CITATION: Zhou et al v. Chen et al, 2026 ONSC 4712
COURT FILE NO.: CV-25-00741704-00CL
DATE: 20260814
SUPERIOR COURT OF JUSTICE – ONTARIO
(COMMERCIAL LIST)
RE: Fan Zhou, 3888 Investment Group Inc., and Visionary Holdings Inc., Plaintiffs
and
Zhong Chen, Donald M. Kealey, Simon L. Tang, Charles Youngjun Fu, Jie Luo, and Xiaofeng Wang, Defendants
BEFORE: Justice J. Dietrich
COUNSEL: Hugh Scher, for Fan Zhou and 3888 Investment Group Inc.
Sara Erskine, Teresa Cheung, for Charles Youngjun Fu, Donald M. Kealey, Simon L. Tang, and Jie Lou
HEARD: August 10, 2026
REASONS FOR DECISION
Introduction
[1] In reasons for decision dated November 5, 2025, Zhou et al v. Chen et al, 2025 ONSC 6218, I found the plaintiff, Ms. Fan Zhou, in contempt of Steele J.’s order made in these proceedings dated June 19, 2025.
[2] This decision follows submissions on the penalty phase of the contempt hearing. The issue before me is the appropriate penalty for Ms. Zhou's contempt, considering whether she has purged her contempt and the presence of other alleged aggravating and mitigating factors.
[3] On April 14, 2026, as a term of the adjournment of a previously scheduled hearing of this matter, I ordered that Ms. Zhou be removed as a director of Visionary Holdings Inc. (“VHI”) and that she not act as the Board’s Chief Advisor and Corporate Culture Mentor.
[4] For the reasons set out below, I find as a penalty for Ms. Zhou’s contempt the terms of the April 14, 2026 adjournment are to remain in place and Ms. Zhou is to bear the costs of this phase of the contempt proceedings, which the parties agree should be set at $20,000 (including HST).
Background
[5] The background to these proceedings is set out in my decision of November 5, 2026. Only a brief summary of the decision is provided here for context.
[6] The underling dispute in the litigation centers around a company, VHI. VHI is an Ontario corporation, publicly traded on the NASDAQ.
[7] The defendants, Donald M. Kealey, Simon L. Tang, Charles Youngjun Fu, and Jie Luo (together, the “Moving Parties”) are four members of the board of directors of VHI. Mr. Zhong Chen was previously one of the Moving Parties, but has since passed away.
Steele J.’s June 19 Order
[8] The June 19 order arose in the context of a motion for interim relief in the underlying proceeding. The motion for interim relief before Steele J. centered around two issues: (a) the rightful board of directors of VHI; and (b) whether there is a prima facie case that Ms. Zhou engaged in fraud and/or oppressive conduct in breach of her fiduciary duties owed to VHI, such that an order directing an investigation was appropriate. At that time, the Moving Parties also sought an order that restrained Ms. Zhou from participating directly or indirectly in the management of VHI pending further court order.
[9] Justice Steele found that the board of directors of VHI, as it existed on March 25, 2025, constituted the lawful board of directors of VHI until further court order. Additionally, Steele J. found that both a March 26, 2025 directors’ meeting (attempting to remove Ms. Zhou as a director) and an April 4, 2025 shareholders’ meeting (attempting to remove specific members of the Moving Parties as directors) were a nullity. Finally, Steele J. found that there was prima facie evidence of serious misconduct on the part of Ms. Zhou and that an investigation was in the best interest of VHI.
