Kaul v. The Queen

Kaul v. The Queen
Court (s) Database
Tax Court of Canada Judgments
Date
2017-06-02
Neutral citation
2017 TCC 55
File numbers
2012-754(IT)G, 2013-1882(IT)G
Judges and Taxing Officers
Eugene P. Rossiter
Subjects
Income Tax Act
Decision Content
Citation: 2017 TCC 55
Date: 20170602
Docket: 2012-754(IT)G
BETWEEN:
WILLIAM KAUL,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent,
2013-1882(IT)G
AND BETWEEN:
IAN ROHER,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Motion heard on January 31, 2017, at Toronto, Ontario
By: The Honourable Eugene P. Rossiter, Chief Justice
Appearances:
Counsel for the Appellant:
Irving Marks, Matthew Sokosky,
Ellad Gersh and Adam Brunswick
Counsel for the Respondent:
Jenna L. Clark, Erin Strashin and
Amit Ummat
AMENDED JUDGMENT AND REASONS FOR JUDGMENT
I. INTRODUCTION.. 2
II. FACTS. 3
A. Edith Yeomans’ Appraisal Reports. 3
B. Charles Rosoff’s Appraisal Reports. 4
C. Court Reports. 5
D. Purpose of this Motion. 6
III. FOUR DIFFERENT TYPES OF WITNESSES WITH EXPERTISE. 6
IV. WHETHER WESTERHOF APPLIES?. 9
A. Parties’ Positions. 9
B. Analysis. 10
(i) A participant expert is quintessentially a fact witness. 10
(ii) Westerhof has been followed in other Canadian jurisdictions. 12
(iii) Language in Tax Court Rules contemplate only independent experts, not “participant experts” 14
(iv) Tax Court Rules should be interpreted liberally to accommodate participant experts and other witnesses with expertise. 16
(v) There are many precedents in this Court that allow opinion evidence from witnesses with expertise 17
(vi) Disclosure issues are less of a concern regarding participant experts. 18
V. IS THE WESTERHOF TEST MET?. 19
A. Overview.. 19
B. Meaning of “engaged by or on behalf of a party to the litigation”?. 21
C. Was Ms. Yeomans “engaged by or on behalf of” the Appellants donors to form the original appraisals?. 27
D. Did Ms. Yeomans form her appraisal opinion based on her observation of or participation in the underlying events at issue as part of the ordinary exercise of her expertise?. 28
E. How does a participant expert fit into the Mohan and White Burgess Framework? 31
VI. Conclusion. 33
Appendix A – Ontario Rules 34
Rossiter C.J.
I. INTRODUCTION
[1] Dr. William Kaul and Mr. Ian Roher (the “Appellants”) are the only two remaining lead litigants in a group of related appeals before the Court. The sole issue in the appeals is the fair market value of the art that was purchased and subsequently donated by the participants in an art donation program that was in operation from 1998 to 2003 (the “Program” or the “Artistic Program”). The Program was promoted and operated by a number of entities over the years, including Artistic Ideas Inc., Artistic Expressions Inc. and Artistic Ideals Inc. (hereinafter collectively referred to as “Artistic”).
[2] The trial started in October 2016 with a larger group of lead litigants, which include the Appellants. Over the course of the hearing, the Respondent challenged the admissibility of the expert reports (the “Court Reports”) prepared by two of the appraisers, Ms. Edith Yeomans and Mr. Charles Rosoff, who were retained by Artistic to provide appraisals for the Program during the relevant years (the “Appraisers”). For various reasons, detailed herein, both Court Reports were excluded. The parties then argued a confidential motion before D’Arcy J. of this Court, the content of which I am not privy to. Following D’Arcy J.’s ruling on that motion, most of the lead litigants, save and except for the Appellants, have settled their appeals with the Canada Revenue Agency (the “CRA”).
[3] Before proceeding with their case, counsel for the Appellants brought forth a motion seeking in advance a ruling as to whether the Appraisers can testify as “participant experts” to their original appraisals for the truth of the contents (the “Appraisal Reports”).
