have been infringed may apply to a court of competent jurisdiction for a remedy. The Ontario Superior Court of Justice is a court of competent jurisdiction. Accordingly, it does not seem to me that the cases to which I was referred on the question of standing are applicable. In addition, when the court commits a party to jail, it has an institutional interest in the propriety of what it has done. Even if the person jailed had no standing to claim that the proceeding within which the committal orders were issued was commenced without authority, the court may, when confronted with such a claim, be compelled to make its own inquiries.
[147] In any event, it is not necessary to consider the question of standing in this proceeding and, accordingly, the court ought not to do so.
[148] I am satisfied that, as a result of the Settlement Agreement, John Hui must be viewed as having had the authority throughout these proceedings to give instructions to Korea Data Systems (USA) Inc. Accordingly, any challenge to his authority to do so fails.
The Action Alleging Fraudulent Conveyances and other Misconduct
[149] I propose now to consider the liability of each of the parties who appeared in the trial of this action.
Preliminary matters
[150] The plaintiffs provided reply submissions of approximately 158 pages. Reply submissions are intended to respond to issues that were raised for the first time by the defence in their closing submissions and that could not have reasonably been anticipated by the plaintiffs. I have considered the plaintiffs’ reply submissions with this legal principle in mind (See: Fuerst & Sanderson, Ontario Courtroom Procedure, 3d ed. (Markham, Ont.: LexisNexis, 2012), at p. 83).
Zheng Li Tsai and Zheng Ying Tsai
[151] Zheng Li Tsai and Zheng Ying Tsai are Christina Chiang's brothers. On February 28, 2011, the plaintiffs brought a motion to validate service of notice of these proceedings on these two defendants. On March 16, 2011, the court released its decision concluding that these two defendants had been validly served with the amended amended Notice of Action, the amended amended amended Statement of Claim and a letter stating that this trial was to commence on February 22, 2011. There is a four times amended Statement of Claim which contains claims against other defendants and which did not modify the claims against these two defendants.
[152] These two defendants filed a Statement of Defence on April 11, 2011. They are represented by Mr. Douglas Garbig, who also represents their mother and sister in these proceedings.
[153] These defendants were permitted to participate in the trial despite no discovery or production of documents. This occasioned no prejudice to the plaintiffs. Zheng Li Tsai and Zheng Ying Tsai were added as defendants in 2006. There has been ample time to move to regularize service and either note them in default or move for an order compelling production of documents and attendance at discovery. In this proceeding, a motion for such an order was argued on July 4, 2011. The timing of the motion was such that it was brought on the 18th day of trial at the close of the plaintiffs’ case.
[154] The plaintiffs were assisted in this case by Mr. Stephen Tseng, who had been retained by Korea Data Systems (USA) Inc. in late 1999 to assist in its efforts to collect on its judgment against Jay Chiang. Mr. Tseng is a lawyer practicing law in Taiwan and we received his evidence by video conference. Mr. Tseng testified that he has been acting for Korea Data Systems (USA) Inc. in Taiwan in connection with these matters since the end of 1999. Mr. Tseng was able to give certain direct evidence concerning Christina Chiang's Taiwan apartment because he acted for the plaintiffs in respect of litigation involving the apartment in Taiwan.
[155] Rather than delay the proceedings, the court ordered that Zheng Li Tsai and Zheng Ying Tsai produce relevant documents in their possession in the event they chose to testify. Zheng Li Tsai and Zheng Ying Tsai did not testify in this matter.
[156] Mr. Tseng testified that, because Korea Data Systems (USA) Inc. had a judgment against Christina Chiang from a court in the United States, it was able to obtain in Taiwan in 2005, what he called a Provisional Seizure Order in respect of Christina Chiang. To obtain this order, Korea Data Systems (USA) Inc. was required to post a bond and to demonstrate that it had a right to collect money from Christina Chiang. Mr. Tseng testified that creditors usually obtain such an order before commencing enforcement proceedings. As a result of the order, Christina Chiang could not transfer real property in her name without a court order.
[157] These two defendants (Zheng Li Tsai, Zheng Ying Tsai) reside in Taiwan in the apartment owned by Christina Chiang. In April 2006, Mr. Tseng became aware of the fact that there was a proceeding in the Taiwanese District Court in which Christina Chiang's mother claimed that Christina Chiang was a Trustee of the apartment and that the beneficiaries of the trust were her children; namely, Christina Chiang, Zheng Li Tsai, Zheng Ying Tsai and Su Feng Tsai.
[158] Mr. Tseng testified that the property was worth approximately (US)$275,000. Mr. Tseng provided the value of the property in new Taiwanese dollars and informed the court that the exchange rate to the U.S. dollar was approximately 28:1.
[159] Mr. Tseng explained that he was not concerned about the transfer of the property because the Provisional Seizure Order he had obtained would prevent Christina Chiang from transferring real property without a court order upon notice.
[160] There is no suggestion that these defendants were engaged in this matter other than as occupiers of the Taiwan apartment and as persons who instituted legal proceedings in Taiwan to try to establish an ownership interest in the Taiwan apartment. Mr. Tseng successfully intervened in that litigation, claiming that Korea Data Systems (USA) Inc. had an interest in the apartment by virtue of its judgment against Christina Chiang issued by the Superior Court of the State of California.
[161] Ultimately, the Taiwan Supreme Court, on April 11, 2008, decided that there was not sufficient evidence of the trust and that the apartment was solely the property of Christina Chiang. The Taiwan Supreme Court dealt with the question of costs.
[162] No evidence was offered to suggest that the plaintiff suffered any loss or damage as a result of these two defendants residing in the apartment. The only direct evidence concerning the payment of rent came from Christina Chiang, who testified that she has not and does not receive any rent or other consideration from her brothers with respect to their use and enjoyment of the apartment. While I am not prepared to accept Christina Chiang's evidence on this question, the rejection of her evidence would not constitute evidence that she did receive a benefit.
[163] The matter of rent is not pleaded in the four times amended Statement of Claim. Mr. Tseng was not asked during his testimony about the possibility of obtaining an order from the Taiwan courts concerning the payment of rent and I draw no conclusions about the availability of such an order. If the plaintiffs thought it advisable to examine these defendants concerning the payment of rent to Christina Chiang or any other matters relevant to this claim, then it would have been possible to attempt to do so, with the advice and assistance of Mr. Tseng, during the various interruptions in the conduct of this trial.
[164] This court is not in a position to give any directions concerning possession of the apartment because, to do so, would not show the appropriate respect for the jurisdiction of the courts in Taiwan. The Taiwan Supreme Court dealt with the question of costs. It has not requested this court's assistance in enforcing that order. It is not appropriate for this court to make any order in that regard and the plaintiffs’ claim as it relates to the costs of the Taiwan proceedings is dismissed.
[165] Ms. Chen Cheng-Yueh Tsai, Christina Chiang's mother, testified that her husband purchased the apartment in 1983. He put the apartment in the name of his eldest daughter, Suh Mei Tsai (i.e., Christina Chiang), and his eldest son. Ms. Tsai testified that her husband saw it as a trust for all four of their children. She stated that her eldest son was not stable and so her husband switched title to Christina's name alone.
[166] Christina Chiang testified that both her brothers live in the apartment without paying rent. Her family served her with documents indicating that they had commenced a proceeding in a Taiwan court claiming an ownership interest in the apartment. She tried to speak to her family about the apartment, but they would not talk to her. She indicated that her father had put the apartment in her name because he was concerned that her oldest brother's irresponsible behaviour was going to result in the loss of the apartment and that it now appeared to her mother and siblings that her conduct had jeopardized ownership of the apartment. Ms. Chiang indicated that, as a result, her mother and her siblings were angry with her.
[167] Given Christina Chiang's history of non-compliance with court orders, I have considered her evidence with caution. In my view, it is dangerous to rely upon her evidence unless it is confirmed by other evidence. As indicated, I accept the evidence of Ms. Tsai and so I accept this portion of Christina Chiang's evidence.
[168] I am not prepared to infer from the evidence affecting these two defendants (Zheng Li Tsai, Zheng Ying Tsai) that they joined the conspiracy defined in paragraph 52 of the Statement of Claim. That conspiracy has as its primary object making Amazing Technologies Corp., Aamazing Technologies Inc. and Jay Chiang “judgment proof”. It is pleaded that the conspiracy included an agreement to assist Jay Chiang in carrying on business through entities not controlled by him. The conspiracy allegedly included an agreement involving Jay Chiang, Christina Chiang and others to arrange the affairs of Jay Chiang and Christina Chiang so that they could clandestinely obtain money to fund their and their children's living, education and legal expenses without disclosing the sources of their funds to the plaintiffs and without paying any money to the plaintiffs. It is alleged that the conspiracy was aimed at injuring the plaintiffs and committing unlawful acts by failing to pay debts that Jay and Christina Chiang were legally obligated to pay to the plaintiffs.
[169] I am satisfied that Zheng Li Tsai and Zheng Ying Tsai participated in an action before the courts in Taiwan to determine whether they have an ownership interest in the condominium apartment in Taiwan.
[170] I am not satisfied that the participation of these two defendants in the Taiwan litigation constitutes a fraudulent conveyance. There is no question of unjust enrichment. The apartment was purchased by Christina Chiang's father with his own money.
[171] It is not appropriate for this court, in my view, to make any order concerning the apartment in Taiwan. That matter is obviously within the jurisdiction of the courts in Taiwan. The plaintiffs have had counsel in Taiwan since 1999.The plaintiffs know how and have had years to enforce their rights in Taiwan if they thought it advisable.
[172] There is no question of spoliation.
[173] All of the plaintiffs’ claims against these two defendants are dismissed with costs.
Su Feng Tsai and Chi Lung Huang
[174] Su Feng Tsai is the sister of Christina Chiang (a.k.a. Suh Mei Tsai). It is alleged that she participated in certain transactions, which had the effect of implementing the conspiracy to which I have previously referred.
[175] The plaintiffs objected to the fact that Su Feng Tsai has not produced documents or been examined for discovery. Su Feng Tsai was added as a defendant in these proceedings in 2006. She did not appear and the plaintiffs moved, on February 28, 2011, for an order validating service of their notice of these proceedings on her. On March 16, 2011, this court decided that Su Feng Tsai had been validly served and, on April 15, 2011, Su Feng Tsai filed a Statement of Defence when her brothers did. She has been represented from that point on by Mr. Douglas Garbig, who, in these proceedings, also acts for her mother, Chen Cheng Yueh Tsai and her two brothers, Zheng Li Tsai and Zheng Ying Tsai.
[176] Su Feng Tsai's alleged participation in these matters has been well-known to the plaintiff since 2006. There was ample time to move to regularize service and either note Su Feng Tsai in default or move for an order compelling her to disclose documents and attend on discovery.
[177] In this proceeding, a motion for an order compelling her attendance at discovery was argued on July 4, 2011. The timing of the motion was such that it was brought on the eve of the close of the plaintiff's’ case. Rather than delay the proceedings, the court ordered Su Feng Tsai to produce relevant documents in her possession if she chose to testify. Su Feng Tsai did not testify in this trial.
The Telecom Business
May 1998, (US)$129,985 from Chi Lung Huang to 124-3723 Ontario Inc. (Asia Connects Technology)
May 9, 1999 (US)$100,000 from Asia Pacific Gateway (H. K.) Ltd. to Su Feng Tsai
[178] It is alleged that Jay Chiang made Su Feng Tsai one of the owners of what has been referred to in this proceeding as the “Telecom Business”. It is the plaintiffs’ position that Jay Chiang needed to hide ownership of the Telecom Business and decided to put share ownership in the names of his immediate family members, including the defendant, Su Feng Tsai.
[179] A bank transaction record provides that Chi Lung Huang transferred (US)$129,985 to Asia Connects Technology (actually, 1243723 Ontario Inc., carrying on business as Asia Connects Technology). While the date does not readily appear on the photocopy of the transaction record, the parties have proceeded upon the understanding that this transfer took place in May 1998. Y. C. Chiang is recorded on the corporate records of 1243723 Ontario Inc. as its sole officer, director and shareholder.
[180] Jay Chiang testified that, when he began the Telecom Business, one of the first areas to which he provided service was Taiwan. In order to set up the business there, a technician by the name of Ed Klune went to Taiwan to install the equipment. Chi Lung Huang helped Mr. Klune with language difficulties, the installation of the equipment and entertained him socially. This resulted in Chi Lung Huang being quite familiar with the Telecom Business.
[181] Chi Lung Huang expressed an interest in investing in the business. Later on, Su Feng Tsai visited Canada and again expressed their family's interest in investing. According to Jay Chiang, he consulted with Y. C. Chiang and Julius Chiang, who all agreed to permit the investment. At that point in May 1998, (US)$129,985 was transferred to 1243723 Ontario Inc. (Asia Connects Technology).
[182] Jay Chiang has not hesitated, in the past, to accept investments from family members when he is starting up a business. He accepted money from Samson Chang when setting up Aamazing Technologies Inc.
[183] The difficulty with Mr. Chiang's evidence is that there are no business records for this company and Mr. Chiang’s evidence is generally unbelievable unless confirmed by independent evidence.
[184] The plaintiffs do not dispute that Asia Pacific Gateway (H.K.) Ltd. took over the Telecom Business. The evidence established that the customers of 1243723 Ontario Inc. (Asia Connects Technology) were directed to remit payment to Asia Pacific Gateway (H.K.) Ltd. I am satisfied that this was done to hinder and delay any recovery by the plaintiff, Korea Data Systems (USA) Inc.
[185] Asia Pacific Gateway (H.K.) Ltd. was a Hong Kong company which, according to its corporate records, was owned 85% by Y. C. Chiang and 15% by Su Feng Tsai, although Jay Chiang insisted that he owned and controlled the company. Su Feng Tsai was, according to the 2007 contempt decision, recorded as a director of that company. There was no suggestion that Su Feng Tsai had any involvement in the operations of that company or the decision to direct customers of 1243723 Ontario Inc. (Asia Connects Technology) to pay Asia Pacific Gateway (H.K.) Ltd.
[186] In the 2007 contempt proceedings against Jay Chiang and Christina Chiang, Jay Chiang is described as the beneficial owner of the Telecom Business. Su Feng Tsai was not a party to the contempt proceedings.
[187] The plaintiffs suggested that this transfer of (US)$129,985 originated from the same bank that received a transfer of (US)$100,000 from Winner International Group Limited on April 29, 2005.
[188] The May 5, 1998 transfer was transferred from the Chang Hwa Commercial Bank. The April 29, 2005 transfer was, according to the remittance advice, received by the Hua Nan Commercial Bank Ltd.
[189] Finally, for the sake of completeness, I note that Mr. Stephen Tseng testified that the Chinese characters on the April 29, 2005 remittance advice do not spell the names of any of the defendants.
[190] The plaintiffs’ submission concerning the bank which originated the May 1998 transfer and the bank which received the April 2005 transfer is in error.
[191] I do not entirely accept Mr. Chiang's evidence that he owned and controlled the company because that evidence is not confirmed by other independent evidence. I am satisfied that Jay Chiang controlled the company and that Jay Chiang, Y. C. Chiang and Julius Chiang owned most of the company. There was no need to record Su Feng Tsai as a 15% shareholder if it was not correct. The corporate records of 1243723 Ontario Inc. (Asia Connects Technology) stated that Y. C. Chiang owned 100% of the company. Obviously, Jay Chiang was not concerned about showing Y. C. Chiang as an owner of the Ontario and Hong Kong telecom businesses; Y. C. Chiang could have been shown as a 100% owner of both businesses, if that had been correct.
