Court File and Parties

COURT FILE NO.: CV-15-2110-00 DATE: 2016 08 25 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: TRADE CAPITAL FINANCE CORP., Plaintiff

- and -

PETER COOK also known as PETER WILLIAM COOK, MARC D’AOUST also known as JEAN MARC D’AOUST, THOMAS BARKER also known as THOMAS RICHARD BARKER (personally and carrying on business as LC EXCHANGE, GLOBAL MEDICAL and GREENLINK CANADA GROUP), ROCKY RACCA, BRUNO DIDIOMEDE also known as BRUNO DIAIOMEDE, ALAN KEERY also known as ALAN JOHN KEERY, CHRIS BENNETT JR. also known as CHRIS BENNETT also known as CHRISTOPHER BENNETT (personally and carrying on business as CJR CONSULTING), TODD CADENHEAD, DAYAWANSA WICKRAMASINGHE, BONNY LOKUGE also known as DON BONNY LOKUGE, VIRTUCALL INC., VIRTUCALL INTERNATIONAL LLC, DEBT RESOLVE-MORTGAGE FUNDING SOLUTIONS INC. carrying on business as DEBTRESOLVE INC., THE CASH HOUSE INC., 1160376 ONTARIO LIMITED operating as THE CASH HOUSE, 2242116 ONTARIO INC. carrying on business as SUPERIOR MEDICAL SERVICES INC. and SUPERIOR MEDICAL SERVICES, CARLO MR. DE MARIA also known as CARLO VINCE DE MARIA also known as CARLO VINCENT MR. DE MARIA also known as CARLO VINCENZO MR. DE MARIA, MATTEO PENNACCHIO, FRANK ZITO also known as FRANCESCO ZITO, SIMONE SLADKOWSKI, JOBEC TRADE FINANCE INC., 1461350 ONTARIO INC., 2299430 ONTARIO INC., WF CANADA LTD., JOBEC INVESTMENTS RT LTD., GREEN LINK CANADA INC., 2339989 ONTARIO INC., 2252364 ONTARIO INC., 2224754 ONTARIO LTD., 6980023 CANADA INC. operating as LIVING BENEFITS and MILLWALK ENTERPRISES INC., OAK HILLS WATER DURHAM INC., JOSHUA COOK, ELIZABETH COOK, REBECCA COOK, MARK PINTUCCI, MARCO SANTONATO also known as MARC SANTONATO and NEW ERA RESOLUTIONS & CONSULTING INC., Defendants

BEFORE: EMERY J.

COUNSEL: Peter W. G. Carey and Christopher R. Lee, for the Plaintiff Andrew Parley and Laura Robinson, for the non-party, 2454904 Ontario Inc. Alysha Shore, for the non-party Red Quest Holdings Inc.

HEARD: June 23 and July 27, 2016

ENDORSEMENT

[1] The plaintiff, Trade Capital Finance Corp., brings this motion to compel Carlo De Maria to answer questions he did not answer at his cross-examination on May 17, 2016. Mr. De Maria was cross-examined on an affidavit he swore on March 22, 2016 in support of a motion made by 2454904 Ontario Inc. (“245”) and Red Quest Holdings Inc. (“Red Quest”) to vary a Mareva Injunction that prevents and prohibits 245 from selling or disposing of its assets. 245 seeks an order to vary that Mareva Injunction to be at liberty to sell all shares of The Cash House Inc. it currently holds to Red Quest.

[2] The sale of those shares would essentially reverse the sale by Red Quest of the same shares it transferred to 245 on March 27, 2015.

[3] Neither 245 nor Red Quest are parties to this action. The action was commenced by Trade Capital against numerous defendants to recover $6.5 million allegedly obtained from Trade Capital through fraudulent means.

[4] Trade Capital has obtained two interlocutory orders in the nature of a Mareva Injunction relevant to the proposed share sale. The first order was obtained from Justice Ricchetti on May 6, 2015 (“the first Mareva Order”). The second Mareva Order was granted by me on March 24, 2016 (“the second Mareva Order”).

[5] Neither 245 nor Red Quest is bound by the first Mareva Order; however, Mr. De Maria personally is bound.

[6] 245 is bound by the second Mareva Order; Red Quest is not.

[7] The motion to vary the second Mareva Order to allow for the sale of all shares of The Cash House Inc. held by 245 was adjourned on May 20, 2016 for the court to hear the plaintiff’s motion to compel Mr. De Maria to answer undertakings given and questions for which no answers were provided at his cross-examination on May 17, 2016. All undertakings were answered by the time the motion was argued. There remained two questions taken under advisement and 24 questions refused by or on behalf of Mr. De Maria at issue on the motion.

[8] The plaintiff also seeks an order for Mr. De Maria to answer undertakings given at his cross-examination on November 25, 2015 relating to a motion heard on December 1, 2015.

