Court File and Parties
COURT FILE NO.: BK-21-02772656-0031 and BK-22-02759464-0031
DATE: 20220922
ONTARIO
SUPERIOR COURT OF JUSTICE
(COMMERCIAL LIST)
B E T W E E N:
Duong/1896088 Ontario Inc.
Randy Schliemann, for the Trustee – Kunjar Sharma & Associates
HEARD: September 22, 2022
ENDORSEMENT
osborne j.
- These two related motions are returnable today. In each motion, the Trustee, Moving Party, seeks an order declaring Yen Thi Duong (“Duong”) to be in contempt of court and ordering her to appear for an examination pursuant to section 163(1) of the Bankruptcy and Insolvency Act within 30 days of this order, failing which a warrant of committal be issued for Duong’s arrest and she be detained for two days. In the alternative, the Trustee seeks a warrant to compel her attendance pursuant to Rule 60.11(4).
Background and Procedural History
The first proceeding is the bankruptcy of Duong, Ct. File No. 31-OR-2772656. The second proceeding is the bankruptcy of 1896088 Ontario Inc., (“189”), a company of which Duong is the sole director and officer, Ct. File No. 31-OR-2759464.
Each of Duong and her company, 189, filed an assignment in bankruptcy; Duong on October 27, 2021, and 189 on August 17, 2021.
The Bank of Montréal (‘BMO”) is a creditor of both Duong and 189. It requested, having been authorized by resolution of inspectors, that the Trustee appointed in both bankruptcy proceedings conduct an examination of Duong in her personal capacity in the first proceeding and in her capacity as the sole director and officer of 189 in the second proceeding, pursuant to section 163(1) of the BIA.
BMO filed a draft Statement of Claim in support of its Proof of Claim filed in each proceeding. It alleges that Duong obtained funds from the bank by false pretenses or fraudulent misrepresentation. It seeks, pursuant to section 178(1)(e) of the BIA, a mandatory order compelling Duong to deliver an accounting of all monies received from the bank, a tracing order, and punitive damages.
The bank alleges that Duong provided to it a falsified invoice for equipment in order to induce the bank to grant to 189 a $350,000 loan under the Canada Small Business Financing Act.
The bank takes the position that 189 and/or Duong never purchased the equipment set out in the invoice presented by Duong to the bank, and that 189 and/or Duong never opened or operated the skincare clinic for which they obtained a loan under the CSBFA for $350,000.
BMO and the Trustee made numerous attempts to schedule and conduct the s.163 examinations without success.
On January 25, 2022, Associate Justice Jean made an order in the Duong bankruptcy proceeding compelling the attendance of Duong for the examination.
On February 8, 2022, Associate Justice Ilchenko made an order in the 189 bankruptcy proceeding compelling the attendance of Duong on behalf of 189.
These two motions came before me on August 9, 2022. On that date, I adjourned the motions to permit the Trustee an opportunity to file further materials given my concerns with respect to service as reflected in my Endorsement issued on that date.
Duong had been served with the Motion Records by electronic mail only. Personal service to the physical address as ordered by Associate Justice Jean was attempted but had been unsuccessful. Duong simply failed to respond.
However, there was no evidence in the record on that date on which I could conclude to the requisite standard that the email address through which service was made was in fact that of Duong. The lengthy chronology of the repeated attempts at service is set out in my Endorsement of that date.
The Trustee advised the Court that additional evidence with respect to attempts at service may be available, with the result that I adjourned the motions to permit that material to be filed.
These two motions came before me again on August 22, 2022 for a scheduling appointment to schedule the return of these motions at the request of the Trustee. Again, neither Duong nor anyone on her behalf appeared, and yet again, she had simply failed to respond whatsoever.
I adjourned the motions to today’s date and scheduled them to proceed, in person at the Court House. I directed the Trustee to serve my Endorsement as well as the motion materials at both the email address and the two physical addresses that the Trustee had for the Respondent. That was done.
Today, counsel for the Trustee was present in Court. Ms. Duong did not appear and neither she nor counsel on her behalf has contacted the Trustee or its counsel. A court reporter was present.
I must therefore consider the first stage of the contempt matter.
The Supreme Court of Canada has set out a three-part test to ground a finding for civil contempt:
(a) the order alleged to have been breached must state clearly and unequivocally what should and should not be done;
(b) the party alleged to have breached the order must have had actual knowledge of it; and
(c) the party allegedly and breach must have intentionally done the act the order prohibits or intentionally failed to do the act the order compels.
