Drouin v. The Queen

Drouin v. The Queen
Court (s) Database
Tax Court of Canada Judgments
Date
2012-02-27
Neutral citation
2012 TCC 94
File numbers
2011-5(IT)G
Judges and Taxing Officers
Paul Bédard
Decision Content
Citation: 2012 TCC 94
2011-5(IT)G
BETWEEN:
ANDRÉ DROUIN,
APPELLANT,
AND
HER MAJESTY THE QUEEN,
RESPONDENT,
[OFFICIAL ENGLISH TRANSLATION]
TRANSCRIPT
OF AMENDED REASONS FOR JUDGMENT
Let the attached certified copy of the reasons for the four orders given at the hearing in Montréal, Qu ebec, on February 27, 2012, be filed. I have revised the transcript certified by the official stenographer in order to improve the style and clarity of the reasons, by adding paragraph numbers and accents and correcting typographical errors.
__________________ "Paul Bédard"________________
Bédard J.
Signed at Ottawa, Ontario, April 10, 2012.
Translation certified true
on this 3rd day of June 2014
François Brunet, Revisor
AMENDED REASONS FOR ORDER
[1] Further to the voir-dire, the Court must determine whether the report and testimony of Michel Gagnon (Gagnon) as an expert witness specializing in management and franchising are admissible.
[2] On December 19, 2011, the respondent served a report on the appellant signed by Gagnon, called [translation] "Counter-expertise to report by Jean-François Ouellet on Section VI: Granting and operating the franchise" along with a certificate as required under Rule 145(1)(b) of this Court to the effect that it represents evidence that the proposed witness is prepared to give in the matter (“the report”).
[3] Gagnon's mandate was essentially to comment on section VI, [translation] "Granting and operating the franchise" of the report by Jean-François Ouellet, served on the respondent on December 6, 2011.
[4] The respondent is asking this Court to admit as evidence the report and the testimony of Gagnon as an expert witness specializing in management and franchising. The appellant objects.
The issue
[5] Are Gagnon’s report and testimony admissible as evidence?
Respondent's submissions
[6] I must first note that the respondent's submissions on this subject are rather brief. In fact, once Gagnon's qualifications were submitted to the Court, the respondent invoked the admissibility criteria for an expert witness, developed by the Supreme Court of Canada (SCC) in R. v. Mohan, [1994] 2 S.C.R. 9, to justify her position.
Appellant's submissions
[7] The appellant essentially submits that Gagnon's testimony as an expert witness, as well as his report, are of no use to the Court and are not admissible pursuant to the criterion of necessity developed by the SCC in Mohan, supra.
Applicable law
[8] With regard to the applicable law, I refer once again to the analysis I conducted in my reasons given orally today with respect to my decision on the inadmissibility as evidence of Denys Goulet’s testimony and report.
Application of the law to the facts
[9] Our analysis will therefore only focus on the criterion of necessity developed by the SCC in Mohan, supra, since the other criteria are not being challenged in this case.
[10] With regard to the necessity of assisting the trier of fact, the first question is whether the expert provides information necessary to appreciate the matters in issue given their technical nature (see R. v. Burns, [1994] 1 S.C.R. 656; R. v. Mohan, supra; R. v. Lavallée, [1990] 2 S.C.R. 852; R. v. Abbey, [1982] 2 S.C.R. 24 and Kelliher (Village of) v. Smith, [1931] S.C.R. 672).
[11] Although necessity means that the evidence must not be simply helpful, it should also not be judged "by too strict a standard" (Mohan, supra, at p. 23).
[12] Mohan aims to ensure that the dangers related to expert evidence are not taken lightly. Mere relevance and/or helpfulness is not sufficient. The question is whether the expert provides information that that is likely outside the ordinary experience and knowledge of the trier of fact (see R. v. D.D., [2000] 2 S.C.R. 275, at p. 98 and Mohan, supra, at p. 23).
[13] In the present case, the appellant submits that a very limited portion of Gagnon's report addresses the specific issue that Ouellet addresses in section VI of his report, regarding the appellant's decision to contract out operations of his franchise to an agent.
