Korea Data Systems (USA) v. Aamazing Technologies Inc. et al., 2015 ONCA 465

• Judge: Hoy, A.C.J.O., Cronk and Watt, JJ.A.
• Court: Court of Appeal (Ontario)
• Case Date: April 15, 2015
• Jurisdiction: Ontario
• Citations: 2015 ONCA 465;(2015), 340 O.A.C. 26 (CA)

Korea Data Systems v. Aamazing Tech. (2015), 340 O.A.C. 26 (CA)

MLB headnote and full text

Temp. Cite: [2015] O.A.C. TBEd. JN.034

Korea Data Systems (USA) Inc. (plaintiff/appellant) v. 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, Christina Chiang a.k.a. Christian Chiang a.k.a. Suh Mei Tasi, a.k.a. Suh Mei Tsai, a.k.a. Christina Suh-Mei Tsai, a.k.a. Suh-Mei Tasi Chiang, a.k.a. Christina Suh-Mei Chiang a.k.a. Suh-Mei Chiang, and Dong Liang a.k.a. Tung Liang (defendants/respondent)

Mendlowitz & Associates Inc. as Trustee of the Estate of Jay Tien Chiang, a Bankrupt, and Korea Data Systems (USA) Inc. (plaintiffs/appellant) v. Jay Tien Chiang a.k.a. Jay Chiang a.k.a. Tienchieh Chiang, Christina Chiang a.k.a. Suh Mei Tasi a.k.a. Christian Chiang a.k.a. Suh Mei Tsai a.k.a. Christina Suh Mei Tsai a.k.a. Suh Mei Tasi Chiang a.k.a. Christina Suh-Mei Chiang a.k.a. Suh-Mei Chiang , Chun Chun Wu, Jie Chu Wu, Chen Cheng-Yueh Tsai, Yu Chang Chiang a.k.a. 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 Wang Chiang a.k.a. Wen Chiang a.k.a. Wen Wang, Crystalview Technology Corp., E.C. Holdings Ltd., Telepower International (Canada) Inc., Best Buy Electronics Inc., Su Feng Tsai a.k.a. 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/respondents)

(C55916; 2015 ONCA 465)

Indexed As: Korea Data Systems (USA) v. Aamazing Technologies Inc. et al.

Ontario Court of Appeal

Hoy, A.C.J.O., Cronk and Watt, JJ.A.

June 24, 2015.

Summary:

A trial judge held that s. 178(1)(d) of the Bankruptcy and Insolvency Act applied only if the bankrupt owed a fiduciary duty to the creditor who sought to obtain declaratory relief under s. 178(1)(d). In other words, s. 178(1)(d) required the fiduciary duty in question to have been one that the bankrupt owed directly to the claiming creditor. See [2012] O.T.C. Uned. 3922. The appellant appealed this finding.

The Ontario Court of Appeal dismissed the appeal. The court awarded the respondent Jay Chiang costs fixed in the amount of $25,000 as agreed by counsel, inclusive of disbursements and all applicable taxes.

Bankruptcy - Topic 10

General principles - Interpretation of bankruptcy law - [See Bankruptcy - Topic 8981 and both Bankruptcy - Topic 8983 ].

Bankruptcy - Topic 8981

Discharge of debtor - Liabilities not released by discharge - General - Section 178(2) of the Bankruptcy and Insolvency Act (BIA) provided that "an order of discharge releases the bankrupt from all claims provable in bankruptcy." - However, s. 178(1) of the BIA created limited exceptions to this general rule - The Ontario Court of Appeal stated that "... the BIA seeks to strike a balance between the financial rehabilitation of insolvent debtors and the legitimate interests of creditors who have lost money because of the bankrupt's conduct ... . The interpretation of s. 178 of the BIA must be informed by these twin objectives." - See paragraph 54.

Bankruptcy - Topic 8983

Discharge of debtor - Liabilities not released by discharge - Act of defalcation or misappropriation in fiduciary capacity - A trial judge held that s. 178(1)(d) of the Bankruptcy and Insolvency Act applied only if the bankrupt owed a fiduciary duty to the creditor who sought to obtain declaratory relief under s. 178(1)(d) - In other words, s. 178(1)(d) required the fiduciary duty in question to have been one that the bankrupt owed directly to the claiming creditor - The appellant appealed - The Ontario Court of Appeal dismissed the appeal - The court stated that "... a creditor cannot bring its claim within the exception set out in s. 178(1)(d) when that claim arose out of the bankrupt's breach of a fiduciary duty to a third party. To hold otherwise would expand the reach of s. 178(1)(d) well beyond what it exists to protect: the relationship between a vulnerable creditor and a fiduciary debtor. Absent clear statutory language indicating such a legislative intention, a broad interpretation of the exception must be rejected. No such language appears in s. 178(1)(d)." - See paragraph 66.