[9] On July 27, 2016, the plaintiff brought a further motion for the court to consider fresh evidence on this motion. This endorsement addresses that subsequent motion in the context of the refusals motion.

BACKGROUND

[10] The Statement of Claim alleges that numerous parties named as defendants were instrumental in a fraudulent scheme to deprive Trade Capital of $6.5 million, or were parties to whom part or some of those funds were diverted. Of the alleged $6.5 million fraudulently obtained, $4.3 million was allegedly diverted to The Cash House Inc. or its business. The Cash House Inc. at one time operated seven locations and was in the business of cheque cashing services, payday loans and foreign exchange transactions.

[11] On May 6, 2015 Justice Ricchetti granted an interlocutory order in the nature of a Mareva Injunction to Trade Capital as the plaintiff in this action against Carlo De Maria, 1160376 Ontario Ltd. (“116”) and The Cash House Inc..

[12] A motion by Mr. De Maria, 116 and The Cash House Inc. was made by Justice Ricchetti on June 1, 2015 to vary the first Mareva Order. For reasons released on June 10, 2015, that motion was dismissed.

[13] Mr. De Maria brought a further motion before Justice Ricchetti that was heard on December 9, 2015 to release certain funds from the ambit of the first Mareva Order. This variation was requested to permit the release of funds for another corporation not a party to this action to make restitution as part of a proposed settlement in an unrelated criminal proceeding. The motion also sought the release of funds to pay a legal firm acting for Mr. De Maria on the unrelated criminal proceeding and to permit the release of funds to counsel for Mr. De Maria in this action. Justice Ricchetti dismissed this motion to vary in an endorsement released on December 11, 2015. However, His Honour granted a variation of the first Mareva Order to permit Mr. De Maria a further $25,000 for legal fees in connection with this action if Mr. De Maria met certain conditions.

[14] Shortly after obtaining the first Mareva Order, Trade Capital became concerned that Mr. Khan and 245, the company he had incorporated to purchase the shares of The Cash House Inc. were breaching the terms of the first Mareva Order by operating the business of The Cash House Inc. without regard to the first Mareva Order made by Justice Ricchetti. Trade Capital therefore brought a motion asking the court to find The Cash House Inc., Mr. Khan and 245 in contempt of the first Mareva Order. For reasons released on January 21, 2016, Justice MacKenzie concluded that Trade Capital had established and satisfied the test beyond a reasonable doubt that The Cash House Inc., Mr. Khan and 245 were in contempt of the first Mareva Order.

[15] At a sentencing hearing on May 24, 2016, Justice MacKenzie sentenced Mr. Khan to a term of imprisonment for a period of 90 days, to be served intermittently on weekends from 6 p.m. on Friday evening to 6 p.m. Sunday evening commencing June 3, 2016, subject to further order of the court.

[16] Trade Capital made a motion to obtain the second Mareva Order to restrain a number of parties and non-parties related to the cause of action from dissipating their assets and other relief on March 24, 2016, without notice to those parties. The motion actually yielded two Mareva Orders. One Mareva Order, which has been described as the second Mareva Order in this action, was made against 245, Mr. Khan, Tax Tag Inc. and 2497743 Ontario Limited as Mareva respondents. The other Mareva Order made on March 24, 2016 was made against the defendant Simone Sladkowski and Mark Pintucci. Mr. Pintucci was later joined as a defendant by leave of this court on May 31, 2016.

[17] 245 and Red Quest have now brought a motion to vary the Second Mareva Order to permit the proposed transfer of shares in The Cash House Inc. from 245 back to Red Quest. Mr. De Maria has sworn an affidavit dated March 22, 2016 in support of that motion. In that affidavit, Mr. De Maria expressly states that Red Quest has appointed him to act as its agent for the purposes of that affidavit and related motions. He attaches a letter from Red Quest as an exhibit to his affidavit as authority that he has been appointed to act as its agent. The letter is also dated March 22, 2016 and is signed by his mother, Linda De Maria, as the president and sole director of Red Quest Holdings Ltd.

[18] Mr. De Maria deposes that he is a director and part owner of the defendant, 116. He also explains that he is the former director and previously owned The Cash House Inc. Mr. De Maria describes how and why he transferred ownership of the shares and trademarks of The Cash House Inc. to Red Quest, which he describes as a holding company now owned exclusively by his mother, Linda De Maria. Although the shares in The Cash House Inc. were transferred to Red Quest in 2010, he remained a director of The Cash House Inc. and continued to run all of its operations after that time.

[19] Mr. De Maria also describes two events that, in his view, have curtailed the business prospects of The Cash House Inc.

[20] The first event occurred in July 2014 when Mr. De Maria was charged with certain criminal offences. He states that those criminal charges have nothing whatsoever to do with the claims alleged in this action. The existence of the criminal charges against him had a significant impact on the ability of The Cash House Inc. to operate, to renew its necessary licencing and to maintain its banking privileges and business connections to conduct financial transactions.

