Citation: 2009 TCC 246
Date: 20090507
Dockets: 2006-1385(IT)G
2006-1386(IT)G
BETWEEN:
GENERAL ELECTRIC CAPITAL CANADA INC.,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR ORDER
Hogan J.
Factual
background
[1]
The Appellant brought a
motion for an order for leave to allow it to adduce evidence from eight experts
at the hearing of its appeals of the assessments issued against it by the
Minister of National Revenue. These assessments disallow the Appellant’s claims
for deductions with respect to guarantee fees paid by the Appellant to its
parent corporation for the Appellant’s 1996, 1997, 1998, 1999 and 2000 taxation
years, and add consequential withholding tax under Part XIII of the Income
Tax Act.
[2]
Mr. Meghji,
counsel for the Appellant, argues that the Appellant should be required simply
to make a prima facie case that it has legitimate reasons to call the
three additional expert witnesses and that such expert evidence may be useful
for me to hear at trial. Mr. Meghji submits that his client has presented
uncontradicted affidavit evidence on both of these points. He argues, rather
forcefully, that the Respondent is confusing the Court by raising issues that
go to the admissibility of the evidence at trial and not to the merits of the
matter now before me. He has undertaken to ensure that the evidence to be given
by each witness will not be duplicative and accepts being held to this undertaking.
Finally, he notes that the Respondent, in opposing the motion, alleges
prejudice, but, unlike the Appellant, has not proffered any evidence, whether
in the form of affidavit evidence or otherwise, to establish the nature of the
prejudice it will suffer if I grant the motion. Finally, Mr. Meghji
accepts that section 7 of the Canada Evidence Act (the “CEA”)
limits each side to five experts for the case and not five experts per issue as
suggested by a contradictory line of cases. The former sets a stricter standard
to be met.
[3]
The Respondent opposes
the motion on the grounds that there is only one issue to be decided at trial
and that the additional three experts will be called to deal with exactly the
same matter. Furthermore, the Respondent argues that it has only recently become
aware of the Appellant’s intention of calling more than five expert witnesses.
The Respondent alleges it will suffer a prejudice if I allow the motion, as counsel
for the Respondent would then have to spend the three weeks remaining before
trial dealing with the three additional expert reports as opposed to preparing the
Respondent’s own case. The Respondent alleges that it believed that the
Appellant would call only five expert witnesses when it agreed to the trial
date and the length of time set aside for the hearing.
Issue
[4]
In brief, the issue
that I must determine is whether or not this is a proper case in which to
exercise the discretion conferred upon me under section 7 of the CEA by allowing
up to eight expert witnesses to be presented by the Appellant at trial.
Analysis
[5]
Section 7 of the CEA
provides that not more than five expert witnesses may be called on either side
without leave of the Court. Section 7 reads as follows:
Where, in any trial or other proceeding, criminal or civil, it is
intended by the prosecution or the defence, or by any party, to examine as
witnesses professional or other experts entitled according to the law or
practice to give opinion evidence, not more than five of such witnesses may be
called on either side without the leave of the court or judge or person presiding.
[6]
In R. v. D.D., the Supreme
Court of Canada commented that the accessibility of the judicial system to
litigants may be curtailed by the proliferation of expert opinions, as follows:
. . . expert evidence is time-consuming and expensive. Modern
litigation has introduced a proliferation of expert opinions of questionable
value. The significance of the costs to the parties and the resulting strain
upon judicial resources cannot be overstated. When the door to the admission of
expert evidence is opened too widely, a trial has the tendency to degenerate
into “a contest of experts with the trier of fact acting as referee in deciding
which expert to accept” . . . .
[7]
Against this background,
what are the factors that I should consider in order to properly exercise the
discretion conferred by section 7? That provision is silent on this matter and
therefore I am of the view that Parliament intended that the issue be dealt
with on a case-by-case basis. I find useful the criteria proposed by the
Federal Court of Appeal and Federal Court Rules Committee (the “Committee”) with
respect to such motions. The Committee states the following:
Federal Courts Rules Committee
Expert evidence in the Federal
Courts
UPDATE
March 16, 2009
(10) Issue 10: Limiting the number of experts
Section 7 of the Canada Evidence Act2 limits the number of expert witnesses that may be called by a party
to five, unless leave of the Court is granted for the calling of additional
witnesses. The Federal Courts Rules Committee has accepted the recommendation
that the Court’s ability to exercise this discretion and the factors that would
be relevant to that decision be made explicit in the Rules. The proposed
factors to be considered are:
(a) the nature of the litigation, its public
significance, and the need to clarify the law,
(b) the number and complexity or technical nature of
the issues in dispute, and
(c) the likely expense involved in relation to the
amount in dispute.
The Committee has also accepted the subcommittee’s recommendation that
rule 400(3) be amended to explicitly provide cost consequences for the
unnecessary tendering of expert evidence at trial.
All of the decisions set out above were made with a view to
obtaining a first draft of the proposed amendments to facilitate future
consultation with the profession and parties. The proposed amendments will be
pre-published in Canada Gazette Part I and comments received on the content of
those amendments will be considered by both the subcommittee and the plenary
committee.
