Reasons for Decision

Overview

This sentencing hearing followed a finding of contempt on March 19, 2025, against the defendants Vahid Farjami and Leila Naghavi Olyaei (2025 ONSC 1740). These defendants breached the disclosure requirements of the Mareva order of Leiper J. dated September 3, 2024, by failing to disclose in sworn statements real property they hold in Spain and by denying ownership during the examinations under oath mandated by the order. I made the contempt finding at the same time as setting the Mareva injunction aside because of the plaintiffs’ breach of the duty of full and frank disclosure on the original motion before Leiper J.

The contemnors intended to evade the Mareva injunction by hiding the Spanish property. As evident in the transactional documents, that acquisition could not have been a casual event that escaped their memory. Apart from the obvious difficulty of forgetting ownership of such property, they instructed conveyancing professionals, wired funds to them, and arranged for payment of expenses out of a Spanish bank account. They clearly hoped the Spanish property would survive execution after a judgment in this case.

As their counsel correctly pointed out at the hearing, the individual defendants are entitled to defend the action against personal liability. Victor Farjami signed the promissory notes in the name of Trip Support Inc., the failed subprime vacation financing scheme. The extent to which that defence will hold water is debatable, since Mr. Farjami also admitted that he used Trip Support money to fund property acquisitions – apparently in a desperate attempt to recoup the funds lost in the failure of Trip Support. In the unusual factual background of this case, the defendants admitted Trip Support owes the plaintiffs at least $6 million, but the plaintiffs could not provide cogent evidence that they had collectively paid the additional $18 million sought in the suit. Assuming Trip Support faces certain judgment for at least the lower dollar figure, the contemnors attempted to conceal the map to the buried Spanish treasure by lying to the plaintiffs and to the court. The sole remaining issue in this two-part contempt motion is the penalty for the contemnors’ deception.

The truth is important if one lives in civil society governed by the rule of law. Living on a desert island, one can utter as many lies and can breach as many oaths as one pleases, because no one can suffer harm. Canada is not such a place. This court relies on truth-telling but possesses only blunt tools for punishing the utterance of falsehoods.

As counsel for the defence have cited in their factum, criminal sentencing principles are applicable to civil contempt: Comeau v. 1140398 Ontario Ltd. et al., 2023 ONSC 5493, at para. 16. The act of contempt here is also prohibited by statutory criminal law. Under s. 131(1) of the Criminal Code, R.S.C., 1985, c. C-46, a person commits perjury who, with intent to mislead, makes a false statement under oath or solemn affirmation, by affidavit, solemn declaration or deposition or orally, knowing that the statement is false. Under s. 132, the offence of perjury carries a maximum sentence of fourteen years imprisonment.

The contemnors have not been found guilty of perjury, under s. 131. For them to suffer such jeopardy, they must be subject to a different court process. Nevertheless, the offence of perjury under the Criminal Code emphasizes the seriousness of lying under oath and the need for a precise and uncompromising penalty. Unlike the criminal justice system, the court and the private litigants lack the investigative resources of the police to prove the offence of contempt except in obvious cases.

The plaintiffs seek a custodial order of 90 days in jail, to be conditional on affording the defendants an opportunity to purge the contempt by requiring answers to certain undertakings given pursuant to the disclosure examinations, namely:

a. all information and transaction records respecting transfers of €364,000 on December 12, 2021, and of €603,400 on October 31, 2022

b. all information and records relating to the purchase, current location, or sale of $638,040.86 in luxury items purchased between April 3, 2021, and March 13, 2023, transactions with Ratehawk.com in Limassol, Cyprus, transfers to The Concept Law Group in Fort Lauderdale, Florida, as well as all transactions or services carried out for the Defendants by the said The Concept Law Group

c. particulars of where the CIBC cash withdrawals made from December 2023 to August 2024 were allocated, and the current location or use of such funds; and

d. particulars of where the $93,568.00 rent cheque deposit was deposited in respect of 47 Harding Blvd

The plaintiffs also seek an order restraining the defendants from dealing in their Spanish property pending the resolution of the case.

Finally, the plaintiffs seek an order for full indemnity costs of the contempt proceeding, subject to offset for costs awardable in the motion for setting aside the Mareva injunction.

The defendants oppose the custodial penalty and say a fine of $2,500 is more appropriate. On the custodial penalty conditional on the fulfilment of undertakings, the defendants submit that the disclosure relates to disputed transactions and property dispositions for which the court could not find contempt based on the criminal standard of proof. Citing case law that a prison sentence is the penalty of last resort for civil contempt, they submit that it would be wholly out of proportion with a discrete infraction that cannot be repeated because they have provided the documentation for the Spanish property. They also claim to have attempted to purge the contempt by admitting the contempt. Pointing out that “a carceral sentence will only delay the action from progressing,” imprisonment would only put distance between the plaintiffs and financial recovery from the defendants. In the circumstances, they consider a fine of $2,500 payable by each to be the appropriate penalty.