[21] Prior to March 2016, The Cash House Inc. operated in an industry that is regulated by various government agencies. The Cash House Inc. was subject to annual licencing requirements as a money services business. The nature of its business required that it be registered with the Financial Transactions and Reports Analysis Centre of Canada (“FINTRAC”). It was also subject to the requirement that it be licenced under the (Ontario) Payday Loans Act. This licence was reviewed and renewed on an annual basis.

[22] Mr. De Maria deposes that, in addition to the change and deterioration in the relationship between The Cash House Inc., its suppliers and bankers, he believed the licence of The Cash House Inc. to conduct business under the Payday Loans Act would not be renewed because of the criminal charges against him. Without the necessary licence to provide payday loan services, he states there was no value in The Cash House Inc. other than the leasehold improvements made to its various locations.

[23] The second event occurred in the context of a legal action The Cash House Inc. had commenced for the recovery of funds for a fraud that had been perpetrated against it. The Cash House Inc. had been successful in obtaining a judgment against one of the defendants in that action, but not against other defendants. As a result, the court had ordered The Cash House Inc. to pay costs totalling $286,684.24 to the defendants who had successfully opposed the action.

[24] Mr. De Maria states that the costs order made against The Cash House Inc. was not disclosed to Mr. Khan during the negotiations to purchase its shares. Mr. De Maria states that Mr. Khan heard about the costs order for the first time in November 2015.

[25] Mr. Khan has not sworn an affidavit in support of the motion to vary brought by 245 and Red Quest. No one else has filed an affidavit by or on behalf of 245 in support of the motion. No one other than Mr. De Maria has filed an affidavit on behalf of Red Quest.

[26] Mr. De Maria states that he sold the shares in The Cash House Inc. for $1,000,000 payable over four years. The shares were sold under a share purchase agreement dated February 3, 2015 to salvage the business and to extract any value of The Cash House Inc. in advance of the expiry date for its licence. The share purchase agreement showed Red Quest Holdings Inc. as the vendor. The share purchase agreement describes the purchaser as Osman Khan in trust for a company to be incorporated. That company became 245.

[27] The sale of The Cash House Inc. from Red Quest to 245 under the share purchase agreement closed on March 27, 2015. A cash payment of $40,000 was paid by 245 to Red Quest on closing. The second installment of the purchase price under the terms of the share purchase agreement was due one year later, on March 27, 2016.

[28] Mr. De Maria candidly admits that the transition of the operating business from Red Quest to the new owners of The Cash House Inc. was not completed at the time the share sale closed. He states that he intended to educate and train Mr. Khan over time regarding the inner workings of the business Mr. Khan had purchased. This education and training would include training Mr. Khan on the operations of the individual stores and the cash flow management systems.

[29] Two interruptions to the business plan occurred subsequent to the closing of the share purchase in March 2015. The first occurred when the court granted the first Mareva Order. Mr. De Maria states that both he and Mr. Khan turned their focus to the litigation with Trade Capital. Consequently, they never moved forward with the transition according to plan. According to Mr. De Maria, Mr. Khan was never properly trained and educated on the operation of The Cash House Inc. stores. Mr. De Maria deposes that the stores were ultimately closed at the end of 2015.

[30] The second development occurred when a bailiff attended at The Cash House Inc. location on Bathurst Street in Toronto to collect on the costs order issued against The Cash House Inc. in the unrelated litigation.

[31] Mr. De Maria states in his affidavit that because the costs orders in the unrelated litigation were never disclosed, Mr. Khan is now demanding that the sale agreement “be rescinded”. Mr. De Maria states that Mr. Khan has advised Red Quest that he will not be making any further payments under the sale agreement.

[32] Mr. De Maria states at paragraph 30 of his affidavit that “on behalf of Red Quest, in my capacity as its agent, I can advise that Red Quest consents to the rescission of the sale agreement for all of the reasons described above.”

[33] Mr. De Maria also states at paragraph 32 of his affidavit that he and Red Quest will assume responsibility for the continuing obligations of The Cash House Inc. under the terms of the first Mareva Order, and the orders of Justice McKenzie once the sale of shares has been reversed.

[34] Mr. De Maria was cross-examined on his affidavit by counsel for Trade Capital on May 17, 2016. At that cross-examination, six undertakings were given, two questions were taken under advisement and a refusal was provided by or on behalf of Mr. De Maria to answer 24 further questions.

[35] The undertakings given at Mr. De Maria’s cross-examination on May 17, 2016 have now been answered. Those answers are attached to the affidavit of Kelly Hayden, a student-at-law at Lenczner Slaght Royce Smith Griffin LLP, counsel for The Cash House Inc., 245 and Mr. Khan in a supplementary motion record filed on the motion to vary. The motion record and the supplementary motion record were before me on this motion to determine the scope and relevance of the questions at issue. I therefore consider them to be proper materials on this motion to determine whether Mr. De Maria should be ordered to answer some or all of the remaining questions.

