COURT FILE NO.: CV-190000611984-0000
DATE: 20220715
ONTARIO
SUPERIOR COURT OF JUSTICE (COMMERCIAL LIST)
BETWEEN:
PETROCHEMICAL COMMERCIAL COMPANY INTERNATIONAL LTD, PCCI LTD and NAVAK ASIA KISH TRADING CO (PJS)
Applicants/Responding Parties
– and –
NEXUS MANAGEMENT GROUP SDN BHD, ASIAN TRADE INVESTMENT BANK LTD, MEHDI EBRAHIMIESHRATABADI (aka MIKE ROBERTSON aka MIKE ROBINSON aka TONY NEWMAN), MALEKSABET EBRAHIMI, OMID LTD, ATIB LTD, 5M INVESTMENT HOLDING LTD, KHADIJEH TAGHAVI SABZEVARI, MOHAMMAD EBRAHIMIESHRATABADI (aka EMANUELE EBRAHIMI), MEHRANEH EBRAHIMI ESHRATABADI, AMIR KARGAR NEGHAB, ALI VASHAEE, 5M CAPITAL INVESTMENT PTY LTD, 5M CAPITAL INVESTMENT PTY LTD, 5M INVESTMENT LTD, MEDIVILLE INVESTMENTS LTD, GLOBAL NEWMAN PTY LTD, HORIZON INVESTMENT HOLDING LTD, EBM CORPORATION, IMBS SDN BHD and MPO LTD
Respondents/Moving Parties
Jonathan Stainsby, for the Applicants/Responding Parties
Arkadi Bouchelev, for the Respondents/Moving Parties Mehdi Ebrahimieshratabadi (aka Mike Robertson aka Mike Robinson aka Tony Newman), Maleksabet Ebrahimi, 5M Capital Investment Pty Ltd
HEARD: June 17, 2022
REASONS FOR DECISION
DIETRICH J.
Overview
[1] The moving parties Mehdi Ebrahimieshratabadi, Maleksabet Ebrahimi, and 5M Capital Investment Pty Ltd are three of the respondents in the within application.
[2] The responding parties Petrochemical Commercial Company International Ltd (“Petrochemical”), PCCI Ltd (“PCCI”), and Navak Asia Kish Trading Co (PJS) (“Navak”) (the “applicants”) are the applicants. They carry on business in Malaysia and Iran buying and selling petrochemical products and providing related logistics services.
[3] The applicants claimed that the respondents and others defrauded them of approximately USD71.1 million and then the respondents engaged in money laundering in various countries. The applicants commenced actions against the respondents in 2017 or early 2018 in countries that spanned the globe, including Malaysia, Singapore, Australia, Cyprus, Canada, and Iran.
[4] On January 8, 2019, Justice Penny of this court granted a worldwide Mareva injunction in the Canadian proceedings against the respondents. Members of the Ebrahimi family, apart from Mehdi Ebrahimieshratabadi, moved unsuccessfully to set aside the Mareva order.
[5] The applicants and the respondents entered into Minutes of Settlement, which they executed on the 19th day of October, 2020 (the “Agreement”). The Agreement was intended to conclude all outstanding litigation between the applicants (referred to in the Agreement as the “First Party”) and the respondents (referred to in the Agreement as the “Second Party”).
[6] Pursuant to the Agreement, the respondents agreed to deliver to the applicants millions of dollars’ worth of property, including real estate, cash, cryptocurrency, private company shares, and gold bars. The respondents’ financial obligations under the Agreement have only been met in part.
[7] The moving parties contend that the applicants have not fulfilled their contractual obligations under the Agreement. They submit that the applicants have not arranged for a full and final discontinuance of all proceedings, including criminal proceedings in Iran, and for the removal of Interpol[^1] Red Notices[^2], which the applicants agreed to do. The moving parties seek an order compelling the moving parties to do these things. Alternatively, the moving parties submit that the applicants acted in bad faith, and the Agreement should be voided.
[8] The applicants contend that they have fully performed their settlement obligations under the Agreement and are, therefore, entitled to have the respondents’ financial obligations enforced. They also contend that they have not acted in bad faith.
[9] The criminal proceedings in Iran have not been discontinued. And, the Interpol Red Notices, which were posted at the request of the Iranian Prosecutor in respect of two of the moving parties, Mehdi Ebrahimieshratabadi (aka Mike Robertson aka Mike Robinson aka Tony Newman), and Maleksabet Ebrahimi have not been removed.
[10] For the reasons that follow, I dismiss the moving parties’ motion. I find that the parties to the Agreement could not have intended to impose on the applicants a result beyond their capability. I find that the Agreement requires the applicants to make a request to the Iranian Prosecutor to withdraw the criminal proceedings in Iran commenced by him, and to make a request to Interpol to remove the Red Notices related to Mehdi Ebrahimieshratabadi and Maleksabet Ebrahimi (the said moving parties). The Agreement also requires the applicants to cooperate fully in the withdrawal of the criminal proceedings and the removal of those Interpol Red Notices, but it does not compel them to take steps beyond their capability, which would include commanding jurisdiction over the affairs and activities of the Iranian Prosecutor and of Interpol.
Preliminary Procedural Matter
[11] At the outset of the motion, the applicants submitted that, in addition to late-filing their factum, the moving parties also late-filed an Amended Notice of Motion in their Third Supplementary Motion Record in support of this motion. The Amended Notice of Motion includes, among other amendments, relief that is being requested for the first time. This relief is set out at paragraph 1, paragraph 3, paragraph 4, and a second paragraph 3 of the Amended Notice of Motion.
