Sarchuk
J.T.C.C.:
—
This
is
an
appeal
by
RIS-Christie
Ltd.
(RIS)
from
assessments
of
tax
with
respect
to
its
1982
and
1983
taxation
years.
In
calculating
its
income
for
the
taxation
year
ended
December
31,
1982,
the
Appellant
deducted
the
sum
of
$160,000
in
respect
of
scientific
research
pursuant
to
the
provisions
of
paragraph
37(1
)(a)
of
the
Income
Tax
Act
(the
Act),
an
additional
research
allowance
in
the
amount
of
$80,000
pursuant
to
the
provisions
of
subsection
37.1(1)
and
an
investment
tax
credit
in
the
amount
of
$40,000
pursuant
to
the
provisions
of
subsection
127(9).
In
assessing
the
Appellant
for
its
1982
taxation
year
the
Minister
of
National
Revenue
(the
Minister),
disallowed
the
deduction
of
the
research
and
development
expenditures,
the
additional
research
allowance
and
the
investment
tax
credit.
As
a
consequence
of
the
adjustments
to
the
Appellant’s
taxable
income
in
1982,
the
Minister
reassessed
its
1983
taxation
year
by
reducing
the
small
business
deduction
claimed
in
that
year
in
accordance
with
section
125
of
the
Act.
Appellant’s
Evidence
Leon
Slonimsky
(Slonimsky)
(since
deceased)
and
Daniel
D.
Dorcich
(Dorcich)
were
the
principals
of
Plyform
Construction
Company
Limited
(PCCL).
In
1982
they
conceived
the
idea
of
developing
a
concrete
forming
medium
for
cast-in-situ
concrete
construction
(the
panel),
a
concept
designed
to
decrease
costs
and
increase
the
quality
of
insulation
in
the
formation
of
concrete
panels
for
use
by
the
residential
and
non-residential
construction
industry.
Dorcich
described
the
panel
as
a
composite
structure
which
is
used
as
a
mould
to
retain
concrete
in
its
plastic
state
until
such
time
as
it
cures
and
becomes
self-supporting
and
a
structural
member
itself.
In
his
view,
there
existed
considerable
uncertainty
as
to
whether
such
a
system
could
technically
be
developed
and
whether
it
could
be
produced
at
competitive
market
prices.
More
specifically,
the
uncertainty
involved
was
whether
one
could
design
and
develop
an
ultra-light
or
very
lightweight
composite
structure
unlike
anything
available
in
the
existing
market.
In
November,
1982
PCCL
developed
a
proposal
for
the
research
and
development
of
the
panel
for
distribution
to
interested
investors.
A
copy
of
this
proposal
was
received
by
Brian
E.
Turner
(Turner)
of
Williams
&
Turner
Consultants
Inc.
(Consultants)
which
acted
as
manager
of
scientific
research
and
development
projects.
Turner
approached
Gilles
Christie,
the
principal
of
RIS,
and
it
agreed
to
invest
in
the
project.
Shortly
thereafter,
it
was
decided
that
the
scientific
research
and
development
would
be
undertaken
by
a
new
corporate
entity
and
541185
Ontario
Inc.
(541185)
was
incorporated
for
that
purpose.
An
agreement
was
executed
as
of
December
1,
1982
between
Consultants
and
541185
whereby
the
latter
agreed
to
perform
the
research
and
development
of
the
panel
and
Consultants
undertook
to
provide
the
necessary
funds
for
the
purpose
of
developing
the
panel.
It
is
not
disputed
that
as
a
result
of
this
arrangement
the
amount
of
$230,000
was
received
by
541185
in
taxation
year
1983.
With
respect
to
the
research
and
development,
the
Appellant
relied
primarily
on
the
testimony
of
Dorcich
and
Edward
L.
Littlejohn
(Littlejohn).
Dorcich’s
health
did
not
permit
him
to
attend
in
Court
and
by
agreement,
his
evidence
was
tendered
by
way
of
an
Affidavit
and
cross-
examination
upon
that
Affidavit.
In
addition
to
Littlejohn’s
testimony
his
report
with
supporting
documents
was
filed.
Regarding
the
project
Dorcich
described
his
input
as
being
the
evaluation
and
application
of
the
product
from
the
practical
standpoint
and
the
financial
aspects
involved.
This
included
communication
with
manufacturers
and
suppliers
both
from
the
standpoint
of
the
acquisition
of
necessary
materials
as
well
as
the
hoped
for
manufacturing
and
marketing
of
the
product.
Slonimsky
was
a
professional
engineer
and
thus
the
engineering
aspect
of
the
project
was
his
domain.
In
his
Affidavit
Dorcich
stated
that
upon
receiving
the
first
instalment
of
funds
in
March,
1983,
they
proceeded
with
the
development
of
the
panel.
Their
“initial
emphasis
was
on
data
collection
which
consisted
of
the
review
and
analysis
of
technical
information
and
literature
in
respect
of
existing
marketed
concrete
forming
systems.”
Included
in
that
review
were
Canadian
and
United
States
patent
applications
for
similar
systems.
He
asserts
that
upon
completing
this
review,
Slonimsky
and
he
“commenced
to
prepare
detailed
conceptual
drawings
and
analysis
in
order
to
determine
the
optimum
dimensions
and
materials
of
the
spatial
membrane
panel”.
Through
the
summer
and
fall
of
1983
they
continued
their
“experiments
and
analysis
to
determine
the
optimum
dimensions
and
materials
of
the
spatial
membrane
panel.”
By
the
end
of
that
year
a
working
prototype
was
completed
with
a
view
to
testing
it
under
field
conditions
in
1984.
According
to
Dorcich
this
was
the
completion
of
Phase
I.
Further
funding
was
sought
for
Phases
II
and
III
of
the
project
and
was
received
in
April,
1984.
The
project
continued
through
1984
and
1985
and
culminated
in
an
application
for
a
Canadian
patent,
which
was
filed
with
the
Canadian
Patent
Office
on
January
31,
1986.
A
patent
was
granted
to
589576
Ontario
Inc.
(589576),
a
successor
corpora-
tion
to
541185,
on
April
30,
1991.