ANALYSIS

[36] Trade Capital seeks an order compelling Mr. De Maria to answer the questions taken under advisement and questions refused by him or on his behalf at his cross-examination on May 17, 2016. The information Trade Capital seeks through those answers relates not only to the pending motion to vary, but also to the larger issues in the action itself.

Motion To Consider Fresh Evidence

[37] In the course of preparing this endorsement for the motion heard on June 23, 2016, I was advised that counsel for the plaintiff had received documentation from a third-party, Buduchnist Credit Union (“BCU”) after that date. BCU was the deposit and lending institution where the Cash House Inc. maintained its accounts, and through which it conducted much of its business to negotiate cheques. On May 20, 2016, I had made an order for BCU to make disclosure of certain documentation required in that order with respect to the second Mareva injunction. The Plaintiff was directed to bring a motion for the court to consider fresh evidence. The motion to consider fresh evidence was heard on July 27, 2016.

[38] At the motion to consider fresh evidence, the plaintiff gave evidence that BCU has now provided certain documents pursuant to the disclosure order. A package of documents had been received by counsel for Trade Capital on July 5, 2016. The documents contained a cover letter from BCU and a BCU Bank Account Activities Statement for “CHATS” bearing member number 000069380 for the period January 1, 2016 to January 31, 2016. The documents also included a cheque image report showing the front and back images of various cheques written to “CHATS” by DoUknow Inc. on an account in its name at TD Canada Trust.

[39] The cover letter dated July 5, 2016 from BCU in the document package stated, in part, as follows:

RE: CHATS Account

Please find enclosed copies of transactions posted to the above account from Wednesday, January 6, to Monday January, 11, 2016 inclusive. Please note that cheques that were charged back to the account also indicate the date of deposit. However, if other cheques deposited are required, please let us know and we will provide copies.

All other items, cheques cleared and wired transactions for the period have been included. Transfers between the various CHATS accounts are clearly indicated as well as transfers to other BCU accounts, namely, Kantor Currency Exchange and GTA Financial and Investments.

[40] Trade Capital takes the position that this third-party disclosure may assist or enhance my ability to decide whether the questions I have been asked on the refusal’s motion should be answered. Trade Capital argues that the answers that may be ordered are relevant to the underlying motion brought by Red Quest and 245 to vary the first Mareva Order. It is submitted that the disclosure shows cheques were written by DoUknow Inc. to CHATS, which I am told is an acronym for The Cash House Inc., while the first Mareva Order was in place. Trade Capital contends that these cheques are evidence that Mr. De Maria, through his company DoUknow Inc. was negotiating funds and that The Cash House Inc. was operating when all such activity was subject to the first Mareva Order. This in turn is relevant to the underlying motion to vary that Mareva Order because it reflects on the true value of The Cash House Inc.

[41] Red Quest and 245 argue that the court should re-open a hearing or to admit fresh evidence if, and only if, each part of the following two part test is satisfied:

a.) The evidence is such that, if it had been presented at trial, it would probably have changed the results; and

b.) The evidence could not have been obtained by reasonable diligence before the trial.

[42] The counsel for 245 and Red Quest concede that the second part of the test is met. The evidence put forward by the fresh evidence motion was not available to the plaintiff, and could not have been obtained from BCU by reasonable diligence before the motion was heard on June 23, 2016. However, those parties argue that Trade Capital has the onus as the moving party to satisfy the first part of the test: Scott v. Cook, 970 Carswell Ont. 253, also at , [1970] 2 O.R. 769. 245 and 671122 Ontario Ltd. v. Sagaz Industries Canada Inc., 2001 SCC 59 at para. 61.

[43] Trade Capital relies on Jackson v. Vaughan (City), 2009 Carswell Ont. 152 as authority to argue the court will take a more permissive approach to admit fresh evidence if there is a possibility that the fresh evidence could assist the trier of fact in circumstances where a matter has been heard, but the decision had not yet been released. Lauwers J., when a judge of this court, concluded in Jackson that the standard to admit fresh evidence expressed by the Supreme Court of Canada in 671122 Ontario Ltd. v. Sagaz Industries should be “somewhat relaxed” where additional evidence was offered prior to the release of any judgment.

[44] Trade Capital submits that even though it has taken the position that the first part of the test requires a lower threshold, it has met the test under either standard.

[45] Implicit in the argument made by Trade Capital or the position taken by 245 and Red Quest is the requirement under either standard that the fresh evidence proposed must be relevant to the issues on the motion. If the fresh evidence proposed by Trade Capital does not meet the relevance threshold, it does not matter what standard is applied for the first part of the test.