[192] I am satisfied that Su Feng Tsai was shown as an owner because that was, in fact, the case.
[193] Jay Chiang testified that Asia Pacific Gateway (H.K.) Ltd. was successful and he wanted to pay a return on investment to Su Feng Tsai and Chi Lung Huang. In this regard, the evidence established that Asia Pacific Gateway (H.K.) Ltd. had revenues in excess of (US)$7 million. Evidence also established that Jay Chiang and Primus, one of the parties he was negotiating with concerning the Telecom Business, agreed that Asia Pacific Gateway (H.K.) Ltd. was worth (US)$5 million.
[194] Chi Lung Huang is shown as a signing officer of Star Data Communications Inc. on a contract, dated January 2, 1998, between EC Holdings Ltd. and that corporation. I do not view this as a confirmation of Mr. Chiang's evidence. First, when I consider the totality of the evidence, it is clear that Mr. Chiang repeatedly placed the name of his in-laws on documents and bank accounts without their knowledge or consent. Second, an initial version of the contract between EC Holdings Limited and Star Data Communications Inc. shows Jay Chiang as a party rather than Star Data Communications Inc.
[195] I am satisfied that Jay Chiang's evidence that the (US)$100,000 payment was a return on investment is the truth.
[196] I am satisfied that there is confirmation of this aspect of Jay Chiang's evidence concerning this payment. The original bank transfer of (US)$129,985 in May 1998 records the transferor as Chi Lung Huang. It records the beneficiary receiving the transfer as Asia Connects Technology. It is not disputed that the business of Asia Connects Technology was transferred to Asia Pacific Gateway (H.K.) Ltd. As well, the Shareholders' Register of Asia Pacific Gateway (H.K.) Ltd. records Su Feng Tsai as a 15% shareholder.
[197] I recognize that, on the same date, namely May 28 1999, there was also a transfer of (US)$50,000 from 1243723 Ontario Inc. (Asia Connects Technology) to Ms. Tsai. It is not necessary for me to decide the significance of this $50,000 payment in order to determine Su Feng Tsai's involvement in this transaction. It is only necessary for me to determine why she was paid (US)$100,000 by Asia Pacific Gateway (H.K.) Ltd.
The Mercedes
[198] In February 2000, Jay Chiang purchased a Mercedes-Benz. It was funded by a trade-in and cash in the amount of approximately $52,000. The vehicle was purchased in the name of Su Feng Tsai. Jay Chiang set up a mailbox so that it would appear that Su Feng Tsai had a Canadian address. The evidence is that she lived in Taiwan and I find that is where she lived.
[199] Mr. Chiang acknowledged that he knew that Korea Data Systems (USA) Inc. was looking for information concerning his possessions and that he set up the mailbox to conceal the car purchase.
[200] In this trial, Jay Chiang testified that Su Feng Tsai did not know about the purchase. On July 16, 2003, Christina Chiang consented to an order that she was in contempt of court. At that time, she gave a number of Undertakings to the court, one of which was to transfer ownership of this car from her sister to herself (Undertaking 5). Christina Chiang complied with that Undertaking.
[201] There are many examples of Jay Chiang placing assets in the names of family members in an attempt to conceal his ownership of those assets. Mr. Hui testified that his investigations revealed that Jay Chiang and his brother, Julius Chiang, had placed assets in the name of their own mother without her knowledge or consent.
[202] I am satisfied that this Mercedes Benz motor vehicle was placed in Su Feng Tsai's name without her knowledge or consent. Receipt of the ownership of the Mercedes Benz is not a conveyance or transaction in which Su Feng participated.
School tuition and living expenses
[203] The plaintiffs submit that the evidence established that (US)$30,000 was transferred on June 7, 2007 from an account in the name of Chi Lung Huang to pay the tuition fees and living expenses for Jay Chiang and Christina Chiang's children. Specifically, the plaintiffs submitted that a wire transfer record suggested that Huang Chi Lung transferred approximately (US)$30,000 to a private school to pay tuition and other expenses.
[204] The wire transfer states that the ordering customer was “HHuang Chih Lung”. I attach no significance to the different spelling of the name.
[205] On June 7, 2007, Jay Chiang was in jail serving the contempt sentence imposed upon him by Justice Lax. Christina Chiang was waiting to serve her sentence for contempt of court.
[206] Jay Chiang has a history of using the names of family members and in-laws without their consent. One has to keep this constantly in mind when assessing documentary evidence.
[207] Justice Lax's decision was released in April 2007. It referred to the fact that tuition payments for the children of Jay Chiang and Christina Chiang had been made to the private school in question in various names, having no apparent connection to Jay Chiang. Details of these payments are referred to below.
[208] The (US)$30,000 payment attributed to Chi Lung Huang occurred in June 2007 after Her Honour's decision. It would have been obvious in June 2007 that the plaintiffs were paying attention to the payment of private school tuition fees. It is clear from the contempt decision that the plaintiffs were aware of the tuition payments and had not hesitated to subpoena that evidence from the private school in question. Despite this fact, the $30,000 payment was made in the name of Chi Lung Huang.
[209] At some point subsequent to the contempt hearing, the plaintiffs caused the private school in question to produce further records of tuition payments, one of which is the payment record in question.
[210] On cross-examination in this matter, Christina Chiang was shown a list of payments to Upper Canada College that had been prepared by the plaintiffs. These payments totalled (US)$148,000. The payments were made in the name of Li Qi Wen (December 27, 2007, (US)$30,000; August 13, 2008, (US)$30,000); Liu Xiao (February 24, 2009, (US)$28,000); CPower Tools Co. Limited (September 10, 2009, (US)$60,000). Christina Chiang testified that she did not know any of these persons and that her husband had arranged these transfers. The payment in the name of her brother-in-law, Chi Lung Huang, was not on this list and Christina Chiang was not asked about this payment.
[211] The plaintiffs tendered, as part of their case, in the form of a Read-In of Christina Chiang, an answer that Christina Chiang gave to a Post-Judgment Special Interrogatory in the Superior Court of the State of California on November 26, 2007. This Special Interrogatory asked Christina Chiang to set forth all money she received from anyone for herself, for her benefit or for the benefit of her family. Christina Chiang answered, in part, that she received $78,000 “from HHuang Chih Lung, a Taiwan citizen currently living in Taiwan believed to have a date of birth of December 5, 1954 and the phone number of 061-746-3765”. Christina Chiang admitted, in that Special Interrogatory answer, that this payment, along with others mentioned in her answer, was used to pay her children's tuition fees, legal expenses in California and Canada and her family's living expenses. It is not clear whether the $78,000 referred to in Christina Chiang's admission includes or is in addition to the (US)$30,000 tuition payment of June 7, 2007.
[212] It is not clear that this out-of-court admission by Christina Chiang, tendered by way of a Read-In, proves this transfer in this trial as far as Chi Lung Huang is concerned. Christina Chiang, who did testify in this trial, was not asked about the $78,000 transfer. The Rules of Procedure provide that the Christina Chiang’s answers, given on discovery, are admissible against her. The Rules do not speak to the admissibility of Christina Chiang's evidence given on discovery against other parties such as Chi Lung Huang. The Rules provide that evidence given on discovery is admissible against the person discovered “if the evidence is otherwise admissible”. Christina Chiang's admission, on discovery, that she made an admission in California is not evidence against Chi Lung Huang (see: Rule 31.11 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194).
[213] As indicated earlier, the plaintiffs successfully moved for an order validating service of the Notice of Action and Statement of Claim on Chi Lung Huang. This motion was brought on February 28, 2011 at the commencement of the trial of this action. The evidence indicated that service occurred June 19, 2009. On March 16, 2011, this court decided that Chi Lung Huang had been validly served and, on April 15, 2011, Chi Lung Huang filed a Statement of Defence. He was represented from that point forward by Mr. Douglas Garbig, who, in these proceedings, acts for his mother-in-law, Chen-Cheng Yueh Tsai, his wife and his brothers-in-law.
[214] The plaintiffs argue that the absence of documentary production and oral discovery should lead to an adverse inference concerning the transfer of these funds.
[215] Chi Lung Huang's alleged participation in these matters has been known to the plaintiff since November 26, 2007, when Christina Chiang disclosed the (US)$78,000 payment to Korea Data Systems (USA) Inc.’s counsel in California in the Post-Judgment Special Interrogatory.
[216] In this proceeding, a motion for an order compelling Chi Lung Huang’s attendance at discovery was argued on July 4, 2011. The motion was brought on the eve of the close of the plaintiff's case. Rather than delay the proceedings, the court ordered that, if Chi Lung Huang decided to testify, he must produce relevant documents in his possession. Chi Lung Huang did not testify.
[217] There was ample time between service on June 19, 2009 and the commencement of this trial to move to regularize service and either note Chi Lung Huang in default or move for an order compelling disclosure of documents and oral discovery. Therefore, I have decided not to draw an adverse inference against Chi Lung Huang due to the absence of documentary production or oral testimony.
[218] I find, on the evidence, that the defendant, Chi Lung Huang, made a tuition payment of (US)$30,000 on June 7, 2007. I assume, without deciding, that the (US)$78,000 transfer has been proven against Chi Lung Huang.
[219] The (US)$30,000 was paid directly to the private school. The payment was made without any attempt to hide the name of Chi Lung Huang as the ordering customer. It was made at the time when Chi Lung Huang's mother-in-law had already been sued and served with these proceedings. The payment was made on June 7, 2007, after the plaintiffs had not only subpoenaed records from the private school, but produced those records in contempt proceedings against Jay Chiang and Christina Chiang. Indeed, according to the contempt sentencing decision, the principal from the private school testified concerning the effect a jail sentence might have on Jay and Christina Chiang's children. Finally, this payment was made when Chi Lung Huang's brother-in-law (Jay Chiang) was in jail.
[220] The $78,000 contribution acknowledged by Christina Chiang in her answer to the California Interrogatory may have included the $30,000 paid to the private school. The Interrogatory answer was provided on November 26, 2007 and the $30,000 payment was made on June 7, 2007. No details concerning the $78,000 are provided in the Interrogatory except that the $78,000 was used to pay Christina Chiang's children's tuition, the family's legal expenses in California and Canada and the family's living expenses. All that is known about the timing of the $78,000 payment is that the question-and-answer indicates that it was received after January 1, 2003 and obviously before November 26, 2007, which is the date of Christina Chiang's answers to the California Interrogatory.
[221] The evidence does not persuade me that Chi Lung Huang was part of a conspiracy to hinder the collection activities of the plaintiffs. I am not satisfied that he agreed to pursue the object of the alleged conspiracy, which was to injure the plaintiffs and commit unlawful acts to impede their ability to collect the debts owing to them. If Jay Chiang wanted to pay the tuition and hide that fact from the plaintiffs, he could simply have used a name disconnected from these proceedings. He did that in 2007, 2008 and 2009, as described earlier in these reasons. Similarly, if Chi Lung Huang had wanted to hide his involvement in the payment of tuition, he could simply have arranged for Jay Chiang to transfer the $30,000 in the name of an entity entirely disconnected from these proceedings.
[222] I am satisfied that the tuition payment was exactly what it purported to be; namely, a payment by Chi Lung Huang made with his own money for the benefit of the education of his wife's sister's children.
April 2005 Winner International Group Limited’s Transfer of (US)$100,000 to Chi Lung Huang and Su Feng Tsai
[223] The plaintiffs submitted in evidence a Remittance Advice from the Hong Kong and Shanghai Banking Corporation, dated April 29, 2005. The name of the party receiving the funds is written in Chinese characters. The plaintiffs suggested that these funds were received by Chi Lung Huang and Su Feng Tsai.
[224] There is no evidence that the Chinese characters on the Remittance Advice set out the names of Su Feng Tsai or her husband, Chi Lung Huang. Mr. Stephen Tseng testified that the Chinese characters on the April 29, 2005 Remittance Advice do not spell the names of any of the defendants. Evidence was received from Mei Huang, who is described elsewhere, to the effect that the transferee of these funds was named Shi Xiu Zheng.
[225] The plaintiffs’ submission in this regard is in error.
Conclusions Concerning Su Feng Tsai and Chi Lung Huang
[226] I am not satisfied that Su Feng Tsai entered into any of the transactions described in the evidence with the intent of defeating, hindering, delaying or defrauding the creditors of Jay Chiang.
[227] I am not satisfied that Su Feng Tsai is a member of the conspiracy defined by the plaintiffs in paragraph 52 of the four times amended Statement of Claim. I am not persuaded by the evidence in this case that Su Feng Tsai joined any such conspiracy. I am not satisfied that she agreed to pursue the object of the alleged conspiracy, which was to injure the plaintiffs and commit unlawful acts to impede their ability to collect the debts owing to them. As a result, I do not view her acts as acts in pursuit of the common object of the conspiracy alleged by the plaintiffs.
[228] I am not satisfied that it has been proven that Su Feng Tsai destroyed any documents. I am also not satisfied that she has been unjustly enriched; the funds returned to her were a partial return of an investment.
[229] All of the plaintiffs’ claims against Su Feng Tsai are dismissed with costs.
[230] There are no transactions, settlements or conveyances to set aside with the exception perhaps of the May 28, 1999 (US)$100,000 transfer from Asia-Pacific Gateway to a Bank of Taiwan account in the name of Su Feng Tsai. However, I am not persuaded that this transfer was a fraudulent conveyance and, therefore, will not set it aside.
[231] I am not satisfied that Chi Lung Huang is a member of the conspiracy defined by the plaintiffs in paragraph 52 of the four times amended Statement of Claim. I am not persuaded by the evidence in this case that Chi Lung Huang joined any such conspiracy. I am not satisfied that he agreed to pursue the object of the alleged conspiracy, which was to injure the plaintiffs and commit unlawful acts to impede their ability to collect the debts owing to them. As a result, I do not view his acts as acts in pursuit of the common object of the conspiracy alleged by the plaintiffs.
[232] There is no evidence that Chi Lung Huang destroyed or assisted in the destruction of any documents.
[233] I am not persuaded that Chi Lung Huang was unjustly enriched.
[234] I decline to award the plaintiffs punitive damages against from Chi Lung Huang.
[235] There is no basis on the evidence for prohibiting Chi Lung Huang from disposing of or dealing with any property that he may own in Taiwan.
[236] There is no basis on the evidence for this court to make an order that the plaintiffs possess an equitable or other interest in the real or personal property of Chi Lung Huang.
[237] There is no basis on the evidence for ordering that the plaintiffs are entitled to an equitable tracing order concerning the real and personal property of Chi Lung Huang.
[238] The plaintiffs’ claims against Chi Lung Huang are dismissed with costs.
Chen Cheng-Yueh Tsai (Christina Chiang's Mother)
[239] Chen Cheng-Yueh Tsai was called as a witness by the plaintiffs. Her counsel declined to give an undertaking to call her as a witness, with the result that the plaintiffs called her as a witness pursuant to rule 53.07. Pursuant to that rule, the plaintiffs were permitted to cross-examine Ms. Tsai.
[240] I found Ms. Tsai to be a believable witness. Her behaviour in this matter was straightforward; her motivation, as she explained it, was readily understandable and believable.
[241] Ms. Tsai is approximately seventy-six years of age, having been born in 1935. She is a widow; her husband died in 1993. She suffers from osteoporosis. Her husband owned a garment factory and she helped him in his business. Her husband handled the family finances. Ms. Tsai cannot read or write English.
