2016 ONSC 3900
COURT FILE NO.: 1075/2000
DATE: 20160613
CORRIGENDA: 20160616
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
BONNIE DAVIES
Plaintiff
– and –
THE CORPORATION OF THE MUNICIPALITY OF CLARINGTON, VIA RAIL CANADA INC., CANADIAN NATIONAL RAILWAY COMPANY, TIMOTHY GARNHAM, THE BLM GROUP INC., APACHE TRANSPORTATION SERVICES INC., BLUE CIRCLE CANADA INC., and HYDRO ONE NETWORKS INC.
Defendants
Jeffrey W. Strype and Kyle Smith, for the Class Member Zuber
James M. Regan, Q.C. and Angelo Sciacca, for the Defendants Apache Specialized Equipment Inc., Apache Transportation Services Inc., and Timothy Garnham
Stephen MacDonald, for the Defendant Hydro One Networks Inc.
David Merner, for the Defendants VIA Rail Canada Inc. and Canadian National Railway Company
Alon Barda, for the Defendant BLM Group Inc.
HEARD: May 12 and May 19, 2016
REVISED RULING regarding admissibility of pipeline expert
The text of the original Ruling has been corrected with the text of the Corrigendum (released today’s date)
EDWARDS J.:
Overview
[1] During the course of the plaintiff’s evidence, Mr. Zuber (Zuber) testified that he had developed a plan to build a pipeline from Czechoslovakia to Poland. This pipeline became known during the course of the trial as the Zuber pipeline. As a result of injuries suffered in the railway accident of November 1999, Zuber advances a claim for loss of opportunity in connection with the Zuber pipeline which he says he was unable to build owing to his injuries.
The Facts
[2] Zuber, in his testimony described the pipeline as very low cost, which initially had a capacity for 500 million cubic metres of gas per year but was subsequently upgraded to 700 million cubic metres per year. Zuber stated that he had developed details and specifications for the pipeline, but because of his injuries - and symptoms attributed to those injuries, he was not able to get the necessary government decisions that would have allowed him to proceed with the pipeline. Ultimately the pipeline was built, but not by Zuber.
[3] Mr. Pitor Szwarc (Szwarc) testified on behalf of Zuber to lend credibility to the suggestion that the Zuber pipeline was more than just an idea and that it would in fact have been built by Zuber, thus generating substantial profits which he has now lost. In his affidavit filed as Exhibit 211 Szwarc, amongst other things, refers to various meetings taking place in Val Gardena, Italy, and in Poland that dealt with “financing, organizing building rights, securing passage rights and connectivity between the 2 countries”. Szwarc continued in his affidavit to state that Zuber could no longer continue with this process due to the injuries suffered in the accident.
[4] While Szwarc says he participated in the aforesaid meetings, none of the other participants – who presumably could have testified from a fact perspective about the financing requirements for the pipeline, have been called as witnesses.
[5] Szwarc testified in cross-examination about the extent of his dealings with Zuber concerning the pipeline. He confirmed that he was in daily contact with Zuber by email and that they exchanged “tens of thousands of emails” about various business deals, including the pipeline. None of these emails were introduced into evidence. Zuber issued his claim in 2001. The failure of Zuber to produce any of these emails, in my view, weighs against the credibility of his claim for loss of opportunity in connection with the Zuber pipeline.
[6] As for the financing for the pipeline, Zuber testified that he had discussions with various parties and was advised by Mr. Maciej Lesny (Lesny) he would have no difficulty obtaining the financing.
[7] Lesny was called as a witness to lend credibility to Zuber’s assertion that his pipeline would have become a reality and generated substantial profits that he has been denied due to the injuries he suffered in the accident. Lesny was the Vice Chairman of the Supervisory Board of the BRE Bank. In his willsay, filed as Exhibit 219, Lesny confirms that he spoke with Zuber several times about the possibility of financing his pipeline project and expresses the opinion that the project was “absolutely bankable”.
[8] Lesny assisted Zuber in arranging a meeting with Francis Krok (Kroc) who was, at the time, a Director of the BRE Bank and also Vice President of PGNIG. In doing so, Lesny expressed the opinion that he considered the financing of the pipeline as being quite feasible.
[9] In his affidavit, filed as Exhibit 217, Lesny states at paragraph 22 as follows:
Based on my background in banking, I have no doubt that Mr. Zuber’s project was economically viable, and would have had no difficulty obtaining financing. If Mr. Zuber had succeeded in completing the project it would have assured him of significant profits. Today, having full personal control of a venture such as this would not be possible without majority, stake holding of the State (of course in one of the forms permitted under law).