[46] DoUknow Inc. is not a party to this action. It is not subject to any Mareva Order made to date except insofar as its shares are arguably owned by Mr. De Maria. To that extent, those shares are frozen by the first Mareva Order.

[47] It is clear that the new information from BCU extends to the banking activities of The Cash House Inc. through its CHATS account, including the cheques written by DoUknow Inc. to CHATS between December 31, 2015 and January 7, 2016. These cheques total an astounding $9,792,000. The cover letter from BCU explains that these cheques were “charged back” to the CHATS account, as shown in the enclosed BCU Account Activities Statement. How the mechanism of a “charge back” operates in such circumstances is not given in the evidence on the motion. However, it would appear that the “charge back” of a particular cheque resulted in the reversal of the payment made by that cheque so that funds were not transferred or retained.

Motion For Answers

[48] Trade Capital states that the court has found on previous motions that Mr. De Maria has not made full disclosure of assets under his ownership or control as required by the first Mareva Order.

[49] The court in Burgoyne Holdings Inc. v. Magda, [1997] O.J. No. 3680, held that when a defendant is seeking a variation of a Mareva Order for the release of funds, that defendant is required to be “meticulously forthright in his disclosure”. As indicated in footnote 10 of that decision, counsel for the plaintiff made the submission that the defendant must come to the court with “clean hands”. This further emphasizes that the discretion to vary a Mareva Order is an exercise of discretion within the equitable jurisdiction of the court, and subject to the rules of equity.

[50] The plaintiff argues that as the court was exercising its equitable jurisdiction to grant the first Mareva Order, so must an order to vary a Mareva injunction be equitable in nature and subject to the same considerations. Trade Capital argues on a general principle that if Mr. De Maria has not complied with the first Mareva Order, he is in no position to ask the court to exercise its equitable jurisdiction to grant an order that varies its scope.

[51] In Canadian Imperial Bank of Commerce v. Credit Valley Institute of Business and Technology, [2003] O.J. No. 40., Justice Molloy identified the purpose of a Mareva injunction in the following terms:

17 The purpose of the Mareva injunction is a limited one. It is meant to restrain a defendant from taking unusual steps to put his assets beyond the reach of the plaintiff in order to thwart any judgment the plaintiff might eventually obtain. It is not meant to give the plaintiff any priority over other creditors of the defendant, nor to prevent the defendant from carrying on business in the usual course and paying other creditors. The nature of the Mareva is such that it is typically sought and granted, in the first instance, without notice to the defendant, but then is subject to a motion by the defendant to vary the injunction to permit payments in the usual course of business or living. As was noted by the English Queen's Bench in Iraqi Minister of Defence v. Arcepey Shipping Co. S.A., [1980] 2 W.L.R 480 at 485-486:

... the point of the Mareva jurisdiction is to proceed by stealth, to pre-empt any action by the defendant to remove his assets from the jurisdiction. To achieve that result the injunction must be in a wide form because, for example, a transfer by the defendant to a collaborator in the jurisdiction could lead to a transfer of assets abroad by that collaborator. But it does not follow that, having established the injunction, the court should not thereafter permit a qualification to it to allow a transfer of assets by the defendant if the defendant satisfies the court that he requires the money for a purpose which does not conflict with the policy underlying the Mareva jurisdiction.

... For my part, I do not believe that the Mareva jurisdiction was intended to rewrite the English law of insolvency in this way. Indeed it is clear from the authorities that the purpose of the Mareva was not to improve the position of the claimants in an insolvency but to prevent the injustice of a foreign defendant removing his assets from the jurisdiction which might otherwise have been available to satisfy a judgment.

[52] Trade Capital submits that the evidence given by Mr. De Maria about the ownership of shares in The Cash House Inc. to date in this action has been equivocal, if not ambiguous. In the affidavit material on previous motions, Mr. De Maria refers to the shares of The Cash House Inc. as his own. In other places, he refers to himself as the owner of those shares. In contrast, he now states in his evidence on the motion to vary that Red Quest has been the owner of the shares since they were transferred in 2010.

[53] Trade Capital argues that it has been accepted by the court on previous motions in this action that a prima facie claim of fraud has been made out, at least for the purpose of granting the first Mareva Order and the second Mareva Order. This prima facie finding was reinforced when Justice MacKenzie found that the business of The Cash House Inc. continued to operate through 245 after Justice Ricchetti granted the first Mareva Order, for which Mr. Khan has been found in contempt.

[54] 245 and Red Quest now seek an order to vary the second Mareva Order to permit the transfer of the shares in The Cash House Inc. back to Red Quest. This, according to the plaintiff, raises a concern about the purpose of the proposed transaction, particularly since there was evidence on the motion that Mr. De Maria received at least one payment of $330,000 from The Cash House Inc. business since Red Quest transferred its shares to 245 in March 2015. Then there is the fresh evidence that cheques in excess of $9 million were written to CHATS in early 2016.