[14] As for the other aspects covered in the report, the appellant submits that Gagnon ventures into and makes statements on a number of subjects such as the appellant's investment decision and the benefits of the franchise system from Prospector's point of view, all of which are clearly beyond his mandate and do not contribute to the decision-making process of this Court.
[15] However, the appellant draws his conclusions after carefully reading the report. We are now at the stage of determining the admissibility of the proposed testimony and the content of Gagnon's report is not to be considered at this stage of the proceedings. Indeed, an analysis of certain parts of Gagnon's report, whose testimony has not been heard, would not be appropriate to dismiss the entire report.
[16] On its face, the report tells us that Gagnon’s mandate was to comment on Ouellet's report regarding section VI: Granting and operating the franchise, in relation to the André Drouin case.
[17] I must disagree with the hasty conclusions drawn by the appellant and cannot come to the conclusion that Gagnon's testimony would be useless in the circumstances. It is the court's duty to proceed with a probative analysis of the report, once the expert has been heard on the content of his report.
[18] For these reasons, I recognize Gagnon as an expert.
AMENDED REASONS FOR ORDER
Bédard J.
[1] Further to the voir-dire, the Court must determine whether the report and testimony of Denys Goulet (Goulet) as an expert mandated to comment on the fair market value (FMV) of the franchise (the franchise) acquired by André Drouin (the appellant), to commercialize solutions developed by Prospector International Networks Inc., its subsidiaries and partners (collectively, Prospector) are admissible.
[1]
[2] On December 6, 2011, the respondent served on the appellant a report signed by Goulet called [translation] "Justice Canada – CRA: André Drouin and Her Majesty the Queen - 2011-5(IT)G" with a certificate as required under Rule 145(1)(b) of this Court to the effect that it "represents evidence that the proposed witness is prepared to give in the matter". This report, sent on December 6, 2011, was then amended on December 23, 2011 (the report).
[3] The report provided an opinion on the following issue:
[translation]
Our mission is to carry out the work required to issue a formal opinion on the fair market value of the investment made by André Drouin (hereinafter, the Appellant) by acquiring a franchise and a series of user and distribution licences for a software suite from Prospector International Networks Inc. dated December 28, 2007.
[4] The respondent, after Goulet's qualifications were listed, asked this Court to admit his testimony and report in the present case as a business valuation expert witness. Not surprisingly, the appellant strongly objected on the basis of on certain facts revealed on cross‑examination, which seem to be at the heart of the present debate and will likely require our attention.
Issues
First issue
[5] Are Goulet’s report and testimony admissible in evidence? Is the Court justified in allowing the admissibility of the report and testimony of Denys Goulet as a business valuation expert witness?
Second issue
[6] Can the Court, if it concludes that it is relevant to do so, split the report and authorize Mr. Goulet to testify as an expert on only part of the report?
Respondent's submissions
[7] First, the respondent's submissions are, to say the least, extremely brief. Once Goulet's qualifications, which will be analyzed in detail later, were submitted to the Court, the respondent simply invoked the criteria for admissibility of an expert witness established by the Supreme Court of Canada (SCC) in R. v. Mohan, [1994] 2 S.C.R. 9, in support of her position.
[8] Again according to the respondent, the training, expertise and work experience of Goulet, as with the mandate that he was granted and the specialized field of business valuation, are all factors that sufficiently justify the admission of his testimony as an expert, in the light of the criteria propounded by the SCC in Mohan, supra. The respondent adds that shortcomings and weaknesses in an expertise only affect the probative value of the expert's testimony and not its admissibility. The following cases were cited in support of this argument: R. v. Marquard, [1993] 4 S.C.R. 223, at para. 35; Halford v. Seed Hawk inc., 2006 FCA 275, at para. 17 and Bouchard v. D'Amours, 2001 CanLII 14425 (QC CA), at paras. 11 and 12.
[9] Moreover, the respondent contends that it would be formalistic to dismiss the report of an expert simply because it contains findings that stray from the given mandate (see Marquard, supra, at para. 37).
Appellant's submissions
[10] The appellant submits that Goulet's testimony as an expert witness as well as his report on the FMV of the franchise are simply inadmissible for the following reasons.
