Citation: 2015 TCC 41
Docket: 2012-671(IT)G
TAX COURT OF CANADA
BETWEEN:
HLP SOLUTION
INC.,
Appellant,
- and -
HER MAJESTY THE QUEEN,
Respondent
[OFFICIAL ENGLISH TRANSLATION]
REASONS DELIVERED ORALLY BY
TELECONFERENCE
BY JUSTICE JOHANNE D’AURAY
at the Tax Court of Canada,
200 Kent Street,
Ottawa, Ontario,
on Monday, January 12,
2015, at 2:00 p.m.
APPEARANCES:
Julie Patenaude Counsel for the appellant
Nathalie
Lessard Counsel
for the respondent
Also present:
Estelle
Lagacé Registrar
Antoinette
Forcione Court Reporter
A.S.A.P. Reporting Services Inc. © 2015
200 Elgin
Street, Suite 1105 333 Bay Street, Suite 900
Ottawa, Ontario
K2P 1L5 Toronto, Ontario M5H 2T4
(613) 564-2727 (416)
861-8720
Ottawa,
Ontario
--- The hearing began on
Monday, January 12, 2015,
at 2:00 p.m.
THE
REGISTRAR: This teleconference of the Tax Court of Canada in Ottawa has now commenced.
The
Honourable Justice Johanne D’Auray is presiding.
Docket
number 2012-671(IT)G between HLP Solution Inc. and Her Majesty the Queen.
Appearing
for the appellant is Julie Patenaude, and for the respondent, Nathalie Lessard.
Please
identify yourselves when you address the Court.
Madam
Justice.
JUSTICE D’AURAY:
So, good afternoon. In this matter, I will render orally my decision regarding
the qualification of the respondent’s expert evidence. I heard the motion in
Montreal on December 8, 2014.
So,
paragraph 1.
[1] The
appellant, HLP Solution Inc., is claiming tax credits for scientific research
and experimental development (SR&ED) for the taxation year ending on
June 30, 2009, with respect to the following two projects:
Project 1:
mobile synchronization software;
Project 2:
parallel mail collector.
[2] The
Minister of National Revenue (the Minister) disallowed the SR&ED tax
credits claimed by the appellant for part of Project 1 and all of Project 2.
The appellant filed a Notice of Objection. Since it did not receive a response
from the Canada Revenue Agency (CRA) to its objection, the appellant filed an
appeal with this Court.
[3] At
the hearing, the appellant informed me that it would be challenging the
qualification of the respondent’s expert witness, Ms. Rosu. I therefore held
a voir dire to determine whether Ms. Rosu could testify as an expert in
the present appeal.
[4] Ms. Rosu
has been working as a research and technology advisor (RTA) for the CRA since
February 2009. She has a DSc in computer science from the University of Geneva.
She has also worked for various private companies in the field of computer
science.
[5] At
the audit stage, Ms. Rosu prepared the technical review report in which
Project 1 was found to be partially eligible for an SR&ED credit. However,
Project 2 was not recognized as an SR&ED project, and therefore no credit
was granted.
Appellant’s
position
[6] The
appellant does not dispute Ms. Rosu’s expertise. Nor does it have any
quarrel with the fact that Ms. Rosu is employed by the CRA as an RTA.
[7] However,
the appellant submits that Ms. Rosu does not have the necessary
impartiality to testify as an expert witness in this appeal. It argues that Ms. Rosu
was involved in this file at every stage:
- She
wrote the technical review report, that is, the scientific report used in
making the assessment at issue.
- She
wrote an addendum, that is, a reply to the appellant’s comments on her
technical review report. The addendum confirms Ms. Rosu’s initial
position, the one she took in her technical review report.
- She
attended all the meetings with the appellant regarding the projects at issue.
[8] After
receiving the addendum, the appellant asked Mr. Filion, Ms. Rosu’s
deputy director, to do a second administrative review of its projects. The
correspondence filed on the record reveals that there was some uneasiness
between Ms. Rosu and the appellant. The appellant submitted that Ms. Rosu
did not understand the projects carried out by the appellant and alleged that Ms. Rosu
had acted in bad faith towards the appellant.
[9] Mr. Filion
therefore asked Ted Wierzbica, an information technology specialist at the CRA,
to get involved in the administrative review. In collaboration with Ms. Rosu,
Mr. Wierzbica prepared a questionnaire to be completed by the appellant.
The purpose of the questionnaire was to determine whether there were any
technological uncertainties associated with the projects.