[242] The plaintiffs agree that Ms. Tsai was a housewife who played no active role in the activities of Jay Chiang, Julius Chiang and Y. C. Chiang. The plaintiffs suggest that Ms. Tsai held property for the benefit of Jay Chiang.
[243] Ms. Tsai testified that no one ever said anything to her about using the accounts in her name for the purpose of hiding money from Jay Chiang's creditors. She denied any intention to harm Jay Chiang's creditors, as well as knowing to whom Jay Chiang owed money. I accept her evidence in this regard. Ms. Tsai did not, on the evidence, receive any tangible benefit from the transactions in her name, despite the fact that they involve considerable sums of money. Jay Chiang, along with his brother and his late father, demonstrated the capacity to involve unwitting family members when attempting to hinder the plaintiff's attempts to recover assets.
[244] At one point during her testimony, Ms. Tsai volunteered to Mr. Blumenfeld that her relatives had taken advantage of her and that she received no benefits at all from any of the transactions attributed to her. Her statements in this regard were spontaneous and I believe they were truthful. Her assertion in this regard is consistent with many of the financial transactions in Ms. Tsai’s 4043 account to which I will refer later. Specifically, sums of money would be transferred into the account and then completely transferred out within a few days. None of the transactions suggested that a portion of the funds transferred was unaccounted for or applied for Ms. Tsai's benefit.
[245] A variety of accounts and transactions were discussed in relation to Ms. Tsai.
The 4043 account
[246] This is Ms. Tsai's (US) $ bank account at the branch of the Bank of Taiwan, located at 120 Chung King South Road, in Taipei. Ms. Tsai does not have her original bank book; years ago, she gave it to an Ontario lawyer by the name of Enzo Diorio to turn over to counsel for the plaintiffs. No evidence was offered to suggest that the original bank book was not surrendered.
[247] Ms. Tsai testified that Y. C. Chiang and Julius Chiang asked her for a favour. They told her it was not convenient for them to open a (US) dollar account in Taiwan and asked her if they could use her account. Ms. Tsai was afraid that they would not treat her daughter, who by this time was married to Jay Chiang, very well if she refused. Ms. Tsai testified that she permitted her account to be used as a favour to relatives; she took no money for doing this and she has no records concerning this transaction. I accept her evidence in this regard.
[248] Ms. Tsai said that, while she was not concerned about getting into trouble, her preference would have been to avoid getting involved with Jay Chiang's family. Ms. Tsai testified that she first realized that these financial transactions were going to cause her trouble when Jay Chiang called her, in 2002 she thinks, and apologized and said that he was being sued.
[249] Ms. Tsai testified that Y. C. Chiang held the passbook for the account when the account was operating. Eventually, Y. C. Chiang told her that he was not using the account any more. Ms. Tsai could not recall whether she was at the bank when the account was closed.
[250] (US) dollars could be transferred out of this account on Ms. Tsai's signature or by someone using her stamp or “chop”. Ms. Tsai testified that Jay Chiang's mother, En Fu Chiang, had possession of her chop for a period of time and only returned it to her when she, that is En Fu Chiang, was going to California. Some of the bank transfer documents did have a stamp on them but, due to the quality of the photocopy, the characters on the stamp could not be identified.
[251] I accept Ms. Tsai's evidence regarding the passbook and the use of her stamp or "chop".
4043 account transactions, only some of which were pleaded against Ms. Tsai
September 6 & 20, 1993 (US)$600,000
[252] These were two transfers by Julius Chiang and Amazing Technologies Corp. There was a (US) $450,000 transfer on September 20, 1993 and a (US) $150,000 transfer on September 22, 1993. Ms. Tsai testified that one of the transfers belonged to Julius Chiang and the other belonged to his wife, Wen Chiang.
[253] She testified that Julius Chiang withdrew (US) $450,000 in cash immediately after this transfer was affected. The bank records indicated that the (US) $450,000 was withdrawn the day after it was deposited. Ms. Tsai testified that the signature associated with the withdrawal was not hers. She also testified that the stamp next to the signature was not hers. Her evidence in this regard was not contradicted and I accept it.
[254] The bank records indicated that (US) $150,000 was withdrawn from account 4043 the day after it was deposited. As indicated, the deposit was on September 22, 1993; the withdrawal was on September 23, 1993. Ms. Tsai testified that Wen Chiang came to the Bank of Taiwan branch with her sister to withdraw (US) $150,000. She recalled that Wen Chiang asked her to come to the bank with her stamp or chop, which she did. Ms. Tsai could not remember if her signature was required.
[255] Counsel for the plaintiffs offered in evidence a bank record which appeared to show that, on September 22, 1993, (US)$450,000 was transferred from an account, purportedly in the name of Ms. Tsai, to Jay Chiang. It was suggested, on cross-examination, that Ms. Tsai made this transfer and that the money for this transfer came from the 4043 account. Ms. Tsai denied making this transfer. The account referred to on this bank record was not the 4043 account. There is no evidence Ms. Tsai made this transfer and I decline to find that she did.
[256] Counsel for the plaintiffs also offered in evidence a bank record purportedly showing (US) $150,000 was transferred from an account in the name of Ms. Tsai to an account of Jay Chiang's on September 24, 1993. Once again, the account from which the transfer was made was not the 4043 account.
[257] The plaintiffs called Stephen Tseng, a litigation lawyer in Taiwan, who has been on retainer to the plaintiffs since 2000. Mr. Tseng cautioned that one cannot determine the transferor of money from a remittance record. He testified that a third-party with authorization from Ms. Tsai could affect a wire transfer in her name. Ms. Tsai's stamp is, according to the evidence of Mr. Tseng, sufficient for this purpose.
[258] I decline to draw the inference that Ms. Tsai transferred this money from the remittance record. If her intention was to transfer the money to Jay Chiang, there would have been no need for the money to be withdrawn in cash prior to the transfer. It could have been transferred directly from the 4043 account. Withdrawing the money in cash and then transferring it did not disguise the name of the purported transferor; it simply meant that Ms. Tsai did not know and could not say what happened to the money.
[259] On September 25 and 27, 1993, Jay Chiang sent (US)$600,000 from his HSBC account to Amazing Technologies Corp.
[260] In summary, this $600,000 was transferred from and returned to Amazing Technologies Corp. after only a few days. Arguably, the effect of this transaction was to make it appear that Jay Chiang had paid his own money to Amazing Technologies Corp. when he had actually returned to Amazing Technologies Corp. (US)$600,000 of its own money.
(US)$240,000 from 961266 Ontario Limited to the 4043 account January 20, 1994
[261] This transaction was not specifically pleaded against Ms. Tsai. Ms. Tsai was not asked about this transaction at trial. She was asked about it on discovery, at which time she denied knowing where the money came from. Once again, there is no evidence that Ms. Tsai received any benefit from this transaction.
[262] Jay Chiang, on cross-examination, admitted that he made this transfer. He also agreed that, when he made this transfer, there were live issues with Korea Data Systems (USA) Inc. over the non-payment of invoices. Mr. Chiang admitted, during cross-examination, that his practice was to tell Ms. Tsai that there would be money coming into the account and to tell her what to do with it. Jay Chiang agreed that the $240,000 transaction was his own; he cautioned, however, that Y. C. Chiang and Julius Chiang used the 4043 account for transactions unrelated to him.
[263] This is perhaps an appropriate place to make an observation about Jay Chiang's credibility. In my view, it is dangerous to accept any evidence offered by Jay Chiang unless it is confirmed by independent evidence. I am satisfied, however, that there is independent evidence that Y. C. Chiang and Julius Chiang, from time to time, acted in their own interests and I accept Jay Chiang's evidence that some of the financial transactions that took place in the 4043 account were the for the benefit of Y. C. Chiang or Julius Chiang, as opposed to himself. I am also satisfied that, on occasion, Y. C. Chiang, Jay Chiang and Julius Chiang acted in concert to assist each other in hiding money from Korea Data Systems (USA) Inc. There is no simple way of viewing all of the transactions; it is not possible to say that all the transactions were carried out for the benefit of Jay Chiang. Each transaction has to be particularly considered when trying to determine who benefited from it.
[264] Jay Chiang admitted that he used the 4043 account as a conduit; he transferred money into the account and then directed Ms. Tsai to send the money elsewhere. Jay Chiang also admitted that one of the reasons he used the 4043 account in this fashion was to hide money from Korea Data Systems (USA) Inc.
[265] I am not satisfied that Ms. Tsai acted with a similar intent. I am satisfied that she was unaware of the purpose behind the financial transactions entered into in her name. I am also satisfied, as will be set out shortly, that transactions were entered into in her name without her knowledge and consent.
(US)$35,000 from Everview Inc. to the 4043 account October 7, 1994
[266] Everview Inc. was wholly-owned by Julius Chiang. Mr. Berenblut, a forensic accountant called by the plaintiffs, concluded that Julius Chiang used Everview to move money to avoid his creditors.
[267] The (US)$35,000 was deposited into the 4043 account on October 7, 1994 and withdrawn on October 8, 1994. Ms. Tsai was not asked about this transaction at trial or discovery and did not benefit from it.
(US)$50,000 May 31, 1999 to the 4043 account
[268] Mr. Berenblut also testified, and I accept his evidence in this regard, that this transaction was carried out by Julius Chiang. These funds were deposited and withdrawn from the 4043 account on May 31, 1999.
[269] There is no evidence suggesting that Ms. Tsai benefited from this transaction.
[270] This transaction is an example of Julius Chiang using the 4043 account for his own purposes.
(US)$900,000 June 30, 2000 transferred from Asia Pacific Gateway (H.K.) Ltd. to the 4043 account
[271] The source of these funds was $1 million received from a company, North American Gateway, controlled by a man named Adrian Science. According to Jay Chiang, Mr. Science provided this money as a facilitation fee to Chinese persons who were in a position to sell fiber-optic cabling to North American Gateway. After receiving the money, Jay Chiang testified that he wired the money to the 4043 account. Jay Chiang testified that his father then paid the money to the appropriate persons in China. Jay Chiang testified that the transaction did not go ahead. Apparently, Mr. Science made no complaint about the loss of his $1 million.
[272] Ms. Tsai testified that Jay Chiang's father called her and asked her to meet him at the Bank of Taiwan. She met him there; his wife was with him. Ms. Tsai testified that Y. C. Chiang filled out the documents necessary to transfer the money and then Jay Chiang's parents personally wired (US)$900,000 somewhere else.
[273] Ms. Tsai believed that Jay Chiang's mother had the receipts for the transfer; Mr. Chiang thought that Ms. Tsai had the receipts. I accept Ms. Tsai’s evidence in this regard. Ms. Tsai testified that she did not know the source of the funds and that the money was transferred out of the 4043 account shortly after it was deposited.
[274] Ms. Tsai was shown a document transferring this $900,000 out of the 4043 account. She denied that the signature on the document was hers, although she acknowledged the address and telephone on the document. Her evidence in this regard was not contradicted.
[275] The remittance form showed that the funds were wired to Vivian Wu at the E. Sun Commercial Bank in Taiwan. Jay Chiang acknowledged that Vivian Wu is an alias for his mother, En Fu Chiang. Ms. Tsai did not know that Vivian Wu was an alias for En Fu Chiang. There was a stamp on the remittance application, but it could not be identified.
[276] The plaintiffs suggested, in closing submissions, that Ms. Tsai testified that Y. C. Chiang and En Fu Chiang withdrew the $900,000 in cash. Ms. Tsai did not give this evidence; her evidence was that they wired the money elsewhere. The plaintiffs’ submission is in error.
April 4 (US$142,000), May 9 (US$25,000) & November 21, 1995 (US$3138) from Everview Technologies Inc., Crystalview Technology Corp. and Aamazing Technologies Inc., respectively, to P.C. Ranger
[277] The only evidence linking Ms. Tsai to these transactions is that her address was used as the address of P.C. Ranger. In this regard, it should be remembered that Y. C. Chiang's address on the corporate documents of Asia Pacific Gateway (H.K.) Ltd. is also Ms. Tsai's address. Ms. Tsai testified that she has lived at the address shown on these documents since 1993 when her husband died.
[278] The (US)$142,000 was transferred from the Cathay Bank in California. The source of these funds is unknown. The wire transfer receipt does not record the name of the institution receiving the funds.
[279] The (US)$25,000 and (US)$3138 were received in account 006007076855. This is obviously not the 4043 account. There is no evidence concerning the owner of this account.
[280] Ms. Tsai was cross-examined concerning these transfers. She acknowledged her address, but denied any involvement with the transactions. She described the recording of her address on these transactions as “outrageous”.
[281] I am satisfied, on a balance of probabilities, that these three transfers have nothing to do with Ms. Tsai and she did not participate in them. I accept her evidence generally, as I indicated, and, specifically, I accept her evidence that she has no knowledge of these three transactions.
October 12, 1999 (US)$80,000 from a TD bank term deposit to David Cheng
[282] Ms. Tsai's name is recorded as the holder of the term deposit. Ms. Tsai testified that she was not involved in this transfer. Dave Cheng is a Y. C. Chiang alias. There is no evidence that Ms. Tsai had any connection with the Shanghai Commercial Savings Bank where the funds were received.
[283] The funds were wired from the Toronto-Dominion Bank. Ms. Tsai testified that Jay Chiang suggested to her when she was visiting Canada that she open a bank account here and instructed Christina Chiang to help her do that. Ms. Tsai could not remember the name of the bank she went to.
[284] Christina Chiang wired this money using a Toronto-Dominion Bank Power of Attorney that she had obtained from her mother. The (US)$80,000 came from the 1997 sale of the Montrose property which is referred to elsewhere in the reasons.
[285] There is no evidence Ms. Tsai benefited from this transaction. I am satisfied that Ms. Tsai did not participate in this transaction and that Christina Chiang used Ms. Tsai’s Power Of Attorney without Ms Tsai’s knowledge and consent.
September 26, 2000 withdrawal of (US)$161,417 from Christina Chiang's account at the Bank of Taiwan
[286] These funds were withdrawn in cash from Christina Chiang's account at the Bank of Taiwan on September 26, 2000, approximately four days after Justice Farley issued a Mareva injunction prohibiting Christina Chiang from dealing with her assets.
[287] This sum was transferred to the trust account of Gambin RDQ, the Toronto-area law firm that represented Jay Chiang and Christina Chiang at the time, on October 7, 2003 pursuant to Undertaking 2, given to Justice Farley on July 16, 2003 as part of the Consent Contempt Order made against Christina Chiang. Undertaking 2 was fulfilled.
[288] The funds were paid out of the trust account of Gambin RDQ pursuant to an order of this court which was made in circumstances totally out of the control of Ms. Tsai.
September 27 & October 4, 2000 and the withdrawal of $173,000 NTD (Cdn) $6885 from Christina Chiang's account at the First Commercial Bank
[289] This account was in Christina Chiang's name. Ms. Tsai used that account because, as she got older, she found it more convenient to use this account because it was close to where she lived. She deposited money into the account and paid her utility bills and other miscellaneous fees out of that account. Her daughter never used that account after she left Taiwan. Ms. Tsai indicated that this money was in a bank account in the name of her daughter, Christina. Ms. Tsai indicated that she used this account for many years to pay utility bills and other miscellaneous items because it was close to where she lived.
[290] The money in this account belonged to Ms. Tsai. This money was also the subject of Undertaking 3, given to Justice Farley on July 16, 2003 as part of the Consent Contempt Order.