[11] The first reason raised by the appellant is about the misrepresentations regarding his qualifications. The appellant first notes that there are some inaccuracies in Goulet's CV. More specifically, the appellant pointed out inconsistencies, during Goulet's cross-examination, regarding his teaching experience and his involvement as an expert in Jobin and Sports 755.
[12] The appellant reminded the Court that expert witnesses have a well regarded position at a trial and as such are held to a higher standard of diligence and honesty.
[13] The second reason raised by the appellant is the lack of relevant expertise. The appellant contends that Goulet cannot be considered an expert witness because of a lack of computer expertise. Indeed, the appellant argues that Goulet does not have the knowledge required to properly assess the technical and functional qualities of the software being marketed by Prospector with respect to other technological solutions available in 2007.
[14] In support of his submission, the appellant reminded the Court that Goulet himself admitted that, in his opinion, to properly assess a business that commercializes new software, it is necessary to be able to correctly identify the characteristics and particularities of that software.
[15] The third reason raised by the appellant is inadequate research. The appellant also contends that the research on which the conclusions noted in Goulet's report are based are clearly inadequate. By his own admission, Goulet did not see the software, nor did he ask to see it. The expertise required to assess the intrinsic qualities of the software and its innovative character was provided by Goulet's colleague, who is not mentioned in his report, or present before the Court. The appellant therefore opines that Goulet was negligent in his obligation under section 4 of the CICBV practice standard 110, to ensure "a comprehensive review and analysis of the business, its industry and all other relevant factors, adequately corroborated..."
[16] The fourth reason raised by the appellant is the usurpation of the Court's jurisdiction. The appellant argues that even if the author was mandated to give an opinion on the FMV of the franchise, Goulet's report addresses other conclusions that are directly under the exclusive jurisdiction of the Court.
[16]
[17] When questioned on the subject, Goulet clearly stated that his mandate was not only to assess the fair market value of the franchise acquired by the appellant, but also to probe the reasons that justified the purchase.
[18] The fifth reason raised by the appellant is the lack of value of his testimony. Lastly, the appellant submits that Goulet's testimony and his report are useless in this case. It was admitted that the appellant was always working at arm's length with Prospector. Therefore, the appellant contends that the FMV of the franchise is necessarily the price the appellant paid to acquire it. Moreover, the test under paragraph 20(1)(a) of the Income Tax Act (ITA) refers to the concept of capital cost and not (the) FMV.
[19] Additionally, the appellant stated that, in his opinion, the FMV has nothing to do with the concept of a sham, which is a result of the parties' intention at the time they entered into a contract and not the FMV of the property in question.
Applicable law
Role of the expert witness
[20] The fundamental rule is that, opinion evidence is inadmissible. As a starting point, the law is well-settled: opinion evidence is prima facie inadmissible. It is the sovereign jurisdiction of the trial judge to assess the facts determined at trial and to draw the appropriate inferences and conclusions (see comments by Lord Mansfield in Carter v. Boehm (1766) 3 Burr 1905, at p. 1918).
[21] The testimony of an expert is an exception to this fundamental rule in that it allows the expert to conduct his own assessment of the facts and present his own interpretation to the Court.
[22] As the SCC explained in Kelliher (Village of) v. Smith, [1931] S.C.R. 672, at p. 684, "[t]he object of expert evidence is to explain the effect of facts of which otherwise no coherent rendering can be given."
[23] Since Kelliher, the SCC has repeated many times, in particular in R. v. Lavallée, [1990] 2 S.C.R. 852, at p. 889, that expert testimony is "to assist the fact-finder in drawing inferences in areas where the expert has relevant knowledge or experience beyond that of the lay person" (see also R. v. Burns, [1994] 1 S.C.R. 656, at p. 866).
[24] Thus, it is undeniable that this type of testimony represents a risk to the administration of justice and the courts should therefore not admit it without understanding its value and necessity. The concern that the role of the trier of fact might be usurped has been addressed many times by the SCC, but rarely with as much brevity and eloquence as in R. v. Mohan, supra, where Justice Sopinka concludes (at p. 24):
There is also a concern inherent in the application of this criterion that experts not be permitted to usurp the functions of the trier of fact. Too liberal an approach could result in a trial's becoming nothing more than a contest of experts with the trier of fact acting as referee in deciding which expert to accept.