[10] The June 19 order contained the following paragraphs:
THIS COURT ORDERS that the Board of Directors of VHI as it existed on March 25, 2025 shall constitute the lawful Board of Directors until further court order;
THIS COURT ORDERS that Fan Zhou is restrained from participating directly or indirectly in the management of VHI pending further court order;
THIS COURT ORDERS that 3888 Investment Group Limited is restrained from taking action to remove the Defendants as directors of VHI pending further court order;…
The Contempt Decision
[11] The Moving Parties raised numerous allegations of contempt, including repeated notices sent by Ms. Zhou calling board meetings. However, in oral submissions at the contempt hearing, counsel for the Moving Parties relied on three specific actions to ground their position of contempt:
a. on July 1, 2025, Ms. Zhou communicated with the SEC (the “July 1 Letter”) on behalf of VHI as “Chairperson of the Board of Directors of Visionary Holding Inc.” and asked the SEC to communicate directly with her;
b. on July 14, 2025, Ms. Zhou also wrote to Steven Schuster (the “July 14 Correspondence”), VHI's US counsel handling SEC communications, purporting to relieve him of his duties as securities counsel for VHI; and,
c. the shares of 3888 Investment Group Limited (“3888”), the largest shareholder of VHI, were voted by Ms. Wu (Ms. Zhou's daughter) to expand the board of directors.
[12] At the contempt hearing, Ms. Zhou defended her actions, in large part, on the basis that they were in accordance with her role as director of VHI and that she was not participating directly or indirectly in the management of the company.
[13] In the contempt decision, I found that the July 1 Letter and the July 14 Correspondence amounted to Ms. Zhou participating directly or indirectly in the management of VHI, contrary to paragraph 4 of the June 19 order. However, I declined to find 3888 or Ms. Wu in contempt of the June 19 order.
Events Following the Contempt Decision
[14] On December 9, 2025, I released an endorsement fixing costs of the initial contempt hearing at $45,000, payable by Ms. Zhou within 30 days. I understand from submissions of counsel that those amounts have not yet been paid, but that they will be paid forthright.
[15] Following my decision on November 5, 2025, a number of attendances took place. Final submissions on the penalty phase of the contempt proceeding were heard on August 10, 2026. The delay in hearing the penalty submissions was in part related to Ms. Zhou changing counsel.
[16] However, the delay also arose because Ms. Zhou failed to attend the originally scheduled hearing of April 14, 2026. Late on April 13, 2026, Ms. Zhou provided an affidavit to the Court indicating that she was traveling to Hong Kong to visit a seriously ill uncle in China. On April 14, 2026, as a term of the adjournment of the penalty phase, I ordered that Ms. Zhou be removed as a director of VHI and that she not act as the board's Chief Advisor and Corporate Culture Mentor.
Submissions on the Appropriate Penalty
[17] The Moving Parties submit that the appropriate penalty for Ms. Zhou is a period of 20 days of incarceration. In support of those submissions, the Moving Parties submitted affidavits of Donald M. Kealey sworn March 6, 2026 and March 31, 2026.
[18] Ms. Zhou swore an affidavit on March 25, 2026 in response to Mr. Kealey's affidavit of March 6, 2026. Ms. Zhou also swore affidavits dated April 7, 2026 and May 26, 2026. Moreover, Ms. Zhou submitted affidavits of Yanhui Jia (Chief Executive Officer of 3888) sworn April 7, 2025 and March 24, 2026; Zhaohui Tang (former board secretary of VHI) sworn April 7, 2026; William Chai (a director of VHI) sworn March 25, 2026 and April 8, 2026; Sheulan (Katy) Liu (Chief Financial Officer of VHI) sworn March 24, 2026; and Yan Xu (a minority shareholder of VHI) sworn March 25, 2026 and April 7, 2026.
[19] Ms. Zhou, Mr. Chai, and Ms. Liu attended on June 26, 2026 before this Court for cross-examination on their affidavits noted above.
