COURT FILE NO.: CV-19-70573

DATE: 20210920

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Business Development Bank of Canada, Plaintiff

AND:

Imex Systems Inc. and Damodar Arapakota, Defendants

BEFORE: Justice D.A. Broad

COUNSEL: Rosemary A. Fisher, for BDC

Defendant Damodar Arapakota – self-represented

HEARD: July 29, 2021

ENDORSEMENT

[1] By letter from former Regional Senior Judge Harrison Arrell dated August 27, 2020 I was appointed to Case Manage this proceeding pursuant to the Civil Case Management Pilot – One Judge Model (the “Pilot”).

[2] At the first Case Management Conference held on November 20, 2020 the parties each confirmed their consent to the terms of the Pilot. Specifically, the parties consented to (1) the case management judge also presiding at the trial, and (2) that no formal interlocutory motions shall be scheduled unless the case management judge orders otherwise (with the exception of motions for recusal).

[3] In the context of the motion for summary judgment of the plaintiff (“BDC”) against the defendant Damodar Arapakota (“Mr. Arapakota”) Mr. Arapakota conducted cross-examinations of three employees of BDC. Certain questions posed by Mr. Arapakota were refused by each of the three witnesses.

[4] Mr. Arapakota brought a motion requiring that the questions refused by the BDC witnesses be answered.

[5] For brief oral reasons following completion of submissions I dismissed Mr. Arapakota’s motion with fuller written reasons to follow. The following are those written reasons.

Pleadings

[6] By Statement of Claim issued September 12, 2019 the plaintiff (“BDC”) brought action against Imex and Mr. Arapakota seeking payment of the liquidated sum of $142,589.32 alleged to be owing by Imex as principal debtor in respect of four loans advanced by BDC to it (the “Loans”), each of which were guaranteed by the defendant Mr. Arapakota pursuant to written guarantees executed by him dated July 24, 2013, January 22, 2016, August 25, 2016 and April 26, 2017 respectively (the “Guarantees”).

[7] The Statement of Claim alleges that, by registered letter stated April 11, 2019, BDC made written demand for payment of the outstanding amount due in respect of the Loans and that on April 11, 2019 BDC and the defendants entered into a Forbearance Agreement which expired on September 1, 2019. The Statement of Claim further alleges that no payment has been received by BDC consequent to the demand for payment.

[8] By the Fresh as Amended Statement of Defence, Cross-Claim and Counterclaim dated November 26, 2020 Mr. Arapakota alleged, inter alia, as follows:

(a) at relevant times he was a director and CEO of Imex until he resigned on or about February 22, 2018;

(b) as of the date of his pleading he was not a shareholder of Imex:

(c) he denied that he agreed to personally guarantee the performance of Imex’s obligations under the Loans or that he executed a guarantee in favour of BDC as alleged, or at all;

(d) in the alternative, if he executed the Guarantees he did so solely as a result of certain representations made to him by BDC and certain third parties related to and/or who did not deal at arm’s length with BDC;

(e) at no point did representatives of BDC advise him that the documents that he was requested to sign in respect of each Loan contained a personal guarantee in favour of BDC and he was not advised by the representatives of BDC to obtain independent legal advice in respect of the documents;

(f) in or about 2016 Imex became publicly listed on the TSX-V and on or about February 22, 2018 he was forced to resign as CEO and as a director of Imex;

(g) the directors and officers of Imex and BDC conspired to mislead him about the financial status of Imex, the status of the Loans and his obligations pursuant to the Guarantees;

(h) following receipt of a demand letter from BDC on or about April 11, 2019 indicating that Imex was in default of its payment obligations to BDC, BDC and Imex entered into a forbearance agreement on or about April 23, 2019. He was not advised by either Imex or BDC that the forbearance agreement was, in substance, a further loan guarantee which negatively impacted his rights, and he was not given an opportunity to obtain legal advice before signing the document;

(i) he was “hoodwinked” by Imex and BDC into giving a further guarantee of Imex’ indebtedness;

(j) BDC misrepresented the terms of the Loans in the manner set forth in the Statement of Defence;