[25] The SCC restated this principle in R. v. J.-L.J., [2000] 2 S.C.R. 600, and Justice Binnie even granted the role of "gatekeeper" to the trier of facts (at pp. 613 and 630):
In the course of Mohan and other judgments, the Court has emphasized that the trial judge should take seriously the role of “gatekeeper”. The admissibility of the expert evidence should be scrutinized at the time it is proffered, and not allowed too easy an entry on the basis that all of the frailties could go at the end of the day to weight rather than admissibility.
...
The trial judge’s discharge of his gatekeeper function in the evaluation of the demands of a full and fair trial record, while avoiding distortions of the fact-finding exercise through the introduction of inappropriate expert testimony, deserves a high degree of respect.
[26] The fact the expert evidence must be assessed in the light of its potential to derail the fact-finding process partially explains why its use is governed by strict guidelines (see R. v. Mohan, supra, at p. 24, restated in R. v. DD, [2000] 2 S.C.R. 275, at p. 298).
Admissibility criteria for expert testimony
[27] To make the gatekeeper role easier for the trier of facts, the SCC has propounded a list of criteria that, in this case, must be used to assess the admissibility of the expert opinion. The landmark case regarding the admissibility of expert testimony is, without a doubt, Mohan, supra, decided by the SCC. In this decision, the highest court in the land adopted a four-step test that governs the admissibility of expert testimony (at p. 20):
Admission of expert evidence depends on the application of the following criteria:
(a) relevance;
(b) necessity in assisting the trier of fact;
(c) the absence of any exclusionary rule;
(d) a properly qualified expert.
[28] Moreover, each of the four criteria must be met for the Court to allow the testimony of an expert.
[29] A cost-benefit analysis is also an essential ingredient of the analysis of the first two criteria, relevance and necessity.
Relevance
[30] 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 that proposition would appear to be in the absence of that evidence" (R. v. J.-L.J., supra, at pp. 622-623). As the concept of relevance is a low threshold, Mohan, supra, included a cost-benefit analysis in the relevance requirement to determine whether its value is worth the cost, with regard to its impact on the trial process (at pp. 20-21) :
Relevance is a threshold requirement for the admission of expert evidence as with all other evidence. Relevance is a matter to be decided by a judge as question of law. Although prima facie admissible if so related to a fact in issue that it tends to establish it, that does not end the inquiry. This merely determines the logical relevance of the evidence. Other considerations enter into the decision as to admissibility. This further inquiry may be described as a cost benefit analysis, that is "whether its value is worth what it costs." See McCormick on Evidence (3rd ed. 1984), at p. 544. Cost in this context is not used in its traditional economic sense but rather in terms of its impact on the trial process. Evidence that is otherwise logically relevant may be excluded on this basis, if its probative value is overborne by its prejudicial effect, if it involves an inordinate amount of time which is not commensurate with its value or if it is misleading in the sense that its effect on the trier of fact, particularly a jury, is out of proportion to its reliability. While frequently considered as an aspect of legal relevance, the exclusion of logically relevant evidence on these grounds is more properly regarded as a general exclusionary rule (see Morris v. The Queen, [1983] 2 S.C.R. 190). Whether it is treated as an aspect of relevance or an exclusionary rule, the effect is the same. The reliability versus effect factor has special significance in assessing the admissibility of expert evidence.
[31] Additionally, when the trier of fact considers the cost-benefit analysis that could alter the relevance of expert evidence, it is reasonable for him to consider the extent to which the proposed opinion is founded on unproven facts. On this, in R. v. K. (A.), 45 O.R. (3d) 641, Justice Charron stated the following (at paras. 80-81):
(c) Although relevant, is the evidence sufficiently probative to warrant its admission?
80 In other words, the evidence, although relevant, will not be admitted unless its probative value outweighs its prejudicial effect. Both the probative value of the evidence and its potential prejudicial effect will depend on a number of factors. The particular inquiries that should be made will depend on the particular facts of the case. The following questions may be useful to consider. The list is by no means exhaustive.