Analysis
[20] As set out in Business Development Bank of Canada v. Cavalon Inc., 2017 ONCA 663, 416 D.L.R. (4th) 269 [“Cavalon”], at para. 74, the Court has wide discretion at the penalty phase of a contempt hearing. Rule 60.11(5) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 (the “Rules”) provides:
(5) In disposing of a motion under subrule (1), the judge may make such order as is just, and where a finding of contempt is made, the judge may order that the person in contempt,
(a) be imprisoned for such period and on such terms as are just;
(b) be imprisoned if the person fails to comply with a term of the order;
(c) pay a fine;
(d) do or refrain from doing an act;
(e) pay such costs as are just; and
(f) comply with any other order that the judge considers necessary,
and may grant leave to issue a writ of sequestration under rule 60.09 against the person’s property.
[21] Courts have also recognized that acts of civil contempt, like criminal contempt, undermine the authority of the courts and diminish respect for the law: see Cavalon, at para. 78. As noted in para. 80 of Cavalon, relying on Boily v. Carleton Condominium Corp. 145, 2014 ONCA 574, 121 O.R. (3d) 670 [“Boily”], 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 the courts.” Punishment of the contemnor is a secondary objective: see Cavalon, at para. 81 and the cases referenced therein.
[22] In civil contempt cases, incarceration is rare and ordinarily such sanction is a last resort: see Cavalon, at para. 82, relying on Korea Data Systems Co. v. Chiang, 2009 ONCA 3, 93 O.R. (3d) 483 [“Chiang”], at para. 90. Additionally, the period between a finding of contempt and the penalty hearing gives the contemnor an opportunity to purge his or her contempt, which is a significant mitigating factor with respect to the penalty imposed: see Cavalon, at para. 86. Serious violations of court orders, even if only one order or one instance, may merit jail time. However, “because incarceration is ordinarily a penalty of last resort, the court must also consider whether any other penalty short of incarceration would be a sufficient sanction for the gravity of the contempt, taking into consideration the sentencing principles applicable to civil contempt.” See Cavalon, at para. 89.
[23] The factors relevant to a determination of an appropriate sentence for civil contempt were set out by Epstein J.A. in Boily, at para. 90. The factors can be summarized as follows (references omitted):
a. the proportionality of the sentence to the wrongdoing—a sentence must be proportionate to the gravity of the offence and the degree of responsibility of the offender;
b. the presence of aggravating and mitigating factors;
c. 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;
d. the similarity of sentences in like circumstances; and,
e. the reasonableness of a fine or incarceration.
[24] Ms. Zhou must demonstrate that she has purged her contempt on a balance of probabilities standard of proof. The same standard applies with respect to mitigating factors. See Chiang, at paras. 50-52. However, the parties agree that the Moving Parties must establish any aggravating factors beyond a reasonable doubt.
[25] The Moving Parties argue that 20 days of incarceration is the appropriate penalty for Ms. Zhou’s contempt. They believe 20 days of incarceration is appropriate because Ms. Zhou has not purged her contempt and that the following actions of Ms. Zhou amount to aggravating factors:
a. taking certain actions in her role as director of VHI, including convening a board meeting on October 29, 2026 and voting at a board meeting on January 26, 2026 to approve a Form 20-F Annual Report for SEC filing purposes;
b. sending an email dated January 26, 2026 to Charles Fu, threatening certain legal consequences by VHI and personal costs if he did not cease and desist in filing an amended Form 20-F in the SEC's EDGAR portal; and,
c. causing 3888 to vote its shares and otherwise controlling that entity.
[26] Ms. Zhou submits that many of the actions the Moving Parties take issue with were actions she took as director of VHI. She argues that these actions did not involve directly or indirectly managing the company. However, the January 26, 2026 correspondence to Mr. Fu is problematic. It states, in part:
Based on the above facts, I make the following final and non-negotiable demands: immediately cease all unlawful activities related to this false report, destroy the false 20-F report and all modified drafts (including but not limited to electronic files, paper documents, and backup media), and refrain from contacting, disseminating, or attempting to disclose any false information related to the Company's 2025 20-F report. You must not induce, coerce, or bribe any third parties to cooperate with your illegal acts, and must immediately terminate any non-compliant communications with related parties.