[4] For the reasons which are detailed below, I would allow, or otherwise direct pursuant to a discretion granted under section 145 of the Tax Court of Canada Rules (General Procedure), SOR/90-688, as amended (“Tax Court Rules”) that Ms. Yeomans may testify as a participant expert with respect to the content of the Appraisal Reports that she had already compiled during her involvement in the Artistic Program. As for Mr. Rosoff, the Court does not have sufficient evidence before it, at this time, to make a similar direction although it appears that he prepared similar appraisals as Ms. Yeomans.
II. FACTS
A. Edith Yeomans’ Appraisal Reports
[5] Ms. Yeomans and Mr. Rosoff are two of the appraisers engaged by Artistic to value the lithographic prints that were transacted in the Artistic Program.
[6] Ms. Yeomans was based in Toronto and was the primary appraiser who had set the Program in motion. From 1998 to 2003, she conducted appraisals of every single title purchased and donated by participants in the Artistic Program.
[7] Ms. Yeomans was a licenced appraiser accredited by the American Society of Appraisers. Her qualifications as an appraiser in fine arts were not in dispute during a voir dire held in November 2016 for the purpose of qualifying her as an expert witness before this Court.
[8] During the voir dire, Ms. Yeomans testified that prior to her involvement with Artistic, she had been approached several times by other art donation programs. She turned them down because they required her to certify or “rubber stamp” certain values to their art that were not determined by her independent judgment and expertise, but were instead dictated by them.
[9] She testified that she took the job with Artistic because it did not impose on her this requirement as a condition of her retainer. She knew that the Program was basically a buy-low-donate-high concept. She also knew that the threshold required of her appraisals was approximately $1,000 CAD per piece. Nevertheless, she was the person responsible for determining, in her capacity as the appraiser, the fair market value of a particular title in USD and consequently, whether that title met the threshold. Those that she determined met or exceeded the threshold were included in the Program for selection by the participants; and those that she determined were below the threshold were discarded. She was retained by Artistic at an hourly rate, irrespective of the valuation opinions that she would reach in any particular case.
[10] Her appraisal process normally involved the direct inspection of art at the offices of Artistic and conducting research on the art, including the artist, the type of art, and etc. She then came to an initial value conclusion based on a market-comparison approach whereby she would compare the sales data of, for example, the same or similar art from the same artist in the U.S. market. She accessed this information through direct communication with art dealers, commercial galleries and etc. She inspected samples of every single title that was purchased and donated by participants in the Program, but not every single reproduction of every title. She would communicate her preliminary value conclusions to Artistic either verbally or by fax.
[11] There was no evidence of any communications between Ms. Yeomans and the Appellants or any of the participant donors.
[12] Following her initial value conclusions, she would provide two Appraisal Reports to Artistic: (i) a long-form report that included the appraisals of all titles that she had appraised for the Program; and (ii) a short-form report that only included titles that were chosen for the Program, i.e., those that met the threshold. The purpose of the Appraisal Reports was, largely, to put into writing the preliminary verbal value conclusions that had already been reached by Ms. Yeomans. Other than the length as a result of the number of titles that were included, the content of the two Appraisal Reports were otherwise no different. Only the short-form reports were later provided to the participant donors and to the charities.
[13] The Appraisal Reports have been disclosed to the Respondent since the very beginning. However, the Appellants refused to produce Ms. Yeomans’ working papers and any supporting documents on the basis that litigation privilege attached to those documents.
B. Charles Rosoff’s Appraisal Reports
[14] Mr. Rosoff was an appraiser based in New York City. He was not involved in the Program initially. He came onboard later in 1999 as a replacement for Lesley Fink, one of the original appraisers for the Artistic Program.
[15] Ms. Yeomans would share information with Mr. Rosoff about the artists and the market, but not her valuation conclusions. Mr. Rosoff then conducted his own independent appraisals and rendered the necessary Appraisal Reports.
[16] There has not been evidence from Mr. Rosoff himself, to date, including but not limited to his expertise or how he had performed his appraisals.
C. Court Reports
[17] In 2016, the Appraisers each produced a Court Report in connection with the current appeals pursuant to section 145 of the Tax Court Rules. Ms. Yeomans’ Court Report largely restates her value conclusions that were reached in the short-form Appraisal Reports. The Court Report also include other content such as opinions on the appropriate market for the determination of the fair market value, and additional follow-up research on values of similar artwork closer to the time of this trial. It is unclear what was included in Mr. Rosoff’s Court Report.