[291] Undertaking 3 was carried out and this sum of money was transferred to the trust account of Gambin RDQ.
[292] As indicated, funds in the Gambin RDQ trust account were paid out pursuant to an order of this court which was made in circumstances totally out of the control of Ms. Tsai.
September 27, 2000 (Cdn) $575,220 from Singapore to Bank of Taiwan account 276
[293] On September 26, 2000, Christina Chiang removed this money from an account in her name in Singapore and transferred it to her mother's account at the Bank of Taiwan.
[294] This sum was the subject of Undertaking 1, given to Justice Farley pursuant to the consent contempt order July 16, 2003. The Undertaking provided that the monies were to be transferred to the trust account of Gambin RDQ. The return of these funds to the trust account of Gambin RDQ in compliance with this Undertaking is described in my reasons of September 2, 2010. This Undertaking was carried out.
[295] The funds were paid out of the Gambin RDQ trust account pursuant to an order of this court which was made in circumstances totally out of the control of Ms. Tsai.
(US)$500,000 wired from the Chang Hwa Bank to the United World Chinese Commercial Bank
[296] Ms. Tsai testified that Y. C. Chiang asked her to come to the bank and sign her name, which she did. Y. C. Chiang handled the entire transaction. Ms. Tsai testified that she was unhappy about doing this transaction because she found it inconvenient. However, because Y. C. Chiang was a relative, Ms. Tsai indicated that it “wouldn’t look good” if she refused.
The Chang Hwa Bank
[297] Ms. Tsai opened this account at the request of Y. C. Chiang and the account was used only by Y. C. Chiang. Ms. Tsai never used the account for herself. The account was opened on September 27, 2000, and closed on October 4, 2000. During that period of time, the (Cdn)$575,220, which Christina Chiang had transferred from an account in her name to an account in her mother's name, contrary to the Mareva injunction issued by Justice Farley, was deposited in this account. These funds were transferred from this account to the United World of Chinese Commercial Bank where they remained until they were transferred to Canada pursuant to Undertaking 1, given to Justice Farley on July 16, 2003. The funds were then paid to the trust account of Gambin RDQ. The funds were paid out of the Gambin RDQ trust account pursuant to an order of this court which was made in circumstances totally out of the control of Ms. Tsai.
The United World of Chinese Commercial Bank
[298] The account at this bank was in Ms. Tsai's name. The account was opened October 3, 2000. The initial deposit of 11.3 million New Taiwanese Dollars (NTD) (roughly (US) $375,000) was provided by Y. C. Chiang and Julius Chiang. Eventually, Jay Chiang wired this money to Gambin RDQ.
[299] There were many transactions in and out of this account; all of them were conducted by Y. C. Chiang and Julius Chiang.
The Canaccord Capital account (May 1994)
[300] This account was opened in the name of Chen Cheng-Yueh Tsai. It is not her account. Ms. Tsai had no involvement in the opening of the account. Her signatures on the account documents are not genuine. Ms. Tsai received no benefit from the transactions which occurred in this account.
[301] This account was subject to Undertaking 6, given to Justice Farley on July 16, 2003. The Undertaking provided that the account was to be liquidated and the proceeds transferred to Gambin RDQ. This undertaking was carried out.
[302] This account is an example of Ms. Tsai’s name being used by Jay Chiang for his and Christina Chiang’s benefit without the knowledge or consent of Ms. Tsai. Based on the evidence I heard in this trial from Ms. Tsai, the false account-opening documents, and the fact that Ms. Tsai received no benefit from any transactions involving this account, I am satisfied that Ms. Tsai has nothing to do with this account. Ms. Tsai is not responsible for transactions that occurred in this account.
The Hong Kong Bank of Canada
[303] Christina Chiang had a power of attorney over this account, which was in the name of Chen Cheng-Yueh Tsai. Ms. Tsai indicated that she did not sign the power of attorney. Ms. Tsai was also shown a signature card on this bank account and denied that the signature on that card was hers. Her evidence in this regard was not contradicted.
[304] This account has nothing to do with Ms. Tsai; the transactions in this account are not Ms. Tsai's transactions. I decline to draw any adverse inferences as far as she is concerned from transactions carried out in this account.
The TD Bank
[305] Account-opening documentation from this bank is not available. Ms. Tsai testified that, when she was visiting Jay Chiang and Christina Chiang in Canada, Jay Chiang suggested that she open a bank account here. Ms. Tsai recalls going to a bank and doing that. She does not recall the name of the bank; she never received bank statements; she never used the bank account.
[306] The evidence establishes, on a balance of probabilities, that Jay Chiang directed the flow of money in and out of these accounts. Ms. Tsai initiated none of the transactions in this account.
[307] It is possible that Ms. Tsai opened this account. Nevertheless, for all practical purposes, she had nothing to do with it. I decline to draw any adverse inferences concerning Ms. Tsai from transactions that occurred with respect to this account.
5 Montrose Crescent, Markham, Ontario
[308] This property was purchased in 1987 while Jay Chiang was in University. Y. C. Chiang arranged the purchase, but put the property in Jay Chiang's name because Y. C. Chiang was thinking of moving to California.
[309] In 1994, Chun Chun Wu received a call from her brother, Y. C. Chiang, who asked her if he could put the house in her name. Chun Chun Wu did not, in fact, purchase the house. She thought she was protecting her nephew, Jay Chiang, by purporting to purchase the property. Chun Chun Wu signed the Declaration of Trust in favour of Chen Cheng-Yueh Tsai (Ms. Tsai) when the property was put in her name. This trust agreement is purportedly signed by Chen Cheng-Yueh Tsai but, in fact, her signature on the trust agreement is not genuine.
[310] Jay Chiang sold the property in 1997. At his request, Chun Chun Wu executed the appropriate sale documents for the property.
[311] Ms. Tsai testified that she had never heard of Chun Chun Wu and that no one told her that someone was holding a house in Canada in trust for her. Ms. Tsai indicated that she did not know that the sale proceeds were deposited in an account in her name in Toronto in 1997 and that she was not aware of the withdrawal of those funds from that account.
[312] In this transaction, both Chun Chun Wu and Ms. Tsai were used by Jay Chiang and Y. C. Chiang. Title was in the name of Chun Chun Wu for a period of time and the proceeds from the sale of the property were in the name of Ms. Tsai for a period of time. Jay Chiang and Y. C. Chiang carried out the details of the transactions involving this property. The funds from the sale of the property were transferred at the direction of Jay Chiang.
[313] Ms. Tsai received no benefit from Y. C. Chiang in Jay Chiang's dealings with the Montrose property.
[314] The transactions with respect to this property cannot be said to be transactions involving Ms. Tsai.
[315] I decline to draw any adverse inference concerning Ms. Tsai from transactions involving this property.
Christina Chiang’s apartment in Taiwan
[316] Ms. Tsai testified that her husband purchased the apartment in 1983. He put the apartment in the name of his eldest daughter, Suh Mei Tsai (i.e., Christina Chiang), and his eldest son. Ms. Tsai testified that her husband saw it as a trust for all four of their children. She stated that her eldest son was not stable and so her husband switched title to Christina's name alone.
[317] Christina Chiang also testified about the apartment. Given Christina Chiang's history of non-compliance with court orders, I have considered her evidence with caution. In my view, it is dangerous to rely upon her evidence unless it is confirmed by independent evidence. As indicated, I accept the evidence of Ms. Tsai and so there are portions of Christina Chiang's evidence about this apartment that I found believable.
[318] Christina Chiang testified that both her brothers live in the apartment without paying rent. Her family served her with documents indicating that they had commenced a proceeding in a Taiwan court claiming an ownership interest in the apartment. She tried to speak to her family about the apartment, but they would not talk to her. She indicated that her father had put the apartment in her name because he was concerned that her oldest brother's irresponsible behaviour was going to result in the loss of the apartment and that it now appeared to her mother and siblings that her conduct had jeopardized ownership of the apartment. Ms. Chiang indicated that, as a result, her mother and her siblings were angry with her.
[319] I accept Christina Chiang's evidence in this regard.
[320] Stephen Tseng, a lawyer in Taiwan retained by Korea Data Systems (USA) Inc. in late 1999 to assist with collection of the debts owed to it by Jay Chiang, testified that he had obtained a Provisional Seizure Order for the apartment on behalf of Korea Data Systems (USA) Inc. in May or July 2005.
[321] Mr. Tseng explained that a Provisional Seizure Order was an order that was used to prevent people from disposing of their properties in order to escape their obligations to repay their debts. Creditors applied to the court for a Provisional Seizure Order before they filed their case to collect the debts owed to them. The creditors have to provide evidence that they are owed money by the debtor and they must post a bond. Provisional Seizure Orders can be issued with respect to real and personal property. Mr. Tseng testified that, after he obtained a Provisional Seizure Order in respect of the condominium apartment, Christina Chiang was not legally able to transfer ownership of it. Mr. Tseng testified that the Provisional Seizure Order was still in effect at the time he testified in July 2011.
[322] Mr. Tseng testified that he became involved in litigation concerning the apartment in 2006. Mr. Tseng testified that the litigation began in April 2006. Mr. Tseng testified that he already knew at this time that Christina Chiang owned the apartment in Taiwan because he had obtained a Provisional Seizure Order for it in May or July 2005.
[323] Mr. Tseng testified that the Taipei District Court rejected the plaintiffs’ claim because there was an outstanding Provisional Seizure Order and because it determined that there was not enough evidence to prove that Christina Chiang was holding the property in trust for her mother and her siblings.
[324] The Taiwan Supreme Court confirmed the decision of the Taiwan High Court and made the final order in this matter on April 11, 2008. The Supreme Court may have confirmed the decision because the trust relationship was not proven. No official translations were provided and Mr. Tseng was not asked about the various judgments.
[325] Ms. Tsai and Christina Chiang's other siblings were entitled, according to the laws of Taiwan, to go to court in Taiwan to claim an ownership interest in this apartment. They commenced proceedings after a Provisional Seizure Order was in place. Korea Data Systems (USA) Inc. participated in those proceedings. I am not prepared to draw any adverse inference against Ms. Tsai, Christina Chiang or her siblings based on evidence concerning their various claims before the courts in Taiwan concerning ownership of Christina Chiang's apartment. This evidence, taken on its own or in conjunction with all the evidence, provides no basis for drawing any adverse inferences of any kind against Ms. Tsai and her children, including Christina Chiang.
[326] The plaintiffs are seeking an Ontario Superior Court costs award for the proceedings in the Taiwan courts. Costs in the Taiwan courts were dealt with by those courts. The appellants in the proceeding before the Taiwan Supreme Court were ordered to pay the costs of that proceeding.
[327] If I assume that I have jurisdiction to award costs in this proceeding to cover the costs of the Taiwan proceedings, then I have to consider whether I would make such an order.
[328] I would not make such an order.
[329] There is nothing objectionable about people who think they have an interest in real property going to court, where the property is located, to protect that interest. It has not been remotely demonstrated that the Taiwan proceedings created an unfair risk to the plaintiffs. Such a conclusion would be unfair and unwarranted. The courts in Taiwan have already dealt with the question of costs. The plaintiffs have counsel in Taiwan should they wish to act on the order.
[330] The plaintiffs’ claim for an award of costs in this proceeding to cover the costs of the Taiwan proceedings is denied.
Ms. Tsai mortgages her own property
[331] Stephen Tseng also testified that Chen Cheng-Yueh Tsai, on October 23, 2002, placed a mortgage on a rural property in favour of the Hua Nan Commercial Bank in the amount of 3,360,000 New Taiwanese Dollars. The exchange rate is approximately 28 NTD: $1 Canadian.
[332] Mr. Tseng also testified that, on November 19, 2002, Chen Cheng-Yueh Tsai placed another mortgage in the amount of 2.5 million NTD on this property.
[333] The plaintiffs submitted that the placing of these mortgages was contrary to a Mareva injunction issued by Mr. Justice Farley on September 22, 2000.
[334] Ms. Tsai was never cross-examined about these mortgages; the mortgages are not pleaded transactions in this matter.
[335] The Mareva injunction to which counsel for the plaintiffs referred, provides, as one would expect, in paragraph 23, that it does not have any extra-territorial effect until it is declared enforceable by the appropriate foreign court. The Mareva injunction issued by Justice Farley in 2000 was addressed to Jay Chiang and Christina Chiang.
[336] Justice Farley’s injunction was varied, from time-to-time, to apply to other persons. I am not prepared to conclude, in the absence of explicit wording, that Justice Farley intended variations of his order to apply to all persons all over the world who happened to be named as defendants in this proceeding. If a court in Taiwan made an ex parte in camera order prohibiting counsel for the plaintiffs’ law firm from carrying on business or using a bank account, I do not imagine that counsel for the plaintiffs’ firm would close down in response to such an order.
[337] It makes far more sense to interpret Justice Farley's order as requiring an order from a court in Taiwan before it became effective against Chen Cheng-Yu Tsai in Taiwan. No such order from a Taiwan Court was offered in this proceeding, despite the fact that Mr. Tseng has been retained by the plaintiff, Korea Data Systems (USA) Inc., since late 1999.
[338] I decline to draw any relevant inferences from the fact that Ms. Tsai entered into these two mortgages in 2002.
Ms. Tsai's Undertakings and Refusals
[339] The plaintiffs asked the court to draw an adverse inference against Ms. Tsai arising from her failure to produce transaction records from the various banks referred to in this litigation. For example, the plaintiff sought transaction records from the United World of Chinese Commercial Bank because $575,000 was deposited in this account in October, 2000.
[340] There were apparently dozens of transactions in this account. The passbook has been produced. However, the plaintiffs believe the transaction records will be more helpful.
[341] The plaintiffs served Ms. Tsai with this proceeding in September 2000. Examinations- for-discovery were held in January and February, 2011. The trial of this matter commenced in March 2011. This is not a case in which there was a motion brought as a result of refusals or where there was an order requiring further and better production. Accordingly, an adverse inference, if one is to be drawn, must flow from the evidence available.
[342] Ms. Tsai's ability to produce additional documentation is not clear. Attempts by Ms. Tsai's counsel to obtain information from the Bank of Taiwan illustrate the difficulty. Counsel for Ms. Tsai wrote to the Bank of Taiwan on March 31, 2011, requesting transaction records for transactions in the 4043 account. The bank responded by e-mail on April 8, 2011, and indicated that it required a Letter of Authorization signed by Ms. Tsai and authenticated by the “Taipei Economic and Cultural Office in Canada”. It is not clear why this authorization was required. Ms. Tsai has always lived in Taiwan; one would have thought authentication by the Taipei Economic and Cultural Office in Canada was unnecessary. On the other hand, counsel for Ms. Tsai disclosed to the bank that he was representing Ms. Tsai in litigation in Canada.
[343] The court can take judicial notice of the fact that Taiwan's status in the world is contentious. It is, therefore, possible that the Taiwanese authorities, in an effort to control the participation of Taiwanese institutions in foreign legal proceedings, require that their participation be vetted by the Taiwan Cultural Office in the foreign jurisdiction. It is not clear that authentication by the Cultural Office required Ms. Tsai's personal attendance in Canada. Counsel for Ms. Tsai responded to the Bank of Taiwan's e-mail and asked for clarification but none was forthcoming.