(k) BDC has been unjustly enriched by its actions at his expense and as a result of the conduct of BDC, he has suffered and will continue to suffer damages;

(l) he pleads and relies on the doctrine of non est factum and he should be relieved from the obligations contained in the Guarantees;

(m) none of the monies loaned by BDC to Imex were used by him personally and all such monies were for Imex’ use only;

(n) the Guarantees had an express and/or implied term that he could only be personally responsible for any obligation owed by Imex as long as he was CEO of Imex and any obligation he had to BDC ceased on or about February 22, 2019 (sic);

(o) it would be unconscionable, unfair, unreasonable or otherwise contrary to public policy to enforce the provisions of any contracts in any manner that would require him to personally pay monies owed by Imex to BDC in the circumstances;

(p) BDC breached the terms of any contracts he entered into with BDC by failing to enforce them in a timely and proper manner including failing to make reasonable efforts to collect from Imex, thereby discharging him from any liability under any contracts that purport to bind him personally;

(q) any losses suffered by BDC were caused or contributed by its own negligence, including by failing to take due care in collecting from Imex.

[9] Imex did not defend the action and BDC has obtained default judgment against it.

Motion for summary judgment

[10] BDC has brought a motion for summary judgment against Mr. Arapakota on the basis that his Statement of Defence does not disclose a genuine issue requiring a trial. Mr. Arapakota opposes the motion for summary judgment and has delivered a responding affidavit.

[11] BDC’s motion for summary judgment was supported by the affidavits of two affiants Golda D’Souza and Tanisha Hinds. Ms. D’Souza is an employee of BDC and Ms. Hinds is a litigation law clerk employed by counsel for BDC.

Cross examinations

[12] Mr. Arapakota was cross examined by counsel for BDC on his affidavit in response to the motion for summary judgment.

[13] Mr. Arapakota conducted cross-examinations of BDC’s affiants Golda D’Souza and Tanisha Hinds and two other employees of BDC named as third-party defendants to Mr. Arapakota’s Third Party Claim Jasmin Ganie-Hobbs and Shane Lee.

[14] Mr. Arapakota has brought a motion for an order that certain questions refused or taken under advisement by Golda D’Souza, Jasmin Ganie-Hobbs and Shane Lee be answered and that, if necessary, each of them re-attend for further cross examination to answer questions refused or taken under advisement on their cross-examinations.

Questions refused by BDC’s employees on cross-examination

[15] According to BDC’s motion material, the outstanding questions which Golda D’Souza, Jasmin Ganie-Hobbs and Shane Lee, respectively, have refused to answer and BDC’s stated basis for refusal are as follows:

(a) Golda D’Souza

Q. 142

To provide a copy of the loan file with all documents related to the loan

The defendant has the relevant documents comprising the contracts between Imex and the Bank and the guarantor and the bank

Q. 208

To provide copies of the loan files with all documents related to the 07 loan and the 10 loan

See re Q. 142 above

(b) Jasmin Ganie-Hobbs

Q. 27

To advise if she is aware of all the rules and regulations related to loans

Question is not specific

Q. 28

To advise how many loans she had processed by the time the loan to Imex was advanced

Question is not reasonable

Q. 94

To provide a copy of the entire loan file

The defendant has the relevant documents comprising the contracts between Imex and the bank and the guarantor and the bank

Q. 130

To provide a copy of the full file with everything in it

Not relevant since the loan was approved. Mr. Arapakota’s liability on the personal guarantees is the relevant issue

Q. 231

To advise if she understood that Mr. Mr. Arapakota understood legal language

The phrase “legal language” makes this question improper. Ms. Ganie-Hobbs had no reason to believe that. Mr. Arapakota did not understand the documents that he signed as he did not signify same or indicate that he had any questions. More importantly, he never indicated that he did not actually read them.

