Court File and Parties

COURT FILE NO.: CV-22-00687209-0000 DATE: 20240816

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

LI YANG (CANADA) HOLDINGS CO. LTD. and DANIEL EXECUTIVE (CANADA) HOLDINGS CORP. Plaintiffs – and – LYSR MANAGEMENT LTD., 2708042 ONTARIO INC., RINA SHINCHI, YANGGUANG LIN, ZI MU LI, RENXIANGYU ZHANG, LOCATION WAY INC., WEI ZHENG, JOHN DOE, JANE DOE and OTHER PERSONS UNKNOWN WHO HAVE CONSPIRED WITH THE NAMED DEFENDANTS Defendants

Counsel: Ford Wong, for the Plaintiffs

HEARD: August 16, 2024

papageorgiou j.

Decision Re Penalty for Contempt

Overview

[1] Civil fraud is a pressing societal issue that causes untold hardship to innocent parties. This proceeding is one such case.

[2] By way of background, this proceeding involves a complicated web of parties and transactions related to the purchase and sale of luxury vehicles. The Plaintiffs financed the purchase of these cars.

[3] On May 1, 2023, I had granted a Mareva injunction.

[4] Following the May 1 Mareva injunction Order, the parties attended on a number of occasions to address their living expenses as well as limitations to the May 1 Mareva injunction.

[5] On July 6, 2023, I made the following Order:

• Paragraph 8 directed that Mr. Lin provide information and supporting documentation as to the financing that is outstanding on certain vehicles set out in Mr. Lin’s affidavits sworn May 13, 2023, and May 23, 2023, be provided within 7 days.

[6] Despite giving Mr. Lin many opportunities to comply and many opportunities to appear and address this contempt motion, he failed to do so.

[7] On July 11, 2024, I found that Mr. Lin was in contempt of paragraph 8. I also awarded default judgment against Mr. Lin and others in excess of $4,000,000 in total.

[8] The Plaintiffs now seek a remedy for Mr. Lin’s contempt.

Decision

[9] For the reasons that follow, I find that the appropriate remedy is incarceration for a period of 30 days, as well as Orders that Mr. Lin may not take any further steps in this proceeding until he has paid various costs Orders set out below.

Analysis

Sentencing Principles for Civil Contempt

[10] Pursuant to r. 60.11 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, the court has a “broad discretion to fashion an appropriate remedy for contempt” and make any Order as is just, including Ordering imprisonment and payment of a fine.

[11] As the Court of Appeal stated in Boily v. Carleton Condominium Corporation 145, 2014 ONCA 574, 121 O.R. (3d) 670, at para. 79, “[t]he purpose of a penalty for civil contempt is to enforce compliance with a court Order and to ensure societal respect for courts. The remedy for civil contempt is designed not only to enforce the rights of a private party…but also to enforce the efficacy of the process of the court itself.”

[12] The most important objectives in determining the appropriate sentence for civil contempt are specific and general deterrence: Boily, at para 105; Business Development Bank of Canada v. Cavalon Inc., 2017 ONCA 663, 416 D.L.R. (4th) 269, at para. 91 (“BDC”).

[13] The secondary objective is punishment: BDC, at para. 81.

[14] As set out in BDC, the Court of Appeal has applied the following five-factor test for determining the appropriate sanction for civil contempt:

a) Presence of aggravating factors/mitigating factors. b) Proportionality of the sentence to the wrongdoing—the sentence must be proportionate to the gravity of the offence and the degree of responsibility of the offender. c) Similarity of sentence in like circumstance. d) Reasonableness of a fine or incarceration. e) Deterrence and denunciation—the sentence should denounce unlawful conduct, promote a sense of responsibility in the contemnor, and deter the contemnor and others from defying court Orders. BDC, at para. 90.

Aggravating Factors/Mitigating Factors

[15] The July 6, 2023 Order was made over a year ago and Mr. Lin has made no attempts to comply with it. The Plaintiffs have had to attend multiple times to seek compliance and overall Mr. Lin has been playing games in this proceeding, sometimes showing up, sometimes saying that he could not connect to the zoom link. He refuses to provide his address or whereabouts.

[16] The Plaintiffs first advised Mr. Lin that they would be seeking a contempt Order on August 11, 2023. This did not move him to comply. They then brought a contempt motion on November 24, 2023, and he did not even bother to attend. At that time, I made a declaration that Mr. Lin was in breach of paragraph 8 of the July 6 Order in accordance with Appellate direction, that before making a contempt finding, a judge consider other options such as issuing a declaration that the party breached an Order.

[17] I also directed that if Mr. Lin continued to fail to comply, the Plaintiffs could return to seek a contempt Order.

[18] Then, Mr. Lin continued his noncompliance. Counsel sought to schedule this motion during the week of March 28, 2024, but it was adjourned for a number of reasons including the absence of an interpreter, Mr. Lin’s counsel desire to be removed from the record as he could not obtain instructions, to allow for personal service on Mr. Lin, as well as because of Mr. Lin’s communication to the court that he was having connectivity issues. It was adjourned to July 8, 2024, in person to ensure Mr. Lin could attend. Mr. Lin again did not attend even though the matter was to be held in person for his benefit. Although given the opportunity to file materials, he did not.