Since the defendants’ aim in lying about the Spanish property was to exclude it from discovery and judicial execution, the appropriate sanction, the plaintiffs’ request for an order effectively for sequestration of the Spanish property is in principle the most appropriate main sanction. Because the acts of contempt were committed by the two individuals, there must also be personal consequence beyond the reimposition of the asset freeze as against the property. The appropriate penalty will be the assignment of net rents from the property to the credit of the action, so that the contemnors will not personally benefit from the profit earned by the property they claimed not to have owned, until the issue of their personal liability to the plaintiffs has been finally determined.

Crafting the Appropriate Order Penalizing the Defendants for Their Contempt

The duty of the court is to craft the appropriate order penalizing the defendants for their contempt. Subrules 60.11(5) to (10) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, set out the parameters for a civil contempt penalty:

Content of Order

(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. R.R.O. 1990, Reg. 194, r. 60.11(5).

Where Corporation is in Contempt

(6) Where a corporation is in contempt, the judge may also make an order under subrule (5) against any officer or director of the corporation and may grant leave to issue a writ of sequestration under rule 60.09 against his or her property. R.R.O. 1990, Reg. 194, r. 60.11(6).

Warrant of Committal

(7) An order under subrule (5) for imprisonment may be enforced by the issue of a warrant of committal (Form 60L). R.R.O. 1990, Reg. 194, r. 60.11(7).

Discharging or Setting Aside Contempt Order

(8) On motion, a judge may discharge, set aside, vary or give directions in respect of an order under subrule (5) or (6) and may grant such other relief and make such other order as is just. R.R.O. 1990, Reg. 194, r. 60.11(8).

Order that Act be done by Another Person

(9) Where a person fails to comply with an order requiring the doing of an act, other than the payment of money, a judge on motion may, instead of or in addition to making a contempt order, order the act to be done, at the expense of the disobedient person, by the party enforcing the order or any other person appointed by the judge. R.R.O. 1990, Reg. 194, r. 60.11(9).

(10) The party enforcing the order and any person appointed by the judge are entitled to the costs of the motion under subrule (9) and the expenses incurred in doing the act ordered to be done, fixed by the judge or assessed by an assessment officer in accordance with Rule 58. R.R.O. 1990, Reg. 194, r. 60.11(10).

In addition to the above rules, courts have developed guidelines based on the dual role of contempt to enforce litigants’ rights in the civil process and to uphold the authority of the court to promote compliance: Boily v. Carleton Condominium Corporation 145, 2014 ONCA 574, at para. 79.

The plaintiffs’ proposal is an attempt to leverage the contempt and the carceral authority of the court for the purpose of unrelated strategic purposes in the litigation. I agree with the defendants that the plaintiffs’ reliance on transactions for which the court was unable to find the defendants in contempt amount to an overreach. Because the Spanish property has been identified and documented, the plaintiffs understandably seek to leverage the contempt finding to expand their tracing of other assets in the hands of the defendants. However, the sentencing hearing should not be used tactically as a means of obtaining unrelated procedural relief in the broader action. The penalty must address the offence and not the underlying issues in the proceeding: 907037 Ontario Inc. et al. v. Plating Plus Ltd. et al., 2024 ONSC 4594, at para. 16. A custodial sentence of 90 days to be commuted once the defendants disclose information about the other transactions would amount to a misuse of the contempt power. The contempt power must be related to the offence and be enlisted to further the interest of the party for whose benefit the court made the order.

The plaintiffs also submitted that the contemnors’ pattern of deception and obfuscation aggravated their contempt and buttressed their request for a significant custodial sentence. Ultimately, counsel for the plaintiffs abandoned reliance on the other non-disclosures and deceptions that fell short of proof on a reasonable doubt standard. The only aspect of the contempt that could have formed the basis of a separate charge for sentencing purposes, under s. 725(1)(c) of the Criminal Code, was the offence of perjury. I agree with the plaintiffs that the lies under oath were an aggravating factor requiring a serious consequence to the contemnors beyond a minimal civil sanction.

The defendants’ proposal for a fine is within the ordinary range for a monetary fine: Boily, at para. 108. Because the contemnors disobeyed the court order to hide assets, a lenient fine would provide no deterrence and resembles the cost of “doing business.” A fine in the ordinary range would not even be a slap on the wrist. A fine therefore appears inappropriate.

While the plaintiffs’ proposed sanction misses the target, an order relevant to the proceeding is more appropriate than a fine. The order needs to be more tailored to the objects of the disobeyed order. As canvassed with counsel at the hearing, the justice of the case entails recognition of an ebb and flow between the two sides on the issue of honesty before the court. The plaintiffs lost the benefit of the blanket Mareva injunction, because of their failure to make full and frank disclosure. This, in turn, was motivated by a desire to present a one-sided story that they were victims of a Ponzi scheme. They have paid for this procedural failure by losing the benefit of the injunction. Without prejudging the case, the side of the story the plaintiffs failed to disclose to Leiper J. was that the Trip Support venture could have been a foolhardy but legitimate attempt at microfinancing.

The contemnors have regained control of their property and finances, albeit diminished significantly by the impact of the asset freeze over several months. To make the punishment fit the offence, the sanction here must address the contemnors’ attempt to put the Spanish property beyond the plaintiffs’ and the court’s reach.