[344] Finally, reference was made to requests for information made prior to the 2007 contempt proceedings against Jay Chiang and Christina Chiang. These requests were made to Jay Chiang and Christina Chiang as a result of Undertakings given to Justice Farley. Jay Chiang and Christina Chiang's compliance, or lack thereof, with the Undertakings cannot be the basis for an inference that Ms. Tsai has not complied with her disclosure obligations in this proceeding. Similarly, conclusions concerning the adequacy of the disclosure provided during the contempt proceedings concerning Jay Chiang and Christina Chiang cannot be the basis for an adverse inference against Ms. Tsai in this proceeding.
Conclusion
[345] When I consider all the evidence, it has not been demonstrated, on a balance of probabilities that Ms. Tsai entered into any of the transactions described in the evidence with the intent of defeating, hindering, delaying or defrauding the creditors of Jay Chiang.
[346] I am not satisfied, on a balance of probabilities, that Ms. Tsai agreed to pursue the object of the alleged conspiracy, which was to injure the plaintiffs and commit unlawful acts to impede their ability to collect the debts owing to them. As a result, her actions cannot be viewed as acts that were done in pursuit of the common object of the conspiracy alleged by the plaintiffs in paragraph 52 of the four times amended Statement of Claim.
[347] Ms. Tsai, like Chun Chun Wu, was used by Jay Chiang, Y. C. Chiang and Julius Chiang in their attempts to frustrate the attempts of Korea Data Systems (USA) Inc. and Mendlowitz and Associates Inc. to collect amounts owed to them. Jay Chiang’s use of Chun Chun Wu and Ms. Tsai is similar to the way in which he and his brother treated their own mother. Evidence was received from John Hui, the driving force behind Korea Data Systems (USA) Inc., to the effect that En Fu Chiang, the mother of Jay Chiang and Julius Chiang, was not a businesswoman, and had no idea about the transactions that Jay Chiang and Julius Chiang were carrying out in accounts in her name. There is no reason for me to believe that Jay Chiang was any more considerate of Ms. Tsai than he was of his own mother.
[348] I am not satisfied that Chen Cheng-Yueh Tsai destroyed documents. I am not persuaded that she was unjustly enriched by any of the transactions that are described in the evidence. I am not persuaded, on the evidence, that any declarations should be made concerning transactions entered into by Chen Cheng-Yueh Tsai. I decline to make any interlocutory injunctions against Ms. Tsai.
[349] In short, all of the plaintiff's claims against Chen Cheng-Yueh Tsai are dismissed with costs.
Samson Chang and Brenda Chang
[350] Brenda Chang is Jay Chiang’s sister; Samson Chang is Brenda’s husband.
Samson Chang
[351] Samson Chang obtained a degree in Business Administration in 1979 from Wilfred Laurier University. After graduation, Samson Chang opened two clothing stores for women. He also trained to become an auditor for two years with Thorne Riddell, but did not complete his qualifications.
[352] Samson Chang testified that, at the end of 1989, when he was thinking of closing one of his clothing stores, Jay Chiang approached him and asked him to work as a part-time bookkeeper for a computer company that he was starting up (Aamazing Technologies Inc.). At this time, Jay Chiang was already in the computer business and appeared to be quite successful. Samson Chang testified that, prior to working for Aamazing Technologies Inc., he had no experience with the computer industry.
[353] Samson Chang testified that he was offered 10% of Aamazing Technologies Inc. for $20,000. He accepted the offer and put up his money. According to Jay Chiang and it does not appear contentious, Aamazing Technologies Inc. had a third shareholder, Frances Chiang, also Jay Chiang’s sister, who also owned 10% of the company. Frances Chiang apparently played no role in the operations of Aamazing Technologies Inc.
[354] In 1990, Samson Chang started working part-time as a bookkeeper for Aamazing Technologies Inc. He was employed at Aamazing Technologies Inc. from 1990 until 1994. In addition to his bookkeeping responsibilities, Samson Chang was a director of Aamazing Technologies Inc. He and his wife also continued to operate the two clothing stores. After he left Aamazing Technologies Inc. in 1994, he returned full-time to the business of operating women's clothing stores. While he was employed at Aamazing Technologies Inc., Samson Chang operated two such stores in Toronto, although the clothing store businesses suffered because neither Sampson nor his wife could look after them properly. Brenda Chang also had a full-time job, but not with Aamazing Technologies Inc.
[355] According to Samson Chang, Aamazing Technologies Inc. was importing computer monitors from Taiwan and purchasing video cards from a Canadian company and then selling both the monitors and video cards to “resellers”. He said that, after he joined the company, the business “just took off”.
[356] In the latter part of 1990, Aamazing Technologies Inc. switched suppliers and began importing monitors from Amazing Technologies Corp. in California. Amazing Technologies Corp. did not manufacture the monitors; the actual manufacturer was Korea Data Systems Co. Ltd. in Korea. The monitors came to the Canadian company directly from Korea by the container load. Invoices to Aamazing Technologies Inc. for the monitors came from Amazing Technologies Corp. in California.
[357] Samson Chang was in charge of bookkeeping, making payments and recording all transactions. Jay Chiang handled purchasing and selling monitors, contracts with customers and agreements with suppliers. Samson Chang and Jay Chiang had the authority to sign cheques and authorize wire transfers. Jay Chiang rarely signed any cheques.
[358] As the company grew, Samson Chang's employment became full-time, starting at 9:00 a.m. and finishing between 6:00 and 7:00 p.m., with occasional weekend work. As the company expanded, Samson Chang saw Jay Chiang less frequently, seeing him on a weekly, instead of daily, basis. Samson Chang testified that he was paid $50,000 a year. When Samson Chang started at Aamazing Technologies Inc., there were three people working there; Jay Chiang, Samson Chang and a salesman. As the company became more successful, the number of employees grew to approximately twenty. For approximately a year-and-a-half, Samson Chang had one employee reporting to him who assisted with collections.
[359] During his first year, the company had sales of approximately $10 million; this increased to $20 million in the second year and $40 million in the third year. During his fourth and final year, Jay Chiang was hoping for sales of $80-$100 million. The plaintiffs suggested that Aamazing Technologies Inc. was not very profitable. They point out that, while sales increased dramatically, the gross margin declined.
[360] Samson Chang testified that, in 1990, he borrowed $102,000 from Aamazing Technologies Inc. so that he could purchase a house. Jay Chiang approved the loan; the loan was recorded on the books of the company. There was a loan agreement introduced into evidence, but Samson Chang testified that it was entered into after the fact on the advice of Deloitte & Touche, the auditors for Aamazing Technologies Inc.
[361] Samson Chang re-paid this loan in full before he left Aamazing Technologies Inc. in 1994. Samson Chang produced a $65,000 cheque payable to Aamazing Technologies Inc., dated November 30, 1993. He also produced a $65,000 deposit slip, dated February 13, 1994 in favour of 961266 Ontario Inc., which, he testified, represented the second and final payment on account of the loan. At the time of this deposit, 961266 Ontario Inc. owned Aamazing Technologies Inc. Samson Chang indicated that the payment was made to the holding company on the advice of Deloitte & Touche. According to Samson Chang, he re-paid the loan because Jay Chiang asked him to pay it back and the $130,000 represented a return of principal plus interest. The plaintiffs maintain that Samson Chang did not re-pay this loan.
[362] I accept Samson Chang's evidence concerning his background. I also accept his evidence concerning his experiences with Aamazing Technologies Inc. and its growth. I am satisfied that the cheque and the deposit slip confirm Samson Chang's evidence that he re-paid the housing loan and I accept his evidence in that regard.
[363] Samson Chang testified that Deloitte & Touche recommended, in 1992, that Jay Chiang set up a holding company, which turned out to be 961266 Ontario Inc., to own the shares of Aamazing Technologies Inc. As a result of this advice being communicated to him, Samson Chang conveyed his shares in Aamazing Technologies Inc. to 961266 Ontario Inc. in 1992. Samson Chang testified that he received no payment for his shares at that time.
[364] Samson Chang testified that, in March 1993, Aamazing Technologies Inc. began to experience a slowdown because the salesmen were running out of product. Korea Data Systems Co. Ltd., the major supplier, stopped shipping. Mr. Chang inquired about the problem and was told by Jay Chiang that Korea Data Systems Co. Ltd. wanted to take over Aamazing Technologies Inc.
[365] Samson Chang testified that there were discussions between Jay Chiang and Korea Data Systems Co. Ltd. and that, as a result of those discussions, he was asked to obtain a six-month financial statement from Deloitte & Touche. This statement was introduced into evidence. I am satisfied that this statement confirms the evidence of Samson Chang in this regard and I accept his evidence concerning what he was told by Jay Chiang and that there were discussions concerning the sale of Aamazing Technologies Inc.
[366] Samson Chang testified that he paid Amazing Technologies Corp. (the California corporation supplying Aamazing Technologies Inc.) every sixty days. Apparently, it took approximately thirty days from the time Amazing Technologies Corp. ordered a container of monitors for the container load to arrive in Canada. The monitors were shipped directly from Korea to Canada. Samson Chang stated that he typically paid Amazing Technologies Corp. invoices for those monitors approximately sixty days after the monitors arrived in Canada. Samson Chang testified that he paid invoices on the instructions of Jay Chiang.
[367] Samson Chang testified that the supply problem was temporarily solved in September 1993 and shipments from Korea Data Systems Co. Ltd. began again. This was short-lived. Samson Chang testified that the shipments stopped again, prompting Aamazing Technologies Inc. to switch suppliers with the result that monitors began arriving from China in early 1994. Samson Chang testified that Aamazing Technologies Inc. began receiving invoices in the latter part of 1994 from the China supplier.
[368] Samson Chang left Aamazing Technologies Inc. in November 1994.
[369] There seems little doubt that Samson Chang left Aamazing Technologies Inc. when he said he did. Other evidence confirms that there were disputes between Amazing Technologies Corp., Jay Chiang, Julius Chiang and Korea Data Systems Co. Ltd. in 1993. Accordingly, I accept Jay Chiang's evidence concerning the slowdown in the supply of monitors by Korea Data Systems Co. Ltd., the effect that the slowdown had on the business of Aamazing Technologies Inc. and the selection of the new supplier. I also accept his evidence that supplies from Korea Data Systems Co. Ltd. temporarily improved in September 1993.
[370] Financial records for Aamazing Technologies Inc. are sparse. Jay Chiang testified that the financial records were destroyed by a storage company when Aamazing Technologies Inc. failed to pay the costs of storing the records. It was Samson Chang's evidence that, when he left Aamazing Technologies Inc., all of the company's records were intact.
[371] I am not satisfied that Samson Chang destroyed documents. Samson Chang left Aamazing Technologies Inc. in November 1994; the company was still functioning, although it was in a difficult situation. There is no evidence that the corporate records were destroyed prior to Samson Chang's departure from the company. Jay Chiang's evidence that the records were destroyed when Aamazing Technologies Inc. failed to pay storage costs, if accepted, establishes that Jay Chiang caused the destruction of the corporate records of Aamazing Technologies Inc.; it does not establish that Samson Chang participated in this destruction. There is no evidence which persuades me that Samson Chang knew that Jay Chiang intended to destroy the corporate records of Aamazing Technologies Inc. or that Samson Chang assisted Jay Chiang in destroying the corporate records of Aamazing Technologies Inc.
[372] The plaintiffs suggested that it was a reasonable inference that Jay Chiang and Samson Chang ensured that the financial records of Aamazing Technologies Inc. and the holding company, 961266 Ontario Inc., disappeared to make it more difficult for Korea Data Systems (USA) Inc. to trace money and assets. It does not seem reasonable to me that such an inference should be drawn against Samson Chang. There is simply no evidence which suggests that he did anything in relation to the records. I decline to draw such an inference from the evidence adduced by the plaintiffs.
[373] Samson Chang testified that he left Aamazing Technologies Inc. because he had wanted to concentrate on his clothing stores. Between November 1994 and February 1995, Mr. Chang occupied himself with renovations and hiring staff for a new store which opened in February 1995. I accept Samson Chang's evidence in this regard.
[374] Samson Chang testified that, before he left, he issued two cheques: one cheque for $20,000 payable to him, which re-paid his original investment in Aamazing Technologies Inc.; and, a second cheque for $80,000 payable to his wife, Brenda, Jay Chiang’s sister, which represented the profit that Aamazing Technologies Inc. was making when he transferred his shares. He calculated this amount by basing it on the value of the shares when he transferred them at Jay Chiang's request to 961266 Ontario Inc. Samson Chang said that he issued the $80,000 cheque in his wife's name so that, if there was a dispute with Jay Chiang over the amount, it could be worked out as a family matter between Jay Chiang and his sister without his involvement. Samson Chang testified that Jay Chiang was aware that he had issued those cheques prior to him leaving the company and never raised an objection with himself or Brenda (i.e., Samson’s wife). In describing the re-payment, Mr. Chang became very emotional; he said he invested his heart and soul for five years with Aamazing Technologies Inc.
[375] Apparently, the Receiver for Amazing Technologies Corp. in California produced a number of invoices from that company to a company called KEO Trading Limited. This company is owned by Samson Chang. KEO Trading was a company that he incorporated to own one of his clothing stores. According to Samson Chang, KEO Trading was dormant. It did no business with Amazing Technologies Corp. and should not have received invoices from that company. Samson Chang said he had no knowledge of these invoices. From Samson Chang's perspective, Amazing Technologies Corp. did business with Aamazing Technologies Inc. and not with KEO Trading. Samson Chang was unable to explain why KEO Trading's name should have been used on any invoices.
[376] On or about March 17, 1993, KEO Trading and Aamazing Technologies Inc. were sued by Korea Data Systems (USA) Inc. on account of unpaid invoices. The address for KEO Trading on the Statement of Claim was the business address of one of Samson Chang's clothing stores. Samson Chang denied being served with the Statement of Claim. He testified that he was unaware of the action. No affidavit of service was produced in these proceedings.
[377] There was one Statement of Defence filed on behalf of both Aamazing Technologies Inc. and KEO Trading by the law firm of Miller Thompson; this Statement of Defence was filed as an exhibit. Samson Chang said that he had never met the lawyer from Miller Thompson whose name appeared on the Statement of Defence. No one from Miller Thompson was called to identify Samson Chang as the person who retained them to act on behalf of KEO Trading.
[378] Jay Chiang testified that KEO Trading was importing video cards from Taiwan. Jay Chiang also testified that KEO Trading did not have enough money to make the payments KEO Trading made to Amazing Technologies Corp. In addition, Amazing Technologies Corp. issued a cheque to KEO Trading in the sum of $1 million. There was no evidence to suggest that Samson Chang received any of this money.
[379] Reference was made to a May 19, 1993 fax from a company in California called Megatrux Inc., which was addressed to "Debbie/Aamazing Technologies Inc. (KEO Trading)". It was agreed that someone named Debbie was the office manager for Aamazing Technologies Inc. Debbie did not testify in these proceedings. This fax was apparently found in the Deloitte & Touche documents obtained by the plaintiffs. This fax is hardly a business record of Deloitte & Touche. Even if it was, I am not prepared to infer that, because someone at Megatrux Inc. in California thought that Aamazing Technologies Inc. and KEO Trading were related companies, it is, therefore, a fact that the companies were related for the purpose of purchasing monitors from Amazing Technologies Corp. in California. I attach no weight to this document.
[380] Jay Chiang testified that he assumed that Miller Thompson was acting on the instructions of both Aamazing Technologies Inc. and KEO Trading when it filed the Statement of Defence. I am not prepared to accept Jay Chiang’s unconfirmed evidence in this regard. It seems more logical to me that Jay Chiang used the name of KEO Trading without the knowledge or consent of Samson Chang. This behaviour is consistent with Mr. Chiang's behaviour generally. For example, he used the name of his mother-in-law without her consent.