[12] The applicants submit that the late-filing of the Amended Notice of Motion without notice is unfair because they have had no opportunity to reply. I agree that it would be unfair and prejudicial to the applicants to permit the moving parties to pursue the recently-revealed relief they seek on this motion. The applicants were not given adequate notice of the Amended Notice of Motion, dated three days before the motion, and they have had no opportunity to reply to it. Paragraphs 1, 3, 4, and the second paragraph 3 of the Amended Notice of Motion are hereby struck.
Positions of the Parties
[13] The moving parties submit that the applicants are foreign corporate entities controlled by the government of Iran, and that the “ultimate shareholder” of the applicants is an Iranian government-controlled armed forces pension fund.
[14] They also submit that the Agreement requires the applicants to take immediate steps to dismiss all proceedings in all relevant jurisdictions within 30 business days of the execution of the Agreement, and to withdraw the Interpol Red Notices. They further submit that these obligations are within the power of the applicants because, as entities controlled by the Iranian government, they are clothed with the power to ensure these results by commanding the dismissal of the criminal proceedings in Iran and the removal of the Interpol Red Notices.
[15] The moving parties ask the court to enforce the Agreement by ordering the applicants to cause the dismissal of the criminal proceedings in Iran and to remove the Interpol Red Notices. Alternatively, if the court declines to make such an order because the applicants are not capable of carrying it out, the moving parties seek an order declaring the Agreement void ab initio on the basis that the applicants entered into the Agreement in bad faith, promising to do something beyond their capability.
[16] The moving parties assert that while the Interpol Red Notices are in place, Mehdi Ebrahimieshratabadi and Maleksabet Ebrahimi cannot travel internationally. Should they do so, they would risk arrest and deportation to Iran where they would face the death penalty for economic crimes.
[17] The applicants admit that there were some delays in implementing the Agreement owing to discussions between the parties regarding the obligations imposed by the Agreement and, more latterly, because the respondents refused to comply with their obligations under the Agreement until the criminal proceedings in Iran had been withdrawn and the Interpol Red Notices had been removed. However, the applicants submit that they have complied with their obligations under the Agreement by sending two letters to each of the Iranian Prosecutor and to Interpol requesting the criminal proceedings in Iran be dismissed and that the Interpol Red Notices be removed.
[18] The applicants submit that the Agreement cannot be interpreted to mean that, at law, they must directly withdraw the criminal proceedings in Iran, which are under the aegis of the Iranian Prosecutor, and that they must command Interpol to remove the Red Notices posted at the request of the Iranian Prosecutor. Moreover, the applicants contend that they never intended to, and never agreed to, do these things when they executed the Agreement.
[19] The applicants further submit that they entered into the Agreement in good faith based on their knowledge and understanding of the law and what was possible under Iranian law. They also submit that they have fulfilled their obligations under the Agreement, including by withdrawing proceedings in Australia, Singapore and Portugal.
Issues
[20] The issues in this matter are as follows:
Did the applicants agree to withdraw the criminal proceedings in Iran and to remove the Interpol Red Notices?
Did the applicants enter into the Agreement in bad faith such that it should be found to be void ab initio?
The Agreement
[21] The sections of the Agreement relevant to the issues on this motion are the following:
The fourth recital: “AND WHEREAS the First Party and Second Party (collectively the “Parties”) intend to fully and finally resolve all matters between them in respect of all issues and matters raised in the various Actions, and in any other proceedings that have been commenced by any of the First Party against any or all of the Second Party in any jurisdiction around the world including, without limitation, any and all claims that have been made in any of the Actions or in any proceeding, known to the Parties to each of the Actions or any party related thereto;”
The seventh recital: “AND WHEREAS the Parties have agreed that a number of steps will occur simultaneously on a date which shall be agreed by the Parties or their legal counsel and which shall be no later than 30 working days from the Execution Date in each Jurisdiction. This is referred to herein as the ‘Completion Date’…”
Paragraph 21: “Parties shall finalize the text of the document necessary to be filed with the Iranian court (Minutes of Settlement in Farsi) in order to allow/order the transactions set out herein to occur and to ensure that Action 7 is fully withdrawn and dismissed unconditionally on the Completion Date, with prejudice and without-costs.”
Paragraph 29: “On the Completion Date in Iran, a request will be sent to Interpol to remove all information related to this case and to close any files related to this case including and not limited to the Red Notice issued against Mr. Mehdi Ebrahimieshratabadi and Mr. Maleksabet Ebrahimi.”
Paragraph 30: “The First Party agrees the responsibility and commits to cooperate fully in order to ensure the complete and final removal of the Interpol Red Notices.”
Paragraph 31: “Second Party’s Iranian lawyer will release the signed Appendix 4 document [A statement declaration regarding funds in Deutsche Bank] to the First Party once the Red Notice removal document is sent to Interpol.”
Paragraph 33: “Immediately after the Completion Date in Canada[^3] and in Cyprus, the First party as part of its obligation under these Minutes of Settlement, is going to remove the information related to Mr. Maleksabet Ebrahimi and Mr. Mehdi Ebrahimieshratabadi from the public website of Interpol.”
Paragraph 45: “Time will be of the essence in fulfilling the terms of these Minutes of Settlement.”
Paragraph 47: “By executing any part of this [sic] Minutes of Settlement, the Parties hereby acknowledge their intention to be bound by the terms of these Minutes of Settlement and the Full and Final Release in each of the jurisdictions in which Actions were commenced including, but not limited to Malaysia, Canada, Singapore, Australia, Cyprus and Iran.”
Paragraph 51: “These Minutes of Settlement and the Full and Final Release shall be governed by the laws of the Province of Ontario and the federal laws of Canada.”
Background Facts
[22] Following the execution of the Agreement on October 19, 2020, the moving parties complied with the Agreement by consenting to various court orders for the transfer of assets located in Canada to the applicants.