(i) To what extent is the opinion founded on proven facts?
81 Although the expert is entitled to take into consideration all possible information in forming his or her opinion, the weight to be given to the opinion will depend on the extent to which the facts upon which the opinion is based are proven: see R. v. Abbey.
Necessity in assisting the trier of facts
[32] In Mohan, supra, Justice Sopinka concluded that expert testimony must be more than merely helpful. He stated that, to be necessary, the expert evidence must be necessary "in the sense that it provide information 'which is likely to be outside the experience and knowledge of a judge or jury'... [T]he evidence must be necessary to enable the trier of fact to appreciate the matters in issue due to their technical nature" (at p. 23).
[33] The expert evidence must therefore assist the trier of facts by providing specific knowledge that the ordinary person does not have. "Its purpose is not to substitute the expert for the trier of fact. What is asked of the trier of facts is an informed judgment, not an act of faith" (R. v. J.-L.J., supra, at p. 628).
Properly qualified expert
[34] Before testifying, an expert witness must be qualified as an expert by the Court in matters on which the opinion is to be given: R. v. Mohan, supra, at p. 25.
[35] On this, the law is now well settled: the shortcomings in an expertise affect the value of the testimony and not its admissibility: R. v. Marquard, supra, at para.
[36] Additionally, the mere fact that another person could have possibly been more qualified to testify on a particular topic constitutes another consideration to review when granting the probative weight of expert testimony and not a concern at the admissibility stage: McLean (Litigation Guardian of) v. Seisel (2004), 182 O.A.C. 122 (C.A.) at p. 140.
[37] However, the courts must make a distinction between the situation described above and that in which, for example, an expert with impressive qualifications does not have particular expertise in the relevant specific field: Vigoren v. Nystuen, 2006 SKCA 47, 266 D.L.R. (4th) 634 (C.A. SK.).
Absence of any exclusionary rule
[38] Meeting the three criteria above from the test set out in R. v. Mohan will not ensure the admissibility of expert evidence if it falls afoul of an exclusionary rule, separate and apart from the opinion rule itself. In other words, the expert evidence must not be excluded under the application of any other rule: R. v. Mohan, supra, at p. 25.
Application of the law to the facts
Absence of any exclusionary rule
[39] From the start, the fourth criterion from Mohan, supra, regarding the admissibility of an expert witness, the absence of any exclusionary rule, does not seem to be problematic in the present case. At any rate, counsel for the appellant did not raise any exclusionary rule distinct from the opinion rule.
[40] As a result, it is appropriate to promptly continue our analysis of the third Mohan criterion and to review the qualifications of the expert proposed to the Court.
A properly qualified expert
[41] Mr. Goulet's CV indicates that he has been active in the field of financial counselling for 20-some years and he currently heads the business valuation and legal accounting sector of one of the most important accounting firms in Quebec. In the course of his career, he has carried out or coordinated hundreds of business valuation missions and financial expertise assessments for various purposes. He is not only a member of the Canadian Institute of Chartered Business Valuators (CICBV) but has also been on its board of directors since 2006 and its executive committee since 2011. He is very active within the association of business valuators and is frequently invited to be a guest speaker by teaching institutions or professional associations.
[42] It seems, therefore, that, with regard to business valuation, Goulet definitely has "special knowledge and experience going beyond that of the trier of fact" (R. v. Marquard, supra, at para 35).
[43] It was brought to the Court's attention that Goulet's business valuation experience in the computing field is limited. In fact, he was allegedly hired only once as a special advisor to senior management at a major telecommunications company. The economic fields in which he was apparently very active in the past revolved more around food, restaurants, hospitality, forest products, finances, manufacturing and retail.
[44] However, I agree with the respondent when she states that an expert witness's shortcomings are relevant to the probative value to be granted to the expert testimony and are not an element that applies during the inquiry as to admissibility: R. v. Marquard, supra, at para 35.
[45] As for the inaccuracies in Goulet's CV that the appellant raised during his cross-examination, I am of the view that they were not made by Goulet for the purpose of establishing his credibility with the Court. I feel that, with regard to his teaching experience, Goulet simply made small inadvertent errors. I also feel that Goulet sincerely believed that the judge had accepted his opinion in Jobin and Sports 755. Goulet's good faith is not in question and I could not disqualify him as an expert for errors that were, in the end, committed in good faith or inadvertently.