[18] Prior to the start of the trial proper, the Respondent brought a motion to exclude both Court Reports on the ground that they failed to comply with the notice and disclosure requirements set out under section 145 of the Tax Court Rules. Specifically, the Court Reports that were filed with the Court failed to include “any literature or other materials specifically relied on in support of the opinions” as set out by subsection 3(h) of the Code of Conduct for Expert Witnesses in Schedule III of the Tax Court Rules (“Code of Conduct”).
[19] The Court found that Mr. Rosoff’s Court Report was substantially, if not wholly deficient in that regard and therefore excluded his Court Report on that basis. As such, Mr. Rosoff has not yet been called as an expert witness before this Court.
[20] With regard to Ms. Yeomans’ Court Report, the Respondent conceded that it had complied with the substantive requirements that were set out by section 145 of the Tax Court Rules and the companion Code of Conduct. However, as the hearing continued and as Ms. Yeomans was later called as an expert witness, the Respondent raised a further challenge to the admissibility of her Court Report, which formed the backbone of her proposed expert opinion evidence, on the basis that her extensive involvement in the Artistic Program precluded her from testifying as an expert before this Court because of her lack of impartiality.
[21] Following the above-mentioned voir dire held to determine if Ms. Yeomans’ may be qualified as an expert witness before this Court (many of the factual findings are set forth above), the Court found that Ms. Yeomans clearly lacked the necessary impartiality and objectivity for her to testify to the content of the Court Report as an independent and impartial expert witness before this Court. Her Court Report was therefore not admitted into evidence.
[22] Following this ruling, the proceeding was adjourned sine die as the parties pondered their next steps. In December 2016, the parties argued a confidential motion before D’Arcy J., who rendered a decision following which, most of the lead litigants in the appeals have since settled their appeals with the CRA, save and except for the Appellants.
D. Purpose of this Motion
[23] The Appellants now seek to tender the Appraisal Reports of Ms. Yeomans and Mr. Rosoff for the truth of their contents, including most importantly the value conclusions that were reached therein, on the basis that the Appraisers are “participant experts” based on the Ontario Court of Appeal’s decision in Westerhof v Gee Estate, 2015 ONCA 206, 124 OR (3d) 721, leave to appeal to SCC refused, 2015 CanLII 69447 (“Westerhof”).
[24] The Respondent argues that Westerhof, which dealt specifically with the amended expert evidence rules under the Ontario Rules of Civil Procedure, RRO 1990, Reg 194 (“Ontario Rules”), should not apply to the present case because the language in the relevant provisions of the Ontario Rules are different than their counterpart in the Tax Court Rules. Alternatively, if the Court finds that Westerhof applies, Ms. Yeomans and Mr. Rosoff nevertheless do not meet the Westerhof test for participant experts. Lastly, the Respondent takes the view that the Court should not make a blanket ruling vis-à-vis the admissibility of the Appraisal Reports at this point.
[25] At the outset, since evidence regarding Mr. Rosoff’s appraisals are lacking at this point, I do not propose to make a ruling regarding the admissibility of his Appraisal Reports at this time. However, I believe that my following analysis should equally inform of the approach that will be taken in respect to the admissibility of his original appraisals.
III. FOUR DIFFERENT TYPES OF WITNESSES WITH EXPERTISE
[26] The Ontario Court of Appeal first coined the term “participant experts” in Westerhof. Subsequently, it has been widely applied in the Ontario courts: see XPG v Royal Bank of Canada, 2016 ONSC 3508, 87 CPC (7th) 57 (“XPG”), Hervieux v Huronia Optical, 2016 ONCA 294, 399 DLR (4th) 63 (“Hervieux”). It has also been referenced in other jurisdictions across Canada: Laing v Sekundiak, 2015 MBCA 72, 319 Man R (2d) 268 (“Laing”) and Kon Construction Ltd v Terranova Developments Ltd, 2015 ABCA 249, 20 Alta LR (6th) 85 (“Kon Construction”).
[27] According to these authorities, there are four different types of witnesses with expertise: (i) an independent expert; (ii) a participant expert; (iii) a non-party expert, and (iv) a litigant with expertise, or a litigant expert.