Dorcich
noted
that
their
efforts
were
successful
to
the
point
that
“apart
from
our
patent
product,
there
is
no
such
thing
in
the
market
anywhere
else”.
Mr.
Littlejohn
holds
a
Bachelor
of
Applied
Science
in
the
field
of
chemical
engineering
which
he
obtained
at
the
University
of
Toronto
in
1949.
For
a
number
of
years
he
was
employed
by
Union
Carbide
and
was
at
one
time,
the
manager
of
new
product
development.
In
1972
he
began
to
publish
the
Ottawa
R
&
D
Report
and
the
Canadian
R
&
D
Directory,
publications
designed
for
the
research
and
development
industry.
In
1990,
he
began
his
own
business
as
a
Consultant
and
recently
has
been
conducting
seminar
programs
entitled
Tax
and
Technology
for
companies
interested
in
“understanding
tax
and
technology
from
the
point
of
view
of
R
&
D
tax
incentives”.
The
Appellant
adduced
evidence
from
Littlejohn
as
an
expert
in
the
methodology
of
research
and
development.
With
specific
reference
to
the
methodology
utilized
by
541185,
in
his
report
Littlejohn
makes
reference
to
nine
groups
of
documents,
the
Canadian
patent
application,
the
Canadian
Patent
and
Income
Tax
Bulletin
IT-151R4
and
states:
...I
came
to
the
following
conclusions
of
fact
which
conclusions
I
have
relied
on
in
this
report:
1.
From
approximately
January
27,
1983
to
the
end
of
1983,
Messrs.
Dorcich
and
Slonimsky
carried
out
the
following
steps:
-
technical
evaluation
of
competing
systems;
-
structural
design
of
panel
-
including
different
configurations,
various
structural
materials;
adhesives
and
insulation,
-
engineering
design
of
working
parts.
2.
Such
steps
ultimately
led
to
the
granting
of
a
patent,
a
copy
of
which
is
attached
to
my
report
of
June
15,
1994,
which
patent
reflected
the
work
described
herein.
In
my
experience,
a
patent
is
granted
only
where
a
significant
improvement
in
an
existing
process,
or,
a
completely
new
process,
is
achieved.
Broadly
speaking,
research
and
development
involves
the
application
of
scientific
and
engineering
principles
to
the
resolution
of
a
scientific
or
technical
problem.
While
the
exact
steps
that
must
be
taken
in
research
and
development
are
infinitely
variable
and
depend
on
the
nature
of
the
project
in
question,
certain
general
principles
apply
in
all
cases.
The
essence
of
research
and
development
requires
a
systematic
pursuit
of
knowledge
involving
the
recognition
and
formulation
of
a
specific
problem,
the
collection
of
data
through
observation
and
experiment
and
the
formulation
and
testing
of
a
hypothetical,
and
ultimately
practical,
resolution
of
the
problem,
the
spatial
membrane.
From
my
review
of
the
materials
referred
to
herein,
and
based
on
the
assumptions
set
out
herein,
I
am
of
the
opinion
that
the
methodology
of
the
research
and
development
was
followed
in
this
case
by
Messrs.
Dorcich
and
Slonimsky
through
1983
and,
specifically,
they
identified
a
problem
dealing
with
the
forming
of
concrete
and
temperature
variations
in
the
existing
environment
and,
after
considerable
experiment
and
data
collection,
came
to
a
technical
resolution
of
this
problem
which
led
to
a
practical
product.
Respondent’s
Evidence
Evidence
was
adduced
on
behalf
of
the
Respondent
from
A.
Ghani
Razaqpur,
Associate
Professor
of
Civil
and
Structural
Engineering,
Carleton
University.
Dr.
Razaqpur
holds
a
B.Sc.
in
civil
engineering
which
he
obtained
from
the
American
University
of
Beirut
in
1973,
and
M.Sc
in
Civil
Engineering
from
the
University
of
Hawaii
in
1978
and
a
PhD.
in
Civil
Engineering
from
the
University
of
Calgary
in
1982.
He
has
taught
courses
on
the
design
of
concrete
structures
and
bridges,
prestressed
concrete
and
advanced
reinforced
concrete.
He
is
a
member
of
the
Professional
Engineers
of
Ontario,
the
Canadian
Society
of
Civil
Engineering,
the
Canadian
Standards
Association
Committee
on
advanced
composite
materials
and
buildings
and
the
American
Concrete
Institute.
He
is
also
a
member
of
the
Executive
Committee
of
the
Canadian
Society
for
Civil
Engineering,
Structural
Division
and
a
member
of
the
Committee
in
Advanced
Composite
Material
in
Bridges
and
Structures.
Dr.
Razaqpur
reviewed
the
transcript
of
the
evidence
taken
on
July
4,
1994
(including
Exhibits);
the
Affidavit
of
Dorcich;
the
transcript
of
the
cross-examination
of
Dorcich
(both
with
accompanying
Exhibits),
and
the
Littlejohn
report.
In
his
view,
the
notes
and
sketches
referred
to
by
Dorcich
in
his
Affidavit
and
certain
others
presented
to
Dorcich
on
cross-examination
amount
to
no
more
than:
Some
very
preliminary
design
calculations
which
appear
to
have
resulted
in
initial
dimensions
for
certain
components
of
the
panel.
The
procedures
used
are
quite
elementary
and
do
not
involve
any
new
knowledge
or
methodologies.
His
analysis
of
this
material
led
him
to
conclude
that
the
necessary
documentation
to
make
the
experiment
repeatable
was
not
present.
In
his
view,
Dorcich’s
Affidavit
and
the
Exhibits
attached
to
it
such
as
the
synopsis,
indicated
only
that
drawings
and
sketches
had
been
made
and
that
testing
and
calculations
had
been
done,
but
that
this
work
had
not
necessarily
been
scientific
research.
His
review
led
him
to
conclude
that
there
was
no
proof
of
scientific
research
in
the
documents
examined,
and
that:
(a)
The
technical
work
presented
in
the
form
of
drawings
and
calculations
represents
a
routine
engineering
exercise
which
requires
no
scientific
research
and
which
is
within
the
grasp
of
any
competent
structural
engineer.