[46] I find that Goulet has sufficient expertise to enlighten the trier of fact and his qualifications are sufficient to meet the third criterion of the test established in Mohan, supra.
Relevance
Logical relevance
[47] Clearly, when the time comes to determine the relevance of an expert witness in the light of Mohan, supra, the first step is to establish the logical relevance of the evidence, the extent to which this point is related to the fact it is likely attempting to establish.
[48] As mentioned above, the appellant submits that Goulet's testimony and report are useless in this case since it was admitted that, at all times, André Drouin had an arm's length relationship with Prospector and as a result, the FMV of the Franchise is necessarily the price the appellant paid to acquire it.
[49] Moreover, the appellant states that the test at paragraph 20(1)(a) ITA refers to the concept of capital cost and not the FMV.
[50] Nonetheless, the Minister is not questioning the way the tax attributes the taxpayer requested were calculated, such as the capital cost allowance (CCA). In fact, it is the actual entitlement to these tax attributes that the respondent is challenging and thus the mechanics behind the calculation under paragraph 20(1)(a) ITA would thereby be irrelevant. This case is not about the capital cost used to calculate the CCA claimed: the issue is whether the appellant actually operated a business.
[51] Moreover, the appellant states that he felt the FMV of the assets has nothing to do with the concept of a sham, which is dependent on the parties' intent at the time they entered the contract and not on the underlying FMV of the item in question.
[52] However, the SCC in Stubart Investments Limited v. R., [1984] 1 S.C.R. 536 tells us that the elements required for there to be a sham are the following: (1) an intention of the parties to the transaction (2) to create a false impression (3) that their rights and obligations are different from their actual legal rights and obligations.
[53] In Stubart, the SCC clearly stresses the element of deceit. In his reasons, Justice Estey explains that this element is the "heart and core of a sham" (at para 53).
[54] As a result, an analysis of the franchise the taxpayer acquired showing that its FMV was significantly lower than the price paid to obtain it could certainly be logically relevant during the evaluation of one of the fundamental elements of the sham raised by the respondent, namely the parties' intent to deceive.
Cost-benefit analysis
[55] However, although the evidence is logically relevant at first glance, the analysis does not end there as other considerations also influence the inquiry regarding admissibility. Expert evidence that is otherwise logically relevant still bears the weight of the general requirement that its probative value outweigh its prejudicial effects (see SCC decisions R. v. Mohan, supra; R. v. J.-L.J., supra, and R. v. D.D., supra). This further inquiry may be described as a cost-benefit analysis.
[56] As with the other criteria from Mohan, the probative value and prejudicial effect are case specific. The Mohan analysis necessarily places great confidence in the trier of fact's ability to carry out his gatekeeper function and this function deserves, as the SCC itself stated, great respect: R. v. J.-L.J., supra, at p. 630.
[57] During his cross-examination, Goulet admitted to the Court that he does not personally have any specific computer knowledge. Strangely, Goulet then indicated that, in his opinion, in order to properly assess a business that markets new software, it is necessary to be able to properly identify what this software represents, and therefore to understand who the programs are designed for and their inherent level of innovation (see paras 213, 240, 241 and 280 to 290 of the transcript).
[58] When he drafted his report, Goulet would therefore have relied on the expertise of Maxime Rousseau, an information technology security specialist from his firm. However, the name Maxime Rousseau does not appear anywhere in Goulet's report and he was not present to attest to his knowledge before the Court (see paras 213, 240, 241 and 280 to 290 of the transcript)
[59] When the trier of fact considers the cost-benefit analysis that could affect the relevance of expert testimony, it is fully acceptable for him to examine the extent to which the proposed opinion is based on unproven facts: see K. (A.), supra, at paras 80-81 (Justice Charron). In fact, probative value must be determined by reviewing the reliability, significance and persuasiveness of the expert testimony: R. v. D.D., supra, at p. 295.