[381] Regardless of the relationship between KEO Trading and Aamazing Technologies Inc., this litigation was settled in 1993. There was no evidence to suggest that all claims reflected in the Statement of Claim were not settled at that time.
[382] I am satisfied that the $20,000 that Samson Chang received from Aamazing Technologies Inc. reflected the re-payment of his original investment in the company. I am satisfied that the $80,000 that was paid to Brenda Chang was the return on Samson Chang's investment.
[383] Samson Chang's involvement in these matters ended in November 1994.
[384] A significant portion of the plaintiffs’ case post-dates 1994. I am not prepared to find that this post-1994 conduct was planned in the early 1990’s years before Justice Seymour gave judgment against Jay Chiang, Julius Chiang and others.
[385] The money received by Samson Chang − that is the home purchase loan and the return on his investment − flow from commercially reasonable transactions.
[386] The household loan was properly recorded on the books of Aamazing Technologies Inc. and was the subject of auditing advice from Deloitte & Touche. Finally, the home loan was re-paid prior to Samson Chang resigning from Aamazing Technologies Inc. These circumstances are consistent with the transaction being exactly what it appeared to be.
[387] There is a commercial basis for Samson Chang's calculation that he was entitled to a profit of $80,000; namely, the fact that the six-month financial statement obtained from Deloitte & Touche suggested that the Aamazing Technologies Inc. earnings were $834,000 and Samson Chang was a 10% owner.
[388] The plaintiffs suggested that the court should infer that the business of Aamazing Technologies Inc. presented Jay Chiang and Sam Chang with an opportunity to remove substantial amounts of money from the business for their own personal use. They suggested that, while the margins were thin, the volume was high and money could be made by not paying the supplier. I am not prepared to draw such an inference as far as Sam Chang is concerned. Sam Chang was a 10% shareholder. He was paid a salary of $50,000 per year and the housing loan that he obtained he re-paid. When Deloitte & Touche prepared their six-month interim financial statement for the period ending March 31, 1993, they calculated earnings to be $834,000; 10 % of this figure is approximately $80,000, which is the amount of money that Samson Chang removed from Aamazing Technologies Inc. when he left in 1994. The inference suggested by the plaintiffs is more properly drawn against Jay Chiang alone.
[389] Finally, Samson Chang testified that, on Jay Chiang's instructions, he contacted their corporate lawyer to incorporate Everview Technologies Inc. It appears that this communication occurred in May 1993. Apart from that, Samson Chang testified that he had no involvement with that company. I do not accept this aspect of his evidence because Everview Technologies Inc. maintained a bank account at the same CIBC branch where Samson Chang had his business and personal accounts. However, the sole shareholder of Everview Technologies Inc. was the same numbered holding company that Jay Chiang used to hold shares of Aamazing Technologies Inc.; namely, 961266 Ontario Inc. The bank statements for Everview Technologies Inc. were sent to Jay Chiang's residence and the available cancelled cheques from the Everview Technologies incorporated bank account were signed by Jay Chiang. I am satisfied that Jay Chiang controlled this company and that Samson Chang played no meaningful role in its activities. The plaintiffs suggested that the court draw an inference that Everview Technologies Inc. was to be a substitute for KEO Trading. While this inference seems reasonable, there is no evidence that Samson Chang had an ownership interest in Everview Technologies Inc. and, as indicated earlier, the litigation against KEO Trading was settled in 1993.
[390] Samson Chang's involvement in these matters ceased with his departure from Aamazing Technologies Inc. in November 1994. To put this date in context, on September 8, 1993, Jay Chiang and Julius Chiang had reached a settlement with the Koh brothers who controlled Korea Data Systems (USA) Inc. and Korea Data Systems Co. Ltd. The settlement purported to settle all of the outstanding litigation. The settlement broke down. The plaintiffs submitted, as part of Exhibit 36C, a Verified Complaint, which was filed in the Superior Court of the State of California on May 9, 1994, alleging a breach of the Settlement Agreement. Exhibit 3 in the plaintiffs’ action to enforce the California judgment against Jay Chiang, which was tried at the same time as this matter, contains Jay Chiang's Answer to the Verified Complaint. This Answer was filed by counsel for Jay Chiang on September 16, 1994. Justice Seymour did not give judgment against Jay Chiang until April 20, 1998, almost four years after Samson Chang's departure from Aamazing Technologies Inc.
[391] The only inference that appears logical to me, given that factual backdrop, is that Samson Chang thought that there was no future for him at Aamazing Technologies Inc. in November 1994. I am satisfied that he decided to leave because he thought his interest would be better served by concentrating on his own businesses. I am satisfied that, as he was leaving Aamazing Technologies Inc., he demanded back his original investment and the profit to which he thought he was entitled. I do not endorse his calculation of that profit, but my disagreement with him in that regard does not provide a basis for concluding that Samson Chang's actions in the fall of 1994 or, for that matter, between 1990 and 1994, were intended to defeat, hinder, delay or defraud Jay Chiang's creditors. Nor am I satisfied that Samson Chang conspired with Jay Chiang and others to defeat, hinder, delay or defraud Jay Chiang's creditors.
[392] I am not satisfied that Samson Chang destroyed documents or assisted in the destruction of documents.
[393] I am not satisfied that Samson Chang entered into the transactions to which I have referred with an intent to defeat, hinder, delay or defraud the creditors of Jay Chiang.
[394] When I consider the evidence admissible against Samson Chang, I am not satisfied that he agreed to pursue the object of the alleged conspiracy, which was to injure the plaintiffs and commit unlawful acts to obstruct their efforts to collect the debts owing to them. As a result, his actions cannot be viewed as acts that were done in pursuit of the common object of the conspiracy alleged by the plaintiffs in paragraph 52 of the four times amended Statement of Claim. I am not persuaded that Samson’s Chang’s acts were acts in pursuit of the common object of the conspiracy alleged by the plaintiffs.
[395] All of the plaintiffs’ claims against Samson Chang are dismissed with costs.
Brenda Chang
[396] Brenda Chang is Jay Chiang’s sister. She graduated from the University of Toronto in the early 1980’s with a major in computer science. At the time she testified, Brenda Chang had been employed as a computer specialist by the Workers’ Safety Insurance Board for more than fifteen years. For the past two years, she has been on long-term disability from the WSIB due to stress.
[397] Brenda Chang also helps her husband with their clothing stores; she does the buying and the inventory.
[398] Wen Chiang is her sister-in-law; Wen Chiang is married to Julius Chiang and lives in California. On August 3, 1998, Wen Chiang transferred (US)$200,786.37 to Brenda. According to Brenda Chang, Wen Chiang told her that this money came from the sale of her house in California. Brenda Chang indicated that Wen Chiang decided to invest the money in Canadian currency. Apparently, both Brenda Chang and Wen Chiang thought that Canadian currency would appreciate against the U.S. dollar. Brenda Chang based her opinion on information she had received from her co-workers at the Workers’ Safety Insurance Board, many of whom invested in currencies. Brenda Chang recalled that Wen Chiang told her that it was difficult for her to open a Canadian currency bank account in California and, as a result, she was asking Brenda Chang to invest the money for her.
[399] The money from Wen Chiang was transferred in U.S. funds. Brenda Chang testified that, when she received the funds, she left the money in the bank after converting it to Canadian dollars.
[400] Approximately ten months later, on June 8, 1999, Brenda Chang transferred $100,000 to an account of Wen Chiang in a bank in Singapore. On June 28, 1999, Brenda Chang transferred $9447.19 to an account in Wen Chiang's name at a bank in Irvine, California. On August 31, 1999, Brenda Chang transferred a further $22,000 to the bank in Irvine, California. Finally, also on August 31, 1999, Brenda Chang transferred $80,000 to an account in the name of Wen Chiang at a bank in Hong Kong.
[401] Brenda Chang testified that she did not ask Wen Chiang for an explanation concerning the transfers because it was Wen Chiang's money. Brenda Chang testified that she received nothing for these transactions.
[402] Brenda Chang testified that her first knowledge of a lawsuit involving Julius Chiang occurred when she was served at her home in Toronto with documents from the Superior Court of the State of California around Christmas time in 1999. These documents informed Brenda Chang that she, along with Julius Chiang, Wen Chiang and others, was being sued in those California proceedings. In part, the California proceedings were based on the transfers I just described.
[403] Brenda Chang testified that the $80,000 payment that she received in November 1994 from Aamazing Technologies Inc. was also a basis for the lawsuit in California. She testified that all of her information about this payment came from her husband, Sam Chang. She recalls her husband telling her that Jay Chiang received his (Samson Chiang’s) shares and never paid for them.
[404] Brenda Chang testified that she deposited the $80,000 into a joint account that she operated with her husband. She also testified that Jay Chiang never mentioned the $80,000 payment to her. She also confirmed that her husband did not like to deal with her family and told her to deal with her brother should the $80,000 prove contentious.
[405] The plaintiffs called Steve Cameron as a witness. Mr. Cameron is a lawyer in California who represents Korea Data Systems (USA) Inc. in its attempts to enforce its judgments against Jay Chiang, Julius Chiang, Wen Chiang and others. Mr. Cameron testified that, after Korea Data Systems (USA) Inc. obtained a judgment against Wen Chiang, Korea Data Systems (USA) Inc. reached a settlement with her. Pursuant to the settlement, money in Singapore was transferred to the plaintiffs and Wen Chiang was given the opportunity to pay the balance of the judgment over time. In addition, Wen Chiang was given certain unspecified credits against the Korea Data Systems (USA) Inc. judgment.
[406] Mr. Cameron testified that Brenda Chang's lawyer in California agreed that the action in California would be dismissed against her on the understanding that the plaintiffs would be free to pursue Brenda Chang in Canada.
[407] Brenda Chang was also questioned about a (US)$44,000 transfer to her, dated April 2, 1996, from a Bank of Taiwan account in the name of Edward Chang. Records of this transfer were obtained in 2011 by Stephen Tseng, a Taiwanese lawyer acting for the plaintiffs in Taiwan, pursuant to an authorization provided by Jay Chiang. Mr. Tseng did not produce the account-opening documents. Brenda Chang said that the Chinese characters opposite the sender’s English name (Edward Chang) spelled her father's name, Y. C. Chiang. The money transferred to Brenda Chang was transferred to an account at the General Bank in Irvine, California. The address for Brenda Chang on the transfer was an address associated with Y. C. Chiang in Irvine, California. Brenda Chang testified that she had no knowledge of the General Bank in California and no recollection of this transfer.
[408] I decline to draw the inference that Brenda Chang permitted herself to be used as a nominee or a conduit for the movement of these funds. Brenda Chang's evidence is that she has never heard of the General Bank in California and that she has no recollection of having an account in California. The account-opening documents were not introduced into evidence. This transaction occurred in 1996, two years before the plaintiffs first obtained judgment against Jay Chiang, Julius Chiang, Y. C. Chiang and others.
[409] A more rational inference is that this is another example of Y. C. Chiang or Julius Chiang using the name of a family member without that person's knowledge or consent.
[410] I am satisfied that Brenda Chang assisted Wen Chiang in removing money from California after Justice Seymour had given Judgment (April 20, 1998) against Julius Chiang, Jay Chiang and others. I do not believe that the funds received by Brenda Chang were provided to her so that she could invest in Canadian currency. I am not satisfied, on the evidence, that the funds received were, in fact, converted to Canadian currency.
[411] Assisting Wen Chiang does not prove that Brenda Chang intended to defeat, hinder, delay or defraud the creditors of Jay Chiang. The evidence does not establish that the $200,000 provided to Brenda Chang by Wen Chiang belonged, in whole or in part, to Jay Chiang.
[412] The funds provided to Brenda Chang were returned to Wen Chiang in 1999. The litigation against Wen Chiang was settled after these funds had been returned to her. Significantly, Mr. Cameron indicated that part of the settlement involved the return of funds which Wen Chiang was holding in Singapore and the evidence in this case established that Brenda Chang transferred funds ($100,000) to Singapore on the instructions of Wen Chiang in 1999. The more logical inference is that the Singapore funds were returned to Korea Data Systems (USA) Inc. when the Wen Chiang litigation was settled.
[413] I am not satisfied that there are any damages suffered by the plaintiff, Korea Data Systems (USA) Inc., that have not been recovered in the settlement between Korea Data Systems (USA) Inc. and Wen Chiang in California.
[414] I am not satisfied that Brenda Chang agreed to pursue the conspiracy set out in paragraph 52 of the four times amended Statement of Claim. I am satisfied that Brenda Chang agreed to assist Wen Chiang by holding some of the proceeds from the sale of Wen Chiang's home and then transferring it out according to her instructions. I am not satisfied that Brenda Chang's primary object was to make the Amazing Companies Judgment Proof. I do not view Brenda Chang’s acts as acts as acts in pursuit of the common object of the conspiracy alleged by the plaintiffs.
[415] Although not necessary for my decision, even if there was an agreement between Brenda Chang and Wen Chiang and this agreement is a conspiracy, it is a different conspiracy than the conspiracy set out in paragraph 52 of the four times amended Statement of Claim. The protection of the proceeds from the sale of Wen Chiang's home from Korea Data Systems (USA) Inc. is not the same object as that set out in paragraph 52 the four times amended Statement of Claim.
[416] I am not persuaded that Brenda Chang destroyed documents related to the receipt and disbursement of the money from Wen Chiang. This is not a case for punitive damages. I decline to declare the transfer of funds from Wen Chiang to Brenda Chang void because a significant portion of those funds were returned to the plaintiffs from Singapore and the balance was the subject of a Settlement Agreement with Wen Chiang.
[417] I decline to issue any further injunctions against Brenda Chang. She has been the subject of a Mareva injunction for the past twelve years and I am satisfied that she complied with the injunction. There is no basis upon which a declaration can be made that real or personal property of Brenda Chang is held in trust for the plaintiffs.
The mortgages on the home of Samson Chang and Brenda Chang
[418] The plaintiffs suggested that Samson Chang and Brenda Chang violated the Mareva injunction by putting mortgages on their home. While there was some initial confusion around the extent to which Samson Chang and Brenda Chang mortgaged their home, the matter was clarified at the conclusion of this trial. Samson Chang and Brenda Chang had only one mortgage on their home which preceded the Mareva injunction by eight years and was actually paid off after the order was granted. They also had several lines of credit used in connection with their clothing store businesses. These lines of credit also preceded the Mareva injunction. These lines of credit were consolidated after the injunction; there is no evidence to suggest that Samson Chang and Brenda Chang actually used these lines of credit and thereby decreased the equity in their home. There is no merit in this suggestion put forward by the plaintiffs.
[419] I am also not satisfied that Samson Chang and Brenda Chang were unjustly enriched. The shareholder loan to Samson Chang was repaid before he left Aamazing Technologies Inc. The money from Wen Chiang was returned to her. Accordingly, the plaintiffs claim that Samson Chang and Brenda Chang were unjustly enriched is not proven.
[420] The plaintiffs’ claims against Samson and Brenda Chang are dismissed with costs.