(b)
That
work
would
not
require
more
than
about
a
week
to
perform
and
would
not
require
any
laboratory
or
field
tests.
(c)
There
is
no
indication
that
any
systematic
laboratory
or
field
testing
has
taken
place.
Such
testing
would
have
required
detailed
technical
reports
describing
the
experimental
program,
the
results
and
the
conclusions.
Furthermore,
it
has
not
been
demonstrated
why
any
particular
tests
were
needed
and
what
their
objectives
were.
(d)
There
is
no
indication
that
any
new
technologies
were
developed
as
a
consequence
of
the
purported
“research
and
development”
work.
(e)
There
was
no
scientific
research
performed
in
respect
of
the
panel.
Issues:
The
principal
issue
for
determination
by
this
Court
is
whether
541185
engaged
in
scientific
research
within
the
meaning
of
sections
37
and
37.1
of
the
Act
in
either
or
both
of
taxation
years
1982
and
1983.
Second,
if
this
issue
is
determined
in
the
affirmative,
was
the
amount
claimed
by
the
Appellant
as
its
scientific
research
expenditure
deductible
in
the
1982
or
1983
taxation
year?
It
is
-agreed
by
the
parties
that
if
scientific
research
was
in
fact
conducted
by
541185,
the
expenses
incurred
by
it
were
prescribed
expenditures
within
the
meaning
of
Regulations
2901
and
2902
of
the
Income
Tax
Regulations.
The
Respondent
has
also
agreed
that
if
conducted,
the
scientific
research
was
sufficiently
related
to
the
business
of
the
Appellant.
Appellant’s
Submissions
Pursuant
to
paragraphs
37(7)(b)
and
37.1(5)(e)
of
the
Act
scientific
research
has
the
meaning
given
to
that
expression
by
Regulation
2900.
The
Appellant
relies
on
the
evidence
of
Dorcich
and
that
of
Littlejohn
whose
expert
opinion
was
that
the
work
conducted
by
541185
was
scientific
research
and
experimental
development.
Their
testimony
and
a
review
of
the
proposal
and
the
synopsis
provide
ample
support
that
541185
followed
a
formalized,
scientific
methodology
and
engaged
in
“systematic
investigation
or
research
carried
out
in
the
field
of
science
or
technology
by
means
of
experiment
or
analysis”.
More
specifically,
it
conducted
applied
research
with
respect
to
the
electro-heating
elements
of
the
panel
and
the
adhesives
and
other
materials
to
be
used
therein
and
engaged
in
the
collection
of
technical
information
and
literature
with
respect
to
marketed
concrete
forming
systems
that
went
beyond
routine
data
collection.
It
was
also
engaged
in
extensive
development
activities
in
which
it
analyzed
and
reviewed
existing
materials
and
products
to
develop
the
panel.
Thus
the
work
performed
by
it
involved
a
real
technical
uncertainty,
resulted
in
a
new
product
and
the
product
was
developed
by
using
an
organized
and
systematic
approach.
Furthermore,
the
research
undertaken
by
541185
included
activities
“with
respect
to
engineering
and
design”
as
evidenced
by
its
work
with
respect
to
the
structural,
engineering
and
electrical
design
aspects
of
the
panel.
This
included
the
building
of
prototypes,
the
existence
of
which
was
confirmed
by
the
testimony
of
Dorcich,
McCabe
and
Turner.
The
Appellant
asserts
that
it
has
met
the
Department
of
National
Revenue’s
technical
guidelines
as
to
what
constitutes
scientific
research
and
development
for
the
purpose
of
subsection
2900(1)
of
the
Regulations'
in
that
it
has
satisfied
the
criteria
of
scientific
or
technological
advancement;
scientific
or
technological
uncertainty;
and
scientific
and
technical
content.
Counsel
for
the
Appellant
further
submitted
that
the
granting
of
patent
protection
was
relevant
and
persuasive
evidence
that
scientific
research
occurred.
Respondent’s
Submissions
It
is
the
position
of
the
Respondent
that
the
work
performed
by
541185
in
1982
and
1983
was
not
scientific
research.
Section
2900
of
the
Income
Tax
Regulations
defines
scientific
research
for
the
purposes
of
the
credit
and
the
deduction.
Scientific
investigation
within
the
meaning
of
that
section
involves
repeatable
steps
which
are
clearly
noted.
While
it
can
be
acknowledged
that
541185
had
produced
something
and
that
work
had
been
done
by
it
and
even
that
the
methodology
of
Dorcich
and
Slonimsky
had
been
reasonable,
this
work
did
not
involve
scientific
research.
The
evidence
of
Turner
and
McCabe
was
silent
on
the
issue
of
whether
the
work
conducted
by
541185
had
been
scientific
research
and
in
any
event,
they
were
not
in
law
capable
of
commenting
on
that
subject.
Dorcich
for
his
part
was
unable
to
provide
any
documentation
for
the
experiments
that
he
asserted
were
performed
by
541185.
Furthermore,
the
opinion
of
Littlejohn
should
be
given
no
weight
since
his
conclusion
that
scientific
research
had
been
done
was
not
adequately
supported
or
explained
.
In
this
context,
the
opinion
of
Professor
Razaqpur
should
be
preferred
since
the
scientific
method
he
described
is
that
used
both
in
industry
and
academia.
Counsel
argued
that
it
is
not
possible
to
meet
the
definition
of
scientific
research
unless
it
is
possible
to
provide
a
recorded
basis
upon
which
others
can
perform
the
same
experiments
and
are
able
to
verify
or
disprove
the
hypothesis
by
setting
up
the
exact
same
test
parameters,
with
the
same
material,
the
same
sizes,
the
same
weight,
the
same
measurement
instruments.
All
of
these
requirements
have
to
be
specified
and
noted.
There
was
no
evidence
that
541185
conducted
“repeatable
experiments
in
which
the
steps,
the
various
changes
made
and
the
results
were
carefully
noted”.
Analysis:
The
evidence
before
this
Court
regarding
the
manner
in
which
this
project
was
carried
on
by
541185
in
the
taxation
years
in
issue
is
found
principally
in
the
testimony
of
Dorcich
and
in
the
various
documents
produced
in
support.