Independent Expert:
[28] An independent expert (also known as a litigation expert) is an expert who is retained by a party for the purpose of, or in contemplation of litigation. In Westerhof, these are the experts contemplated by rule 4.1.01 and Form 53 of the Ontario Rules as experts “engaged by or on behalf of a party to provide evidence in relation to a proceeding.” In Kon Construction at paragraph 35, the Alberta Court of Appeal described these experts as individuals “who are retained to provide opinions about issues in the litigation, but were not otherwise involved in the underlying events.” The Court further stated that this is the category of experts who is contemplated by the common law framework and rules set out in R v Mohan, [1994] 2 SCR 9 (“Mohan”) and White Burgess Langille Inman v Abbott and Haliburton Co, 2015 SCC 23, [2015] 2 SCR 182 (“White Burgess”) and that the “rules of evidence and civil procedure relating to expert witnesses are primarily designed to deal with [these experts].” These experts must be willing and able to provide independent, impartial and unbiased litigation opinions to the court and must not act as advocates for any of the parties: White Burgess.
Participant Expert:
[29] A participant expert may be described as a witness with expertise who was involved in the underlying events that gave rise to the litigation, but in contrast to a litigation expert, was not involved for the purpose of, or in contemplation of any litigation. These experts may express opinions that were formed based on their observation of or participation in the underlying events as part of the ordinary exercise of their skill, knowledge, training and experience: Westerhof, at para. 60. These experts are a unique hybrid in that they can attest to both “facts”, which they observed or examined while participating in the underlying events, and “opinions”, which they formed during their participation based on their expertise: Westerhof, at paras. 61, 67 to 70. While it is recommended that these witnesses be properly qualified as experts, there is no rule mandating such: Kon Construction, at para. 37.
[30] The most salient example of this category are treating physicians. They are allowed to provide their treatment opinions in court without complying with the court’s procedural rules dealing with expert evidence: Westerhof. Such evidence is usually unchallenged because these witnesses are essentially “witnesses of fact” to the extent that they can testify to “facts” of their involvement, as well as the “opinions that went to the exercise of [their] judgment”: Marchand v The Public General Hospital of Chatham (2000), 51 OR (3d) 97, [2000] OJ No 4428 at para. 120 (“Marchand”); also see Westerhof at paras. 67-70.
Non-Party Expert:
[31] Non-party experts are similar to participant experts in that their opinions are also formed for a purpose other than litigation: Westerhof, at para. 62. They are retained by a non-party to the litigation. The Court in Westerhof referred to, for example in an accident, medical practitioners who were engaged by statutory accident benefits insurers. In Westerhof, a physiotherapist and a kinesiologist were allowed to testify to their opinions initially prepared for Mr. Westerhof’s insurer without complying with the expert evidence rules in the Ontario Rules: at paras. 112-114.
Litigant Expert:
[32] The fourth category is a litigant or a party with expertise, and includes employees of a corporate litigant who have expertise in the jobs they were hired to perform. This category appears to have been first formally recognized by the Alberta Court of Appeal in Kon Construction. The Court differentiated such witnesses on two grounds. First, it is not necessary for the party tendering such a witness to show that he or she is impartial, independent, or unbiased according to White Burgess. The obvious self-interest of the litigant does not automatically disqualify the opinion evidence. Second, there is no need to engage in a Mohan-type of analysis to qualify these witnesses. In this Court, these witnesses have also been allowed to give their opinion evidence to explain why they did what they did: see Diotte v Canada, 2008 TCC 244, 2008 DTC 4558 (the taxpayer was allowed to provide his valuation opinions).
[33] The common thread that ties the latter three types of witnesses of expertise together, and which makes them distinct from the first category of experts is that their opinions are based on their personal observations of or participation and involvement in the subject matter at issue in a litigation for a purpose other than litigation. A participant expert and a litigant with expertise formed the opinions at the time of the events taking place. A non-party expert may or may not have observed the events at the time, but nonetheless formed his or her opinions for a purpose other than litigation. Because of the nature of these witnesses, the scope of their opinion testimony is necessarily limited to their respective roles and involvement.