[60] In a case such as the case at bar, I agree with the observations of Justice Bowie in Petro-Canada v. Canada, 2003 D.T.C. 94 (TCC) (partially amended on appeal, but not on this issue (2004 D.T.C. 6329 (FCA); application for leave to appeal denied (337 N.R. 397)), which state the following (at paras 103-104):
[103] Throughout both the written statement of his evidence and his oral evidence, Mr. O'Dwyer makes frequent reference to both factual material that has been provided to him by "consultants", and also to matters of judgment as to which he had sought opinions from those "consultants", and then adopted their judgments as his own. One such instance appears in the passage I have quoted at paragraph 100, but it is only one of many. The "consultants" it appears, are two individuals who have been engaged from time to time in, among other things, advising as to the value of seismic data. Whatever the level of their expertise might be, they were not at the trial, they did not give evidence, and counsel for the Appellant had no opportunity to cross-examine them.
[104] Opinion witnesses, at least in civil proceedings, have a certain latitude to base their opinions upon information that they have gathered outside the courtroom, and which is not formally proved. It becomes part of the general body of knowledge that contributes to the expertise of the witness. No such latitude is available in respect of matters of judgment or opinion, however. The reason that certain witnesses may express opinions is because they possess knowledge and expertise, acquired through study and experience, that will assist the Court. They may consult recognized texts and reference materials in formulating and in defending their opinions, but they may not simply reiterate the opinions of others, with or without attribution. The opinion evidence of Mr. O'Dwyer in this case is tainted by his wholesale adoption of the advice of those he consulted, not simply as to the facts of transactions, but as to matters which are primarily matters of judgment, such as the establishment of a copy price, and the appropriate levels of discount to be applied to large volume sales. However, I know nothing of the qualifications of these consultants, I have had no opportunity to assess their competence, and, most importantly, they have not been subject to cross-examination. In my view, their opinions pervade the evidence of Mr. O'Dwyer to such an extent, and so inextricably, as to destroy any probative value that it might otherwise have.
[61] The Federal Court of Appeal did not find any error in this approach.
[62] In another decision with a similar factual background as the present case, this Court ruled, per Judge Couture, that it is possible for a business valuation expert to call upon the expertise of a third party when he cannot personally assess one of the elements of the asset to be valuated. He adds, however, that it is essential for this third party to be clearly identified and that his skills be shown to the Court's satisfaction before it can accord any probative value to the proposed report (see Taylor Estate v. Minister of National Revenue, [1990] 2 C.T.C. 2304, at paras 36-37):
To support and justify his theory of the fair market value of the shares as of October 3, 1981 based on the return or sustainable profit of the business method, the witness explained that he also proceeded to determine the break-up value of the business. However, no admissible evidence was filed to establish that the market value of the company's assets was correct. The witness merely said that:
the market value of the moveable and immoveable property had been determined on the basis of information provided by persons in the firm and then determined also what was buildings and what was land on the basis of the municipal assessment.
A statement of this kind is not admissible evidence and for this reason I cannot assign any probative value to this feature of the report. An expert is permitted to complete his valuation on the basis of a valuation prepared by another expert when among the property to be valued by him is property that he does not have the requisite skill to value. Moreover, for a valuation prepared by a second expert to be admitted as evidence, the qualifications of the second expert must be clearly established to the satisfaction of the Court and also the author of the report be at least accessible to the other party so that it may examine or cross-examine him in order to determine whether his expert opinion is correct. Absent testimony from the author, the Court cannot assign any probative value to this valuation.
[63] Later, Judge Couture continued his reasoning as follows (at paras 57 and 62) :
In preparing a valuation to be used as evidence in court, a valuer may not accept figures that he did not check or take facts for granted over the correctness of which he has no control. Expert testimony must be the product of the expert's personal opinion based on established facts the existence of which is proved, and not on conjectures or information he receives from third persons.