[10] The
appellant argues that Ms. Rosu’s continued involvement at the audit stage means
that Ms. Rosu does not have the necessary impartiality to testify as an
expert witness.
[11] In
this regard, the appellant submits that the opinions expressed by Ms. Rosu
at the audit stage are reflected in her expert report filed with this Court. The
appellant alleges that, in some instances, Ms. Rosu reproduced word for
word in her expert report certain paragraphs from her technical review report.
Moreover, according to the appellant, at some places in her expert report, Ms. Rosu
confused her role as an RTA for the CRA and her role as an expert witness. The
appellant submits that, in both her expert report and her rebuttal report, Ms. Rosu
defends the opinion she gave at the audit stage.
[12] The
appellant therefore argues that, given Ms. Rosu’s involvement and the
opinions she expressed regarding the appellant’s two SR&ED projects, she
could hardly change her opinion and thus did not have the necessary
impartiality to act as an expert witness in this appeal.
Respondent’s
position
[13] The
respondent for her part submits that it is rare for a court to refuse to hear
the testimony of an expert witness. There must be clear evidence of bias, of which
there is none in this appeal.
[14] The
respondent also argues that Ms. Rosu is an expert and that it is in this
capacity that her opinion is sought by the CRA, whether it be at the audit
stage, the objection stage or in an appeal before this court. In this regard,
she argues that Ms. Rosu has undertaken to respect the Code of Conduct for
Expert Witnesses under the rules of this Court.
[15] According
to the respondent, this Court must hear the whole of the expert’s testimony to
determine whether an expert witness has become an advocate for his or her
client’s position. This should not be done when determining whether the expert may
testify.
[16] Ms. Rosu
testified that she started afresh in preparing the expert report filed with
this Court. In light of the facts she had gathered during the audit, she
performed a new review of the literature and did searches on the Internet,
including user forums, in order to ensure that she had not missed anything.
[17] Thus,
during this new research. Ms. Rosu noticed that the activities she had
accepted as being SR&ED for Project 1 were standard practice; she had
therefore made a mistake at the audit stage when she accepted part of
Project 1 as being SR&ED. According to the respondent, this proves
that the expert analyzed anew the appellant’s SR&ED projects and that if
she had found literature in the appellant’s favour, she would have reversed her
opinion and granted the appellant SR&ED credits. In this regard, she lays emphasis
on Ms. Rosu’s testimony.
[18] Consequently,
the respondent argues that Ms. Rosu is a qualified, impartial expert who
is seeking the truth and who will not mislead the Court. She should therefore be
qualified as an expert witness in this case.
Applicable law and analysis
[19] First, I would like to mention that an expert witness’s
main role is to assist the Court in assessing evidence on scientific or
technical matters.
[20] The
Code of Conduct for Expert Witnesses is to the same effect. Under the heading
General Duty to the Court, the first two sections of the Code read as follows:
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.
[21] It
is therefore important to bear in mind that the expert witness’s main duty is
to assist the Court.
[22] The
leading case on the admission of expert evidence is the Supreme Court of Canada’s
decision in R. v. Mohan, [1994] 2 S.C.R. 9, in which Justice
Sopinka sets out the following criteria for determining whether expert evidence
should be admitted.
(a) relevance;
(b) necessity
in assisting the trier of fact;
(c) the
absence of any exclusionary rule;
(d) a
properly qualified expert.
[23] Only
the relevance criterion is being questioned by the appellant in this appeal. I
will therefore limit my analysis to that criterion.
[24] At
paragraph 18, Justice Sopinka explains what he means by relevance:
Relevance is a threshold requirement for the admission of expert
evidence as with all other evidence. Relevance is a matter to be decided by a
judge as [a] question of law. Although prima facie admissible if so
related to a fact in issue that it tends to establish it, that does not end the
inquiry. This merely determines the logical relevance of the evidence.
Justice Sopinka goes on to
say:
Other considerations enter into the decision as to admissibility.
This further inquiry may be described as a cost benefit analysis, that is “whether
its value is worth what it costs.” See McCormick on Evidence (3rd ed.
1984), at p. 544. Cost in this context is not used in its traditional economic
sense but rather in terms of its impact on the trial process. Evidence that is
otherwise logically relevant may be excluded on this basis, if its probative
value is overborne by its prejudicial effect, if it involves an inordinate
amount of time which is not commensurate with its value or if it is misleading
in the sense that its effect on the trier of fact, particularly a jury, is out
of proportion to its reliability.