(c) Shane Lee

Q. 142

To provide a copy of the loan file with all documents related to the loan

The defendant is in possession of the relevant loan file documents and specifically, the loan contract between BDC and Imex and the guarantee contract between BDC and Damodar Mr. Arapakota

Q. 208

To provide copies of the loan files with all documents related to the 07 and the 10 loan

See re Q. 142 above

[16] In his Reply affidavit on the motion Mr. Arapakota deposed that the issue for determination by the court on the Motion is the production by BDC of the entire files relating to the Loans which BDC, for reasons of its own, is resisting.

[17] In his written and oral submissions Mr. Arapakota characterized the outstanding refusals as follows:

(a) produce copies of the entire loan files for each of the four loans including all internal notes, internal documents, internal correspondence, and internal communications;

(b) produce all documentation relative to the postponement referenced in the amending letter dated December 8, 2016;

(c) produce all communications between Ms. D’Souza, Aaron Boles and the person who approved the Forbearance Agreement;

(d) advise if Ms. Ganie-Hobbs is aware of all the rules and regulations related to loans;

(e) advise how many loans Ms. Ganie-Hobbs had processed by the time the loan to Imex was advanced;

(f) advise the yearly targets BDC personnel were required to meet;

(g) advise if the staff were required to maintain a certain book value of a loan portfolio;

(h) advise if Ms. Ganie-Hobbs agrees with the statement that “account managers have targets to meet and how difficult it is to meet those targets”;

(i) advise if Ms. Ganie-Hobbs understood that Mr. Arapakota understood legal language;

(j) produce all memos and communications regarding the internal review that was conducted when BDC learned that Imex went public;

(k) produce copies of any internal BDC correspondence, internal BDC discussions or memos regarding the “change of control” at Imex;

(l) produce copies of any internal memos or communications relative to the transfer of Imex’s account to the special accounts department at BDC

Affidavit of the defendant Mr. Arapakota in support of the Motion

[18] In his affidavit support of the refusals Motion Mr. Arapakota has deposed, inter alia, as follows:

(a) for various reasons as set out in his pleadings, he denies that he entered into the personal guarantees as alleged by BDC or at all;

(b) he takes the position that BDC and its representatives engaged in various acts or omissions which resulted in his being deceived as to the nature of the loan documents which he was signing at the time he entered into them;

(c) he takes the position that, following the change of control of Imex after his departure, BDC and/or its representatives conspired with the other third-party defendants to deceive him as to the nature of the Forbearance Agreement, which resulted in the Imex third-party defendants unlawfully diverting funds which should have been used to pay BDC and leaving him “holding the bag” by means of the alleged guarantees that he had been deceived into signing in the first place;

(d) answers to the questions refused by BDC are necessary in order to place a full evidentiary record before the court and it is in the interests of justice to require that Golda D’Souza, Jasmin Ganie-Hobbs and Shane Lee be ordered to provide proper and complete answers to the questions put to them on cross-examination.

Issues

[19] The issues for determination are as follows:

(a) is BDC obliged to produce to the defendant Mr. Arapakota on cross-examination its entire file in relation to each of the four loans advanced to Imex?

(b) if so, should Golda D’Souza, Jasmin Ganie-Hobbs and Shane Lee be required to re-attend to be cross-examined further in relation to the contents of the files?

Guiding Principles

[20] In the case of Ravenda Homes Ltd. v. 1372708 Ontario Inc., 2011 ONSC 4277 Lococo, J. held at paras. 28-29. that production of documents in connection with cross-examination on an affidavit is limited by two concepts, relevance and proportionality.

[21] With respect to relevance, Lococo, J. observed that the documents required to be produced must be relevant to any matter in issue on the main motion, provided that a reference to a document in an affidavit in effect makes the document relevant since the document become subject to inspection under subrule 30.04(2).

[22] Lococo, J. went on to note that the limitation based on proportionality is evident from the factors that the court is required to consider in determining whether the person being examined must answer a question or produce a document as set out in rule 29.2 .03 of the Rules of Civil Procedure. Moreover, even without a specific rule relating to examinations, the court is required generally by sub- rule 1.04(1.1) to apply the principle of proportionality in making its decisions.