[19] The Plaintiffs have incurred interpreter costs for two attendances when Mr. Lin said he required an interpreter but then did not attend anyway.

[20] To date, despite ample opportunity to provide the information required by paragraph 8 of my Order, the November 17, 2023 declaration that he was in breach, as well as my July 8, 2024 Order that found him in contempt, he has failed to purge his contempt.

[21] He did not even attend today. Although he has an email address he has refused to provide his whereabouts for more than a year.

[22] I am satisfied that there are aggravating circumstances. Mr. Lin has shown contempt for the court’s process as well as the Order and his conduct has caused the Plaintiffs to spend more money in legal costs.

Proportionality to the offence

[23] At first blush, it may appear that incarceration for Mr. Lin’s failure to provide the information on the vehicles is not significant. However, this failure is more significant than it seems. The Plaintiffs advanced significant funds to Mr. Lin on the basis that they would have security over the vehicles referenced.

[24] Because Mr. Lin has effectively “disappeared,” the Plaintiffs have been unable to recover any of the significant debt that he owes. The information that he failed to provide could have provided valuable information that would have permitted them to collect some of the outstanding debt. As such, this failure has frustrated their effort to recover his debt.

[25] I add that he is a flight risk because he is not a Canadian citizen.

[26] As such, I find that the remedy of incarceration is proportionate to his contempt.

Similarity of Sentence in Like Circumstances

[27] There are several similar cases where courts have awarded incarceration.

[28] Cellupica v. Di Giulio, 2010 ONSC 5839 at paras 1-2, 8-9, 12, 30, 49 (“Cellupica”) is a decision where default judgment was granted before contempt proceedings were heard. There, the Plaintiffs obtained a default judgment against the contemnor for $2.5 million based on a fraudulent investment scheme. The contemnor had failed to comply with Orders to provide certain evidence and to attend at an examination in aid of execution. He also, much like Lin in this matter, failed to attend the various returns of the contempt motion. The contemnor in Cellupica failed to purge his contempt in full, showed little remorse, and lied to the court. At the sentencing stage of the contempt motion, he was sentenced to the 90 days’ incarceration that the Plaintiffs sought, despite this being the first time that he was found in contempt.

[29] Justice Brown found that the contemnor “played a cat-and-mouse game with the Plaintiffs” for over a year to avoid disclosing financial information. His Honour reasoned:

“When a person, such as [the contemnor], exhibits a course of conduct showing disregard for the process established by our law, as aided by court Orders, to enable judgment creditors to secure legitimate information about the financial affairs of a judgment debtor, it is appropriate to impose a strong sanction on that person in Order to preserve the integrity of our legal process and court Orders, especially when set against the backdrop of a judgment debtor who essentially “took the money and ran”.”: at paras 15, 41

[30] In Dean Warren Enterprises Inc. v. 1628655 Ontario Inc., 2017 ONSC 5038, Justice Ferguson sentenced the contemnor to 60 days’ incarceration at a provincial correctional institute, while, at the same time, directing that a Form 60L Warrant of Committal issue against him. The contemnor was also a judgment debtor. Her Honour considered his conduct and weighed it against what the Order required of him as follows:

“[7] The amount of money Mr. Feeley took from the plaintiff was large. At the same time the tasks imposed upon him by the Order of this court were simple, to attend an examination in aid of execution and produce records of bank accounts etc. in his name. The simplicity of complying with the court Order, when assessed against the magnitude of the debt owed, point to the appropriateness of a significant penalty for breach of the court’s Orders.

[8] Consequently, in my view this is one of those cases in which it would be just to impose a period of incarceration on the contemnor even though it is his first offence. I do not consider the imposition of a fine to be appropriate. Mr. Feeley has not sought to set aside the judgment. Collection has been unsuccessful, although some money is being garnished. He has not tried to satisfy any portion of the $18,000.00 in costs awards on July 24, 2017. On the evidence before me there is no reasonable prospect that Mr. Feeley would pay a fine. Based on his conduct, I expect he would simply ignore it. ” [emphasis added]

[31] Similarly, in the case at bar, Mr. Lin has effectively stopped participating in the litigation for months, despite the seriousness of the allegations against him in this action and inherent in contempt proceedings. Any fine that may be imposed on him will probably go unpaid, as has been true of all of the costs awards and default judgment granted against him and the other Lin Defendants. He has largely ignored this process for approximately a year now, apart from his very selective and opportunely timed communications with the Court shortly before or after most of the recent appearances. Lin would mostly likely ignore any fine on him.