He then continues:
While frequently considered as an aspect of legal relevance, the
exclusion of logically relevant evidence on these grounds is more properly
regarded as a general exclusionary rule (see Morris v. The Queen, [1983]
2 S.C.R. 190).
He further states:
Whether it is treated as an aspect of relevance or an
exclusionary rule, the effect is the same. The reliability versus effect factor
has special significance in assessing the admissibility of expert evidence.
[25]
According to Mohan, therefore, the judge, when analyzing relevance, must
first make sure that the evidence is related to the fact in issue that this
evidence is intended to establish. In other words, the evidence must be relevant
to the facts in issue. This is what Justice Sopinka calls the logical relevance
of evidence.
[26] Second,
still with respect to relevance, Justice Sopinka states that the judge must
perform a cost- benefit analysis in order to determine whether the value of the
testimony is worth what it costs, not in the economic sense but rather in the
sense of its impact on the trial process.
[27] Furthermore,
in the decision of the Court of Appeal for Ontario in R. v. Abbey,
[2009] O.J. No. 3534, 246 C.C.C. (3d) 301, Justice Doherty applies the Mohan
criteria, but distinguishes between the preconditions to admissibility dealt
with in Mohan, that is, the four criteria, and the judge’s exercise of
the gatekeeper function, which consists of weighing the benefits or the
probative value of evidence against the cost or the prejudice associated with
admitting this evidence. According to Mohan, this step is performed when
the judge is conducting the analysis of the relevance criterion.
[28] Justice
Doherty changes the order of the analysis of the criteria set out in Mohan.
After analyzing the four Mohan criteria, he moves on to the second
stage, where the judge must take on the role of gatekeeper, which requires the
judge to exercise his discretion, that is, to perform a cost- benefit analysis.
In this regard, he writes as follows:
Using these criteria, I suggest a two-step process for
determining admissibility. First, the party proffering the evidence must
demonstrate the existence of certain preconditions to the admissibility of
expert evidence. For example, that party must show that the proposed witness is
qualified to give the relevant opinion. Second, the trial judge must decide
whether expert evidence that meets the preconditions to admissibility is
sufficiently beneficial to the trial process to warrant its admission despite
the potential harm to the trial process that may flow from the admission of the
expert evidence.
Justice Doherty adds:
It is helpful to distinguish between what I describe as the
preconditions to admissibility of expert opinion evidence and the performance
of the “gatekeeper” function because the two are very different. The inquiry
into compliance with the preconditions to admissibility is a rules-based
analysis that will yield “yes” or “no” answers. Evidence that does not meet all
of the preconditions to admissibility must be excluded and the trial judge need
not address the more difficult and subtle considerations that arise in the “gatekeeper”
phase of the admissibility inquiry.
The “gatekeeper” inquiry does not involve the application of
bright line rules, but instead requires an exercise of judicial discretion.
. . . This cost-benefit analysis is case-specific . . . .
Different trial judges, properly applying the relevant principles in the
exercise of their discretion, could in some situations come to different
conclusions on admissibility.
[29] It
is apparent from these two decisions that the judge must perform an analysis to
determine the cost and the benefit of the expert evidence. If the judge finds
that the probative value and the reliability of the expert evidence is likely
to have little or no probative value, the judge may, in the exercise of his or
her discretion, disqualify the expert at the expert qualification stage.
[30] Justice
Doherty explains that each case is different, and whether an expert should be
disqualified at the qualification stage or not will depend on the outcome of
the voir dire or, if there is no voir dire, on the evidence presented at the
hearing at the time of the expert qualification inquiry.
[31] In
the present appeal, I determined on the voir dire that Ms. Rosu did not
have the necessary impartiality to testify. In weighing the probative value of
her testimony against the cost of that testimony in terms of its impact on the
trial process, I decided that it was preferable to disqualify Ms. Rosu at
the qualification stage.
[32] The
following reasons led me to this conclusion:
- Ms. Rosu
was involved at every stage of the file.
- Ms. Rosu
delivered the opinion (the technical review report) that served as the basis
for the assessment.
- Following
the appellant’s representations, Ms. Rosu also wrote an addendum to her
technical review report, in which she still upheld the same position.
- She also
participated in every meeting with the appellant as the CRA’s representative.
[33] In
my view, it is very difficult for a person who has been involved at every stage
of a file to have the necessary detachment to give a new opinion that will
disregard that person’s previous opinions.
[34] Indeed,
during the voir dire, she stated that it is difficult to change one’s opinion
if the facts do not change. Is that not the very difficulty that faces a person
who has been involved at every stage of a file and who has given opinions at the
various stages of that file?