If you ignore this warning and attempt illegal disclosure, I will immediately coordinate with the Company's management to initiate comprehensive legal protection measures, submitting a complete and irrefutable chain of evidence to the SEC and U.S. judicial authorities (including alteration trace verification, communication records, document evidence, etc.), pursuing all criminal and civil liability, and simultaneously applying for market bans, asset preservation, travel restrictions, and other compulsory measures. Any actions harming the Company or investors’ lawful rights will not be tolerated. [Emphasis added.]
[27] On February 1, 2026, less than a week following Ms. Zhou’s email to Mr. Fu, Ms. Zhou sent emails to the SEC and Mr. Schuster withdrawing and apologizing for the July 1 Letter and the July 14 Correspondence (both of which formed the basis of the original contempt finding). Ms. Zhou relies on these emails as evidence of purging her contempt.
[28] In the emails, Ms. Zhou withdraws and apologizes for her previous correspondence. However, the Moving Parties submit that her retractions are not genuine because both emails were sent several months after the contempt finding, rather than immediately after.
[29] Ms. Zhou takes the position that there was confusion regarding what she could lawfully do as a director of VHI versus what amounted to directly or indirectly managing VHI (thereby breaching Steele J.’s order). Ms. Zhou explained in February 1, 2026 retraction emails that her previous emails were a result of a misunderstanding of Steele J.’s order and the fact that English is not her native language. Regardless of whether the confusion expressed by Ms. Zhou is genuine, her removal from the VHI board pursuant to my order on April 13, 2026 puts an end to these concerns.
[30] The Moving Parties also allege that Ms. Zhou attempted to file Form 20-F in the SEC’s EDGAR portal without Mr. Kealey’s consent, contrary to an order made by Steele J. on January 22, 2026. To effect the filing, Mr. Kealey alleges that Ms. Zhou, either directly or indirectly (through directing Ms. Liu), impersonated him to create a fake VHI email account in his name. Ms. Zhou denies this. Moreover, Ms. Liu swore an affidavit in support of Ms. Zhou, denying that she received instructions from Ms. Zhou to impersonate Mr. Kealey. Ms. Liu maintained this position on cross-examination. The Moving Parties admit that there is no clear, cogent, or convincing evidence as to who filed Form 20-F in contravention of Steele J.’s order. Accordingly, I am not prepared on the evidence before me to draw an inference that the fake email account was made, directly or indirectly, by Ms. Zhou.
[31] Finally, the Moving Parties argue that Ms. Zhou is the controlling mind of 3888. However, other than Mr. Kealey's belief that this is the case, the record before me does not contain any evidence to support this allegation as fact. As such, I am not prepared to impute the actions of 3888 to Ms. Zhou for the purposes of this hearing.
[32] Taking into account the factors set out above, I am not persuaded that incarceration is an appropriate remedy in this case. This is the first finding of contempt by Ms. Zhou. She took steps to purge her contempt as set out in the February 1, 2026 emails to the SEC and Mr. Schuster. Although the emails do provide a purported explanation by Ms. Zhou of her actions, they also set out a clear withdrawal and apology.
[33] That said, I am concerned that Ms. Zhou’s January 26, 2026 correspondence amounted to actively participating in the management of VHI. However, the primary purpose of a penalty in a contempt hearing is to encourage compliance with a court order. In this case, compliance with Steele J.’s June 19 order is best encouraged by maintaining Ms. Zhou’s removal as a member of the board of directors of VHI, not by incarceration.
Disposition
[34] For the reasons set out above, I find as a penalty for Ms. Zhou’s contempt: the terms of the April 14, 2026 adjournment are to remain in place and Ms. Zhou is to bear the costs of this phase of the contempt proceedings which, as agreed by the parties are set at $20,000 (including HST).
The Honourable Justice J. Dietrich
Date: August 14, 2026