Reasonableness of a fine, house arrest community service or incarceration

[32] The court must consider a non-custodial sentence and must assess the reasonableness of a range of sanctions. In Law Society of Upper Canada v. Hatzitrifonos, 2018 ONSC 3719, Monahan J., as he was then, observed at para 8:

Because the primary purpose of imposing a penalty for civil contempt is to secure compliance with the relevant Order, incarceration is rare in civil cases. Ordinarily, a finding of contempt, together with a fine or some other appropriate Order is sufficient to gain compliance and restore the authority of the court. Incarceration is a sanction of last resort.

[33] In this case, Mr. Lin’s conduct in ignoring the court Orders and proceedings demonstrate that he would ignore a fine, just as he has ignored other court Orders and the judgment against him.

[34] In the circumstances, incarceration is reasonable because no other Order is likely to encourage compliance.

[35] The Plaintiffs have also requested a fine in the amount of $50,000. However, in my view, the incarceration is sufficient, and the reason for the incarceration is because of the unlikelihood that he will pay any fine.

Deterrence and Denunciation

[36] Court Orders are not suggestions, they are made to be obeyed.

[37] Mr. Lin has been found liable for fraud and conspiracy and owes damages in the amount of approximately $4,000,000.

[38] With respect to general and specific deterrence, in my view, incarceration is required because of the egregious nature of his conduct, and, again, his disrespect of the court and his ignoring these proceedings and Orders made against him.

[39] A fine that is sure to never be paid would not serve the interests of general or specific deterrence. It would simply demonstrate to the world at large that a party can defraud others, fail to obey court Orders that would assist the innocent party in recovering damages, and then disappear so that Orders cannot be enforced, and get away with it.

Costs

[40] The Plaintiffs request costs on a substantial indemnity basis which I award.

[41] The court has the discretion to award substantial indemnity costs, but such costs are “rare and exceptional” and only warranted where there has been reprehensible, scandalous or outrageous conduct on the part of a party: see DUCA Financial Services Credit Union Ltd. v. Bozzo, 2010 ONSC 4601, at para. 5; Foulis v. Robinson (1978), 21 O.R. (2d) 769 (C.A.); and most recently Mars Canada Inc. v. Bemco Cash & Carry Inc., 2018 ONCA 239, 140 O.R. (3d) 81, at para. 43.

[42] Ontario courts have established that costs on a motion for a finding of civil contempt are ordinarily awarded on a substantial indemnity basis. As noted by Goldstein J. in Astley v. Verdun, 2023 ONSC 6734 at paras 52-57, aff’d 2014 ONCA 668, the authorities in Ontario “lean to the view that costs should generally be awarded on a substantial indemnity basis in contempt matters” and “there is a rebuttable presumption that substantial indemnity costs are appropriate.”

[43] In all the circumstances, I find that Mr. Lin’s conduct is sufficiently reprehensible, scandalous and outrageous so as to justify a substantial indemnity costs award for all the reasons set out above. In summary, he has shown disrespect to the Court and the parties. He has caused the Plaintiffs to incur significant costs as a result of his cat and mouse game where he continually said he wanted to defend and file materials but never did and also positions he took regarding not being able to connect to zoom; he never bothered to attend when the matter was in person to accommodate him. He has wasted the court’s valuable and scarce resources through his conduct.

Conclusion

• Therefore, I make the following Orders:
• An Order that the Defendant, Yangguang Lin also known as Sony Lin, be imprisoned for 30 days
• An Order that a warrant of committal be issued against Lin;
• An Order that Lin shall not be permitted to take any further step in this action, until he has paid the Plaintiffs the following, for which the Lin Defendants are jointly and severally liable:
  • Costs in the amount of $60,000.00 and disbursements in the amount of $865.00, pursuant to the Order dated June 21, 2023, plus post-judgment interest at the rate of six percent (6.0%) per year, commencing on June 21, 2023;
  • Costs in the amount of $12,000, pursuant to the decision dated November 24, 2023 (addendum dated November 27, 2023), plus post-judgment interest at the rate of 5.3 percent (5.3%) per year, commencing on November 24, 2023;
  • Costs in the amount of $137,790.00, pursuant to the decision dated July 11, 2024, plus post-judgment interest at the rate of seven percent (7.0%) per year, commencing on July 11, 2024; and
  • Costs on a substantial indemnity basis for this contempt motion in the amount of $10,000 plus post-judgment at the Courts of Justice Act rate.

[44] Order to go as above.

Justice Papageorgiou

Released: August 16, 2024

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

LI YANG (CANADA) HOLDINGS CO. LTD. and DANIEL EXECUTIVE (CANADA) HOLDINGS CORP. Plaintiffs – and – LYSR MANAGEMENT LTD., 2708042 ONTARIO INC., RINA SHINCHI, YANGGUANG LIN, ZI MU LI, RENXIANGYU ZHANG, LOCATION WAY INC., WEI ZHENG, JOHN DOE, JANE DOE and OTHER PERSONS UNKNOWN WHO HAVE CONSPIRED WITH THE NAMED DEFENDANTS Defendants

REASONS FOR JUDGMENT Papageorgiou J. Released: August 16, 2024