Court File and Parties

Court File No.: 457/10 Date: 2016/05/26 Ontario Superior Court of Justice

Between: XPG, A Partnership and C & M Seeds Manufacturing Inc., Plaintiffs – and – Royal Bank of Canada, Defendant

Counsel: T. Corbett, for the Plaintiffs M. Koehnen and C. Adamson, for the Defendant

Heard: May 26, 2016

Raikes J. – (Orally)

XPG – Participant Expert Ruling

[1] The Plaintiffs seek to adduce opinion evidence from a former employee, Dana Omland, on the basis that Mr. Omland is a “participant expert” who meets the requirements set forth in paragraph 60 of Westerhof v. Gee Estate, 2015 ONCA 206 (“Westerhof”).

Background

[2] In the Fall of 2007 and early 2008, Mr. Omland was employed by Palmerston Grain (hereafter “PG”) as merchandising manager. He testified that his role was “to drive profitability and sales”. To that end, he was responsible for managing dealings with commercial suppliers on the purchase side and to deal with end-users to whom PG sold its grain.

[3] He was also responsible for overall risk management hedging for the company. That entailed review of daily reports generated by software used at the company that collated, inter alia, purchases and sales of grain stored at the Palmerston facility, its satellites or held at other third-party commercial elevators for PG. From those reports, he determined what futures needed to be sold to offset cash purchases of grain, and instructed the futures broker to complete the necessary transactions.

[4] Mr. Omland provided a detailed history of his work experience leading up to 2007 – 2008; in particular, his work in and with the futures markets. He was employed from 2003 – 2007 by the Ontario Wheat Producers Marketing Board (“Wheat Board”) as its marketing manager. As at PG, he was in charge of the Board’s forward contracting program and dealt with hedging and futures.

[5] In general terms, forward contracts on the purchase side occur when the grain elevator enters into an agreement with a farmer or other commercial elevator for the delivery of a crop which has not yet been harvested and may, in fact, not even be planted. In this litigation, these forward contracts have been referred to as “new crop”. This is to be contrasted with grain which has already been planted and harvested which may or may not yet have been delivered to PG by the producer. That grain has been referred to as “old crop” in the evidence to date.

[6] Mr. Omland is the author of various emails, spreadsheets and internally generated reports while employed at PG. He left PG in February, 2014 to pursue an offer from his current employer. His leaving had nothing to do with the issues in the litigation.

[7] The various emails and other documents authored by Mr. Omland which have been filed as exhibits already in this trial disclose that Mr. Omland assisted in the preparation of or provided information that was incorporated into documentation that was provided to the Defendant Bank at the relevant time as part of the dealings between the parties concerning bank financing for PG’s operations.

[8] In addition, the documents reflect that Mr. Omland did more than merely report on what the markets were doing or what particular suppliers or end-users were communicating. He provided his analysis and recommendations, express or implied. Those recommendations related to various issues including the timing of purchases and sales and anticipated discounts. He also effected purchases and sales of grain for PG in this period. Those transactions are central to the events in issue in this litigation.

[9] Mr. Omland was hired by PG specifically because of his background and expertise in the grain industry; specifically, the purchase and sale of wheat and futures hedging for both old and new crop. He reported to one of the owners of the business, Anne Schneider and in a dotted line fashion to the general manager, Archie Wilson.

[10] Mr. Omland has already provided some opinion evidence with respect to the way that hedging works and the implications of same for the grain operator from a profit perspective. He has also testified with respect to the “basis” used by PG on purchases and the “basis” used on sales, including how each basis is derived and the implications of same vis-à-vis dealings with producers on the one side and end-users or customers on the other. To a large degree, his evidence in this regard duplicates that already provided by Mr. Wilson and no objection was taken by the Defendant.

[11] Plaintiffs’ counsel seeks to pursue a line of inquiry with Mr. Omland with respect to the degree of risk on forward contracts. Mr. Omland was asked whether there was any greater risk when purchasing new crop or forward contracts as opposed to old crop. He indicated: “not in the slightest”.