[55] Trade Capital submits that the court should be concerned that The Cash House Inc. business continued notwithstanding the granting of either the first Mareva Order or the second Mareva Order and their intended effect.

[56] 245 and Red Quest take the position that all of these arguments are not relevant to this motion. On this motion, the only focus should be on the questions themselves and their relevance to the underlying motion.

The Law

[57] This motion is brought under Rule 34.12(3) and Rule 34.15(1)(a) of the Rules of Civil Procedure to compel answers to questions that the plaintiff submits Mr. De Maria improperly refused to answer at his cross-examination on May 17, 2016. Trade Capital seeks an order compelling Mr. De Maria to re-attend a cross-examination to answer those questions, and any questions arising from those answers. At this stage, Trade Capital seeks no other sanction for his refusal to answer those questions.

[58] The scope of questions a witness may be asked on a cross-examination is limited, and less broad than on an examination for discovery. Master MacLeod, as he then was, discussed those limits and the requirement that questions be relevant to those matters within the permitted scope of the cross-examination in Caputo v. Imperial Tobacco Ltd., [2002] O.J. No. 3767. Master MacLeod summarized the rules governing scope and relevance for questions on a cross-examination as follows:

14 A deponent may be cross examined on any fact set out in his or her affidavit but also on any fact in his or her knowledge which is relevant to the determination of the motion. Cross examination may also be directed towards the credibility of the evidence. I was referred to Master Beaudoin's decision in BASF Canada Inc. v. Max Auto Supply (1986) Inc., [1998] O.J. No. 3676; (1998), 75 O.T.C. 58 (Master) which reviewed the law in this area. I recently followed that decision in another class action motion in which I had the following to say: 3

[16] The test of relevance on cross examination for use on a motion is the same as on discovery, "semblance of relevance". The measure of relevance, however, is what is relevant on the motion and not in the action as a whole. Relevance is further defined by the affidavit material. If a fact is deposed in an affidavit tendered for use on the motion, the deponent may be cross examined on that fact. The affidavit, however, does not limit the scope of relevance. A deponent may be examined on facts relevant to the motion in his or her knowledge even if they are not his or her affidavit. On the other hand, just because a fact is deposed in one party's affidavit does not permit that party to cross examine the other on the fact if it is not otherwise relevant. Questions may also be asked to test the credibility of the facts deposed or the answers given although questions otherwise irrelevant which are directed solely at credibility are improper. See BASF Canada Inc. v. Max Auto Supply (1986) Inc., [1998] O.J. No. 3676; (1998), 75 O.T.C. 58 (Master).

[17] A simplified version of these rules is as follows:

• If you put it in, you admit its relevance and can be cross examined on it - at least within the four corners of the affidavit;
• You can't avoid cross examination on a relevant issue by leaving it out;
• You can't get the right to cross examine on an irrelevant issue by putting it in your own affidavit; and,
• You can be cross examined on the truth of facts deposed or answers given but not on irrelevant issues directed solely at credibility.

[59] The court in Caputo also considered the purpose of a question on cross-examination to determine the relevance of that question to the subject matter from the perspective of the judge who ultimately hears the motion. Master MacLeod concluded that:

To the extent that this is a screening function, it is a widescreen. Any proper question which may lead to evidence that could legitimately influence the judge hearing the motion should be allowed. To exclude potentially relevant evidence by two narrow a definition of relevance is to usurp the function of the motions judge.

[60] In a case decided after the amendment to the Rules of Civil Procedure in 2010, Master Haberman in Ramspen Investment Corp. v. Woods, 2010 ONSC 30005, [2010] O.J. No. 2546 at paragraph 16 explained the distinction between relevance and the previous standard of semblance of relevance this way:

16 In view of recent amendments to the Rules, the degree of connection between the question asked and the matters in issue is now relevance, rather than "semblance of relevance". I am of the view that, in most instances, there is no significant difference between the two standards of disclosure. At the end of the day, regardless of whether the test is relevance or semblance thereof, the approach comes down to this: subject to privilege, if the question asked could elicit a response that the trial judge could rely on to resolve a matter in issue before him, the test has been met - the question asked is relevant.