(See Carey v. Laiken, 2015 SCC 17 at paras. 17-35). The evidence must show the contempt beyond a reasonable doubt.
In this case, each of the January 25, 2022 order of Associate Justice Jean made in the Duong bankruptcy proceeding, and the February 8, 2022 order of Associate Justice Ilchenko made in the 189 bankruptcy proceeding, clearly and unequivocally compelled Duong to attend for an examination.
Each order sets out who is to attend [Duong], the date on which she was to attend, where the examination would take place [video conference] and sets out in detail what documents she was required to produce according to an attached schedule. The Notice of Examination served with the orders provided the Zoom Link for the examination.
The evidence in the chronology of these two proceedings also establishes clearly that Duong intentionally failed to do the act each order compels; i.e., attend for the examination in the bankruptcy proceeding. She has completely ignored these proceedings.
The issue when these matters were returnable previously was whether Duong had actual knowledge of the orders.
When the matter was before me on August 9, the Record reflected as noted above the lengthy and repeated efforts of the Trustee to serve Duong with the materials, including the two orders compelling her attendance on which these contempt motions are based.
The affidavit of service confirmed service of the motion materials by email on Duong to the email address on file with BMO and with the Trustee: bichyen6@hotmail.com.
I observed in my Endorsement of August 9 that the evidence was clear that service of the motion records, including the orders, had been made to this email address, and no “bounce” or automatically generated reply was received to confirm or even suggest that delivery of the message [and therefore the motion records] had failed or been unsuccessful.
However, there was no direct evidence in the Record before me on that date to confirm the validity of the email address for Duong or that she had actually received the motion records. There was no evidence that she had ever sent any message to the Trustee or its counsel from that address, or replied to any earlier message sent to that address.
Further as noted in my Endorsement of August 9, the motion record contained and still contains extensive evidence, largely in the Second Report of the Trustee in each of the two proceedings, setting out the extensive chronology relevant to a consideration of the attempts by the Trustee to conduct the s.163 examination of Duong in her personal capacity and on behalf of 189.
I further observed in my Endorsement of August 9 that as part of the lengthy chronology of attempts at service, Duong at one time had been represented by counsel. In fact, the examination at one point had been scheduled on consent through counsel to proceed in December, 2021.
However, less than two hours before it was set to begin, and as reflected in the Second Report, Duong’s counsel advised counsel for BMO that Duong had been ill the previous night with migraine headaches and vomiting, and believed she may have Covid, all with the result that she was unable to attend that day and the examinations would have to be rescheduled.
Duong, through counsel, provided to counsel for BMO a screenshot of what was said to be a Covid PCR test result dated December 17, 2021 [the day after the previously scheduled examinations]. However, the bank raised concerns about the validity of that certificate since it had been provided by a private testing facility that, according to its publicly available promotional and website materials, offered testing services only to asymptomatic individuals which cohort would not have included, at the relevant time, Duong, who by her counsel’s admission was indeed symptomatic.
It was that lengthy chronology that led the Trustee to obtain the two orders compelling the examination in respect of which the findings of contempt are now sought.
I have set out this chronology here because, notwithstanding that all of the above precedes the date of the two orders, Duong was clearly aware that the Trustee was attempting to schedule the examination in each proceeding.
The order of Associate Justice Jean dated January 25, 2022 directing Duong to attend for the examination in that proceeding directed that the Notice of Examination be served on her at 612-50 Lotherton Parkway, Toronto, by regular mail and email to the above-noted email address. The record is clear that service was effected in accordance with that order.
The order of Associate Justice Ilchenko made February 8, 2022 directing Duong to attend for the examination that proceeding did not, according to counsel, specify the manner of service to be effective. Personal service was attempted at the Lotherton Parkway address referred to above, and a second physical address at 25 Grove Tree Rd., Etobicoke, a previous known address of Duong although Duong had previously advised the bank that this address was no longer valid since she had disposed of that property. In any event, personal service was not effective at either location. However, service of this order also was made at the email address noted above.
Before me today, in addition to all of the motion materials referred to above as part of the Record including but not limited to the Second Report and all appendices thereto filed in each of the two proceedings, is a Supplementary Motion Record of the Trustee also filed in each of the two proceedings.
The two Supplementary Motion Records have been served on Duong at both physical addresses and the email address referred to above.