Jay Chiang
Jay Chiang’s evidence generally
[421] Jay Chiang agreed that, on a number of occasions throughout the course of the last eleven years, he has given answers that were untrue. For example: he admitted that in 2001, he was examined with respect to account-opening documents from an HSBC account in the name of Ms. Tsai and he falsely said he could not read the name of Chen Cheng-Yueh Tsai on HSBC account documents because he did not read Chinese characters; and he falsely said that he had no recollection of playing a role in the setting up of the HSBC account when, in fact, he set up the account in the name of Chen Cheng-Yueh Tsai and directed the flow of money in and out of this account. Jay Chiang also testified that, when he was examined in 2001, he stated that he had no knowledge of the circumstances surrounding the sale of the Montrose property – evidence which he now agrees was false. Jay Chiang is also in contempt of court.
[422] As a result, it is dangerous to rely on Jay Chiang's evidence unless it is confirmed by independent evidence.
[423] Mr. Chiang agreed that, over the last ten years, one of the first questions he asked himself when considering a business transaction was how the plaintiff, Korea Data Systems (USA) Inc., would look at the transaction.
[424] He also testified that he tried to determine how he could do something without the people around him becoming entangled in litigation with the plaintiffs.
The 4043 account and the plaintiffs and Ms. Tsai
[425] Jay Chiang confirmed that Chen Cheng-Yueh Tsai’s 4043 account was used as a conduit. He testified that it was used by Y. C. Chiang, Julius Chiang and himself. It was a stopover place for money. It was his evidence that Chen Cheng-Yueh Tsai was told what to do with respect to the account. This is consistent with the evidence of Ms. Tsai and it is also consistent with the fact that funds remained in the 4043 account for only a few days before they were entirely transferred out. This account was closed shortly after the Mareva injunction. I accept Jay Chiang’s evidence in this regard.
[426] Jay Chiang testified that he had no clear recollection of instructing Chen Cheng-Yueh Tsai to close the account; he added that he was not inclined to disagree with the suggestion that he had.
[427] Jay Chiang agreed that at least some of the 4043 transactions were done to avoid or frustrate Korea Data Systems (USA) Inc.
The Telecom Business and the plaintiffs
[428] Jay Chiang described the structure of the Telecom Business as follows: he was responsible for sales; Julius Chiang was responsible for manufacturing with some support from Jay Chiang; and administration was handled in the United States by Wen Chiang. When the Telecom Business was switched to Hong Kong, i.e., Asia Pacific Gateway (H.K.) Ltd., it became the responsibility of Y. C. Chiang and Julius Chiang.
[429] Jay Chiang agreed that one reason he and his brother, Julius, were not shareholders of 1243723 Ontario Inc., which carried on business as Asia Connects Technology, was because the plaintiff, Korea Data Systems (USA) Inc., had an outstanding judgment against both Jay and Julius Chiang. Jay Chiang also agreed that 1243723 Ontario Inc. had revenues exceeding $7 million per year from customers. Y. C. Chiang was shown on the corporate books and records of 1243723 Ontario Inc. as its sole shareholder. Jay Chiang also agreed that, when he was being examined in 1999 in connection with his assignment of bankruptcy, he and Julius Chiang probably discussed moving money out of Asia Pacific Gateway (H.K.) Ltd.
[430] I accept Jay Chiang's evidence concerning the structure of the Telecom Business and the fact that Julius Chiang and Y. C. Chiang played a role in that business. It is clear, for example, that Y. C. Chiang played a role in the payment of a facilitation fee of approximately $1 million. I am satisfied that Jay Chiang, Y. C. Chiang and Julius Chiang were independent actors who, at times, acted in concert and, at times, acted individually in their own interest.
[431] I am satisfied that Jay Chiang was involved in serious discussions in the People's Republic of China concerning the Telecom Business and transferred that business from the Ontario company to a Hong Kong company, in part, to avoid or frustrate the efforts of Korea Data Systems (USA) Inc. I accept the fact that, in making this transfer, Jay Chiang lost some control over the telecom assets to his brother and his father. In this regard, I am satisfied that Y. C. Chiang and Julius Chiang were independent actors seeking to benefit themselves as well as Jay Chiang.
[432] Jay Chiang agreed that he never turned over any assets from the Telecom Business to the plaintiff, Mendlowitz & Associates Inc.
The Canaccord Capital account, the plaintiffs and Ms. Tsai
[433] Jay Chiang agreed that Chen Cheng-Yueh Tsai had no knowledge or control over the Canaccord Capital account in Vancouver. This is entirely consistent with the documentation that set up that account and I accept Jay Chiang's evidence in this regard. Jay Chiang agreed that he transferred money and stocks to this account to avoid having liquid assets in his name and to thereby frustrate the plaintiff, Korea Data Systems (USA) Inc.'s, attempts to enforce any judgment that it might obtain against him.
[434] Jay Chiang agreed that his parents permitted him to use a bank account at the Bank of Montreal after the Mareva injunction was obtained. His father and mother left him blank cheques for the account. Jay Chiang agreed that he deposited money into that account and that he had a bank card for that account, which he used. I am satisfied that Jay Chiang did this to frustrate the efforts of Korea Data Systems (USA) Inc. and Mendlowitz and Associates Inc. to collect money from him.
Ms. Tsai’s HSBC account
[435] Jay Chiang agreed that Chen Cheng-Yueh Tsai never engaged in transactions recorded in an HSBC account in her name. Jay Chiang agreed that he set up the account in July 1994, and that he did not speak to Chen Cheng-Yueh Tsai directly about it. He speculated that there might have been communication between his wife and her mother about the account. He agreed that he directed money in and out of the account. He agreed that proceeds from these transactions went into his account in Hong Kong and his wife's account in Singapore in 1995 and 1996. Jay Chiang's evidence in this regard is consistent, in part, with the evidence of Chen Cheng-Yueh Tsai and I accept his evidence in this regard. He agreed that he engaged in these transactions to make it harder for Korea Data Systems (USA) Inc. to collect money from him.
The Montrose property
[436] Jay Chiang agreed that he never told Ms. Tsai about the Trust Agreement concerning the Montrose property. Jay Chiang testified that $272,000 was paid to Y. C. Chiang at the end of the Montrose transactions. The proceeds from the sale were deposited to a joint account in the names of Jay Chiang and Y. C. Chiang and money out of that account was wired in the name of Y. C. Chiang. I accept Jay Chiang's evidence in this regard. Mr. Chiang's evidence is consistent with the bank records recording the transfer of this money. I am satisfied that Jay Chiang did this to ensure that the plaintiff, Korea Data Systems (USA) Inc., would not be able to seize his father's original investment in the Montrose property.
Mortgaging 10 Cortina Court
[437] Jay Chiang agreed that he instructed his wife to take out a mortgage on their home at 10 Cortina Court and that he transferred most of the mortgage proceeds to his father to make it more difficult for the plaintiff, Korea Data Systems (USA) Inc., to attack his equity in 10 Cortina Court. He also agreed that he used the alias, David Chang, to describe his father in the transfer to make it more difficult for the plaintiff, Korea Data Systems (USA) Inc., to trace the mortgage proceeds. I accept Mr. Chiang's evidence in this regard. It is clear that the mortgage proceeds were wired to his father and there appears to have been no commercial reason to mortgage the property.
$340,507
[438] Jay Chiang agreed that he transferred $340,507 out of one of his wife's accounts with the HSBC in Singapore to his father in an effort to keep the money safe from the plaintiff, Korea Data Systems (USA) Inc.
The Bendix transactions
[439] Jay Chiang agreed that he engaged in transactions with Sidney Lugassy to make it impossible for the plaintiffs to find out how much money he was receiving in cash. I accept Jay Chiang's evidence in this regard because his evidence is entirely consistent with the evidence of the transfers to Mr. Lugassy's Bendix account. Mr. Chiang also testified that Mr. Lugassy panicked when he realized that Jay Chiang was being pursued by the plaintiff and that the trail led to him (i.e., Mr. Lugassy). As a result, they entered into a consulting agreement to provide a legitimate veneer to the transactions. I accept Mr. Chiang's evidence that the consulting agreement was an afterthought. I also accept his evidence that Mr. Lugassy was in a panic when he thought he was being investigated because Mr. Lugassy is an unsavory character whose financial transactions obviously cannot bear too much scrutiny.
[440] This is perhaps an appropriate place to find that I accept Mei Huang's evidence that she was told by Jay Chiang that these Bendix transfers were carried out in an attempt to strengthen the business of Winner International Group Limited. Mei Huang is separately referred to in these reasons.
The conspiracy claim
[441] I am satisfied that there was a conspiracy to hinder the collection efforts of the plaintiffs. I am satisfied that such an agreement was unlawful because it was contrary to the BIA, the Fraudulent Conveyances Act, R.S.O. 1990, c. F.29 (“FCA”) and in breach of this court's Mareva injunction order. In addition, I am satisfied that there was a conspiracy to injure the plaintiffs by hindering their collection efforts, which had the effect of depriving them of the damages awarded to them by Justice Seymour in 1998. I do not accept the plaintiffs’ assertions concerning all of the persons it claims were members of that conspiracy.
[442] I am satisfied, on a balance of probabilities, that Jay Chiang was such a conspirator. I am also satisfied that his brother, Julius Chiang, and his father, Y. C. Chiang, joined in the conspiracy.
[443] The object of the agreement, as described in paragraph 52 of the four times amended Statement of Claim, has been admitted by Jay Chiang in his evidence. Even if Mr. Chiang had not made the admissions he did, I would still come to the conclusion, based upon the evidence that such an agreement existed and that Jay Chiang, Julius Chiang, and Y. C. Chiang were parties to it.
[444] I satisfied that Jay Chiang knew that damage to the plaintiffs would likely result in the sense that assets would be forever concealed from the plaintiffs or dissipated before the plaintiffs could find them.
[445] Similarly, I am satisfied that the plaintiffs have suffered damages, although the precise extent of the damages remains to be proven. I am not satisfied that the plaintiffs are entitled to judgment in the total amount of the conveyances. Many of the overt acts in furtherance of the conspiracy were conveyances as that term is defined in the FCA. They were also intended to frustrate the plaintiff, Mendlowitz & Associates Inc.'s, attempts to realize upon the assets of Jay Chiang. Many of the sums of money conveyed have never been recovered. Accordingly, the plaintiffs are entitled to judgment against Jay Chiang for having engaged in these conveyances. However, this is not an appropriate case for a broad and imprecise remedy. Specifically, I have also ordered the enforcement of the California judgment against Jay Chiang and any damage calculation has to ensure that the plaintiff, Korea Data Systems (USA) Inc., does not recover twice and, as well, that there are not two judgments in respect of the same amount of money. I will hear submissions on the precise nature of the damages.
Spoliation
[446] I will consider Jay Chiang's interest in Winner International Group Limited separately. I am satisfied that Jay Chiang knew that Korea Data Systems (USA) Inc. was pursuing him in California in 1994 and thereafter and that, as a result, he knowingly permitted the documents of Aamazing Technologies Inc. to be destroyed. Mr. Chiang testified that the corporate books and records of Aamazing Technologies Inc. were stored with a third-party and then destroyed by that third-party when storage fees were not paid. Evidence has been adduced which establishes that Mr. Chiang had significant resources available to him at this time. Specifically, a November 5, 1996 bank statement from a branch of the Hong Kong and Shanghai bank in Hong Kong indicated that Mr. Chiang had more than (US) $700,000 on deposit there at that time. I am satisfied that Jay Chiang deliberately failed to pay the storage fees to bring about the destruction of the corporate records of Aamazing Technologies Inc.
[447] There is no need for me to award damages for spoliation. I have already found that the plaintiffs have established that Mr. Chiang conspired against them and engaged in fraudulent conveyances and those findings provide a sufficient basis for any remedies which the court is inclined to fashion.
The Mareva injunction in aid of execution
[448] I am satisfied that, due to the conduct of Jay Chiang throughout this litigation, it is necessary and appropriate to issue a Mareva injunction in aid of execution. Mr. Chiang has not provided the plaintiffs with meaningful assistance in locating his assets. It is not a case for a broad, imprecise Mareva injunction.
[449] I recognize that Mr. Hui has expressed an intention to pursue Jay Chiang and Julius Chiang regardless of the likelihood of recovery. This speaks to a very personal antagonism and the court must be very careful to avoid becoming an instrument of revenge; this is especially concerning because the “true essence” of the dispute among Mr. Hui, Jay Chiang and Julius Chiang remains unknown.
[450] Accordingly, it will be necessary to receive submissions concerning the terms of the Mareva injunction.
The failure to comply with the Undertakings given to Justice Farley
[451] Jay Chiang suggests that his failure to comply with the Undertakings that he gave to Justice Farley are no longer an issue because the Undertakings and his lack of compliance with them merge in this judgment. I do not accept this submission. The question of the application of the doctrine of merger is relevant to the outcome of the contempt proceedings because those proceedings deal with Jay Chiang's failure to comply with his Undertakings to the court. Imposing consequences on Jay Chiang for failure to comply with his Undertakings is a matter for the contempt proceedings, as is the question of whether the Undertakings merge in this judgment. Even if this should turn out to be correct, it does not imply that the court’s ability to fashion an appropriate remedy in this case is thereby diminished.
Tracing order
[452] I am also satisfied that this is an appropriate case for an equitable tracing order. Mr. Chiang has not provided any meaningful co-operation concerning his assets. This is not an appropriate case for a general, imprecise tracing order. The plaintiffs can apply for specific tracing orders when it seems advisable to them to do so.
Mei Huang
[453] I propose to discuss Jay Chiang's evidence concerning Mei Huang when I consider the plaintiffs’ case against her.
Conclusions Concerning Jay Chiang
[454] I am satisfied that Jay Chiang participated in fraudulent conveyances and that he conspired with Julius Chiang and Y C Chiang as described in paragraph 52 of the four times amended statement of claim.
[455] I am satisfied that Jay Chiang has been unjustly enriched. Aamazing Technologies Inc. received computer monitors for which it did not pay in circumstances where the proceeds from the sale of those monitors have not been accounted for.
[456] I am not satisfied that Jay Chiang passed the benefits which he unjustly received to any of the other defendants, with the exception of Christina Chiang.
[457] I will receive submissions concerning what order should be made concerning costs against Jay Chiang.
Christina Chiang
[458] On February 14, 2000, Christina Chiang was first named as a defendant in proceedings instituted by the plaintiffs, when she was added as a defendant in a conspiracy and fraudulent conveyances action in California which, according to the Court of Appeal of the State of California, alleged an overarching international conspiracy to fraudulently convey property. Korea Data Systems (USA) Inc. alleged that all of the defendants conspired to prevent it from collecting on its 1998 California judgment against Jay Chiang and Julius Chiang. Specifically, the action alleged that Christina Chiang engaged in fraudulent conveyances and assisted in the transfer of funds that could have been used to satisfy the 1998 judgment.
[459] On July 28, 2000, Christina Chiang was named as a defendant in this action which also alleged a conspiracy and fraudulent conveyances. The conspiracy was described as a conspiracy by the defendants to injure Korea Data Systems (USA) Inc. and to fraudulently convey property, transfer and hide property, take property in their names which was not theirs in a manner intended to delay, hinder and defeat the efforts of Korea Data Systems (USA) Inc. to collect amounts owing to it by Jay Chiang, Julius Chiang and others. The conspiracy is described as both a conspiracy to injure the plaintiffs and a conspiracy to commit unlawful acts in order to avoid paying debts owed to the plaintiffs.
[460] In this action, Christina Chiang eventually brought a motion to prevent the plaintiffs from simultaneously proceeding against her in this action and the California action. Specifically, Christina Chiang wanted an injunction restraining the plaintiffs from continuing the California conspiracy and fraudulent conveyances action.