[23] Subsequent to the appointment of a receiving party in Canada, the moving parties transferred to the applicants various assets including currency, cryptocurrency, gold bullion, as well as ownership documents and keys to certain real properties. The assets that remain to be transferred include shares in a private company, three real properties in Richmond Hill, Ontario, and funds held in trust by the applicants’ counsel.
[24] The moving parties allege that former counsel to the applicants told counsel to the respondents in an email, dated May 26, 2021, that PCCI had sent a letter to the Iranian Prosecutor requesting the withdrawal of the criminal proceedings and the removal of the Red Notices. However, the respondents’ search of the court record in Tehran did not reveal such a letter.
[25] On October 31, 2021, the applicants sent two letters, one to the Iranian Prosecutor and the other to the Iranian branch of Interpol. In the letters, they have advised that the disputes between the parties had been resolved and they requested the dismissal of the criminal proceedings in Iran and the removal of the Red Notices. The applicants sent follow-up letters to each of the Iranian Prosecutor and the Iranian branch of Interpol on November 10, 2021.
Issue 1: Did the applicants agree to withdraw the criminal proceedings in Iran and to remove the Interpol Red Notices?
[26] The Agreement is governed by the laws of the Province of Ontario. At issue is the extent of the applicants’ obligations regarding the withdrawal of the criminal proceedings in Iran and the removal of the Interpol Red Notices. For the reasons that follow, I find that the applicants agreed to take certain steps to cooperate in securing the withdrawal of criminal proceedings in Iran, and the removal of the Interpol Red Notices, but they did not guarantee these results, nor did they have the capability to unilaterally deliver these results.
[27] The moving parties assert that paragraphs 21, 29, 30, 31 and 33 of the Agreement make it clear that the applicants have an obligation to bring about the discontinuance of the criminal proceedings in Iran and to remove the Interpol Red Notices. The moving parties point to the language in these paragraphs that they submit requires the applicants “to ensure that [the Iranian proceeding] is fully withdrawn and dismissed unconditionally”; “to obtain the dismissal order and deliver it to the Applicants”; to bring about the “complete closure of the Interpol case”; “to ensure the complete and final removal of the Interpol Red Notices”; and “to remove the information related to Mr. Maleksabet Ebrahimi and Mr. Mehdi Ebrahimieshratabadi from the public website of Interpol.” The moving parties assert that these contractual terms reflect the applicants’ acceptance of their obligation to ensure that the results are achieved and not an obligation to merely send letters of request.
[28] The issue is one of contractual interpretation. The Supreme Court of Canada provided the following guidance on the interpretation of contracts in Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, [2014] 2 S.C.R. 633, at para. 47:
[47] Regarding the first development, the interpretation of contracts has evolved towards a practical, common-sense approach not dominated by technical rules of construction. The overriding concern is to determine “the intent of the parties and the scope of their understanding” (Jesuit Fathers of Upper Canada v. Guardian Insurance Co. of Canada, 2006 SCC 21, [2006] 1 S.C.R. 744, at para. 27, per LeBel J.; see also Tercon Contractors Ltd. v. British Columbia (Transportation and Highways), 2010 SCC 4, [2010] 1 S.C.R. 69, at paras. 64-65, per Cromwell J.). To do so, a decision-maker must read the contract as a whole, giving the words used their ordinary and grammatical meaning, consistent with the surrounding circumstances known to the parties at the time of formation of the contract. Consideration of the surrounding circumstances recognizes that ascertaining contractual intention can be difficult when looking at words on their own, because words alone do not have an immutable or absolute meaning:
No contracts are made in a vacuum: there is always a setting in which they have to be placed. . . . In a commercial contract it is certainly right that the court should know the commercial purpose of the contract and this in turn presupposes knowledge of the genesis of the transaction, the background, the context, the market in which the parties are operating.
[29] I disagree with the moving parties’ interpretation of paragraphs 21, 29, 30, 31 and 33 of the Agreement. In accordance with the principles of contractual interpretation as set out in Sattva, the contract must be read as a whole, and the words used given their ordinary meaning, consistent with the surrounding circumstances known to the parties at the time the Agreement was executed.
[30] Reading the contract as a whole, I find that the obligation of the applicants is to make requests of others and to cooperate with others to ensure that certain steps are taken, but not to take those steps themselves, which, in any event, are beyond their capability.
The Words Used
[31] To begin, in the seventh “whereas” clause of the Agreement, the “Completion Date” is defined as the date on which “the courts in different jurisdictions are informed about the exhaustion of Second Party’s full and final obligations to The First Party per this Minutes [sic] of settlement and are requested to issue the necessary order/document(s) and or directive(s) to insure the full and final implementation of these Minutes of Settlement” (emphasis added). Attributing to these words their ordinary and grammatical meaning, it is clear that the First Party’s obligation is to inform a court, and to request that court to make the necessary order. It is not for the First Party to make the order itself. The First Party agrees to inform and to request to “insure” that the order may issue and that the process will not be impeded by the First Party’s failure to comply with their obligation to inform and request. The very same intention is reflected in paragraphs 29 and 30 of the Agreement regarding the Interpol Red Notices. In paragraph 29, after the Completion Date in Iran, it is agreed that a request will be sent to Interpol “to remove all information related to this case [the Iran action] and to close any files related to this case including and not limited to the Red Notice issued against Mr. Mehdi Ebrahimieshratabadi and Mr. Maleksabet Ebrahimi.” And, in paragraph 30, the First Party “agrees the responsibility”, that is, to send the “request”, and “to cooperate fully in order to ensure the complete and final removal of the Interpol Red Notices.” The language of the Agreement does not require the First Party to remove the Interpol Red Notices, but rather to send a request “to Interpol to remove information and the Interpol Red Notices”, and to “cooperate fully” in that process.