[10] Lesny, in expressing the opinion set forth above, was doing so – in my view, as a fact witness. He had not filed a Rule 53.03 compliant expert’s report. Counsel did not seek to qualify him as an expert in the field of Polish banking, nor as an expert in the field of pipeline financing. As a fact witness, he might very well be considered as a “participant expert” who would not have to comply with Rule 53.03. While non-compliance with Rule 53.03 obviates the need for the service of an expert’s report, it does not obviate the need to formally qualify a witness to give opinion evidence. Counsel did not do so, and as such I give little weight to Lesny’s opinion that Zuber would have had little difficulty in obtaining financing for his pipeline.
[11] Mr. Janusz Miekus (Miekus) testified for Zuber as someone who had known him since the late 1990’s, and indicated in his affidavit (filed as Exhibit 220) as follows:
In or about 2003 and 2004, my wife and I were organizers of the annual spring conference for Wide-Ranging Energy and Banking industry in Val Gardena, Italy. Mr. Zuber and Mr. Szwarc asked me to consider inviting them to the conference for the purpose of preparing meetings with bankers to obtain financing for their planned pipeline project. I extended an invitation to Mr. Zuber and Mr. Szwarc and arranged meetings for them with Bank Handlowy, Energo Broker SA, Energo Utech SA, Utech Finance and Leasing Association SA, Capital Group FASING SA, and WARTA Investment Funds. These meetings were specifically to discuss privately funding of Mr. Zuber and Mr. Szwarc’s gas pipeline project which would take gas from Trzonowiec, Czech Republic, to Skoozow, Poland. The meetings took place and the bankers indicated that the project was promising. The gas pipeline project was still secret at the time, so these talks were done in the strictest of privacy. I was only advised of the existence of the project in order to enable me to organize the meetings in Val Gardena.
Based on my experience in the energy industry, I considered the proposed gas pipeline project to be viable, and I expected Mr. Zuber to be able to obtain financing to bring it to fruition. After 2004 I was no longer involved in future talks regarding the pipeline, as Mr. Zuber was forced to withdraw from the project due to his ongoing health issues related to the 1999 train accident in which he was involved. Mr. Szwarc continued with the project and did manage to bring it to fruition along with some new partners in the Czech Republic.
[12] For the same reasons set forth in paragraph 10 above in relation to Lesny’s evidence, I do not accept the opinion evidence of Miekus with respect Zuber’s ability to obtain financing to bring the pipeline to fruition.
[13] Miekus refers in his affidavit to a number of individuals and organizations with whom Zuber and Szwarc met in connection with the need to obtain financing for the purposes of the planned pipeline project. None of these individuals have been called to give evidence. In my view, their evidence with respect to the ability to obtain financing would have been the best evidence. In the absence of that evidence, I can only infer it would not have supported the inference that the necessary financing would have been available to build the Zuber pipeline.
[14] Kroc provided evidence to the court with respect to the Zuber pipeline. Kroc holds a PhD in electron technology from the Moscow Energy Institute. Amongst other things he worked as the Director and Vice President for BRE Bank, a position that he held until 2003 when he moved into the energy sector with a position of Vice President of Trade and Marketing of PRGiG.
[15] Kroc, in his affidavit filed as his evidence in-chief, states that as the Vice President of PGNiG he met Zuber at the request of Lesny, who was the Undersecretary of State in the Ministry of the Economy in the Polish government.
[16] Kroc, in his affidavit, states that Zuber was sent to him by Lesny in order to discuss his plan to build a pipeline from the Czech Republic to Poland. Kroc states in his affidavit that he assured Zuber that PRNiG would provide the connection to its network, and also expressed support for the beneficial effect that the pipeline would have on Poland’s energy supply.
[17] In his affidavit, Kroc states that Zuber’s pipeline was planned to cost between 50 million to 60 million PLN, which Kroc states was considered to be “viable” at that time. Kroc goes on in his affidavit to state that:
Without a doubt Mr. Zuber’s pipeline would have had no issue obtaining funding. This was the sort of project the banks were hoping to find. In my opinion I would expect that Mr. Zuber’s planned pipeline would have been worth four times its invested capital at minimum, once completed and functioning, if he chose to sell.
[18] Kroc was neither qualified as an expert in pipeline financing, nor was he qualified as an expert with respect to the valuation of a pipeline. For the same reasons expressed with respect to Lesny’s “opinion evidence” in paragraph 10 above, I give little to no weight to Kroc’s opinion evidence with respect to the ability of Zuber to obtain financing, and no weight with respect to Kroc’s evidence with respect to the value of the pipeline if it had been sold by Zuber.