[12] He explained that with any purchase contract, it is backed by decades old trade laws. The contracts provide for a specific quantity, quality, timeframe for delivery and price. If the quality is less than that which was agreed to, the elevator can make a quality adjustment to the price so that the elevator remains profitable.

[13] He was then asked about the risk of default on forward contracts which he characterized as “extraordinarily” low. He began to explain his rationale for that conclusion when an objection was made by the Defendant that Mr. Omland was giving opinion evidence which he was not permitted to do as he is not a Rule 53 expert nor is he a participant expert who meets the preconditions set forth in para. 60 of the Westerhof decision. I observe that Mr. Omland started to refer to a study that he did or at least worked on while at the Wheat Board on this very issue when the objection was made.

[14] Plaintiffs’ counsel asserts that Mr. Omland is a participant expert. He intends to adduce from Mr. Omland not only the specific basis for his opinion that defaults on forward contracts are rare and therefore forward contracts have little or no risk, but additional expert opinion evidence dealing with hedging and risk. The exact scope of the opinion evidence to be adduced is at this point known only to Mr. Corbett.

[15] Dealing with the specific line of inquiry to which objection has been taken, Mr. Corbett seeks to adduce this evidence for the following purposes:

1. To explain Mr. Omland’s understanding which is material to the steps which he took and his observations at the time; and,
2. As proof of the truth of the opinions expressed, for example that forward contracts have little or no risk to the grain elevator.

[16] It is the latter use which is in issue.

Defendant’s Position

[17] The Defendant submits that Mr. Omland’s testimony should be restricted to factual evidence as:

1. He does not meet the test for a participant expert in that the opinions which he is about to express do not arise from his observations and participation in the events which form part of this litigation;
2. He will be opining on his own conduct and decision-making. As such, he lacks the requisite degree of independence and impartiality essential to expert evidence;
3. There is a reasonable apprehension of bias in the circumstances;
4. Mr. Omland’s lack of impartiality is fatal to the admissibility of this evidence; it does not go merely to weight;
5. Cases where a participant expert has been permitted to provide opinion evidence typically involve independent third-party witnesses like treating physicians who record what they observed and their conclusions which they formed in the course of their business, occupation or profession;
6. He lacks the requisite qualifications to be an expert in any event.

Plaintiffs’ Position

[18] The Plaintiffs submit that:

1. Mr. Omland meets both branches of the criteria for a participant expert found in para. 60 of Westerhof;
2. He is a participant expert precisely because of his participation in and observations of the events at issue;
3. He is not a party and is no longer an employee of PG;
4. The opinions which he formed were not made for the purpose of the litigation or to build the case as with a Rule 53 expert;
5. The gatekeeper function that the Defendant points to is one which applies to all expert evidence whether it comes from a Rule 53 expert or a participant expert; and,
6. Mr. Omland will be testifying as to the basis for his belief that there was no risk in forward contracts to PG at the material time. The foundation for that belief comes from the many years of experience and expertise he accumulated before being employed by PG. His employment at PG at the time may go to weight but not admissibility in the circumstances.

Law

[19] Counsel provided three cases on which they both rely to advance their positions. I will deal with each in turn.

[20] First, the test for and the admissibility of opinion evidence given by a participant expert is articulated in Westerhof, supra. Westerhof was a motor vehicle accident case. At paragraph six of the decision, Simmons J.A. framed the issue before the court as follows:

“The Westerhof appeal raises the question of whether rule 53.03 applies only to experts described in rule 4.1.01 and Form 53 – experts “engaged by or on behalf of a party to provide [opinion] evidence in relation to a proceeding” (referred to in these reasons as “litigation experts”) - or whether it applies more broadly to all witnesses with special expertise who give opinion evidence. This broader group of witnesses would include, for example, treating physicians, who form opinions based on their participation in the underlying events (referred to in these reasons as “participant experts”) rather than because they were engaged by a party to the litigation to form an opinion. It would also include experts retained by a non-party to the litigation (for example, statutory accident benefits (“SABS”) insurers), who form opinions based on personal observations or examinations relating to the subject matter of the litigation for a purpose other than the litigation (referred to in these reasons as “non-party experts”).”

[21] I will come back to the three categories of experts identified by the court later in these reasons.