[35] Moreover,
at different places in her report, Ms. Rosu confused her role as an RTA with
that as an expert witness. For example, at page 6 of her rebuttal report, Ms. Rosu
refers in the following terms to the requests she made during the audit:
[translation]
I failed to find any comments formulating assumptions in the documents
produced with the version control software that were provided by the company.
Despite our requests, I never received copies of tests to document the
experiments. In that context it is difficult for me to conclude that the
procedure adopted complied with the scientific method.
The answer is no.
[36] Furthermore,
there are indications in the expert report that Ms. Rosu lacks detachment.
[37] For
example, she describes in detail all the work she did on this file as an RTA,
the meetings she had with the appellant and the requests for documents made to
the appellant during the audit; while not determinative in itself, this is
unusual.
[38] In
some parts of her export report, Ms. Rosu reproduces word for word
paragraphs from her technical review report.
[39] Furthermore,
in her expert report Ms. Rosu uses the pronoun “nous” (“we”), “nous” being
the CRA. In this regard, she noted during the voir dire that it was sometimes
difficult to hide the fact that she worked for the CRA. She stated, and I quote:
[translation] “Of course, I have a
file that was prepared by the CRA and requests that were made by the CRA.” She
concluded, however, that the “nous” was a question of style.
[40] In
my opinion, these examples and her constant involvement in the file only serve
to demonstrate that there was a blurring of the distinction between Ms. Rosu’s
role as an expert witness and her role as an RTA.
[41] In Les
Abeilles Service de Conditionnement Inc. c. La Reine, 2014 CCI 313 (Les
Abeilles), the respondent’s expert had, as in the present case, drafted the
technical review report leading to the assessment. During the process of
qualifying the respondent’s expert, counsel for Les Abeilles objected to that witness’s
testimony. She asked that the expert be disqualified, arguing that he did not
have the necessary impartiality.
[42] Justice
Jorré took the objection of counsel for Les Abeilles under advisement. After
hearing the testimony of the respondent’s expert, he indicated that, in light
of the conclusion he had reached, he did not have to rule on the objection made
by counsel for Les Abeilles concerning the admissibility of the testimony of
the respondent’s expert.
[43] Justice
Jorré concluded, however, that the respondent’s expert was not impartial and he
refused to accept his testimony as that of an expert witness, but he did accept
it as that of a fact witness.
[44] According
to Justice Jorré, it was clear that the respondent’s expert had confused his
role as an expert witness for the Court and his role as an RTA. The judge also made
the following observation in footnote 36:
[translation]
The serious difficulties I have with the testimony of the
respondent’s expert, which I express below, illustrate the dangers of having
the scientific advisor at the audit stage testify as an expert witness.
[45] In Gagné
v. The Queen, [2002] T.C.J. No. 61, 2002 CanLII 53, Judge Tardif,
in a case involving the fair market value of an immovable property, stated the
following with regard to the testimony of the respondent’s expert:
. . . His involvement in the case from the start of
the audits disqualified him or, at the very least, discredited the value of his
work.
[46] The
respondent referred me to the line of authorities that treats bias as a
question of probative value rather than as one of admissibility. In the
decisions that were provided to me, and which I examined, dealing with tax
matters, the judges of this Court gave little or no probative value to the
testimony of the respondent’s experts when these experts had been involved at
the audit stage. Consequently, in these cases, the Court did not have the
benefit of the testimony of the expert produced by the respondent.
[47] Moreover,
in the decisions in which the judges chose to treat bias as a question of
probative value rather than as one of admissibility, it is unclear whether a voir
dire on the admissibility of the expert’s evidence was held.
[48] The
cost-benefit analysis I have done in fulfilling in this case my gatekeeper role
under Abbey or under the relevance criterion in Mohan shows that
the probative value of the testimony of the respondent’s expert is likely to be
so low that the testimony would have no impact on the issues. Thus, the
testimony would be of no assistance to the Court.
[49] It
is important to note that I am not disqualifying Ms. Rosu because she is
employed by the CRA. I understand the distinction between independence and
impartiality. An expert witness does not have to be independent.
[50] I
also wish to point out that I do not question Ms. Rosu’s competence. She
simply found herself in a difficult position.
[51] As I
gave the appellant time to allow its expert to write an expert report including
the facts on which he relied following the respondent’s objection, I am giving
the respondent the opportunity to submit a new expert report.
I would
like the parties to decide on the submission date for the expert report,
bearing in mind the late April hearing dates.
[52] Costs
will be in the cause.
Translation certified true
on this 16th day of July 2015.
Erich
Klein, Revisor
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