[19] In Kroc’s cross-examination he confirmed that he did meet with Zuber, and when he did Zuber brought records with him that would show Zuber’s need for financial assistance. None of those records were produced to the court. It is particularly significant that the meeting with Kroc would have occurred sometime in 2004, well after 2001 when Zuber had commenced his action arising out of the railway accident. When he retained counsel to commence his action, this court can presume that Zuber either knew or should have known of his obligation to produce all relevant documents as required by the Rules. Zuber’s failure to produce any records in connection with the proposed Zuber pipeline, in my view, weighs heavily against the credibility of this aspect of his claim.
Voir Dire
[20] The plaintiff seeks to have qualified as an expert, Mr. Andrzej Sikora (Sikora), to address the loss of opportunity/loss of profit in connection with the failed Zuber pipeline.
[21] The defence objects to the admissibility of Sikora’s evidence on a number of grounds including bias, necessity and reliability. I embarked on a voir dire with respect to the qualification of Sikora.
[22] There does not appear to be any dispute between the parties with respect to Sikora’s academic qualifications as someone with expertise in the pipeline industry and, as such, qualified to give opinion evidence with respect to the profitability of a pipeline. In 2011 Sikora obtained his PhD in the field of engineering/oil and gas drilling from the University of Krakow in Poland. Since 2007 he has been the president and CEO of a company known as The Energy Studies Institute, where Sikora has been responsible for various projects in the oil and gas sector on behalf of Polish and international companies, as well as for the Polish government.
[23] In Sikora’s evidence in-chief, as part of the voir dire, he was asked whether he had any personal relationship with Zuber prior to the preparation of his expert’s report in April 2015. Sikora confirmed that he had contact with Szwarc, who had been involved with Zuber in connection with the possible idea of constructing the Zuber pipeline. As far as any relationship with Zuber is concerned, Sikora testified that he never did any business together with Zuber and that he did not know Zuber’s business. He confirmed that he did not live far from Zuber and that they each drove the same type of automobile. He also confirmed that there was the possibility he may have sent Christmas greetings to Zuber, as he did to many other people. He testified that he knew Zuber by way of reputation within the Polish business community, and that most recently he had seen Zuber in a hotel lobby but did not say good morning to him.
[24] I took from Sikora’s evidence in-chief that, in essence, he only knew Zuber by way of Zuber’s general reputation in the Polish business community and that he had not had any direct dealings with Zuber either of a business or social nature. He was specifically asked in-chief whether he had talked to Zuber about any business between 2010 and the time of this trial, to which he responded that there were no projects that they did together, nor had they done any business together.
[25] In cross-examination Sikora was shown a letter (the Letter) which purported to be written on the letterhead of The Energy Studies Institute, and was purportedly signed by Sikora. The letter is dated 10/02/2011, and it purports to be written by Sikora to Zuber. Sikora was quite adamant when this document was put to him that it was not a document that he had signed, nor was it a document that his company would have sent. The contents of the letter were reviewed with Sikora in cross-examination and he stated:
For sure this is not my letter. This letter doesn’t have our corporate logo – I never refer to myself as Management Board Director as indicated on the letter.
[26] The letter came from Zuber’s productions. Sikora was asked in cross-examination whether Zuber responded to the letter, to which Sikora indicated in the negative as it should have been in his files. In essence Sikora, when initially confronted with the letter called it a fraud, albeit he did not use that language.
[27] Midway through his cross-examination Sikora was asked to produce his complete file, to the extent that he had any file involving Zuber. When the voir dire resumed on May 19, 2016, further documents were produced. Exhibit 286 is a memo from Bastion ISE. Bastion ISE was apparently a team made up of Bastion and ISE; ISE being Sikora’s company and Bastion being Zuber’s company. While the business relationship reflected in Exhibit 286 may not have come to pass, it is quite apparent from a review of this document and Sikora’s evidence that there was in fact a contemplated business relationship between Sikora and Zuber dating back to 2011. It was contemplated by Sikora that he and Zuber intended doing business in Kazakstan, and while that business relationship may not have come to fruition; even Sikora acknowledged that Exhibit 286 was intended to be relied upon by government officials in Kazakstan. Anyone reading Exhibit 286 would have reasonably concluded that Zuber and Sikora were in business together.
[28] Given the contents of Exhibit 286, it is very hard to reconcile Sikora’s evidence in-chief to the effect that there was no business relationship between him and Zuber. It is also equally hard to reconcile Sikora’s initial position in cross-examination, when confronted with the letter.
Analysis
[29] The initial position advanced by the defence with respect to not qualifying Sikora as an expert was one based on bias. As I indicated to counsel during the course of argument, I was not going to rule out Sikora as an expert on the basis of bias. The Supreme Court of Canada in White Burgess Langille Inman v. Abbott and Haliburton Co, 2015 SCC 23, has set the bar for the disqualification of an expert on the basis of bias relatively low. At para. 49, the Supreme Court stated:
This threshold requirement is not particularly onerous and it will likely be quite rare that a proposed expert’s evidence will be ruled inadmissible for failing to meet it…I emphasize that exclusion at the threshold stage of the analysis should occur only in very clear cases in which the proposed expert is unable or unwilling to provide the court with fair, objective and non-partisan evidence. Anything less than clear unwillingness or inability to do so should not lead to exclusion, but be taken into account in the overall weighing of costs and benefits of receiving the evidence.