[32] Similar language is found in paragraph 21 of the Agreement regarding the dismissal of the criminal proceedings in Iran. In that paragraph, the parties agree to “finalize the text of the document necessary to be filed with the Iranian court (Minutes of Settlement in Farsi) in order to … ensure that Action 7 [the Iran action] is fully withdrawn and dismissed …” In this case, both parties agree to prepare the document to be filed with the Iranian court to ensure that the court can dismiss the claim. The intention, on a plain reading of this paragraph, is not that the First Party will ensure the dismissal of the criminal proceedings, but that it will ensure that the court has the necessary document to allow it to make that decision, should the court find it appropriate to do so.
[33] Paragraph 31 is also clear and unambiguous. The First Party’s obligation thereunder is met “once the Red Notice removal document is sent to Interpol”, not once the Interpol Red Notices are removed by the First Party.
[34] Paragraph 33 is worded differently. It appears to impose an obligation on the First Party following the “Completion Date” in Canada and in Cyprus, being the date immediately after the First Party has informed the courts in Canada and in Cyprus that the Second Party has exhausted its obligations to the First Party per the Agreement; and those courts are requested to issue the necessary order/document(s) and or directive(s) to ensure the full and final implementation of the Minutes of Settlement. At that time, according to paragraph 33, the First Party is “going to remove the information related to Mr. Maleksabet Ebrahimi and Mr. Mehdi Ebrahimieshratabadi from the public website of Interpol.” This paragraph is ambiguous when read in the context of the Agreement as a whole. The intention of the parties is not clear from the words used. On its face, the paragraph does not relate to the criminal proceedings in Iran or Interpol Red Notices posted at the request of the Iranian Prosecutor as those matters are addressed specifically in paragraphs 29 and 30. Further, no specific mention is made in this paragraph of Red Notices. It is unclear what “information” is to be removed from the public website, what the “public” website is, or how the First Party is to effect the removal of this information.
The Surrounding Circumstances
[35] The principles in Sattva direct consideration of the surrounding circumstances known to the parties at the time they executed the Agreement to ascertain the parties’ intention. Such consideration is especially helpful when words in the context used are not explicit. Such is the case with respect to paragraph 33.
[36] Dr. Morteza Zahraei, former legal counsel to PCCI, was a member of the applicants’ legal team when the Agreement was being discussed and negotiated, though he was not directly involved in the negotiation or the drafting of the Agreement. He did initial the Agreement when asked to do so. Dr. Zahraei deposed that the Agreement was negotiated between the then CEO of PCCI, Dr. Hoveidapour, on behalf of the applicants, and Dr. Erfan Lajevardi, a lawyer in Iran, who had in the past represented PCCI but was then representing the respondents in the negotiation of the Agreement.
[37] Dr. Zahraei also deposed that he was excluded from effective participation in the negotiations, and that his advice was largely ignored. However, Dr. Zahraei deposed that when the parties were discussing the removal of the Interpol Red Notices and the withdrawal of the criminal proceedings in Iran, he informed Dr. Lajevardi that the applicants themselves could not remove the Interpol Red Notices. Dr. Zahraei also deposed that, as an Iranian lawyer, Dr. Lajevardi would have already been aware of that fact.
[38] Dr. Zahraei deposed that the applicants executed the Agreement knowing that they would be obligated to send the letter of request regarding the withdrawal of the criminal proceedings and the removal of the Interpol Red Notices, and that they were obligated to cooperate to ensure this result. He deposed that the parties were nonetheless aware, when they executed the Agreement, that it was not within the applicants’ control to compel the withdrawal of the criminal proceedings in Iran or the removal of the Interpol Red Notices, which had been posted at the request of the Iranian Prosecutor.
[39] Dr. Lajevardi acknowledged in his affidavit evidence that the applicants could only make the request.
[40] Dr. Zahraei’s evidence on the independence of the Iranian Prosecutor and the fact that a withdrawal of proceedings is a matter of prosecutorial discretion was unchallenged. Ultimately, it would be in the Iranian Prosecutor’s discretion to decide whether to withdraw the criminal proceedings in Iran, and whether to direct Interpol to remove the Interpol Red Notices that he had asked to be posted.
[41] The moving parties urge the court to disregard Dr. Zahraei’s evidence on the basis that he was not part of the legal team involved in the negotiation and drafting of the Agreement. I decline to do so. I accept that Dr. Zahraei was advising the applicants at the time the Agreement was being negotiated, even if he was not directly involved in the negotiations. Further, the moving parties did not challenge Dr. Zahraei’s evidence with respect to the independence of the Iranian Prosecutor. Mr. Jabbar Solati Maklavani—an attorney at law in Tehran retained by Mehdi Ebrahimieshratabadi, who provided evidence in support of the moving parties’ motion—admitted on cross-examination that the Iranian Prosecutor is independent, and that the withdrawal of the proceedings in Iran would be within his discretion.
[42] According to the principles set out in Sattva, at para. 58, evidence of surrounding circumstances consists of objective evidence of facts at the time that the contract was executed within the “knowledge that was or reasonably ought to have been within the knowledge of both parties at or before the date of contracting.” Based on the record, both Dr. Zahraei, an Iranian lawyer, who was advising the applicants, and Dr. Lajevardi, an Iranian lawyer, who was advising the respondents, were aware or ought to have been aware of the independence of the Iranian Prosecutor at the time the Agreement was made, and thus were aware, or ought to have been aware, of the limitations on the applicants’ ability to unilaterally cause the withdrawal of a criminal proceedings or the removal of Interpol Red Notices.
Analysis
[43] Regarding the applicants’ obligations pursuant to paragraphs 21, 29, 30 and 31 of the Agreement, I am satisfied that they have met these obligations, albeit not within the 30-day period prescribed by the Agreement. Regarding the delay in sending the letters, Dr. Mohammadali Abdollahi, a member of PCCI’s legal team, deposed that the applicants’ failure to send the letters within the prescribed timeline was not an act of bad faith but, rather, was because PCCI and its CEO had come to believe that the respondents were not complying with their obligations under the Agreement, and there was ongoing debate about the meaning of the Agreement and the obligations of each party.