IV. WHETHER WESTERHOF APPLIES?
A. Parties’ Positions
[34] The first issue that arises is whether Westerhof, an Ontario decision dealing with the Ontario Rules, applies to a proceeding arising in the Tax Court of Canada.
[35] The Respondent argues that Westerhof does not apply because the concept of a “participant expert” arose out of the wording of the relevant provisions in the Ontario Rules, which is different than their counterpart under the Tax Court Rules, which govern the current proceeding.
[36] Specifically, in Westerhof, the issue that was before the Ontario Court of Appeal was whether rule 53.03 of the Ontario Rules (see Appendix A), i.e. the rule setting out the procedural requirements regarding expert opinion evidence, applied only to litigation experts described by the language of rule 4.1.01 and Form 53 of the Ontario Rules – which specifically refer to experts who are “engaged by or on behalf of a party to provide evidence in relation to a proceeding” – or much more broadly as to encompass all witnesses with expertise, including participant experts and non-party experts, who propose to give opinion evidence. The Court found that rule 53.03 of the Ontario Rules applied only to litigation experts, and that other witnesses with expertise who are not “engaged by or on behalf of a party”, such as the treating physicians in Westerhof, need not follow rule 53.03 prior to providing opinion evidence regarding their observations of or participation in the underlying events at issue.
[37] The Respondent asserts that, in contrast, the Tax Court equivalent, namely section 145 of the Tax Court Rules and the Code of Conduct, do not define or add any qualification to the term “expert witness.” Consequently, the expert evidence rules in the Tax Court ought to apply to all witnesses with expertise who propose to provide opinion evidence. Lastly, the Respondent acknowledges that the Court ultimately retains the discretion to admit such evidence at trial pursuant to subsections 145(7) and (15) of the Tax Court Rules.
[38] The Appellant argues that Westerhof applies to a proceeding arising in this Court as there is no material distinction between an expert who is “engaged by or on behalf of a party” as contemplated under the Ontario Rules and an “expert witness” under the Tax Court Rules. As with the former, the latter should also be interpreted narrowly so as to include only a litigation expert, particularly in light of the wording on Form 145(2)—the Certificate Concerning Code of Conduct for Expert Witnesses—that every proposed expert witness must sign as a companion document to an expert report that is in compliance with the Tax Court Rules. Specifically, Form 145(2) expressly states as follows:
(name), having been named as an expert witness by the (party), certify that I have read the Code of Conduct for Expert Witnesses set out in Schedule III to the Tax Court of Canada Rules (General Procedure) and agree to be bound by it. [emphasis added]
B. Analysis
[39] I agree with the Appellant’s position that Westerhof applies to a proceeding in this Court and that section 145 of the Tax Court Rules contemplates only independent or litigation experts retained for the purpose of litigation, but not participant experts, or other witnesses with expertise. I based my conclusion on the following reasons.
(i) A participant expert is quintessentially a fact witness
[40] First and foremost, the Respondent mainly rests her case on the differences in the statutory language between the relevant expert evidence rules under the Ontario Rules that were discussed in Westerhof and the Tax Court Rules. On my reading of Westerhof, I find that there is much more than what meets the eye as the idiosyncratic statutory language in the Ontario Rules was but one of six reasons (number 4 out of 6, to be precise in terms of the ordering) which the Ontario Court of Appeal relied on in finding that rule 53.03 under the Ontario Rules did not apply to participant experts or non-party experts: Westerhof, at para. 80. Instead, I find that the primary reason behind the Court’s “creation” of a participant expert - who was allowed to provide opinion evidence relating to his or her participation or observation of the underlying events at issue – was because of the fact that he or she was, in essence, a fact witness to those events.
[41] Two passages in Westerhof were particularly revealing of the Court of Appeal’s true intentions. First, immediately following the formulation of the test for a participant expert at paragraph 60, the Court stated the reasons as to why it preferred to call such witnesses “participant experts”, notwithstanding that they have also been referred to as fact witnesses in the past:
61 Such witnesses have sometimes been referred to as "fact witnesses" because their evidence is derived from their observations of or involvement in the underlying facts. Yet, describing such witnesses as "fact witness" risks confusion because the term "fact witness" does not make clear whether the witness's evidence must relate solely to their observations of the underlying facts or whether they may give opinion evidence admissible for its truth. I have therefore referred to such witnesses as "participant experts".