[23] Rue 29.2.03 of the Rules of Civil Procedure provides as follows:

In making a determination as to whether a party or other person must answer a question or produce a document, the court shall consider whether,

(a) the time required for the party or other person to answer the question or produce the document would be unreasonable;

(b) the expense associated with answering the question or producing the document would be unjustified;

(c) requiring the party or other person to answer the question or produce the document would cause him or her undue prejudice;

(d) requiring the party or other person to answer the question or produce the document would unduly interfere with the orderly progress of the action; and

(e) the information or the document is readily available to the party requesting it from another source.

[24] Sub-rule 1.04(1.1) provides:

In applying these rules, the court shall make orders and give directions that are proportionate to the importance and complexity of the issues, and to the amount involved in the proceeding.

[25] Perell, J. in the oft-cited case of Ontario v., Rothmans Inc., 2011 ONSC 2504 summarised at para 143 a number of the principles derived from the jurisprudence concerning the scope of cross-examination of a deponent for the purposes of an application or a motion as follows (authorities and citations omitted):

• The scope of a cross-examination of a deponent for an application or motion is narrower than an examination for discovery;

• A cross-examination is not a substitute for examinations for discovery or for the production of documents available under the Rules of Civil Procedure;

• The examining party may not ask questions on issues that go beyond the scope of the cross-examination for the application or motion

• The questions must be relevant to: (a) the issues on the particular application or motion; (b) the matters raised in the affidavit by the deponent, even if those issues are irrelevant to the application or motion; or (c) the credibility and reliability of the deponent's evidence;

• If a matter is raised in, or put in issue by the deponent in his or her affidavit, the opposite party is entitled to cross-examine on the matter even if it is irrelevant and immaterial to the motion before the court;

• 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;

• A question asked on a cross-examination for an application or motion must be a fair question;

• The test for relevancy is whether the question has a semblance of relevancy;

• The scope of cross-examination in respect to credibility does not extend to a cross-examination to impeach the character of the deponent;

• The deponent for an application or motion may be asked relevant questions that involve an undertaking to obtain information, and the court will compel the question to be answered if the information is readily available or it is not unduly onerous to obtain the information;

• The deponent for a motion or application who deposes on information and belief may be compelled to inform himself or herself about the matters deposed.

[26] In the subsequent case of Strathan Corp. v. Chromeshield Co., 2012 ONSC 576 (Master) Master Pope at footnote 1, qualified Perell, J’s comment respecting the test for relevancy as follows:

In view of the recent amendments to the Rules, it is accepted that the test for relevancy is no longer "semblance of relevance" but rather relevance. I concur with the approach taken by Master Haberman in Romspen Investment Corp. v. Woods Property Development Inc., 2010 CarswellOnt 4008, 2010 ONSC 30005 (Ont. Master), at para. 16, where she states: "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 questions 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."

[27] With respect to whether the evidence which a party seeks to adduce is relevant to an issue at trial (or as in the case at bar on a motion for summary judgment), it is useful to consider what is captured by the concept of "relevance." David M. Paciocco (now Justice Paciocco of the Ontario Court of Appeal) and Lee Stuesser in The Law of Evidence (6th ed.), at p. 27, observed that logical "relevance" is the relationship between the evidence and the fact it is offered to prove. The authors offered the following formulation for determining issues of relevance:

Evidence is relevant where it has some tendency as a matter of logic and human experience to make the proposition for which it is advanced more likely than the proposition would appear to be in the absence of the evidence. To identify logically irrelevant evidence, ask, "Does the evidence assist in proving the fact that my opponent is trying to prove".

[28] To similar effect, Doherty, J.A., in the case of R. v. Pilon, 2009 ONCA 248 (Ont. C.A.) stated, at para. 33, "evidence is relevant if, as a matter of common sense and human experience, it makes the existence of a fact in issue more or less likely."

[29] The case of Levine v. Roots Canada Ltd. 2012 NSSC 268 (N.S. Sup. Ct.) concerned a claim for damages advanced by the plaintiff for injuries sustained by him in the defendant’s retail store. The plaintiff sought production of the defendant’s insurer’s entire file on the basis that it may touch upon the manner in which the insurer handled his claim and that it was necessary to advance his argument that it was relevant to the awarding of costs and pre-judgment interest.