[44] Ultimately, albeit after the moving parties initiated this motion, the applicants did write to the Iranian Prosecutor twice to request the withdrawal of the Iranian proceedings and the removal of the Red Notices. The letters were sent by the applicant Navak as the agent for the applicants PCCI and PCCI Ltd. According to Dr. Abdollahi’s evidence, letters were sent to the Iranian Prosecutor and to the Head of Interpol in Iran on October 31, 2021. Follow-up letters were sent on November 10, 2021, and Dr. Mohammad Hadi Beikzad, another member of PCCI’s legal team in Iran, attended at the court in Tehran the same day to request a meeting with the Iranian Prosecutor.
[45] Dr. Abdollahi deposed that the meeting with the Iranian Prosecutor took place on November 16, 2021, and that he was accompanied by PCCI’s current CEO (Dr. Mahdiannahad) and Dr. Beikzad. He also deposed that Dr. Lajevardi, who was representing the respondents, was also in attendance at the meeting with the Iranian Prosecutor.
[46] Dr. Abdollahi deposed that Dr. Beikzad explained the Agreement to the Iranian Prosecutor and the need for the applicants to use their best efforts to bring about the withdrawal of the criminal proceedings in Iran and the removal of the Interpol Red Notices. He explained to the Iranian Prosecutor that this was the reason that Navak had sent the letters.
[47] According to Dr. Abdollahi’s evidence, the Iranian Prosecutor confirmed that he had received the letters and was aware that PCCI had withdrawn its civil claim against the respondents. Dr. Abdollahi also deposed that the Iranian Prosecutor advised that the withdrawal of the civil claims would be a mitigating factor, however, it would not bring about the removal of the Interpol Red Notices or a withdrawal of the criminal charges in Iran. Further, the Iranian Prosecutor informed PCCI that he had a duty to exercise his independent discretion regarding a withdrawal of the charges and a request that Interpol remove the Interpol Red Notices. Dr. Abdollah was not cross-examined on these points and his evidence was unchallenged.
[48] The moving parties urge the court to disregard Dr. Abdollahi’s evidence because he is not a licensed lawyer, he was not involved in the case until April 2021, and he was not involved in the negotiations of the Agreement. I see no reason to disregard Dr. Abdollahi’s evidence regarding the sending of the letters, which was done in late 2021; the reason for the delay in sending them; or the subsequent meeting with the Iranian Prosecutor. The moving parties had an opportunity to cross-examine Dr. Abdollahi on this evidence but did not.
[49] Dr. Zahraei deposed that he agreed with the Iranian Prosecutor’s description of his own role. Dr. Zahraei affirmed that the Iranian Prosecutor’s position on the withdrawal of the criminal charges in Iran, the removal of the Interpol Red Notices, and his response to the requests for those actions were in keeping with, and consistent with, the Iranian Prosecutor’s role in the context of this case under Iranian law. Dr. Zahraei testified that the Prosecutor’s role carries with it “prosecutorial independence” requiring that the Iranian Prosecutor make decisions based on public interest and order, and that the applicants and Dr. Lajevardi knew this when the Agreement was negotiated. This evidence is bolstered by the fact that Mehdi Ebrahimieshratabadi himself contacted the Iranian Prosecutor regarding the withdrawal of the criminal proceedings and the removal of the Interpol Red Notices. In doing so, he was not relying on the capability of the applicants alone to ensure that these steps were taken.
[50] Dr. Zahraei also deposed that Interpol, too, must act independently and that while PCCI could request the withdrawal of the criminal proceedings and the removal of the Interpol Red Notices, only the Iranian Prosecutor would have the legal authority to withdraw the criminal proceedings. And, while the Iranian Prosecutor could request that Interpol remove the Interpol Red Notices, only Interpol would have the legal authority to do so.
[51] The applicants also rely on the opinion of Dr. Abbas Ali Kadkhodaei Alyadjorani (“Dr. Kadkhodaei”), a professor of public law at Tehran University, Tehran and a member of Iran’s Guardian Council. Dr. Kadkhodaei opined that, like courts in Canada, the courts in Iran will not interfere with the exercise of prosecutorial discretion absent a finding of an abuse of process. Dr. Kadkhodaei’s opinion on this subject was unchallenged.
Iranian Government Control of the Applicants
[52] The moving parties do not accept that “prosecutorial independence” applies in this case. They assert that the applicants, and in particular PCCI, is Iranian government-controlled and, accordingly, it is within the applicants’ power to cause the withdrawal of the criminal charges against Mehdi Ebrahimieshratabadi and Maleksabet Ebrahimi and to remove the Interpol Red Notices. They further assert that, in the Agreement, the applicants agreed to do just that.
[53] I find that there is insufficient evidence before the court to support a finding that the applicant PCCI is, in fact, Iranian government-controlled. I note that in an earlier decision of this court involving these same parties, Petrochemical Commercial Company International Ltd v. Nexus Management Group SDN BHD, 2019 ONSC 1142, at para. 17, Justice Penny stated: “More generally, PCCI does not appear to be owned or controlled by the Iranian Government at all. Rather, significant shareholders, as noted above, appear to include a number of armed forces pension and social security funds.”
[54] I agree with the moving parties that Justice Penny did not find as a fact that PCCI was not controlled by the Iranian government, though it appeared to him that it was not. The finding of this fact was not necessary for Justice Penny to make his order granting the Mareva injunction. The moving parties urge me to find that the applicants are agents of the Iranian state based on the moving parties’ evidence, which they assert shows an inescapable connection between the applicants and the Iranian government.