The affidavit of Gregory Judd, Licensed Insolvency Trustee with the offices of the Trustee in each proceeding sworn September 6, 2022, confirms again that he, as the Trustee with carriage of these matters, communicated with Duong by email at the above-noted address and messages were not returned as undeliverable. The telephone number provided at the time of the engagement signing by Duong is no longer in service.
However, additional evidence now in the Record [see Exhibit B] reflects that a driver’s licence search from the Ministry of Transportation dated August 22, 2022 confirms Duong’s current address as the Lotherton Parkway address referred to above.
Also in the Supplementary Motion Record in each proceeding is the affidavit of Candy Leung, account manager with BMO sworn September 6, 2022. Included as Exhibit A is a screenshot of the personal profile of Duong in the bank records containing the personal information provided, by her, to the bank and confirming the above-noted email address as her own.
Importantly, also included at Exhibit B and C is an email exchange between the bank and Duong in which Duong responded to an email sent to that address. Indeed, her reply includes in the email thread the message from the bank to her at that email address. Her reply states, in the English language: “sent from my iPhone” such that the affiant states her belief that Duong not only uses the above referenced email address, but also that she is able to receive and read emails through her iPhone which appears to be linked to that email address.
The Supreme Court of Canada stated in Carey that “it may be possible to infer knowledge in the circumstances, or an alleged contemnor may attract liability on the basis of the willful blindness doctrine. [See para. 34].
I have no difficulty in drawing the inference from the facts set out above that Duong has actual knowledge of the orders.
She was represented at one time by counsel who scheduled the examinations which the relevant orders compel Duong to attend. Duong cancelled those on the basis of illness the very day they were to proceed. Her counsel subsequently advised that he no longer acted for her.
Duong has been served, now multiple times, with the orders and relevant materials. She has been served via the email address that she has previously used and which she provided to the bank as part of her personal profile when the accounts were opened. She has also been served at the physical address she provided and which the MTO records confirm is a current address for her. Out of an abundance of caution, she has also been served at a prior address.
This Court has emphasized in earlier cases the importance of court orders and the importance in a free and democratic society like Canada, that citizens act pursuant to and under the rule of law. The deliberate failure to obey a court order strikes at the very heart of the administration of justice. As Justice Coming stated: “if the remedies a court directs to be put in place through its orders can be ignored with impunity, the road to civil anarchy is close at hand.” (See Sussex Group Ltd. v.3933938 Canada Inc., [2003] OJ 2906 at paras. 47-48.
Contempt findings may be appropriate where the orders clearly compel attendance for an examination and production of documents. (See Ting v. Borelli, 2020 ONSC 5976).
In all the circumstances, I am satisfied beyond any reasonable doubt that Ms. Duong, wilfully and without lawful excuse, breached both orders by failing to attend for the examination.
Today the Trustee seeks a warrant for committal imprisoning Duong for two days. I am not prepared to make that order today or until following the penalty hearing in this matter.
Duong shall have the opportunity to purge her contempt by immediately contacting counsel for the Trustee, agreeing to attend for the s. 163 examination in each bankruptcy proceeding and in fact attending to be examined within 30 days of this order. I will consider what efforts she has made, if any, to purge the contempt at the sentencing hearing.
In the circumstances, in my view it is appropriate to issue a warrant for Duong’s arrest pursuant to Rule 60.11(4) to bring her before the Court to participate in this hearing. I am of the opinion that her attendance at the hearing is necessary in the interest of justice and it appears that the person is not likely to attend voluntarily. This opinion is based on the facts set out above in this Endorsement.
Rule 60.11(4) provides for such a warrant to compel the person’s attendance at the hearing. This sub-rule can therefore have effect only at this stage of the proceeding, rather than following the penalty hearing. It is attendance at the penalty hearing itself for which a warrant pursuant to this sub-rule is specifically directed, and therefore the issuance of a warrant at this stage cannot be premature. [See, example, Cicada 137 LLC v. Andean Medjedovic, 2021 ONSC 8473, Estate of Allan Taylor, 2014 ONSC 3421 and Broze et al v. Toza, 2014 ONSC 3302).
The penalty hearing for both contempt matters shall proceed before me for one hour commencing at 10:00 AM on October 27, 2022 or such earlier time as Duong is apprehended pursuant to the warrant and brought before the Court as soon as possible thereafter.
I strongly urge Ms. Duong to retain counsel, and to purge her contempt before the penalty hearing as set out above.
The Trustee is entitled to its costs of the attendances on August 9, August 22 and today. They should be quantified at the penalty hearing.
Osborne J.
Released: September 22, 2022