[42] Second, the Court further explained in Westerhof that the concept of “participant experts” had its roots in common law that predate the relevant 2010 amendment to the Ontario Rules that gave rise to the new rules: at paras. 66 to 73. I find it important to quote in full the Court’s discussion of the leading case, Marchand, supra in Westerhof, at paras. 67 to 70, as it clearly illustrates the common law origin of a “participant expert” in Ontario, or as the Court of Appeal called it in Marchand, a “witness of fact”:
67 The leading pre-2010 case concerning the scope and application of rule 53.03 is this court's decision in Marchand v. The Public General Hospital Society of Chatham (2000), 51 O.R. (3d) 97. In Marchand, this court confirmed that treating physicians could testify about treatment opinions without complying with the former rule 53.03.
68 At para. 120 of Marchand, this court held that a treating physician is called as a "witness of fact, not as an expert witness", and therefore the former rule 53.03 was not engaged:
Dr. Tithecott was not a "rule 53.03 witness". Dr. Tithecott was called as a witness of fact, not as an expert witness. Thus, insofar as Dr. Tithecott was testifying about the facts of his own involvement, or the opinions that went to the exercise of his judgment, rule 53.03 was not engaged. [Emphasis added.]
69 In describing Dr. Tithecott as "a witness of fact, not as an expert witness", this court was not making a simple distinction between factual evidence and opinion evidence. This court said specifically that, "insofar as Dr. Tithecott was testifying about the facts of his own involvement, or the opinions that went to the exercise of his judgment" (emphasis added), the former rule 53.03 "was not engaged."
70 Put another way, Dr. Tithecott, a treating physician, was permitted to testify about opinions that arose directly from his treatment of his patient, the plaintiff in the case. He was not required to comply with rule 53.03, and his opinion evidence was admitted for the truth of its contents. This was because he formed his opinions relevant to the matters at issue while participating in the events and as part of the ordinary exercise of his expertise. Accordingly, rather than being a stranger to the underlying events who gave an opinion based on a review of documents or statements from others concerning what had taken place, Dr. Tithecott formed his opinion based on direct knowledge of the underlying facts. He was therefore a "fact witness", or, as I have referred to such witnesses in these reasons, a "participant expert". [emphasis added].
[43] Precisely because these witnesses are fact witnesses, it makes logical sense that the expert evidence rules in the Ontario courts or in this Court should not target them. However, because of their expertise and their involvement in the underlying events at issue, they are allowed to testify essentially to the facts of their own involvement, or the opinions that went to the exercise of their judgment.
(ii) Westerhof has been followed in other Canadian jurisdictions
[44] Other Canadian jurisdictions that do not have the same statutory regime as Ontario nonetheless found that Westerhof was applicable or instructive.
[45] In Laing, the Manitoba Court of Appeal followed Westerhof and found that the application judge erred in disregarding the opinion evidence of a treating physician, an orthopaedic surgeon who performed a remedial hip replacement surgery on the litigant, in an action for damages based on, among other things, negligence for a lack of informed consent. In particular, at paragraph 103, the Court stated that:
The Ontario Court of Appeal recently addressed the varying categories of expert evidence in Westerhof v. Gee Estate, 2015 ONCA 206, 331 O.A.C. 129. The case concerns Rule 53.03 in the Ontario Rules of Civil Procedure, R.R.O. 1990, Reg. 194, which was amended in 2010. This rule sets out the requirements for introducing the evidence of expert witnesses at trial. While this rule is distinct to Ontario, Westerhof is instructive about how the evidence of an expert witness, such as Dr. Hedden, may be used. [emphasis added]
[46] In Kon Construction, the Alberta Court of Appeal took it one step further and allowed “expert” employees of an engineering firm, one of the parties to the litigation, that was sued over performance of a contract to give opinion evidence about how and why they performed their jobs as they did, the very subject matter of the contractual dispute. In doing so, the Court noted that the Alberta Rules of Court, AR 124/2010 (“Alberta Rules”) specifically defined an “expert” much more widely as “a person who is proposed to give expert opinion evidence” as opposed to the much narrower qualification added in the Ontario Rules. Nevertheless, the Court commented as follows at paragraphs 32 and 34:
32 On their face, the Alberta Rules apply to any witness who proposes to give expert opinion evidence.
33 …
34 Notwithstanding their wide wording, the Rules and the common law on expert witnesses largely contemplate the "external" expert witness who is retained to provide an opinion to assist the court. For example, in White Burgess at para. 32 the Court wrote:
Underlying the various formulations of the duty [of the expert witness to the court] are three related concepts: impartiality, independence and absence of bias. The expert's opinion must be impartial in the sense that it reflects an objective assessment of the questions at hand. It must be independent in the sense that it is the product of the expert's independent judgment, uninfluenced by who has retained him or her or the outcome of the litigation. It must be unbiased in the sense that it does not unfairly favour one party's position over another.
This formulation of the duty of expert witnesses assumes that the expert has no interest or involvement in the case other than to provide his or her expert opinion on the issues. [emphasis added]
[47] While none of these cases, including Westerhof are binding on this Court, they are highly persuasive. The Respondent has not brought to my attention any case law in the federal courts on this particular issue of a “participant expert”.
(iii) Language in Tax Court Rules contemplate only independent experts, not “participant experts”
[48] On a reading of the Tax Court Rules as a harmonious whole, I find that it also only targets independent experts hired for the purpose of litigation, and not “participant experts” who are essentially fact witnesses, as discussed above.
[49] First of all, as the Appellant correctly submitted, while the Tax Court Rules do not use the same exact phrase “engaged by or on behalf of a party” in section 145, I find no material distinction between that phrase and the phrase “named … by the (party)” used in the Form 145(2) Certificate that must be signed by a proposed expert witness. The two phrases can be used interchangeably in this context.
[50] This conclusion is buttressed by similarly suggestive language found throughout the relevant provisions in the Tax Court Rules that, when viewed as a whole, strongly imply that the Tax Court Rules likely only contemplated independent experts who are retained for the purpose of the adversarial process, but not the broader group of witnesses with expertise, including participant experts.
[51] For example, the formulation of an expert’s duties under rule 4.1.01 of the Ontario Rules exhibit an uncanny resemblance to that which was set out in the Expert’s Code of Conduct in the Tax Court Rules. The relevant portions are reproduced as follows for comparison:
Ontario Rules, Rule 4.1.01 “Duty of Expert”
Tax Court Rules, Code of Conduct, “General Duty to the Court”
4.1.01 (1) It is the duty of every expert engaged by or on behalf of a party to provide evidence in relation to a proceeding under these rules,
(a) to provide opinion evidence that is fair, objective and non-partisan;
(b) to provide opinion evidence that is related only to matters that are within the expert's area of expertise …
Duty Prevails
(2) The duty in subrule (1) prevails over any obligation owed by the expert to the party by whom or on whose behalf he or she is engaged.
1 An expert witness has an overriding duty to assist the Court impartially on matters relevant to his or her area of expertise.
2 This duty overrides any duty to a party to the proceeding, including the person retaining the expert witness. An expert witness must be independent and objective and must not be an advocate for a party.
[52] Subsection 3(i) of the Code of Conduct also provides that a properly done expert report referred to under subsections 145(1) and (2) of the Tax Court Rules must include “a summary of the methodology used … including … whether a representative of any other party was present.” This language suggests that at the time that an expert is conducting its research and investigation for the purpose of drafting the expert report, litigation is either being contemplated or has already commenced. Otherwise, this requirement would serve no purpose.
[53] In addition, the following policy statements made in the Regulatory Impact Analysis Statement [1] released in connection with the 2014 amendments to the expert evidence rules lend further credence to the above interpretation:
Subsection 145(2) provides that the expert’s report must set out the proposed evidence of the expert, the expert’s qualifications and be accompanied by a certificate signed by the expert acknowledging that the expert agrees to be bound by the Code of Conduct for Expert Witnesses that is added as a schedule to the Rules to ensure that expert witnesses understand their independent advisory role to the Court. [emphasis added]
[54] Lastly, I would add that the phrase “engaged by or on behalf of a party” did appear, for what it’s worth, in a different context under subsection 99(1) of the Tax Court Rules wherein the Court has a discretion to grant leave to examine for discovery a non-party other than “an expert engaged by or on behalf of a party in preparation for contemplated or pending litigation.” The Respondent drew the conclusion that the absence of the said phrase in section 145 indicates that section 145 applied to all expert witnesses. I prefer not to draw such a quick conclusion based on the non-existence of certain language. If anything, in light of what I found above regarding the nature of a participant expert, the case law following Westerhof, the statutory context and further reasons below, I find the converse to be true, that is, the only experts that are contemplated under the Tax Court Rules are independent experts.