[64] I certainly agree with the respondent that the SCC has repeatedly stated that the nature of the sources on which an expert opinion is based cannot affect its admissibility (see, in particular, R. v. Marquard, supra, and Saint John (City) v. Irving Oil Co., [1966] S.C.R. 581). However, I also feel that, no matter what it is, a source must be clearly identified in the expert report. On this, Judge Dussault's comments in Mathew v. R., [2001] 4 C.T.C. 2101 are of particular interest (at para 29) :
[29] None of the authorities referred to by the Respondent's counsel refute this general principle. Although I recognize that the nature of the source upon which an expert opinion is based cannot affect the admissibility of the opinion itself, as stated by the Supreme Court of Canada in the Saint John case, I am of the opinion that that source, regardless of its nature, has to be clearly stated. Similarly, I agree with the Respondent's counsel that deficiencies in the expert opinion that may result from reliance on inaccurate assumptions are only relevant in assessing the weight of the opinion, as the Supreme Court of Canada stated in the Warsing case, supra. However, I am also of the opinion that the unknown character of the assumptions relied on is relevant to the determination of the admissibility of the expert opinion. In my view, the fact that the opinion is based on the expert's own findings of fact (as appears to be the case with Mr. Taylor's report), which are unknown to the Court, is an issue that relates to its admissibility. It seems obvious to me that the admission of the expert evidence in the present case would, as a result of the extreme difficulty in determining what assumptions were actually relied on and how accurate they were as well as which ones were not considered, leave the Court wondering when assessing the weight to be attached to that evidence. In no way can this meet the test of clear and unambiguous hypothetical facts.
[65] If not to accord some value to the expert opinion, a determination must still be made about the facts on which it is based: R. v. Abbey, [1982] 2 S.C.R. 24, supra; R. v. J.-L.J., supra, and R. v. D.D., supra). As Justice Lawton stated in R. v. Turner (Terence), [1975] 1 Q.B. 834, at p. 840, this "elementary principle is frequently overlooked."
[66] In the present case, Goulet did not make any mention of his computer security co‑worker in his report and this co-worker was not present to attest to his knowledge to the satisfaction of the Court. However, once again, Goulet freely admitted that it is essential to properly understand and identify the characteristics and particularities of the software developed by Prospector to be able to accurately valuate the franchises they offer on the market.
[67] More specifically, Goulet admitted on cross-examination that Rousseau's opinions regarding the qualification of software, the innovative character of the software programs and their utility compared to other products available on the market at the relevant times constituted an integral and inseparable part of his report.
[68] However, an expert opinion that relies significantly on other people's opinions that are unproven and the content of which is contentious and outside the knowledge of the person who is seeking to qualify it is devoid of probative value.
[69] The reliability-effect factor is of particular importance when assessing the admissibility of expert evidence and, as a result, I feel that it is appropriate to conclude that Goulet's proposed expert testimony fails this exercise.
The necessity in assisting the trier of fact
[70] Now, we shall determine the admissibility of the expert evidence that the respondent wishes to introduce in the light of this last criterion, the necessity in assisting the trier of fact.
[71] The first question is whether the expert is providing information necessary for the trier of fact to assess the issue given its technical nature: R. v. Burns, supra; R. v. Mohan, supra; R. v. Lavallée, supra and R. v. Abbey, Kelliher (Village of) v. Smith, supra.
[72] According to Mohan, the risks associated with expert evidence must not be taken lightly. Mere relevance or "helpfulness" is not enough. The issue is whether the expert is providing information likely to be outside the ordinary experience and knowledge of the trier of fact: R. v. D.D., supra, at p. 298 and R. v. Mohan, supra, at p. 23.
[73] Logically, Justice Sopinka indicated the need for expert evidence to be "assessed in light of its potential to distort the fact-finding process" (R. v. Mohan, supra, at p. 24).
[74] In this case, when questioned on the scope of his mandate, Goulet stated that he paid particular attention to the economic reality underlying the transactions that the appellant conducted. More specifically, he clearly noted that his mandate consisted not only of assessing the FMV of the franchise the appellant acquired but also of examining the reasons that justified this purchase. Indeed, for him, these two assignments were interrelated and interdependent (see paras. 251 to 255 of the transcript).
[75] But, Justice McIntyre, for the SCC in R. v. Béland, [1987] 2 S.C.R. 398, stated the following with regard to the circumstances that require expert testimony (at para 16):
The function of the expert witness is to provide for the jury or other trier of fact an expert's opinion as to the significance of, or the inference which may be drawn from proved facts in a field in which the expert wi