As in many cases in which a Mareva injunction is an instrument of litigation, the plaintiffs’ suit is in large part a recovery operation. Aside from the corporate veil issue, the issues are not complicated. Nevertheless, in Thrive Capital Management Ltd. v. Noble 1324, 2021 ONCA 722, at paras. 19-20, the Court of Appeal stated that the merits of an action may not be particularly relevant in setting a penalty for contempt. Based on the dual rationale for enforcement of the rights of a private party, and to maintain respect for court authority, sentencing focuses on the following factors:

1. proportionality of the sentence to the wrongdoing
2. mitigation
3. aggravation
4. deterrence and denunciation
5. similarity of sentences in like circumstances
6. reasonableness of a fine or incarceration.

In addition to these general principles, clause 60.11(5)(d) specifically permits the court to order the contemnor to “do or refrain from doing an act.” This, and the similar clause (f) providing for an order to “comply with any other order that the judge considers necessary” address the court’s discretion to craft a proportionate penalty focusing on the nature of the offence.

One of the obvious remedies coming out of the contempt proceeding not directly available: partial judgment for $6 million arising from the defendants’ assertion that they only owe the plaintiffs that much and not $24 million. Judgment in the subject case is not directly available as a sanction for contempt: Thrive Capital Management Ltd., at para. 32. However, a sanction providing a path to judgment, such as striking a defence, can be appropriate: para. 33. In coming to that conclusion, the Court of Appeal noted that the Alberta rules permitted judgment as a penalty, but the Ontario rules did not. As the contemnors’ counsel pointed out, the expectation of judgment against Trip Support Inc. is not certain as against the individual defendants. As stated in my previous decision in 2025 ONSC 1740, at para. 5, the connection between the plaintiffs’ funds to the property the contemnors acquired is not tenuous. The documentation restricting the liability under the promissory notes to the corporation does not necessarily help the individuals, if they used the funds to acquire properties in their personal capacities.

Since the purpose of a Mareva injunction is to sequester property before judgment, their lies under oath were calculated to defeat or circumvent the court order. Their admissions of the contempt and later provision of the transactional documents must be considered in mitigation. However, they did these things only because they had been caught in the lie. If the penalty for active hiding of assets subject to a Mareva order is a fine of $2,500 to each contemnor, it would not deter others from similar disobedience of court orders.

The appropriate sanction for the contempt must be directed at the objects of the provision of false testimony: if the object was to evade the Mareva, the obvious sanction is to restore the Mareva in some fashion in respect of the concealed property. This is not as easy as it sounds, because the property is situated in another sovereign country.

I observe that leave to obtain a writ of sequestration is also reserved under subrule 60.11(5) as a provision in the order penalizing a contemnor. The procedure is limited jurisdictionally to the authority of the sheriff in a county of Ontario. However, the principle that the court can sequester the personal and real property of a contemnor is consistent with an order requiring a contemnor to preserve an asset situated outside Ontario, if the court has jurisdiction over the person, including any corporation controlled by the person. Since this court lacks authority over the property situated in another country, the court can only exercise its authority over the contemnors domiciled in Ontario. This court can order the contemnors to do things, on pain of escalating penalties for further disobedience.

I therefore prohibit the defendants Vahid Farjami, a.k.a. Victor Farjami, a.k.a. Ahmad Vahid Farjami, and Leila Naghavi Olyaei, a.k.a. Marjan Naghavi Olyaei, from transferring, encumbering, or otherwise transacting with the Spanish property or causing others to do so, until further order of the court. As canvassed with counsel for the parties, this sanction is less than satisfactory, in that an order compelling sale of the property and payment of proceeds into court would better serve the plaintiffs as a realizable asset for recovery of judgment. In recognition of the legal presumption that the individual defendants are not personally liable until such liability is found, an order requiring the sale of the property is a step beyond the reach of this court. This, however, does not terminate the sanction arising from the contempt.

As pointed out by counsel for the plaintiffs, whatever the defence available to the individuals against personal liability, they and not inanimate corporations uttered the falsehoods under oath. Both individuals breached the order, and their purpose in doing so was to put the asset beyond reach. Their contempt was personal. Accordingly, in addition to the ban against dealing with the property, I hereby order the contemnors to instruct their Spanish agents to pay net rental income, after deduction for utilities, taxes, and property insurance, to the Accountant of the Superior Court of Justice. Such payments shall be made on a quarterly basis and will be subject to an accounting to be provided starting June 15, 2025, and every three months thereafter. Thus, until their personal liability is determined by the court, they shall derive no benefit from a property of which they disclaimed ownership. Lies have consequences.

Costs

As a further consequence of the finding of contempt and the sentencing hearing, the defendants shall pay the plaintiffs their costs of the contempt motion, both for conviction and sentencing, on a full indemnity basis. The defendants are entitled to set off from this liability the costs of the motion to set aside the Mareva injunction, but on a partial indemnity basis. If the net costs liability cannot be settled, counsel may contact my judicial assistant to obtain a schedule for exchange of bills of costs.

Edward Akazaki

Date: May 21, 2025