[30] Justice Rosinski made the following useful observations at paras. 3-5:

Disclosure of all relevant documents/information is fundamental to do justice between litigants subject to exceptions in the Civil Procedure Rules, legislation, or privileges barring same for policy reasons. Yet somewhere there must be a line between relevant and irrelevant information.

Drawing that line is by no means a scientifically precise exercise. It is a determination uniquely driven by the facts in each case, and the intention to do justice between the parties by concerning oneself with proportionality between the material sought and its place in the design that is the pleading.

If satisfied that the probative link between the requested materials and a specific fact in issue between the parties is sufficient to give the materials' relevance an air of reality, then disclosure should be ordered.

[31] Rosinski, J. was not satisfied on the facts of the case before him that the plaintiff had placed an evidentiary basis before the court that raised the argument for production of the insurer’s entire file from “fishing expedition” to air of reality (see para. 31).

[32] It is evident that the information and documentation that Mr. Arapakota seeks from BDC on the motion fall into three categories as follows:

(a) production of the entire loan files maintained by BDC;

(b) whether BDC account managers had targets for the processing of loans and the maintenance of loan portfolios; and

(c) Ms. Ganie-Hobbs’ knowledge of government rules and regulations respecting loans, her experience in transacting loans, and her knowledge of whether Mr. Arapakota had knowledge of legal language.

[33] In my view Mr. Arapakota has not laid any evidentiary foundation to support a suggestion that production of BDC’s entire files respecting the loans will yield evidence carrying probative value to support his pleading that he was “hoodwinked” by Imex and BDC into giving a what he characterized as a further guarantee of Imex’ indebtedness by means of the Forbearance Agreement. It is evident that he seeks production of the files in the hope that something will be found in them that will support this aspect of his theory of the case.

[34] Mr. Arapakota is in essence seeking to have BDC, by production of the loan files in their entirety, prove a negative, namely that they did not act in concert with Imex to “hoodwink” him into executing the Forbearance Agreement, thereby reducing his chances of being relieved of liability under the Guarantees.

[35] Moreover, I find that Mr. Arapakota’s request for production of BDC’s entire loan files would not meet the test for proportionality in the proceeding.

[36] With respect to whether BDC account managers were subject to targets imposed by their employer for the processing of loans or the maintenance of loan portfolios, I find that this evidence is not relevant as that term is explained by Justice Paciocco and Professor Stuesser in The Law of Evidence referred to above. The evidence would not assist in proving the facts that Mr. Arapakota is trying to establish to support his defences, specifically his suggestion that the BDC personnel involved in processing the loan documentation sought to avoid making proper disclosures to him in order to get him to sign the loan documents in order to meet their annual targets.

[37] Even if BDC personnel were subject to certain targets set by their employer (which is not in evidence) the existence of such targets would not have a tendency as a matter of logic and human experience to make the proposition that they cut corners in explaining the documentation to Mr. Arapakota more likely than the proposition would be in the absence of the evidence. The proposition advanced by Mr. Arapakota amounts to pure speculation.

[38] With respect to Ms. Ganie-Hobbs’ knowledge of government rules and regulations respecting loans, the extent of her experience, and her knowledge of Mr. Arapakota’s familiarity with “legal language,” I find that this evidence sought by Mr. Arapakota is not relevant to any issue the court will be called upon to determine on the motion for summary judgment, and in particular, whether Mr. Arapakota is liable pursuant to the terms of the guarantees he executed.

Disposition

[39] I find that the questions in issue were properly refused by the bank employee witnesses produced by BDC and that Mr. Arapakota’s motion must therefore be dismissed.

Costs

[40] As I ordered in my oral reasons and brief endorsement following completion of submissions, the issue of costs of the motion is reserved to argument of BDC’s motion for summary judgment, which will be heard by me as Case Management Judge.

D.A. Broad, J.

Date: September 20, 2021