[30] The mere fact that Sikora may have had a business relationship with Zuber, albeit one that may not have got off the ground, in and of itself should not disqualify Sikora as an expert witness, taking into account the aforesaid comments of the Supreme Court of Canada. In Burgess, supra.
[31] In R. v. Mohan, [1994] SCR 9, the Supreme Court of Canada set out the well-known two step test for determining whether to qualify and admit the evidence of a proposed expert. The two step test can be paraphrased as follows:
- The proponents of the evidence must establish that the proposed expert evidence meets the four threshold requirements:
a)relevance;
b) necessity in assisting the trier of fact;
c)the absence of any exclusionary rule; and
d) a properly qualified expert; and
- Assuming that the four threshold requirements are met, the trial judge then still retains discretion to exclude the evidence if the prejudicial effect of the expert’s opinion outweighs its probative value.
[32] In my view, for evidence to be relevant it must be reliable. It seems to me that it would be incongruous for the court to conclude from the voir dire evidence of a proposed expert, that it cannot rely on the credibility of the expert and accept that the expert’s evidence would be relevant. In this case, while Sikora may be an eminently qualified expert in the field of pipeline profitability, I cannot conclude that his evidence would be reliable and thus it cannot be relevant. Whether it was intentional or otherwise, Sikora failed to disclose the relationship that he had with Zuber - as reviewed both by the letter and by Exhibit 286, which fundamentally undermines his credibility and reliability.
[33] Moving then to the issue of necessity, I can only conclude that Sikora’s evidence would be necessary and helpful to the court if I also had credible and admissible evidence that Zuber would have been able to build the pipeline. In order to build the pipeline he needed financing.
[34] Various witnesses, whose evidence I have already reviewed, were called on behalf of Zuber to offer what can only be described as opinion evidence with respect to his ability to obtain the necessary financing. As I have already indicated, that opinion evidence was not properly put before the court and I place little to no reliance on it. Zuber chose not to call any of the individuals with whom he had direct meetings in Val Gardena, referred to in Miekus’ affidavit (Exhibit 220). Presumably, those witnesses would have provided the best evidence to this court with respect to the substance of the meetings with Zuber and his ability to obtain financing. Having chosen not to call the evidence of these witnesses, I can only infer that their evidence would not have supported Zuber.
[35] Perhaps most importantly, in exercising my gatekeeper function not to allow the evidence of Sikora, I have taken into account the failure of Zuber to produce any documents that would have been within his possession, power and control during the relative time period 2003 through 2004, when it is said that Zuber was actively proceeding with his idea to construct the Zuber pipeline.
[36] As I have already indicated, Zuber commenced this action in 2001. Zuber had an obligation to produce all relevant documents, which would have included documents that he would have had at that time in connection with the Zuber pipeline. Presumably, in the time period 2003 through 2004 Zuber would have recognized the potential profitability of such a pipeline, and it is inconceivable to me that those documents have not now been produced given his obligations under the Rules to produce such documents. I can only infer from the fact that these documents have not been produced that again they would not have supported Zuber’s claim.
[37] In the absence of any evidence with respect to the ability of Zuber to obtain the necessary financing to construct the Zuber pipeline, it is not necessary for this court to hear the evidence of Sikora. The pipeline may very well have been a profitable venture, but it would only be potentially profitable to an individual, corporation or conglomerate, that had the ability to finance the construction of the pipeline. I have no admissible evidence before me with respect to the possible financing of the pipeline and, as such, the evidence of Sikora simply is not necessary.
Justice M.L. Edwards
Released: June 16, 2016
CORRIGENDA
- Paragraph [25]: “The letter is dated 10/02/2001…” has been changed to “The letter is dated 10/02/2011…”
2016 ONSC 3900
CORRIGENDA: 20160616
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
BONNIE DAVIES
Plaintiff
– and –
THE CORPORATION OF THE MUNICIPALITY OF CLARINGTON, VIA RAIL CANADA INC., CANADIAN NATIONAL RAILWAY COMPANY, TIMOTHY GARNHAM, THE BLM GROUP INC., APACHE TRANSPORTATION SERVICES INC., BLUE CIRCLE CANADA INC., and HYDRO ONE NETWORKS INC.
Defendants
RULING REGARDING ADMISSIBILITY OF PIPELINE EXPERT
Justice M.L. Edwards
Released: June 16, 2016