[61] Justice Perell provided a most helpful synopsis of various principles that govern the scope of a cross-examination of an affiant for an application or motion in Ontario v. Rothmans Inc, 2011 ONSC 2504. Of the several principles set out in paragraph 143 of that decision, the following are applicable to this motion:

• The scope of a cross-examination of a deponent for an application or motion is narrower than an examination for discovery: BOT Construction (Ontario) Ltd. v. Dumoulin, [2007] O.J. No. 4435 (S.C.J.) at para. 6.
• A cross-examination is not a substitute for examinations for discovery or for the production of documents available under the Rules of Civil Procedure: BOT Construction (Ontario) Ltd. v. Dumoulin, supra at para. 7; Westminer Canada Holdings Ltd. v. Coughlan, [1989] O.J. No. 252 (Master), aff'd [1989] O.J. No. 3038 (H.C.J.).
• The examining party may not ask questions on issues that go beyond the scope of the cross-examination for the application or motion: Thomson v. Thomson, [1948] O.W.N. 137 (H.C.J.); Toronto Board of Education Staff Credit Union Ltd. v. Skinner, [1984] O.J. No. 478 (H.C.J.) at para. 12; Westminer Canada Holdings Ltd. v. Coughlan, [1989] O.J. No. 3038 (H.C.J.).
• The proper scope of the cross-examination of a deponent for an application or motion will vary depending upon the nature of the application or motion: Blum v. Sweet Ripe Drink Inc. (1991), 47 C.P.C. (2d) 263 (Ont. Master); Moyle v. Palmerston Police Services Board (1995), 25 O.R. (3d) 127 (Div. Ct.).
• The scope of cross-examination in respect to credibility does not extend to a cross-examination to impeach the character of the deponent: Moyle v. Palmerston Police Services Board (1995), 25 O.R. (3d) 127 (Div. Ct.).

[62] With those principles in mind, I now turn to the questions at issue from the cross-examination of Mr. De Maria on May 17, 2016.

Question 20 and 150

[63] The question asked of Mr. De Maria at question 20 was to produce a complete list of all of Red Quest’s assets, including bank accounts with account numbers and bank statements for the last year. The purpose given for asking this question was to determine the true ownership of Red Quest. Although Mr. De Maria describes in his affidavit that he was appointed for the purposes of giving the affidavit as the agent for Red Quest, Red Quest is not a defendant in the action, and neither Mareva Order extends to Red Quest or its assets. I do not see on the evidence how the answer to this question may assist me to determine an issue on the motion to vary. Therefore, I do not consider this question to be relevant.

[64] Question 150 asks Mr. De Maria to provide Mr. Bergman’s source of knowledge for his statement “Mr. Bergman understands that The Cash House Inc. has difficulty with the licence renewal process”. Mr. Bergman is the criminal lawyer for Mr. De Maria on the charges he is facing in an unrelated matter. The purpose given for asking this question is to determine the true ownership of Red Quest. According to the theory of the plaintiff, Mr. De Maria directly or indirectly owned the shares of The Cash House Inc. Mr. De Maria would therefore directly or indirectly be purchasing back the shares of The Cash House Inc. This does not inform the court about the true ownership of Red Quest but rather, who owned the shares in The Cash House Inc. itself.

[65] Red Quest also refers to the answers to undertakings attached to the supplementary motion record filed by 245 that show that Mr. De Maria’s parents have owned Red Quest since it was incorporated in the year 2000. Those answers show that Mr. De Maria’s mother, Linda De Maria has been the sole shareholder of Red Quest since 2010. The answers to these undertakings filed on the motion in the Responding Motion Record form part of Mr. De Maria’s examination.

[66] I therefore consider that no answer is required to questions 20 and 150 as they either have no bearing on an issue in the underlying motion, or sufficient information has already been provided to answer the question asked.

Questions 71 to 74, 76, 87 to 91 and 93

[67] Each of these questions asks for information about who is paying personal expenses for Mr. De Maria, or alternatively, if and how he has paid those expenses. The purpose given for asking each of these questions is to determine the ownership of Red Quest and value of The Cash House Inc. I do not consider any of these questions relevant as there is no connection to either the purpose given between the question and the motion to vary, or the purpose for asking it.

Questions 101 to 104, and 107 to 110

[68] Vicar Homes Ltd. is a corporation Mr. De Maria owned with his father. Vicar Homes Ltd. owns rental properties for which it collects rent from tenants. The plaintiff asked 10 questions relating to either Vicar Homes Ltd. or those rental properties and the rents it collects for the given purpose of determining the ownership of Red Quest and the value of The Cash House Inc. No link has been established between Vicar Homes, 245 or Red Quest to the stated purpose for asking these questions.

[69] Those questions have no relevance to the underlying issues, the parties to the proposed transaction or the transaction itself for which the motion to vary is brought. They need not be answered.

Questions 118, 119 and 121

[70] The plaintiff asked three questions relating to the employees, revenues and funding of DoUKnow Inc., a company owned by Mr. De Maria.

[71] The fresh evidence that Trade Capital seeks to have the court admit on the motion to compel answers on questions taken under advisement and refused relate to the cheques written by DoUknow Inc. to CHATS. There are only three questions relating to DoUknow Inc. at issue on the refusal’s motion: questions 118, 119 and 121.