[55] The moving parties assert that the applicants are not only controlled by the Iranian government but have also taken deliberate steps to obscure their connection to the Iranian government to avoid sanctions imposed by the United States. In making these assertions, the moving parties rely on the expert report of Ali Ghanbar Pour Dizboni, who is an Associate Professor at the Department of Political Science, Royal Military College of Canada, and a Research Associate and Fellow with several research organizations. They also rely on the evidence of Mr. Maklavani where he sets out a list of the members of the Supreme Council of the Armed Forces Pension Fund, which appears to include high-ranking ministers and commanders.
[56] Dr. Dizboni prepared two expert reports, one dated February 11, 2021, and another dated March 18, 2022. He prepared these reports as an expert on the Iranian constitution and legal and political systems. The second report was prepared in response to affidavit evidence provided by Dr. Kadkhodaei on February 21, 2022, and the statements made in that affidavit respecting the independence of the Iranian judiciary, the role of the Supreme Leader in the decisions of the judiciary, and the Supreme Leader’s ability to withdraw criminal proceedings.
[57] Dr. Dizboni opined that Article 57 of the Iranian Constitution provides that the Supreme Leader of Iran has absolute authority over all three branches of the Iranian government (legislative, executive and judiciary). Dr. Dizboni also states that the office of the Supreme Leader can give orders to the applicants, the prosecutors in charge of the Iranian proceedings, and the Iranian branch of Interpol.
[58] In Dr. Dizboni’s first report, he commented on the ownership and control structure of each of the applicants. He admitted that his research did not yield significant specific data on the ownership and control of these companies. However, he opined that his research revealed that PCCI is subject to secondary sanctions in the United States and that an affidavit sworn by Kamal Zangeneh, and filed in the High Court of Malaysia, described Mr. Zangeneh as the “Finance Manager” and a Member of the Boards of Petrochemical and Navak. In the affidavit, Mr. Zangeneh described the “retirement pension fund for the military” as the “ultimate shareholder” of these two applicants, and he described PCCI as a trust company that acts on behalf of Navak. Based on this evidence, and the evidence that the subject companies appear on the United States OFAC (Office of Foreign Assets Control) list of SDN (Specially Designated Nationals), Dr. Dizboni stated that “it would be reasonable to conclude that the Subject Companies are not privately owned.” Based on the same evidence, Dr. Dizboni went on to conclude that “the Subject Companies are owned and controlled by the Iranian government. This means that Supreme Leader has ultimate power and control over the said companies.” In his report, Dr. Dizboni assumed that the “retirement pension fund for the military” is one and the same as the Armed Forces Social Security Organization (“AFSSO”) and opined, without proof, that the “official name” of the retirement pension fund of the Iranian military is AFSSO. He stated that the AFFSO was established in 2009 pursuant to the decision by the Iranian Ministry of Defence and the official authorization by the Supreme Leader. He further stated that the AFSSO is a government-owned entity, and that in 2016, a bill to privatize AFSSO was defeated in the Iranian Parliament. Dr. Dizboni then relied on a single paragraph in Mr. Zangeneh’s affidavit as confirmation that AFSSO is the ultimate shareholder of Petrochemical and Navak. Dr. Dizboni then opined, without further evidence, that the Supreme Council of the AFSSO is the “highest management level of the organization”, and that “[u]ltimately, the activities and decisions of the Supreme Council are subject to direct oversight and control of the Supreme Leader.”
[59] However, Mr. Zangeneh’s affidavit states that the “ultimate shareholder” of Petrochemical is the “retirement pension fund for the military”, not the AFSSO. Under cross-examination, Dr. Dizboni agreed that the retirement pension fund for the military had not merged with the AFSSO and that he did not know the meaning of “ultimate shareholder” as used in Mr. Zangeneh’s affidavit.
[60] The applicants urge the court to disregard Dr. Dizboni’s evidence because he conceded that he approached his opinion as a political scientist and not as a lawyer. The applicants reject Dr. Dizboni’s knowledge of the status and ownership of the applicants. Under cross-examination, Dr. Dizboni admitted that he did not search the ownership of the applicants on the Tehran Stock Exchange, where such information could be found. Dr. Dizboni admitted that he had no training or expertise in law or business, and that he could not attest to the identity, bona fides, or authority of a number of the sources he cited in his opinion. Dr. Dizboni also admitted that no one apart from the Supreme Leader or the Head of the Judiciary could control District Court 20, where the criminal investigation relating to the moving parties is being conducted.
[61] In support of their position that the applicants are not Iranian government-owned, the applicants rely on the expert evidence of Dr. Kadkhodaei.
[62] Dr. Kadkhodaei provided evidence on the independence of the judiciary under the Constitution of the Islamic Republic of Iran and other relevant laws and regulations. He also opined on the Supreme Leader’s scope of jurisdiction, and the possibility of the Supreme Leader’s intervention in the criminal proceedings involving the moving parties.
[63] Dr. Kadkhodaei opined as follows:
In the Islamic Republic of Iran, interference of other authorities in the Judiciary is forbidden, and will be contempt of court, deserving prosecution and punishment. The judges do not yield to recommendations of others. No one has the right to interfere with judicial proceedings; such interference and obstruction of justice shall be against the rule of law. Judicial Independence from other government branches is a well-established principle in the Constitution. Accordingly, the Judicial System of Iran is an independent authority under the Constitution of the Islamic Republic of Iran and other relevant laws and regulations and that all its actions, including the initiation or termination of criminal proceedings does not depend on the wishes or instructions of any other person or authority, including the [Supreme] Leader or the head of the Judiciary.