Bankruptcy - Topic 8983

Discharge of debtor - Liabilities not released by discharge - Act of defalcation or misappropriation in fiduciary capacity - A trial judge held that s. 178(1)(d) of the Bankruptcy and Insolvency Act (BIA) applied only if the bankrupt owed a fiduciary duty to the creditor who sought to obtain declaratory relief under s. 178(1)(d) - In other words, s. 178(1)(d) required the fiduciary duty in question to have been one that the bankrupt owed directly to the claiming creditor - The appellant appealed - The Ontario Court of Appeal dismissed the appeal - The court held, inter alia, that "[s]ections 172(2) and 173 of the BIA seek to ensure that dishonest debtors do not benefit from their dishonesty by requiring the court to refuse or suspend a bankrupt's discharge in bankruptcy, or to grant a discharge on terms (s. 172(2)), on proof that the bankrupt has been guilty of ' any fraud or fraudulent breach of trust' (emphasis added) (s. 173(1)(k)). The existence or breach of a fiduciary duty is not a prerequisite to the application of these sections. Accordingly, it is unnecessary to expand the scope of the term 'fiduciary capacity' in s. 178(1)(d) in order to prevent a bankrupt from profiting under the BIA from his or her own fraud or fraudulent breach of trust." - See paragraphs 77 and 78.

Cases Noticed:

Husky Oil Operations v. Minister of National Revenue et al., [1995] 3 S.C.R. 453; 188 N.R. 1; 137 Sask.R. 81; 107 W.A.C. 81; 35 C.B.R.(3d) 1, refd to. [para. 1].

Canada (Superintendent of Bankruptcy) v. 407 ETR Concession Company Ltd. - see Moore (Bankrupt), Re.

Moore (Bankrupt), Re (2013), 314 O.A.C. 153; 118 O.R.(3d) 161; 2013 ONCA 769, leave to appeal granted (2014), 474 N.R. 391; 2014 CanLII 23006 (S.C.C.), refd to. [para. 1].

Chiang (Trustee of) v. Chiang - see Mendlowitz & Associates Inc. et al. v. Chiang et al.

Mendlowitz & Associates Inc. et al. v. Chiang et al. (2009), 257 O.A.C. 64; 305 D.L.R.(4th) 655; 2009 ONCA 3, refd to. [para. 36].

Mendlowitz & Associates Inc. et al. v. Chiang et al. - see Chiang (Bankrupt), Re.

Chiang (Bankrupt), Re, [2015] O.T.C. Uned. 71; 2015 ONSC 571, refd to. [para. 37].

Bank of Montreal v. Giannotti - see Giannotti (Bankrupt), Re.

Giannotti (Bankrupt), Re (2000), 138 O.A.C. 316; 51 O.R.(3d) 544 (C.A.), refd to. [para.54].

Simone v. Daley et al. (1999), 118 O.A.C. 54; 43 O.R.(3d) 511 (C.A.), refd to. [para. 55].

Jerrard v. Peacock (1985), 61 A.R. 161; 37 Alta. L.R.(2d) 197; 57 C.B.R.(N.S.) 54 (Q.B. Master), refd to. [para. 56].

Schreyer v. Schreyer, [2011] 2 S.C.R. 605; 418 N.R. 61; 268 Man.R.(2d) 154; 520 W.A.C. 154; 2011 SCC 35, refd to. [para. 58].

Gray (Bankrupt), Re (2014), 317 O.A.C. 286; 119 O.R. (3d) 710; 2014 ONCA 236, refd to. [para. 61, footnote 4].

McAteer v. Billes et al. (2007), 409 A.R. 143; 402 W.A.C. 143; 34 C.B.R.(5th) 1; 2007 ABCA 137, leave to appeal refused (2007), 383 N.R. 395 (S.C.C.), refd to. [para. 67].

Valastiak v. Valastiak (2010), 283 B.C.A.C. 204; 480 W.A.C. 204; 63 C.B.R.(5th) 188 2010 BCCA 71, reving [2009] B.C.T.C. Uned. 204; 53 C.B.R.(5th) 181; 2009 BCSC 204, consd. [paras. 69, 70].

Frame v. Smith and Smith, [1987] 2 S.C.R. 99; 78 N.R. 40; 23 O.A.C. 84, refd to. [para. 74].

Hodgkinson v. Simms et al., [1994] 3 S.C.R. 377; 171 N.R. 245; 49 B.C.A.C. 1; 80 W.A.C. 1, refd to. [para. 74].

Perez v. Galambos et al. (2009), 394 N.R. 209; 276 B.C.A.C. 272; 468 W.A.C. 272; 2009 SCC 48, refd to. [para. 74].

Statutes Noticed:

Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3, sect. 178(1)(d) [para. 2].

Counsel:

Scott C. Hutchison, Matthew R. Gourlay and Sherif M. Foda, for the appellant, Korea Data Systems (USA) Inc.;

J. Thomas Curry and Constanza Pauchulo, for the respondent, Jay Tien Chiang;

Catherine Francis and Mark A. Freake, for Mendlowitz & Associates Inc., in its capacity as Trustee of the Estate of Jay Tien Chiang, a Bankrupt;

No one appearing for the respondent, Christina Chiang.

This appeal was heard on April 15, 2015, by Hoy, A.C.J.O., Cronk and Watt, JJ.A., of the Ontario Court of Appeal. Cronk, J.A., delivered the following decision for the court on June 24, 2015.