2 R.S.C. 1985, c. C-5.
[8]
With respect to the
first point, this is the first case that I am aware of that will deal with the
application of an arm’s length standard to related-party guarantee fees. In the
financial area, related-party guarantee agreements are often used to mitigate
risk for lenders.
[9]
On the second point,
the parties agree that the comparable uncontrolled price method is not
available in the present case. Therefore they may have to rely upon alternate
and complex valuation frameworks and perspectives in order to present their
case. While there is ultimately one issue to be decided by the Court, each of
these different approaches may constitute proper sub-issues for consideration
at trial. I used the word “may” because the question of the admissibility of
the expert evidence is not a matter to be considered at this stage.
[10]
For example, the
creditworthiness of the guarantor and of the beneficiary of the guarantee may
have an impact on pricing. The credit rating that the beneficiary of the
guarantee may secure with, as opposed to without, the guarantee may be
relevant. The beneficiary’s capital position at the time may also be relevant.
This is a complicated technical issue. The financial troubles of AIG Assurance demonstrate
that even sophisticated industry players may draw improper inferences regarding
the risk that they are taking on and fail to charge the appropriate premium in
the circumstances. In recent times, rating agencies have been harshly
criticized for their rating methodology, one that has led, in the eyes of many,
to inappropriate high rating grades for borrowers who have quickly found
themselves in serious financial difficulty.
[11]
Counsel for the
Appellant provided during the hearing an undertaking that the evidence that
will be led by the additional expert witnesses will not be duplicative. He has
promised to abide by that undertaking at trial and I will hold the Appellant thereto
so as not to waste the Court’s time. I expect that the Respondent’s counsel will
also be vigilant in this regard.
[12]
The Respondent’s
counsel claims that he may be prejudiced in his preparation for the hearing as he
learned of the Appellant’s intention of perhaps calling up to eight witnesses
only four weeks before the commencement of the trial. He was under the impression
that the Appellant would be limiting the number of expert witnesses to five.
[13]
I agree with counsel
for the Respondent that the best practice with regard to seeking leave to
produce additional expert witnesses is to present the motion prior to the
setting of the trial date. At the very least, counsel intending to bring such a
motion should advise his confrère of this possibility well in advance of
setting the trial date. This being said, if the Respondent is, as it alleges,
caught by surprise, there is nothing to stop it from bringing a motion, with
proper affidavit evidence in support thereof, requesting an adjournment of the
hearing of the appeals. If prejudice is established at the hearing of such a
motion, then presumably additional time could be granted.
[14]
I also find particularly
helpful the comments of the Canadian Human Rights Tribunal, in the case of Public
Service Alliance of Canada and Canadian Human Rights Commission v. Minister of
Personnel for the Government of the Northwest Territories,
on the question of the proper exercise of judicial discretion in matters such
as this:
4 The judgment in Mohan sets out some of the general
principles in the area. The purpose of expert evidence is to assist an
adjudicative body in deciding the facts of the case. It does so by providing
the trier of facts with knowledge and "ready-made" inferences which
stand outside the scope of their experience. It follows that experts have a
special role in litigation which relies on statistical and scientific evidence.
The issue in each instance is whether the evidence is "necessary" to
decide the issues in the case. The standard of necessity is relatively relaxed,
however, and should not be overstated. Mr. Justice Sopinka also remarks, at
paragraph 24, that a trial should not become "a contest of experts with
the trier of fact acting as referee in deciding which experts to accept".
5 It is important to distinguish between the issues which
arise on an application for leave to call witnesses and the issues which arise
with respect to the admissibility of their testimony. Although it is inevitable
that there will be some blurring of the line between the two areas, issues with
respect to the relevance and admissibility of an expert's testimony are more
properly decided when the witness is called. The inquiry at the present
stage of the proceeding is merely whether the party applying for leave has
reasonable grounds for calling the witnesses. In deciding such an issue, a
Tribunal must bear in mind that a party is entitled to provide a complete
answer to the case against it.
6 Counsel for the Respondent appeared to take the position
that the relevant question is whether the proposed evidence would have a
significant bearing on a distinct issue in the case. We agree with this view of
the matter. A Tribunal is not in a position to assess the reliability of
proposed witnesses at this stage of the proceeding and can merely determine
whether their testimony would logically contribute to the defence. It is
accordingly sufficient if it can be reasonably said that the expert's
testimony is needed to determine one of the factual issues in the case.
This excludes testimony which undermines the fairness or expeditiousness of the
process.
[Emphasis added.]
[15]
If the expert evidence adduced
by the Appellant is duplicative, counsel for the Respondent will be entitled to
object to the hearing of the witnesses’ evidence. Finally, if the evidence is
redundant and the trial is needlessly prolonged by it, this is a relevant factor
that counsel for the Respondent can present at the hearing regarding costs at
the end of the trial.
[16]
For all of these
reasons, I grant the Appellant’s motion and allow it to call up to eight expert
witnesses at the hearing of the appeals.
Signed at Ottawa, Canada, this 7th day of May 2009.
"Robert J. Hogan"
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