[22] At paras. 60 and 61, Justice Simmons wrote:

“[60] Instead, I conclude that a witness with special skill, knowledge, training, or experience who has not been engaged by or on behalf of a party to the litigation may give opinion evidence for the truth of its contents without complying with rule 53.03 where:

• the opinion to be given is based on the witnesses observation of or participation in the events at issue; and
• the witness formed the opinion to be given as part of the ordinary exercise of his or her skill, knowledge, training and experience while observing or participating in such events.

[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 witnesses” risks confusion because the term “fact witness” does not make clear whether the witnesses 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”. [Emphasis in original]

[23] Justice Simmons noted at para. 64 that the court retains its gatekeeper function in relation to all opinion evidence including from participant experts and non-party experts. In exercising that function, a court may exclude all or part of the opinion evidence of a participant expert or rule all or part of that evidence inadmissible for the truth of its content if the evidence does not meet the test for admissibility.

[24] For opinion evidence from a participant expert to be admissible, I must be satisfied that:

1. The evidence meets the criteria applicable to all expert evidence;
2. The opinion which the particular participant expert seeks to give is based upon his or her observation of or participation in the events at issue; and
3. The witness formed that opinion as “part of the ordinary exercise of his or her skill, knowledge, training and experience while observing or participating in such events ”. [Emphasis added]

[25] The law is well-settled as to the criteria applicable to all expert opinion evidence. To be admissible, the following criteria must be met:

1. The evidence is relevant to some issue in the case;
2. The evidence is necessary to assist the trier of fact;
3. The evidence does not contravene an exclusionary rule; and,
4. The witness is a properly qualified expert: R. v. Mohan, [1994] 2 S.C.R. 9.

[26] The party seeking to tender the expert evidence has the evidential and legal burden to satisfy these criteria on a balance of probabilities: R. v. J.(J.-L.), [2002] 2 S.C.R. 600 at paras. 36 and 50.

[27] I observe at this point that no argument was advanced by the Defendant that the evidence sought is irrelevant or unnecessary to assist the trier of fact or contravened an exclusionary rule. The arguments advanced by the Defendant focus on the criteria set out in Westerhof and the lack of impartiality or apprehension of bias which goes to whether Mr. Omland is a proper qualified expert.

[28] The second case to which I was directed by counsel is the decision of the Supreme Court of Canada in White Burgess Langille Inman v. Abbott and Haliburton Co., 2015 SCC 23. In White Burgess, the court was not concerned with the distinction between a participant expert and litigation expert; rather, the case dealt with the obligation of objectivity and impartiality of an expert.

[29] At paragraph 2, Justice Cromwell, writing for the court, stated:

“Expert witnesses have a special duty to the Court to provide fair, objective and non-partisan assistance. A proposed expert witness who is unable or unwilling to comply with this duty is not qualified to give expert opinion evidence and should not be permitted to do so. Less fundamental concerns about an expert’s independence and impartiality should be taken into account in the broader, overall weighing of the costs and benefits of receiving the evidence.”

[30] At paragraph 22, the Supreme Court adopted the analytical approach taken by the Ontario Court of Appeal in R. v. Abbey, 2009 ONCA 624 with minor adjustments. The first step of the analysis requires the proponent of the evidence to establish the threshold requirements for admissibility. These are the four Mohan factors identified above and, in the case of an opinion based on novel or contested science or science used for a novel purpose, the reliability of the underlying science for that purpose. Evidence that does not meet these threshold requirements should be excluded.

[31] The second stage of the gatekeeping analysis requires the trial judge to balance the potential risks and benefits of admitting the evidence in order to decide whether the potential benefits justify the risk. This balancing requires the judge to consider 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”: R. v. Abbey, supra, at para. 76, cited with approval in White Burgess, supra, at para 24.

[32] At para. 45, Justice Cromwell concludes as follows:

“Following what I take to be the dominant view in the Canadian cases, I would hold that an expert’s lack of independence and impartiality goes to the admissibility of the evidence in addition to being considered in relation to the weight to be given to the evidence if admitted. That approach seems to me to be more in line with the basic structure of our law relating to expert evidence and with the importance our jurisprudence has attached to the gatekeeping role of trial judges. Binnie J. summed up the Canadian approach well in J.(J.-L.): “The admissibility of the expert evidence should be scrutinized at the time it is proffered, and not allowed too easy an entry on the basis that all of the frailties could go at the end of the day to weight rather than admissibility” (para. 28)”.