I
turn
first
to
the
documents.
Substantial
reliance
was
placed
by
Dorcich,
Littlejohn
and
by
Counsel
for
the
Appellant
in
argument
on
the
“proposal”
and
the
“synopsis”
.
The
proposal
was
prepared
by
PCCL
(Dorcich
and
Slonimsky)
in
November,
1992,
was
forwarded
to
Consultants,
who
upon
receipt
sent
it
on
to
Brook,
Carruthers,
Shaw,
Architects
for
an
engineering
review.
The
reviewer,
William
Carruthers,
in
a
report
dated
January
18,
1983
was
somewhat
critical
of
the
proposal
and
ended
by
noting:
The
concluding
statement
in
the
proposal
implies
a
thoroughness
of
exploration
and
evaluation
and
is
not
apparent
from
the
rest
of
the
document.
A
much
more
comprehensive
feasibility
study
would
appear
to
be
required
before
being
able
to
properly
arrive
at
such
a
conclusion,
and
before
being
able
to
properly
appraise
the
validity
of
a
full-scale
research
and
development
study.
While
this
may
be
fair
comment,
the
proposal,
such
as
it
was,
did
outline
the
basic
requirements
for
a
new
concrete
forming
medium.
The
synopsis
referred
to
was
written
by
Dorcich
and
Slonimsky
in
September,
1987.
He
was
unable
to
recall
the
reason
it
was
prepared
but
did
say
that
it
was
based
on
a
review
of
a
number
of
documents,
on
their
recollection
of
events
and
“whatever
was
available
to
them
to
enable
them
to
put
it
together”
and
that
all
of
the
steps
that
were
taken
in
the
research
and
development
of
the
panel
were
enumerated
therein.
This
document
provides
limited
support
for
the
Appellant’s
argument
that
541185
followed
appropriate
research
methodology.
It
is
an
abbreviated
summary
of
the
development
of
the
panel
in
the
course
of
which
general
comments
are
made
inter
alia
with
respect
to
such
matters
as
the
design
of
the
panel
frame
and
the
composite
core;
the
selection
and
testing
of
adhesives
and
insulation
material.
Less
than
one
page
of
the
synopsis
is
devoted
to
the
subject
of
testing,
the
gist
of
which
can
be
exemplified
by
the
statement
“testing
procedures
went
through
all
phases
of
research
and
development”
and
“along
with
the
testing
of
panels
and
components,
all
necessary
testing
facilities,
testing
equipment
and
sample
fabrication
technology
was
developed
to
suit
specific
needs”.
While
the
synopsis
suggests
that
certain
problems
were
resolved,
it
provides
no
evidence
regarding
the
manner
in
which
this
was
done.
By
way
of
example
with
respect
to
a
reference
in
the
synopsis
to
the
testing
of
adhesives,
Dr.
Razaqpur
made
the
following
comment
in
his
report:
21.
On
pages
8-9
of
the
Synopsis,
reference
is
made
to
the
selection
of
the
adhesive
used
to
join
the
two
facings.
It
is
stated
that
“a
wide
number”
of
products
were
“analyzed
and
tests
conducted”
and
that
after
“extensive
search
and
testing”,
adhesive
2216
B/A
was
selected.
There
is
nothing
to
indicate
that
any
scientific
testing
was
conducted.
Even
if
they
were
performed,
these
“experiments”
are
not
repeatable
as
there
is
no
record
which
provides
the
following
critical
information:
(a)
What
was
the
experimental
set-up?
(b)
What
test
specimens
were
used?
(c)
How
many
specimens
were
tested?
(d)
What
were
the
test
parameters?
(e)
What
temperature
ranges
were
used?
(f)
What
loading
procedure
was
used?
(g)
Was
foam
injected
and
then
temperature
measurements
taken?
(h)
What
device
was
used
to
measure
the
temperature?
(i)
At
what
location
were
the
temperatures
measured?
(j)
As
this
is
a
composite
system,
even
thermal
rise
would
produce
substantial
stresses
in
the
various
components.
Was
any
attempt
made
to
model
the
problem
analytically
and
then
measure
the
thermal
deformations?
This
would
be
crucial
if
a
flat
pouring
surface
is
to
be
guaranteed.
There
is
nothing
to
indicate
that
any
scientific
tests
were
performed
to
arrive
at
the
final
selection.
There
was
no
need,
in
this
context,
to
develop
new
methods
or
devices
for
applying
glue
on
a
wood
surface.
If
any
novel
process
was
developed,
there
is
no
indication
of
it
here.
The
process
described
is
routine
and
is
not
specific
to
the
panel.
These
concerns
apply
equally
to
the
insulation,
working
components
and
electroheating
elements
referred
to
on
pages
10,
11
and
12
of
the
Synopsis.
Other
documents
tendered
on
behalf
of
the
Appellant
include
a
letter
from
a
firm
of
consulting
structural
engineers
to
Dorcich
dated
January
27,
1983;
the
agreement
between
Williams
&
Turner
Consultants
and
541185
and
a
status
report
from
Dorcich
to
Turner
dated
June
30,
1983.
None
of
these
documents
contain
any
information
regarding
the
nature
of
the
research
being
carried
on.
Also
filed
as
exhibits
were
letters
dated
December
16,
1983
from
Dorcich
to
Turner
(a
year
end
status
report)
and
a
proposal
dated
February
27,
1984
seeking
more
funds
and
setting
out
various
budgets
and
schedules.
While
not
irrelevant,
neither
document
provides
any
real
assistance
in
the
determination
of
the
issue
in
this
case.
The
remaining
documents
are
those
referred
to
by
Littlejohn
as
“working
papers,
notes
and
diagrams”
prepared
by
Slonimsky
.
In
total,
they
consist
of
some
39
pages
of
sketches
and
handwritten
notes
(some
quite
illegible).
More
regarding
these
documents
later.
Testimony
of
Dorcich:
Mr.
Dorcich
is
a
businessman
with
many
years
of
experience
in
the
concrete
and
construction
businesses.
His
testimony
with
respect
to
the
development
of
the
panel
was
given
from
the
perspective
of
a
non-engineer
concerned
primarily
with
its
evaluation
and
practical
application.