[461] The plaintiffs responded to Christina Chiang's motion, in part, by moving for an order staying her motion for an injunction. This aspect of the plaintiffs’ responding motion was supported by an affidavit from John Hui, dated April 16, 2003. In that affidavit, Mr. Hui said in paragraph 2:
[I]t is the intention of the plaintiffs to amend their statement of claim in this proceeding against Christina Chiang once default judgment is obtained against her in the California action. Once this occurs the plaintiffs intend to amend their claim to enforce the California judgment against Christina Chiang. The plaintiffs intend to further amend their claim to seek all relief currently claimed against Christina Chiang in paragraph 1 of their claim in the alternative, only if the Ontario court does not enforce the California judgment for whatever reason. The plaintiffs are prepared to provide an undertaking to the court to this effect if so requested by the court.
[462] Mr. Hui testified in this proceeding that he did not understand the legal maneuvering described in the affidavit; he said that he left that to counsel for the plaintiffs.
[463] Christina Chiang's injunction motion was argued and decided on May 7, 2003. On that day, Justice Farley made an order varying his outstanding Mareva injunction to permit Christina Chiang's counsel in Ontario to withdraw (US)$10,000 to pay California counsel. Justice Farley also permitted the plaintiff, Korea Data Systems (USA) Inc., to proceed to enter judgment against Christina Chiang in California. Finally, Justice Farley adjourned Christina Chiang's injunction motion.
[464] On March 16, 2004, the plaintiffs obtained default judgment against Christina Chiang in California. The default judgment was successfully appealed to the Court of Appeal of the State of California. On February 21, 2006, the Court of Appeal sent the matter back to the trial judge to explain the factual and legal basis for his default judgment damage award against Christina Chiang and others. On October 5, 2006, the trial judge explained his default judgment damage award and His Honour's reasons were deemed sufficient by the Court of Appeal of the State of California on March 14, 2008.
[465] Accordingly, on March 14, 2008, there was no doubt that the plaintiffs had a final judgment against Christina Chiang in California. This judgment exceeded $6 million.
[466] Instead of amending its claim in this proceeding, as Mr. Hui had set out in his affidavit, the plaintiffs commenced a separate action against Christina Chiang to enforce the California judgment and, on December 4, 2006, the plaintiffs obtained default judgment enforcing the California judgment.
[467] Despite Mr. Hui's affidavit and despite obtaining an order of this Court enforcing the judgment of the California Superior Court, the plaintiffs continued with this action. In their closing submissions in this matter, the plaintiffs stated that they were not seeking damages for anything occurring prior to August 26, 2004. This is perhaps an appropriate place to note that there is some confusion around this date. Counsel for Christina Chiang indicated in her opening, without objection from counsel for the plaintiffs, that the plaintiffs were not seeking judgment for anything that occurred before May 20, 2004. Counsel for Christina Chiang took the position that the appropriate date should be October 5, 2006, i.e., the date that the trial judge in California explained his default judgment damages award. In any event, all of this is quite different from the representation made to Justice Farley by Mr. Hui in his affidavit of April 16, 2003.
Christina Chiang's evidence generally
[468] Christina Chiang admitted that she has, in the past, given untruthful evidence. Accordingly, her evidence in this case must be approached with caution. It is dangerous to accept Christina Chiang's evidence unless it is confirmed by independent evidence.
[469] Christina Chiang testified that she is compelled to take money from her husband because she has no other source of income. Ms. Chiang testified that, on occasion, she asked her husband where his money was coming from and that he told her that he was handling their financial problems and that she should not worry about it. She said that, beyond that, her husband was not forthcoming with any details. Christina Chiang's evidence in this regard is entirely consistent with the approach that Jay Chiang, Julius Chiang and Y. C. Chiang took with other family members, specifically Chen Cheng-Yueh Tsai, En Fu Chiang and Chun Chun Wu. I accept this aspect of Christina Chiang's evidence. This has some significance in terms of the conspiracy action. I am not satisfied that Christina Chiang was generally provided with information by Jay Chiang. I am satisfied that she was given instructions and carried them out because she looked to her husband to take care of the financial affairs of their family.
[470] Christina Chiang agreed that she knew that her husband was being sued by Korea Data Systems (USA) Inc. in 1993.
[471] Christina Chiang has become more proficient in English over the years. It is important to remember that, in the early 90’s, she was much less familiar with English language and less able to understand its written form.
Particular transactions carried out by Christina Chiang
$575,000
[472] The plaintiffs suggested, in their closing submissions, that an adverse inference should be drawn from the fact that Christina Chiang failed to disclose what happened to this money from the time she transferred it from her account in Singapore shortly after Judge Farley issued a Mareva injunction against her and her husband.
[473] As indicated, when I gave my decision dealing with Christina Chiang’s compliance with the Undertakings given to Justice Farley at the time of the Consent Contempt Order, these funds have been accounted for.
[474] On the date the Mareva injunction was served, September 25, 2000, Christina Chiang flew to Singapore and transferred $575,000 to an account at the Bank of Taiwan in the name of her mother, Ms. Tsai. The account number was 006-007-077-276. By the time Christina Chiang gave Undertakings 1 and 10 to Justice Farley, this money was in an account at the United World of Chinese Commercial Bank.
[475] Christina Chiang caused this money to be transferred in compliance with Undertaking 1 to the trust account of Gambin RDQ on May 24, 2005.
[476] Christina Chiang, pursuant to Undertaking 10 which she gave to Justice Farley, accounted for this money by producing records tracing the money. Specifically, she produced the incoming wire, dated December 27, 2000, from the Bank of Taiwan, a passbook for the Chung Hwa bank account number 007-8 003, dated September 27, 2000, documents from the United World Chinese Commercial Bank showing transactions from October 1, 2000 to November 1, 2000 and, finally, transaction records from the United World of Chinese Commercial Bank from 2000.
[477] As indicated in my earlier ruling, I am satisfied that Christina Chiang accounted for this money and fulfilled Undertaking 10 in that regard. These funds were used to pay living and other expenses of Jay Chiang and Christina Chiang in accordance with an order of this Court consented to by the plaintiffs. Mr. Mendlowitz acknowledged that the plaintiffs were not entitled to judgment for this sum.
$161,417.41
[478] The day after the Mareva injunction, this matter was served on Christina Chiang and this sum of money was withdrawn by her mother from Christina Chiang's account at the Bank of Taiwan. These funds were deposited in the trust account of Gambin RDQ pursuant to the order of Justice Farley, dated June 26, 2003. This transfer carried out an Undertaking which Christina Chiang had given to Justice Farley. These funds were used to pay living and other expenses of Jay Chiang and Christina Chiang in accordance with an order of this Court consented to by the plaintiffs. Mr. Mendlowitz acknowledged that the plaintiffs were not entitled to judgment for this sum.
The 1996 Porsche
[479] She confirmed that, in 1996, she paid for a motor vehicle, a Porsche, by signing a cheque for $40,000. It was Christine Chiang's evidence that she signed this cheque because her husband asked her to sign it. I accept Christina Chiang's evidence in this regard. The conduct and control which she attributes to her husband is entirely consistent with the way Chen Cheng-Yueh Tsai, En Fu Chiang and Chun Chun Wu were treated by Jay Chiang and his father.
The transfer of $200,000 in 1995
[480] Christina Chiang agreed that some transfers were made with the intention of keeping her assets and her husband's assets out of the hands of Korea Data Systems (USA) Inc. Specifically, she identified a $200,000 transfer in early 1995 as having been entered into for this purpose.
The 1999 mortgage of 10 Cortina Court
[481] Christina Chiang identified her signature on the mortgage of $442,000 that she placed on the Chiang family home at 10 Cortina Court in 1999. She agreed that she wired this money to Dave Cheng, which was an alias for Y. C. Chiang. Christina Chiang indicated that she used the alias at the request of Y. C. Chiang.
[482] Christina Chiang admitted that she gave untruthful evidence concerning this transaction at an examination pursuant to the provisions of the BIA on November 9, 1999. She testified that, at the time, she lied because she was afraid she would lose her house and that her children would not have a place to live.
[483] I accept Christina Chiang's evidence that she was told to use the alias, Dave Cheng, by Y. C. Chiang; there is no reason to believe that Christina Chiang invented this pseudonym. I also accept her evidence concerning her motivation, which seems reasonable given the fact that Korea Data Systems (USA) Inc. was pursuing her in California for millions of dollars and that Jay Chiang had foolishly decided to ignore the California proceedings.
[484] Christina Chiang also indicated that there was a mortgage in favour of Dong Liang on the 10 Cortina Court property and that she had no dealings with this person and knew no one by that name.
The October 12, 1999 transfer of $85,000
[485] Christina Chiang also admitted that, on October 12, 1999, she transferred $85,000 from a bank account in her mother's name at the Toronto-Dominion Bank to Y. C. Chiang's account in Taiwan. She testified that she did this on the instructions of Jay Chiang.
[486] I accept Christina Chiang's evidence in this regard; it is quite clear that Jay Chiang orchestrated the transactions in which she participated. I am satisfied that Jay Chiang did so to hinder the plaintiffs’ collection efforts and that Christina Chiang knowingly assisted him.
The October 19, 1999 transfer of $18,000
[487] Christina Chiang also admitted that she transferred $18,000 to Dave Cheng from her mother's account at the Hong Kong Bank of Canada on October 19, 1999.
[488] I am satisfied that Christina Chiang entered into these transactions for the purpose of frustrating Korea Data Systems (USA) Inc.'s attempts to realize on its judgment against Jay Chiang.
The February 14, 2000 transfer of $340,000
[489] Christina Chiang transferred $340,000 from a Singapore bank account on February 14, 2000 to Yu Chen Chiang, who, Christina Chiang acknowledged, was her father-in-law, Y. C. Chiang. Christina Chiang admitted that she made this transfer because her husband asked her to and that she thought he was doing it to protect his assets from Korea Data Systems (USA) Inc. Christina Chiang explained that the money in this account was not hers; it belonged to her husband.
Bank accounts in the name of Chen Cheng-Yueh Tsai at the HSBC and the TD Bank
[490] Christina Chiang agreed that the accounts opened in her mother’s name were opened so that her husband could move money without any records associating his name with the accounts transferring or receiving the money. She agreed that this was done for to protect her husband's assets by putting the assets in the name of her mother. Christina Chiang acknowledged, for example, that a $200,000 transfer on February 27, 1995 from one of these accounts to an account in her husband's name in Hong Kong was done for the purpose of keeping the $200,000 out of the hands of Korea Data Systems (USA) Inc.
TD bank account in the name of 1204360 Ontario Inc.
[491] The incorporating law firm for this company was Miller Thompson, which was the law firm repeatedly retained by Jay Chiang. Documentary evidence suggests that the company was incorporated in October 1996, and that Christina Chiang is its director and officer.
[492] Christina Chiang testified that she was asked by her husband to incorporate a numbered company. Christina Chiang testified that she did what her husband told her to do because he was her husband and because she trusted his judgment. She said that she did not know whether she was a director or officer of the company. Ms. Chiang testified that she did not make business decisions for this company. She testified that she did not know what the business of the company was. Christina Chiang testified, that if the company needed money, that was a matter that her husband would have looked after.
[493] In the 2007 finding of Christina Chiang in contempt of this court, it was determined that Jay Chiang had, since 1996, been operating several businesses in the telecom industry. The first such investment was made by this company in Telepower International (Canada) Inc. It also appears that this company issued the cheque for a Porsche motor vehicle acquired by Jay Chiang for his own use in October 1996.
[494] In the California fraudulent conveyance action that resulted in a $6 million judgment against Christina Chiang, reference was specifically made to fraudulent transfers involving this company in the amount of $68,000.
[495] I accept Christina Chiang's evidence in this regard. There is no evidence to suggest that Christina Chiang ever took the initiative to establish a corporation to do anything. I am satisfied that Christina Chiang was not involved personally with the transactions carried out by this company.
The Montrose property
[496] On September 19, 1994, Christina signed as a witness to what purported to be her mother’s signature as the owner of this property. Christina Chiang's mother did not own the Montrose property and knew nothing about it.
[497] Christina Chiang testified, and I accept her evidence, that she was asked to sign this document by Jay Chiang and did so. Christina Chiang testified that her husband told her that they were selling the property to Chun Chun Wu and that is why she had to sign. Of course, the sale to Chun Chun Wu was a sham. As indicated elsewhere in these reasons, it was entirely consistent with Jay Chiang's method of operation that he either told people used in transactions to hide money or assets as little as possible or provided them with information that was false.
The payments from Paul Kelley
[498] Christina Chiang received seven payments from a company called Asia First Financial in late 2006 and 2007. She said that Jay Chiang had given her the cheques and told her to deposit them in the bank because he did not have a bank account. These payments were $5000 each and they were deposited in Christina Chiang's Bank of Montreal bank account.
[499] Christina Chiang testified that she thought these were payments from Paul Kelley to her husband. She testified that they used the Bank of Montreal bank account because that was the only bank account the courts permitted them to use. She said she either withdrew the money for family expenses or for Jay Chiang personally. Christina Chiang testified that the manager at the Bank of Montreal branch eventually asked her to close this bank account because too much bank staff time was required providing information as a result of a court order concerning this bank account.
[500] The context for the receipt of these cheques was provided by Paul Kelley. Mr. Kelley indicated, on cross-examination in an earlier proceeding before me, that before he entered into any arrangement to pay Jay Chiang, he discussed the matter with counsel for the plaintiffs. It was Mr. Kelley's evidence that Jay Chiang had told him that his (i.e., Jay Chiang's) legal difficulties precluded him (i.e., Jay Chiang) from receiving compensation. Mr. Kelley indicated that he advised counsel for the plaintiffs of his intention to enter into an arrangement with Jay Chiang and that, after his telephone call with counsel for the plaintiffs, he informed Jay Chiang that it was now permissible for them to have a financial arrangement. It was in this context that Christina Chiang received the seven cheques. I indicated in the earlier proceeding that I found Mr. Kelley to be a credible witness.
[501] The receipt, deposit and disbursement of the funds represented by the cheques from Paul Kelley do not support an adverse inference against Christina Chiang in this matter.
The Lexus SUV lease November 2005
[502] Christina Chiang testified that, in November 2005, she signed this lease agreement on her husband's instructions. Apparently, Jay Chiang had no credit rating and asked her to put the lease in her name. Christina Chiang testified that her husband selected the car and asked her to sign the lease. Both Christina Chiang and Jay Chiang drove this car. Jay Chiang drove the car when he was working; Christina Chiang used the car to drive her children to school. Christina Chiang testified that she believed that Jay Chiang was doing work for Paul Kelley at this time, although it appears that Jay Chiang's employment with Paul Kelley was months after the lease was signed.
[503] Approximately $21,000 was required at the time the lease agreement was signed. Christina Chiang testified that her husband provided this money in cash. Christina Chiang testified that she did not ask her husband where he got this money and that he did not tell her.
[504] Christina Chiang acknowledged that she gave untruthful evidence concerning the leasing of this vehicle at an examination under oath in September 2006. Specifically, she indicated that Mr. Chiang's aunt chose the vehicle and paid for it.
[505] It is the plaintiffs’ position that the cash for this lease came from a withdrawal from the Winner International Group Limited HSBC account. It is not suggested that Christina Chiang made this withdrawal. The plaintiffs rely on the fact that Christina Chiang lied