[33] Thus, the impartiality and objectivity of an expert should be assessed at the outset when the opinion evidence is proffered to determine whether it should be admitted at all. Even if admitted, the court may consider any concerns that it had at the end of the day with the objectivity or bias of the expert which did not rise to a level sufficient for its exclusion, as part of the consideration of the weight to attach to that evidence.

[34] The third case tendered by counsel is the decision of Justice Bondy in Ontario (AG) v. $18,550 in Canadian Currency, 2016 ONSC 2237. In that case, Justice Bondy declined it to admit the evidence of a Detective Constable who had submitted to the reviewing authority a request that the Attorney General consider commencing a civil forfeiture proceeding. At paragraph 48 of his decision, Bondy J. found that there was a reasonable apprehension that the Detective Constable had a vested interest in the outcome of the litigation: that he worked for the very agency charged with determining the feasibility of asset seizures. Justice Bondy concluded that the officer’s role in the litigation was essentially the same role as an expert engaged by or on behalf of a party, and that the role played by him was that of “litigation expert” in disguise.

[35] Justice Bondy distinguished the cases which had been provided to him where police officers provided opinion evidence founded, in part, on personal observations made during the course of an investigation and/or arrest. He distinguished those findings and opinions as the Detective Constable was not engaged in an arrest but in the process of building a case for seizure of the currency. Simply put, the officer formed his opinion as part of the construction of the civil forfeiture case.

[36] It could be said that the Detective Constable in that case could not be a participant expert because his opinion was not based on his observation of or participation in the events at issue. He did not form his opinions while observing or participating in the events at issue. Accordingly, he did not meet the Westerhof criteria.

Analysis

[37] The first stage of the analysis is to consider whether the four Mohan criteria are satisfied:

1. Relevance;
2. Necessity;
3. Lack of exclusionary rule;
4. Qualified expert.

a. Relevance

[38] In my view, of the opinion sought with respect to the relative risk to PG of forward contracts is relevant to the issues in the lawsuit. I note that I have already heard evidence from Mr. Wilson in this regard without any objection from defence counsel.

b. Necessity

[39] This criterion requires a consideration of whether the evidence sought to be adduced would be helpful to the court as it engages areas beyond the general knowledge of the court. Grain commodities contracting, and the management of the risk of price fluctuations in grain prices which is fundamental to forward contracts and futures hedging is certainly beyond the expertise of the court. In short, this criterion is satisfied. The evidence would be helpful and is beyond the scope of ordinary knowledge of a layperson.

c. Lack of Exclusionary Rule

[40] There is no other exclusionary rule for this evidence that is engaged by this evidence beyond the general rule against opinion evidence itself.

d. Qualified Expert

[41] I am satisfied on the evidence adduced that Mr. Omland has acquired special skill and expertise as it relates to the buying and selling of wheat in Ontario and the use of the futures market to hedge the risk of a drop in grain prices between the date of purchase and the date that the grain is ultimately sold. This applies to both new and old crop transactions. His education and his prior work experience in commodities trading and at the Wheat Board performing the same function as at PG provides him with a specialized knowledge and skill set as described.

[42] There is, however, a further consideration: is he sufficiently impartial and unbiased? The Defendant asserts that he is required to be independent of the parties at the time he formed his opinions. He cannot opine about his very actions or decisions. I disagree that he cannot be a participant expert because he was then employed by PG. I also note that at this point it is not clear that the opinion evidence sought will directly relate to what he did and how.

[43] A participant expert need not be someone who is independent of the parties. For example, a doctor employed by a company who treats an employee who comes in complaining of a set of symptoms is nonetheless a medical expert. That doctor will record his or her observations and the diagnosis made based on his observations and examination. That diagnosis is an opinion which is admissible although the weight attached to it may or may not be diminished depending on the factors usually considered by a trial judge assessing expert evidence.