While
involved
in
the
engineering
aspects
of
the
project,
which
he
described
as
best
he
could,
they
were
carried
out
by
the
late
Mr.
Slonimsky
and
another
engineer,
aided
by
a
generalist.
They
were
responsible
for
the
actual
design
and
the
engineering
calculations
for
each
part
and
component
of
the
panel.
Nonetheless,
on
the
positive
side,
Dorcich
outlined
the
engineering
uncertainty
quite
adequately,
and
although
occasionally
vague
and
imprecise
with
respect
to
detail,
for
the
most
part
his
description
of
the
development
of
the
panel
and
of
the
tests
and
experiments
conducted
were
relatively
clear
and
concise.
He
said
that
in
order
to
determine
the
optimum
dimensions
and
materials
for
the
panel,
they
conducted
a
technical
review
of
various
systems
the
purpose
of
which:
Was
to
determine
certain
basic
engineering
ratios
that
involved
weights,
usually
prescribed
for
the
various
systems
and
calculations
on
their
maximum
allowable
-
or
maximum
weight
that
they
would
carry,
or
resist,
prior
to
failure.
This
analysis
and
subsequent
calculations
provided
sufficient
information
to
confirm
a
basis
for
the
development
of
their
own
product.
According
to
Dorcich,
at
this
stage,
Slonimsky
and
his
assistants
began
to
produce
“the
actual
design
and
the
engineering
calculations
for
each
part
and
component
of
the
product.”
On
June
30,
1983,
in
a
report
to
Turner,
Dorcich
stated
that
the
structural
design
aspects
were
well
advanced
and
referred
to
a
number
of
modifications
which
had
been
made.
In
response
to
questions
by
Counsel
for
the
Respondent,
he
described
these
as:
Modifying
certain
ribbing
patterns,
on
the
aluminum,
either
by
making
them
wider,
or
narrower,
to
carry
the
load
better,distribute
the
load
better.
Determine
the
best
possible
radius,
whether
it
was
1/16
of
an
inch,
or
1/4
of
an
inch,
or
1/8
of
an
inch
for
the
extruded
components.
Which
components,
of
course,
were
done
only
in
theory,
because
we
could
not
even
entertain
the
idea
of
spending
maybe
-
well,
large
sums
of
money,
on
Aluminum
Company
of
Canada,
something
like
that.
It
was
all
theoretically.
He
went
on
to
say
that
although
theoretical
at
this
stage
they
ultimately
became
practical
modifications.
Alcan
was
contacted
and
provided
a
computer
design
of
the
special
shapes
required.
The
initial
design
was
not
satisfactory
and
was
redesigned
by
Slonimsky
and
then
redesigned
again
through
Alcan’s
computer
program.
Eventually,
the
segments
which
were
the
subjects
of
these
modifications,
were
extruded
by
Alcan.
Dorcich
also
noted
that
while
he
has
no
recollection
that
the
reasons
for
the
redesigning
were
recorded,
he
was
certain
that
the
comments
expressed
in
their
various
reviews
were
noted
on
the
relevant
drawings
(none
of
which
have
been
produced).
Dorcich
also
had
a
firm
recollection
that
in
the
course
of
the
development
of
the
panel,
discussions
took
place
assessing
the
advantages
and
disadvantages
of
various
alternatives.
He
believes
that
sketches
were
probably
made
but
likely
discarded
once
the
final
element
was
selected.
If
any
alternative
was
seriously
considered,
it
was
hand-manufactured
by
the
generalist
for
testing.
As
he
noted:
“How
many
times
they
redesigned
it,
I
have
no
idea,
but
it
was
redesigned
over
and
over
again,
until
they
felt
it
was
ready
for
testing
to
destruction”.
In
due
course,
he
said,
the
panel
was
developed:
to
a
point
where
all
the
members
were
working
properly.
Structurally,
we
knew
that
it
would
carry
a
certain
load,
with
the
determined
and
required
safety
factor.
The
consensus,
based
on
the
regulatory
requirements,
and
our
knowledge
of
the
industry,
we
found
the
product
was
complete.
Then
we
had
to
test
it
under
real-life
conditions,
that
was
in
the
field.
A
working
prototype
designed
to
determine
the
insulation
factor
was
apparently
ready
in
December,
1983
and
was
field-tested
at
a
construction
site
in
1984
under
winter
conditions.
Dorcich
also
testified
that
at
a
later
stage
the
structural
aspects
of
the
panel
were
similarly
tested.
Both
tests
produced
very
good
results
which
were,
to
the
best
of
his
recollection
recorded.
On
the
negative
side,
Dorcich’s
testimony
with
respect
to
the
collection
of
data
and
the
recording
of
essential
elements
of
an
experiment
such
as
the
test
set-up,
methodology
and
parameters
and
the
analysis
and
interpretation
of
that
data
was
far
from
illuminating.
Again,
by
way
of
example,
in
his
Affidavit
Dorcich
stated
that
testing
went
on
through
all
phases
of
research
and
development.
He
also
testified
that
certain
experiments
began
shortly
after
they
received
the
funding
in
March
of
1983.
When
asked
what
they
were
about,
his
response
was:
The
experiments
at
that
time
were
for,
and
again
we
covered
that
somewhere
else
in
our
conversations
this
afternoon.
The
experiments
were
bits
and
pieces
of
metal
put
together
to
see
how
it
looked,
see
what
our
gut
feeling
was.
If
we
can
call
it
gut
feeling
from
a
technical
point
of
view,
or
any
point
of
view.
It
could
have
been
a
bent
piece
of
aluminum,
or
a
bonding,
fastening,
of
aluminum
to
plywood,
rebonding
it,
hitting
it,
putting
weight
on
it,
or
just
jump
over
it.
It
was
anything
that
we
felt
was
necessary
to
give
us
a
feel
for
it.
The
results
of
these
tests
were
not
necessarily
recorded
in
writing
because
as
Dorcich
said:
...these
are
tests
that
you
do
in
the
shop,
and
the
fellow
there
is
showing
you,
in
visual
form,
what
it
is,
sketch
or
design.