[64] The moving parties submit that Dr. Kadkhodaei’s evidence should be given no weight because he is not an expert in Iranian law. Rather, according to Dr. Dizboni’s report, Dr. Kadkhodaei is a high-ranking government official who currently holds two high-level positions. The moving parties submit that his evidence should not be relied on because he sits on the Guardian Council of the Constitution whose functions include approving and disqualifying candidates for elections in Iran, and vetoing laws passed by the Iranian Parliament. They also submit that Dr. Kadkhodaei was sanctioned by the United States because of decisions made by the Guardian Council.
[65] Despite these criticisms of Dr. Kadkhodaei’s role in the Iranian government, his opinion regarding interference in the judiciary was undisturbed in cross-examination. Dr. Dizboni opined that the Supreme Leader has the final say in any decision made by the Iranian judiciary, but under cross-examination, Dr. Dizboni conceded that the Supreme Leader is generally not involved in routine matters of the three branches of the Iranian government, and Dr. Dizboni could not identify a single example of the Supreme Leader having overruled a decision of the judiciary. Under cross-examination, Dr. Dizboni confirmed that there has been no judicial decision in the criminal proceedings involving the moving parties that is under investigation by the Iranian Prosecutor.
[66] As between these two experts, Dr. Dizboni and Dr. Kadkhodaei, I prefer the evidence of Dr. Kadkhodaei. Dr. Dizboni’s opinion is based on assumptions and tenuous conclusions about the identity of PCCI’s shareholder(s). It does not, in my view, support a finding, even on a balance of probabilities, that the applicants are controlled by the Iranian government, or that the applicants act as agents of the Iranian government. Dr. Dizboni could not attest to the identity, bona fides or authority of a number of sources cited in his opinion. Even if it could be found that the Supreme Leader, in fact, controls the applicants, which I do not find on the evidentiary record before the court, there is no evidence to suggest that the Supreme Leader would give orders to the applicants or the Iranian Prosecutor to carry out terms of the Agreement. Nor is there any evidence to suggest that the Supreme Leader has appointees within the applicants to whom he has delegated, or could delegate, his absolute authority. The evidence bends in the opposite direction. There is no evidence to suggest that the Supreme Leader has ever exercised his jurisdiction to command the judiciary to make a particular order.
[67] The moving parties also assert that the applicants initially brought their complaint to the Military Court in Iran, which suggests that they are government-owned or -controlled.
[68] Dr. Zahraei deposed that commencing the proceedings in the Military Court was a mistake that was later rectified by a transfer of the matter to the International Court.
[69] The moving parties submit that, notwithstanding the transfer of the applicants’ proceedings to a court other than the Military Court in Iran, a matter involving the moving parties in these proceedings remains open in the Military Court. Based on correspondence to the Head of the Fifth Branch of Tehran Military Court dated July 22, 2018, it appears that the Military Court had some ongoing involvement in these proceedings even though the matter had been transferred to the International Court in Iran. It is not at all clear what that involvement is, whether the involvement has continued, or whether the Military Court has jurisdiction. This evidence, now nearly four years old, in my view, is insufficient to ground a finding that the applicants are Iranian government-owned, or Iranian government-controlled, and therefore clothed with the authority to commit to, and to carry out, the dismissal of a criminal proceedings in Iran and the removal of Interpol Red Notices.
[70] Mr. Maklavani responded in writing to questions relating to cases heard in the Iranian Military Court. In a letter dated December 28, 2021, he stated that “if the act for which the complaint is made is related to military matters, it is processed in the military court.” Mr. Maklavani also stated that “[a]ny authority that does not consider itself competent will refer the case to a competent authority.” It is not disputed that in the case at bar, the criminal proceedings, in respect of which the withdrawal is sought, are not before the Military Court.
[71] For the foregoing reasons, I find that the moving parties have not shown that the applicants are Iranian government-owned or agents of the Supreme Leader such that they are clothed with the authority to dismiss the criminal proceedings in Iran or remove the Interpol Red Notices. Regardless, even if PCCI were so owned, or deputized as an agent of the Iranian government, based on the record, including the expert opinion of Dr. Kadkhodaei, I am not persuaded that the applicants would have the authority to command the Head of the Judiciary, Iran’s Supreme Leader, or his agent to comply with the Agreement by withdrawing the criminal proceedings and removing the Interpol Red Notices, or to contract on behalf of the Judiciary or the Supreme Leader to commit to carry out these acts themselves.
Conclusion
[72] Applying the principles in Sattva, as set out above, I find that an interpretation of the Agreement that would require the applicants to essentially guarantee a withdrawal of the criminal proceedings in Iran and a removal of the Interpol Red Notices posted on Interpol at the request of the Iranian Prosecutor cannot be supported. Such an interpretation would fail to give the words used in the Agreement their ordinary meaning consistent with the surrounding circumstances known to the parties, or which ought to have been known to the parties, at the time of the formation of the Agreement. Reading the Agreement as a whole leads me to conclude that the applicants have an obligation to request a dismissal of the criminal proceedings in Iran, to request the removal of the Interpol Red Notices, and to act cooperatively to ensure that these things are done. This obligation does not require them to do something that they have no capability or authority to do directly. The obligation, in my view, is to make the request, and to cooperate, in ways available to them, to facilitate the withdrawal of the criminal proceedings and the removal of the Interpol Red Notices.
[73] I also agree with the applicants that the interpretation advanced by the moving parties would not lead to a commercially reasonable result. As set out in Canadian Encyclopedic Digest, “Choice Between Alternative Interpretations”, (Thomson Reuters Canada, 4th ed.), X.2(e), at s. 621:
If alternative constructions of contractual provisions are possible, the courts will avoid interpretations that are absurd, commercially unreasonable, unjust, or even improbable. Similarly, the courts will shrink from interpretations which would render a party’s promises meaningless or the transaction void, or which would involve illegality such as contravention of a statutory prohibition, since it will be presumed that the parties did not intend to violate the law. [Footnotes omitted.]