[72] Question 118 relates to the employees of DoUknow, question 119 relates to what incoming revenues DoUknow received or expected, and question 121 relates to what money DoUKnow provided for operating capital. I fail to see the relevance of questions 118 and 119 to the proposed transaction or to 245 or Red Quest. The fresh evidence will not assist or enhance the trier of fact to determine the relevance of those questions on the motion to vary. The information contained in the documents provided by BCU on July 5, 2016 may be relevant to another motion or to the greater action, but they are not relevant to the questions at issue on the motion.

[73] Since Mr. De Maria is a principal of DoUKnow Inc. the fresh evidence that DoUKnow Inc. wrote cheques within an 11 day period totalling $9,792,000 to “CHATS” connects the source of the funds to The Cash House Inc. to an extent sufficient to establish relevance, and is therefore allowed. The answer to question 121 about what money DoUKnow Inc. provided for operating capital after the first Mareva Order was in place will assist the motions judge on the motion to vary to appreciate the true value of The Cash House Inc. shares. It is also relevant to the issue of whether Red Quest proposes to pay an amount equal to the true value of those shares. There shall be an order that Mr. De Maria answer question 121, and to re-attend and be examined on all questions arising from that answer.

UNDERTAKINGS FROM NOVEMBER 25, 2015

[74] The plaintiff also seeks answers to undertakings given by Mr. De Maria on November 25, 2015 when he was cross-examined on his affidavit filed in support of the motion to vary heard by Justice Ricchetti on December 1, 2015. I do not propose to consider the relevance of those undertakings in order to determine whether they should be answered because they are moot.

[75] In Willekes v. University of Alberta Hospitals, 2010 ONSC 1331, Master Haberman addressed circumstances where a court should exercise its discretion and decline to decide a motion which raises a hypothetical or abstract question, and instances when it would be useful for the court to adjudicate an issue that may have some applicability elsewhere in the action.

[76] Master Haberman considered the two-step process developed by Justice Sopinka in R. v Morgentaler, [1988] CarswellOnt 45 (S.C.C.) to make that call. The court is directed as a first step to determine whether a tangible dispute has been resolved to the extent that the issues before the court have become academic. In that event, the proceeding is considered moot. However, even after making that determination, the court retains a discretion to adjudicate the issue “if circumstances warrant”. At that time, the court must consider whether circumstances exist that would justify a departure from the general rule that the court should not adjudicate issues that are moot.

[77] In Willekes, the court was to hear a motion for summary judgment seeking an ultimate disposition of the case and an affiant had been cross-examined and had given undertakings. The motion was subsequently withdrawn. The answers to those undertakings would have likely had utility elsewhere in that action at trial. Within the framework of Hryniak v. Mauldin, 2014 SCC 7, [2014] S.C.J. No. 7, a motion for summary judgment is an equally viable procedure to seek a fair and just determination of issues in dispute. Therefore, answers obtained from undertakings given at a cross-examination in the context of a motion for summary judgment may be of equal use later at a conventional trial.

[78] Here, I do not find there to be circumstances that warrant a departure from the general rule that the court should not adjudicate issues that have become moot. The undertakings were spent when Justice Ricchetti heard the second motion to vary on December 1, 2015. Therefore, the motion to answer those undertakings is dismissed, without prejudice to ask those questions again at an examination for discovery.

Conclusion

[79] I therefore make the following orders:

(1) The motion of the plaintiff to file fresh evidence on the motion is granted to the extent necessary to obtain the order for Mr. De Maria to answer question 121, and the balance of that motion is dismissed.

(2) The motion to enforce the undertakings given at Mr. De Maria’s cross-examination on May 17, 2016 is dismissed, without costs.

(3) The motion to enforce questions taken under advisement at Mr. De Maria’s cross-examination on May 17, 2016 is dismissed.

(4) The motion to compel the answer to question 121 refused at Mr. De Maria’s cross-examination on May 17, 2016, is granted. Mr. De Maria shall answer question 121 and re-attend at a follow-up cross-examination to answer all questions arising from that answer.

(5) The balance of the motion to compel answers to questions refused at Mr. De Maria’s cross-examination on May 17, 2016 is dismissed.

(6) The motion to enforce undertakings that were given by Mr. De Maria at his cross-examination on November 15, 2015 is dismissed.

[80] I would ask the parties to use their best efforts to resolve the issue of costs for this motion, and for the attendance on May 20, 2016. Otherwise, any party seeking costs shall file submissions consisting of no more than three pages, not including dockets or other supporting materials, by September 9, 2016. Any party from whom costs are sought shall have until September 16, 2016 to file responding materials, subject to the same page limits. No reply submissions are permitted without leave. All submissions may be filed by fax to my judicial assistant, Mr. Christopher Charles at 905-456-4834 or by delivery to the trial coordinator’s office in Brampton.

Emery J. Date: August 25, 2016