That’s
what
it
looks
like,
is
“oh,
fine,
what’s
this,
did
I
do
it
right?”.
Then
put
a
load
on
it,
see
what
happens,
put
in
on,
it
holds,
that’s
fine.
If
it
doesn’t
hold,
then
back
to
the
drawing
board,
then
you
throw
it
out.
You
don’t
record
tests
for
all
of
these
things
in
this
application.
If
tests
were
to
be
repeated,
then
they
“simply
would
have
done
them
again”.
Asked
whether
a
record
was
made
of
what
was
different
about
each
test
and
of
the
different
variables,
he
responded:
Not
for
the
purposes
that
we
needed
at
that
time.
They
were
not
of
a
real
scientific
nature
...
they
were
just
to
get
the
feel
of
the
matter”,
and
“No,
I
could
not
show
you
that,
because
if
anything
was
on
that,
in
written
form,
it
would
just
be
of
no
consequence
to
us,
and
we
probably
discarded
it.
The
parts
and
items
that
were
tested
were
thrown
into
the
garbage.
Dorcich
conceded
that
the
only
person
who
could
repeat
the
experiments
would
be
Slonimsky
based
on
his
recollections
and
whatever
material
he
might
have
retained.
Testimony
of
Littlejohn:
Littlejohn
stated
that
he
examined
the
documents
listed
in
Appendix
“A”
of
his
first
report.
As
previously
noted,
they
are
comprised
of
39
pages
of
sketches,
notes
and
drawings.
In
his
supplementary
report,
Littlejohn
wrote:
“in
coming
to
the
conclusions
in
this
report,
I
reviewed
certain
documentation,
copies
of
which
are
attached
as
exhibits
to
my
report
of
June
15,
1994.”
On
the
face
of
this
evidence,
one
was
entitled
to
assume
that
Littlejohn’s
opinion
was
based
strictly
on
the
material
appended
to
his
report.
However,
in
the
course
of
his
testimony,
it
became
evident
that
prior
to
completing
his
supplementary
report,
he
attended
at
Slonimsky’s
former
residence
and:
reviewed
a
number
of
documents
in
five
or
six
large
boxes
in
a
barn
in
Georgetown
that
had
sketches,
drawings,
conclusions,
calculations,
etc.,
that
Mr.
Slonimsky
had
collected
during
his
period
of
doing
work.
He
added
that:
there
are
a
host
of
different
documents
that
are
not
included
in
this
particular
Appendix
C
or
identifi
(sic)...whatever
we
call
this.
There
are
a
host
of
additional
documents
that
I
didn’t
include
in
this.
What
have
I
given
you,
42
pages?
There
are
hundreds
of
pages
of
documents
that
are
still
in
Georgetown,
I
hope.
None
of
these
documents
were
produced
nor
was
any
explanation
for
their
absence
proffered
by
Littlejohn.
He
did
say,
with
reference
to
the
material
appended
to
his
report
that:
...these
are
representative
drawings;
they
are
not
the
complete
experiment
that
was
undertaken
in
each
of
the
areas
referred
to
by
Counsel.
These
are
not
the
complete
set
of
sketches,
drawings
and
other
work
that
was
done.
There
was
more
material,
more
information
that
I
am
not
able
to
relate
to
you
at
this
time
that
what
was
undertaken.
and
The
documents
here,
and
we’ve
got
42
pages
of
sketches
that
show
us,
Your
Honour,
some
of
the
experiments
that
were
done,
and
I
was
trying
to
use
them
as
an
example.
Based
primarily
on
the
Georgetown
documents
Littlejohn
made
certain
assumptions
and
came
to
the
conclusion
that
scientific
research
and
development
was
carried
on.
Since
Littlejohn
did
not
itemize
or
categorize
the
documents
available
to
him
at
Georgetown
and
made
no
record
regarding
the
specific
documents
examined
and
relied
upon,
it
was
not
surprising
to
hear
that
he
was
at
a
complete
loss
to
support
his
conclusion.
More
specifically,
he
was
unable
to
provide
any
substantive
evidence
to
demonstrate
that
an
analysis
and
interpretation
of
test
data
from
any
experiment
had
in
fact
been
performed
by
Slonimsky;
was
unable
to
refer
to
any
document
or
indeed
to
describe
how
or
whether
Slonimsky
had
ever
correlated
test
data
to
the
original
hypothesis,
nor
could
he
describe
the
test
set-up
or
the
number
of
specimens
used
in
any
particular
experiment.
With
reference
to
the
Littlejohn
report
generally,
Dr.
Razaqpur’s
comments
were:
(a)
[The]
statement
that
Messrs.
Slonimsky
and
Dorcich
“identified
a
problem
dealing
with
the
forming
of
concrete
and
temperature
variations
in
the
existing
environment
and,
after
considerable
experiment
and
data
collection,
came
to
a
technical
resolution
of
this
problem
which
led
to
a
practical
product”
is
difficult
to
support.
First,
he
fails
to
identify
the
nature
of
the
particular
“problem”.
Second,
his
assertion
that
“considerable
experiment”
was
done
is
without
any
factual
foundation.
Third,
he
has
not
identified
the
“technical
resolution”
of
the
“problem”.
Finally,
there
is
no
support
for
his
statement
that
the
“technical
resolution”
led
to
a
“practical
product”
of
any
kind.
(b)
[His]
opinion
as
to
whether
any
research
and
development
was
carried
out,
quite
apart
from
the
fact
that
it
appears
to
be
based
on
his
own
incomplete
and
incorrect
“conclusions
of
fact”,
fails
to
take
into
account
the
facts
disclosed
at
the
cross-examination
of
Mr.
Dorcich
on
September
30,
1994.
These
are
fair
comments.
Conclusion:
There
is
no
dispute
that
in
1982
Dorcich
and
Slonimsky
embarked
on
a
project
which
ultimately
led
to
a
patent
being
granted
for
the
panel.
However,
that
does
not
per
se
resolve
the
issue
whether
the
evidence
before
the
Court
establishes
that
in
the
taxation
years
in
issue
541185
did
in
fact
engage
in
scientific
research
within
the
meaning
of
section
2900
of
the
Regulations.