[74] The reasoning in Consolidated-Bathurst v. Mutual Boiler, 1979 CanLII 10 (SCC), [1980] 1 S.C.R. 888, at p. 901, though dealing with a contract of insurance, is of assistance in this case:
… the normal rules of construction lead a court to search for an interpretation which, from the whole of the contract, would appear to promote or advance the true intent of the parties at the time of entry into the contract. Consequently, literal meaning should not be applied where to do so would bring about an unrealistic result or a result which would not be contemplated in the commercial atmosphere in which the insurance was contracted. Where words may bear two constructions, the more reasonable one, that which produces a fair result, must certainly be taken as the interpretation which would promote the intention of the parties.
[75] I find that in the present case, it would be both commercially unreasonable and unjust to deny the applicants the settlement for which they negotiated based on their failure to do what is impossible for them to do, and which, in my view, they did not intend to agree to do.
Issue 2: Did the applicants enter into the Agreement in bad faith?
[76] The moving parties submit that if the applicants are not found to be in breach of the Agreement for their failure to directly dismiss the criminal proceedings in Iran and to arrange for the removal of the Interpol Red Notices, then this court should find the Agreement to be void ab initio. They seek this finding on the basis that if the applicants have not breached the Agreement, then it must be found that they made a material misrepresentation in the Agreement. Specifically, the applicants knowingly promised something that they could not deliver, and they entered into the Agreement in bad faith with an intention to deceive or mislead. The moving parties assert that the applicants knowingly agreed to assume obligations that they could not fulfill, and they knew that they could not fulfill them.
[77] The moving parties submit that this misrepresentation goes to the very root of the contract because, for the moving parties, the discontinuance of the criminal proceedings and the removal of the Interpol Red Notices were the most important aspects of the transaction. Mehdi Ebrahimieshratabadi and Maleksabet Ebrahimi assert that if they were extradited to Iran and forced to stand trial in a criminal proceedings, they could face the death penalty.
[78] There is no compelling evidence to corroborate their statement that they could face the death penalty in Iran in the circumstances they describe. The only evidence in this regard is Mr. Maklavani’s evidence in reply on his cross-examination. There, he referred to a particular case in which the death penalty was allegedly imposed, but he gave no details of the charge or the facts of that case.
[79] I have found that the applicants did not agree to directly dismiss the criminal proceedings in Iran or remove the Interpol Red Notices, nor did they have the capability to carry out such tasks. Rather, they agreed to make a request to those persons who had authority to take such steps in order to give effect to the terms of the Agreement. They also agreed to cooperate to ensure these steps were taken. I have found that the applicants sent the requests and cooperated with Iranian Prosecutor, with whom they met to explain the Agreement and the reasons for their written requests. As mentioned, Mehdi Ebrahimieshratabadi himself reached out to the Iranian Prosecutor regarding the withdrawal of the criminal proceedings and the removal of the Red Notices. Such action would not have been necessary if the moving parties truly believed that the applicants had the authority to do unilaterally and independently what the Iranian Prosecutor would otherwise be required to do.
Disposition and Costs
[80] The moving parties’ motion is dismissed.
[81] The applicants successfully defended the motion and are entitled to their costs. The applicants did not submit a costs outline at or prior to the hearing, but submitted a costs outline after the hearing. The moving parties submitted an “updated” costs outline after the hearing. I have reviewed the costs outlines submitted following the hearing. The costs sought by each of the parties, if successful, are not that far apart. The applicants seek costs on a partial indemnity basis of $112,178.90. If the moving parties had been successful, they would have sought costs on a partial indemnity basis of $142,362.69. Having considered the relevant factors as set out in r. 57.01 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, I am satisfied that the fees sought by the applicants are fair and reasonable in the circumstances of this case. I fix the applicants’ costs, on a partial indemnity basis, at $112,178.90, payable by the moving parties forthwith.
Dietrich J.
Released: July 15, 2022
COURT FILE NO.: CV-190000611984-0000
DATE: 20220715
ONTARIO
SUPERIOR COURT OF JUSTICE (COMMERCIAL LIST)
BETWEEN:
PETROCHEMICAL COMMERCIAL COMPANY INTERNATIONAL LTD, PCCI LTD and NAVAK ASIA KISH TRADING CO (PJS)
Applicants/Responding Parties
NEXUS MANAGEMENT GROUP SDN BHD, ASIAN TRADE INVESTMENT BANK LTD, MEHDI EBRAHIMIESHRATABADI (aka MIKE ROBERTSON aka MIKE ROBINSON aka TONY NEWMAN), MALEKSABET EBRAHIMI, OMID LTD, ATIB LTD, 5M INVESTMENT HOLDING LTD, KHADIJEH TAGHAVI SABZEVARI, MOHAMMAD EBRAHIMIESHRATABADI (aka EMANUELE EBRAHIMI), MEHRANEH EBRAHIMI ESHRATABADI, AMIR KARGAR NEGHAB, ALI VASHAEE, 5M CAPITAL INVESTMENT PTY LTD, 5M CAPITAL INVESTMENT PTY LTD, 5M INVESTMENT LTD, MEDIVILLE INVESTMENTS LTD, GLOBAL NEWMAN PTY LTD, HORIZON INVESTMENT HOLDING LTD, EBM CORPORATION, IMBS SDN BHD and MPO LTD
Respondents/Moving Parties
REASONS FOR DECISION
Dietrich J.
Released: July 15, 2022
[^1]: The International Criminal Police Organization [^2]: According to the Interpol website, Red Notices are issued for fugitives wanted either for prosecution or to serve a sentence. A Red Notice is a request to law enforcement worldwide to locate and provisionally arrest a person pending extradition, surrender, or similar legal action. [^3]: Thirty days from October 19, 2020