(iv) Tax Court Rules should be interpreted liberally to accommodate participant experts and other witnesses with expertise
[55] Rule 4(1) of the Tax Court Rules provides the overarching principle that the rules, including the expert evidence rules, shall be given a liberal and expansive reading so as to “secure the just, most expeditious and least expensive determination of every proceeding on its merits.” Consistent with that principle, participant experts should be allowed to testify to their observation of or participation in the events that later gave rise to litigation, subject to inherent limitations in the scope of their evidence.
[56] First and foremost, the opinion evidence of participant experts constitute in many cases the best evidence available. A participant expert derives his or her opinion contemporaneously based on his or her expertise and participation in the underlying events at issue. The opinions are not influenced by the exigencies of litigation and may be trusted by the courts because these witnesses, as often the case, are professionals whose professional integrity, absent evidence to the contrary, can usually be relied upon by the courts. In this regard, I find the rationale provided by the Alberta Court of Appeal in Kon Construction, at para. 40, which allowed litigants or parties with expertise to give opinion evidence relating to the underlying events, to be equally valid and forceful:
As parties to the litigation they are entitled to testify, and generally they will have the most direct and relevant evidence about the issues. The truth finding function of a trial requires that their evidence be received. Since they were often only involved in the underlying events because of their expertise, it makes no sense to hold that they cannot explain why they acted as they did, if they stray into their expertise. Their opinions explain why they acted as they did. [emphasis added]
[57] Such evidence is particularly helpful where the Court is forced to deal with matters that are “antiquated”. The present case is a perfect example. At issue before me is a dispute about the value of artwork that was donated anywhere from 14 to 19 years ago. To disallow, categorically, contemporaneous opinion evidence from the Appraisers who were retained to provide appraisals at the time because of their expertise is to deprive the Court of potentially probative evidence that may very likely bear on the merits of the case.
[58] The Respondent’s strict interpretation of section 145 will not promote “the most expeditious and least expensive determination of every proceeding on its merits” but rather exacerbate the existing problems of delays and cost in litigation. Pursuant to the Respondent’s interpretation, all witnesses with expertise must comply with section 145 in order to tender any expert opinion evidence. Yet, participant experts because of their involvement in the underlying events that gave rise to litigation will in most if not all cases fail to meet the threshold of impartiality required of an expert witness: White Burgess. The Court Report of Ms. Yeomans was excluded on this exact basis. This cannot be the correct outcome. Participant experts are, after all, just another way of saying “fact witnesses with expertise”. Because of their hybrid nature, Marchand and Westerhof provide the case law foundation for them to testify not only to the “facts” of their participation in the underlying events at issue, but also opinions that were formed in the ordinary exercise of their expertise.
(v) There are many precedents in this Court that allow opinion evidence from witnesses with expertise
[59] I note that this Court has long had a rather lenient approach to admitting contemporaneous opinion evidence tendered by witnesses with expertise who had participated in the underlying events at issue. These witnesses were never given the name “participant experts” as their limited opinion evidence were presumably admitted based on the premise that they are essentially witnesses of fact, to the extent that their opinions related to their direct involvement in the underlying events. As all trials before this Court are judge-only, this Court has long preferred to determine cases based on their real merits, which include admitting potentially probative opinion evidence from witnesses with expertise who had formulated their opinions for a purpose other than litigation.
[60] I will give just two examples. In Klotz v R, 2004 TCC 147 aff’d by 2005 FCA 158, another art donation case in which expert appraisal evidence was involved, former Associate Chief Justice Bowman (as he then was) allowed the appraiser, Ms. Laverty, to testify as an expert notwithstanding that she had in fact participated in the donation program at issue,. Her original appraisal report was admitted in full and her expert report prepared in connection with the litigation was also allowed into evidence, notwithstanding the challenge raised by the Respon