[44] There is no evidence before me presently that calls into question the impartiality of the opinions the Plaintiffs seek to obtain from this witness. Unlike the Detective Constable in the Canadian Currency case, this witness was not engaged in the formation of the case or in the building of the case that is before the court. It is not sufficient, in my view, to exclude Mr. Omland’s opinion evidence solely on the basis that at the time he formed those opinions, he was employed by PG.

[45] At this stage, I am not prepared to find that this evidence must, of necessity, be excluded on the basis of lack of objectivity, lack of independence or bias. Counsel may revisit the issue of admissibility if it becomes clear that the evidence, as it unfolds, raises that spectre, or as part of their closing submissions at trial. This is a civil non-jury trial. I can disabuse myself of this opinion evidence if appropriate. The prejudice that would enure in a jury trial is not present.

[46] From a cost–benefit standpoint, admitting this evidence is unlikely to side-track or confuse the court on the issues before me. The Defendant is calling a rule 53.03 expert on hedging. Any prejudice to the trial, and I see none, does not outweigh the probative value of this evidence.

[47] I turn now to the next phase of the analysis: whether the criteria for a participant expert in Westerhof are met.

Westerhof Analysis

[48] There is overlap between the criteria in Mohan and those found in para. 60 of the Westerhof decision. Both require that the witness have special skill, knowledge, training or experience.

[49] One of the fundamental distinctions between a participant expert and a litigation or non-party expert lies in the requirement on a participant expert for a connection between the opinion to be expressed and the expert’s observation of or participation in the events at issue. Litigation and non-party experts may opine on the basis of a review of medical records, documents or other evidence gathered or created after the events in issue. They may observe the party on one or two occasions but as part of their role as an expert engaged for that purpose.

[50] The Westerhof criteria expressly contemplate a direct factual and temporal connection between the events in issue and the opinion formed. The opinion derives from what he or she saw and did at the time. The participant expert is part of the narrative as to what happened, what was observed and what conclusions were drawn by him or her in the context of his or her particular expertise.

[51] Thus, questions directed at Mr. Omland which elicit opinion evidence within the scope of his expertise are proper provided that those questions relate specifically to what he observed and/or did at the material time in 2007 – 2008. The Plaintiffs cannot use Mr. Omland’s testimony as a vehicle to elicit opinion evidence which lacks any factual and temporal connection to what he observed and/or did. Specifically, he cannot opine with respect to matters or issues about which he may have expertise but which have no factual and temporal connection to the events at issue. He must have formed the opinion while observing and participating in the events in issue.

[52] Mr. Omland possessed expertise in the areas I have described above. Questions that elicit opinions within the scope of that expertise that arise directly from what he observed or did are proper. Questions that elicit opinions unconnected to his observations and his participation in the events in issue are improper – they go beyond the scope of the participant expert’s participation in the events in issue.

[53] I turn now to the specific line of questioning which led to this ruling. Mr. Corbett seeks to adduce from Mr. Omland the basis for his opinion that forward contracts are no more risky for PG than contracts for old crop. However, it is evident from the answer that Mr. Omland started to give that he intends to go well beyond what he observed or did at the time. He intends to go back and recount his involvement in one or more studies while at the Wheat Board on this topic and the findings obtained. In my view, this goes well beyond the scope of questions connected to what he observed or did at the time dealing with the events in issue in this litigation.

[54] Mr. Omland is not a litigation expert. No expert report has been served. No Form 53 certificate has been signed. He is not at liberty to opine broadly on all matters falling within his expertise. To allow an open range of examination would give the participant expert a decided advantage to the party calling that witness given the lack of any forewarning with respect to the content of the opinions to be expressed.

[55] It is my view that the question put to Mr. Omland is improper to the extent that it seeks to elicit from Mr. Omland broad evidence of his activities well before the events in issue in this litigation. There is no factual or temporal connection between those events, studies and findings and the matters in issue in this litigation. I have found that he may testify and provide opinion evidence as a participant expert but the above restrictions must be followed.

“Justice R. M. Raikes” Justice R. M. Raikes Delivered Orally: May 26, 2016