This
section
defines
the
term
“scientific
research”
for
the
purposes
of
section
37.1
of
the
Income
Tax
Act
as
follows:
For
the
purposes
of
this
part
and
paragraphs
37(7)(b)
and
37.
l(5)(e)
of
the
Act,
“scientific
research”
means
systematic
investigation
or
search
carried
out
in
a
field
of
science
or
technology
by
means
of
experiment
or
analysis,
that
is
to
Say,
(a)
basic
research,
namely,
work
undertaken
for
the
advancement
of
scientific
knowledge
without
a
specific
practical
application
in
view,
(b)
applied
research,
namely,
work
undertaken
for
the
advancement
of
scientific
knowledge
with
a
specific
practical
application
in
view,
or,
(c)
development,
namely,
use
of
the
results
of
basic
or
applied
research
for
the
purpose
of
creating
new,
or
improving
existing,
materials,
devices,
products
or
processes,
and,
where
such
activities
are
undertaken
directly
in
support
of
activities
described
in
paragraph
(a),
(b)
or
(c),
includes
activities
with
respect
to
engineering
or
design,
operations
research,
mathematical
analysis
or
computer
programming
and
psychological
research,
but
does
not
include
activities
with
respect
to
...
It
is
the
Appellant’s
responsibility
to
adduce
evidence
establishing
that
“scientific
research
and
experimental
development
activity”
was
carried
on
by
541185
in
the
taxation
years
in
issue.
In
this
case,
there
is
some
evidence
that
an
engineering
uncertainty
existed,
that
a
hypothesis
was
formulated
and
that
by
testing
models
and
by
observation
of
the
results,
541185
resolved
the
problem
and
created
a
practical
product
which
embodied
a
technological
advance.
The
fact
which
remains
in
issue
is
the
adequacy
of
the
evidence
relating
to
the
repeatability
of
the
scientific
experimentation.
In
Sass
Manufacturing
Ltd.
v.
Minister
of
National
Revenue
-
,1
said
at
page
2535:
Regulation
2900
requires
an
Appellant
to
adduce
cogent
evidence
of
such
investigation
or
search.
Systematic
investigation
connotes
the
existence
of
controlled
experiments
and
of
highly
accurate
measurements
and
involves
the
testing
of
one’s
theories
against
empirical
evidence.
Scientific
research
must
mean
the
enterprise
of
explaining
and
predicting
and
the
gaining
knowledge
of
whatever
the
subject
matter
of
the
hypothesis
is.
This
surely
would
include
repeatable
experiments
in
which
the
steps,
the
various
changes
made
and
the
results
are
carefully
noted.
Both
Dr.
Razaqpur
and
Littlejohn
agree
that
scientific
research
and
development
is
considered
to
be
the
application
of
scientific
and
engineering
principles
to
the
resolution
of
a
scientific
or
technical
problem.
In
Dr.
Razaqpur’s
view
all
scientific
research
involves
the
following
steps:
formulating
the
problem,
constructing
the
model,
testing
the
model,
deriving
a
solution
from
the
model,
testing
and
implementing
the
solution.
The
repeatability
of
the
scientific
experiment
is
an
essential
attribute
of
scientific
research.
In
this
context,
he
referred
to
the
following
comment
by
James
K.
Feibleman:
As
a
matter
of
fact,
this
is
the
established
practice
in
scientific
procedure.
The
repetition
serves
to
ensure
the
elimination
of
experimental
error
and
often
produces
refinements
of
observation
that
may
have
gone
undetected
in
the
original
trials.
The
repeatability
of
scientific
experimentation
is
responsible
for
what
has
been
called
the
self-corrective
nature
of
the
scientific
method.
What
is
proposed
by
an
hypothesis
cannot
be
established
by
a
single
experiment;
the
scientific
method
makes
this
impossible
because
of
its
demand
that
all
experiments
must
be
repeated....
There
are
substantial
shortcomings
in
the
direct
evidence
adduced
on
behalf
of
the
Appellant
with
respect
to
this
issue.
While
I
do
not
propose
to
completely
disregard
the
testimony
of
Littlejohn,
as
urged
by
Counsel
for
the
Respondent,
his
report
and
testimony
raised
a
question
regarding
his
expertise
in
“research
methodology”.
Indeed,
Counsel
for
the
Appellant,
although
contending
that
his
testimony
was
“worthy
of
considerable
weight”,
noted
that
“it
may
have
come
in
a
form
not
as
felicitous
as
he
(Counsel)
would
have
sought”
and
that
“the
Court
should
consider
Mr.
Littlejohn’s
evidence
in
a
fairly
narrow
way”.
First,
his
failure
to
produce
the
“Georgetown”
material
or
at
the
very
least,
to
properly
document
and
summarize
what
he
examined,
is
in
my
view
unpardonable.
Second,
his
assurances
that
he
could
have
established
repeatability
by
sorting
those
documents
and
that
he
satisfied
himself
from
his
examination
of
the
material
that
scientific
research
was
carried
on
are
unacceptable,
since
they
are
based
on
inferences
drawn
from
facts
not
proven.
As
was
noted
by
Mahoney
J.
in
À.
v.
the
Capitol
Life
Insurance
Co.
“the
weight
to
be
given
expert
evidence
is
a
matter
for
the
trier
of
fact
and
an
expert’s
conclusion
which
is
not
appropriately
explained
and
supported
may
properly
be
given
no
weight
at
all.”
Given
the
quality
of
Littlejohn’s
testimony
generally,
I
give
no
weight
whatsoever
to
the
conclusions
he
reached.
In
so
doing,
I
wish
to
make
clear
that
I
draw
no
adverse
inference
from
the
failure
of
the
Appellant
to
produce
any
relevant
documents
viewed
by
Littlejohn
at
Georgetown.
Counsel
for
the
Appellant
further
argued
that
in
circumstances
such
as
these,
it
would
be
proper
to
give
some
meaningful
weight
to
Littlejohn’s
evidence
on
the
basis
that
it
was
the
testimony
of
a
direct
witness
in
which
case,
he
was
testifying
as
to
what
he
saw
rather
than
as
an
expert.
It
is
a
fact
that
some
of
the
Georgetown
documents
referred
to
were
initialled
and
dated
by
Slonimsky
and,
Littlejohn
said,
reflected
work
done
and
tests
carried
out
in
various
areas
such
as
adhesive
systems,
aluminum
extrusions,
insulation
and
heating
devices.
However,
nothing
he
said
or
produced
established
on
a
balance
of
probabilities
the
existence
of
recorded
information
capable
of
making
the
experiments
or
tests
repeatable.
As
to
the
weight
to
be
given
this
testimony,
it
must
be
remembered
that
he
described
the
42
pages
of
sketches
and
drawings
appended
to
his
report
as
representative
of
the
“complete
experiment
that
was
undertaken”
by
Slonimsky.
He
made
specific
reference
to
two
of
these
pages
captioned
“Selection
of
Panels
-
Table”
and
suggested
they
were
proof
of
the
recording
and
analysis
of
test
data.
With
respect
to
this
Table,
Dr.
Razaqpur
made
the
following
comments:
These
are
elementary
calculations.
All
you’re
saying
is:
If
I
make
the
panel
a
bit
longer
or
wider
or
apply
the
load
in
one
section
or
another,
what
would
be
the,
what
we
call
the
forces
that
would
cause
it
to
rupture
in,
what
we
call
sheer
vertically
or
it
would
flex
and
cause
it
to
fail?
But
even
that
is
incomplete.
This
is
a
calculation;
this
does
not
relate
to
any
experimentation.
and
“...this
is
not
experimentation,
this
is
simply
calculations
that
you
do
in
order
to
arrive
probably
later
at
an
experimental
model
but....”
And
added
that:
“It
would
be
fair
to
say
that
this
work
can
be
performed
by
a
junior
engineer
in
about
a
week.”
If
indeed
the
sketches,
drawings
and
notes
before
the
Court
are,
as
Littlejohn
stated,
representative
of
the
material
at
Georgetown,
it
would
be
extremely
difficult,
given
the
evidence
of
Dr.
Razaqpur
(which
I
accept)
to
attach
much
weight
to
his
assertions
that
appropriate
research
methodology
was
utilized.
Dorcich’s
testimony
confirms
that
investigation
and
experimentation
to
develop
a
product
was
conducted
in
the
taxation
years
in
issue
and
that
a
new
product
was
created.
However,
as
I
understood
his
testimony,
while
not
all
minutiae
were
noted,
the
results
of
some
tests
were
recorded
and,
Dorcich
implies,
were
available
for
analysis
and
reference
by
the
engineers.
Beyond
that,
other
than
in
most
general
terms,
he
was
not
able
to
describe
the
nature
of
the
tests,
the
hypotheses
which
were
being
tested,
the
results
and
whether
the
results
were
recorded.
Viewing
Dorcich’s
testimony
as
a
whole,
it
falls
short
of
establishing
the
essential
element
of
repeatability.
As
previously
noted,
the
proposal
and
synopsis
provide
little
assistance
to
the
Appellant.
With
respect
to
the
patent,
the
Patent
Act?"
defines
an
invention
as
“any
new
and
useful
art,
process,
machine,
manufacture
or
composition
of
matter,
or
any
new
and
useful
improvement
in
any
art,
process,
machine,
manufacture
or
composition
of
matter”.
In
this
case,
the
Patent
Office
granted
a
patent
for
a
new
invention
and
while
this
is
some
evidence
that
a
new
or
improved
product
was
created,
it
is
not
dispositive
of
the
issue
before
me.
Pieces
of
evidence,
each
by
itself
insufficient,
may
together
constitute
a
significant
whole
and
justify
a
conclusion
by
their
combined
effect.
The
question
in
this
appeal
is
whether
on
a
reasonable
balance
of
probabilities
one
can
draw
the
logical
inference
that
a
requisite
element
of
scientific
research,
that
is,
the
element
of
repeatability
in
all
that
that
term
entails,
has
been
established.
I
am
cognizant
of
the
fact
that
in
this
case
we
are
dealing
,
with
the
development
of
new
technology
and
that
it
might
be
appropriate
to
consider
a
less
rigorous
standard
than
that
espoused
by
scientists
involved
in
pure
or
applied
research.
In
my
view
that
would
still
not
assist
the
Appellant
since
there
is
very
little
evidence
that
essential
information
such
as
the
type,
size
and
number
of
specimens;
the
test
set-up;
the
test
methodology;
the
instrumentation
and
data
acquisition
system;
the
test
data
collected;
the
analysis
and
interpretation
of
test
data;
and
the
correlation
of
test
data
to
the
original
hypothesis
was
recorded.
As
Dr.
Razaqpur
wrote
in
his
report:
This
existence
of
a
complete
written
record
of
the
experiment
ensures
the
essential
element
of
repeatability.
As
Russell
L.
Ackoff
states
in
Scientific
Method,
at
425:
Every
research
project
should
yield
a
document
which
makes
it
possible
to
duplicate
the
study
in
essential
details,
since
the
ultimate
test
of
much
research
lies
in
its
ability
to
be
duplicated.
Certainly
the
possibility
of
progress
depends
on
the
ability
to
study
past
work
in
great
detail.
A
distinction
must
be
made
between
the
drawing
of
inferences
from
proven
facts
and
speculation.
On
the
evidence
before
me,
the
latter
would
be
required
in
order
to
conclude
that
the
essential
element
of
repeatability
has
been
established.
For
this
reason,
the
Appellant
cannot
succeed
on
this
issue.
Pursuant
to
a
Partial
Consent
filed
by
the
parties,
the
appeal
in
respect
of
the
Appellant’s
1982
taxation
year
is
allowed
and
the
matter
is
referred
back
to
the
Minister
of
National
Revenue
for
reconsideration
and
reassessment
on
the
basis
that
the
Appellant
is
entitled
to
the
mortgage
reserve
claimed
for
the
1982
taxation
year.
The
Appellant
is
entitled
to
no
further
relief.
The
appeal
with
respect
to
the
1983
taxation
year
is
dismissed.
Costs
to
the
Respondent.
Appeal
allowed
in
part.
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