NEWMARKET COURT FILE NO.: FC-17-54359 and CV-22-3267-00 DATE: 20230925 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

Rae Marie Ierullo Applicant – AND – Vito Ierullo Respondent

Martha McCarthy and Joy Casey, Counsel for the Applicant Jaret Moldaver, Counsel for the Respondent

– AND –

Mulberry Hills Realty Inc. Added Respondent Vito Ierullo Plaintiff Rae Marie Ierullo and Forever Thyme Sanctuary Defendants Aeden Erica MacLean Defendant

Christopher Gibson, Counsel for the Added Respondent in FC-17-54359 and CV-22-3267-00 Sean Zeitz, and Trung Nguyen, Counsel for the Plaintiff Vito Ierullo in CV-22-3267-00 Joy Casey, Counsel for the Defendants Rae Marie Ierullo and Forever Thyme Sanctuary in CV-22-3267-00 Gwendolyn Adrian, Counsel for the Defendant Aeden Erica MacLean in CV-22-3267-00

MID-TRIAL RULING VOIR DIRE ON EXPERT QUALIFICATIONS

JARVIS J.

Introduction

[1] In this combined family law and civil trial the parties dispute the values to be attributed to the business interests of the respondent (“Ierullo”) in the family proceedings at the date of the parties’ marriage (February 17, 1990) and the valuation date (April 1, 2017). Each party has proffered a witness to be qualified as an expert to express an opinion on those values. The applicant (“Adragone”) proposes to call D.J. Myles Martin. Ierullo proposes to call Wayne Rudson. Ierullo disputes the qualifications of Martin. Adragone accepts Mr. Rudson’s qualifications. A mid-trial voir dire was held with respect to Mr. Martin’s qualifications.

[2] The court declines to qualify Mr. Martin as an expert witness. These are the reasons.

The Law

[3] The threshold requirements for expert evidence admissibility are set out in R. v. Mohan (relevance, necessity, absence of an exclusionary Rule and a properly qualified expert). Only the last requirement is disputed in this case. In White Burgess Langille Inman v. Abbott and Haliburton Co., the admissibility test evolved to require a two-step analysis; first, the court must apply the Mohan criteria then, second, the court must exercise a discretionary function, balancing the potential risks and benefits of admitting the evidence. At this second, or “gatekeeping”, stage relevance, necessity, reliability, and absence of bias are helpful factors “in weighing the overall competing considerations in admitting the evidence.” White Burgess at para. 54.

[4] In Aldush v. Alani, a parenting case in which the court needed assistance in the understanding of Sharia law, Smith J. outlined the expectations of a proposed expert and the non-exhaustive factors going to the issue of qualifications (citations omitted).

[24] A properly qualified expert must be able to provide fair, objective and non-partisan assistance to the Court. The expert’s opinion must be impartial, independent, and absent of any bias. In terms of independence, the expert’s opinion must be the product of independent and uninfluenced judgment: White Burgess Langille Inman.

[25] To be found as a properly qualified expert, the Court must be satisfied that the expert has “acquired special or particular knowledge through study or experience in respect of the matters on which he or she undertakes to testify”: R. v. Mohan.

[26] The words “properly qualified” does not only mean “judicially qualified” but also refers to academic and experiential credentials, as well as registration with a governing body regarding the expertise: Children’s Aid Society of Algoma v. F.M.

[27] Factors that can assist the Court in determining if the tendered witness is qualified includes the expert’s formal education, professional qualifications, membership and participation in professional associations, attendance at courses or seminars in the subject matter, experience, teaching and writing in the proposed area, and previous qualification to give opinion evidence: R. v. Pham.

[5] As pointed out in Dulong v. Merrill Lynch Canada Inc. (2006), 80 O.R. (3d) 378, it does not matter how the witness acquired the “special” or “peculiar” knowledge about the matter on which they have undertaken to testify so long as they can demonstrate they have acquired that knowledge. As Ducharme J. noted,

[21] When assessing the qualifications of a proposed expert, trial judges regularly consider factors such as the proposed witness's professional qualifications, her actual experience, her participation or membership in professional associations, the nature and extent of her publications, her involvement in teaching, her involvement in courses or conferences in the field and her efforts to keep current with the literature in the field and whether or not the witness has previously been qualified to testify as an expert in the area.

Discussion

[6] By way of background, Mr. Rudson’s expert reports are dated October 1, 2018. Ms. Adragone retained an expert (Paula White) who had a Chartered Business Valuator accreditation (“CBV”) like Mr. Rudson but she was unable to recall the date of Ms. White’s retainer. Even so, Ms. White made at least one disclosure request of Ierullo in mid-November 2018 before her retainer was terminated for what Adragone described were “personality” issues (Mr. Martin testified that he’d heard that Adragone and Ms. White “did not click or something”). Mr. Martin was retained afterward. He had met Adragone at a social function in 2018 or 2019 and interacted with her in social groupings a handful of times before and after he was retained such as dining at the parties’ matrimonial home and a Christmas party there (“a handful of engagements”). A friend of a friend had recommended him to Adragone who testified that she had intermittently socialized with Mr. Martin about once or twice a year during the same period, but no business was discussed on those occasions.

[7] An engagement letter was signed. Mr. Martin was aware that Adragone had engaged a valuator before him but was unsure whether the disclosure and documents provided to him by Adragone comprised Ms. White’s file and the information she had. He did not reach out to Ms. White. Instead of directing his enquiry through counsel, he emailed Ierullo directly (no response) and the business owner who had sold the company in which Ierullo had been involved before the parties’ marriage. Mr. Martin’s reports are dated October 27, 2021 (value of Ierullo’s business interests on the date of marriage) and November 16, 2021 (valuation date values of Ierullo’s business interests) slightly over three years after the date of the Rudson reports.

[8] Mr. Martin testified that:

(a) He graduated from a university in the United States in 1993 with a non-business related Bachelor of Arts degree after which he began to work for a stock brokerage firm in Toronto. He worked for several organizations in the banking and the brokerage/ finance industry (about five or six years as a U.S. institutional equity analyst). He was an associate portfolio manager. His duties involved research, analysis, evaluation and ultimately decision-making;

(b) In 1998, he obtained a Certified Financial Analyst designation (“CFA”). This involved successfully passing a three-part exam testing the fundamentals of investment tools, valuing assets, portfolio management and wealth planning. About three years later he accepted a sales management position with a leading U.S. investment advisory firm. In 2005 he co-founded a firm specializing in global equity investment servicing institutional investors and high net worth clients. His duties involved advising clients in what companies to invest. He sold his interest in that company in 2010 after which he returned to university in Ontario to pursue a Masters Degree in media studies which, due to health reasons, he never completed;

(c) Mr. Martin acknowledged that he was neither a Chartered Accountant (“CA”) nor a Certified Public Accountant (“CPA”);

(d) In terms of the financial industry in general, Mr. Martin had taken the Canadian Securities Course, the Canadian Options Course and an Investment Funds course;

(e) At some point after Adragone terminated Ms. White’s retainer she retained Mr. Martin to undertake a valuation of Ierullo’s business interests. This was the first time that he had been asked to undertake a valuation for litigation purposes or, specifically, as an expert in business valuation for family law purposes;

(f) Mr. Martin acknowledged as “about right” that his engagement letter (which he was unable to produce when examined) set out that the purpose of his retainer was to help facilitate a resolution to a divorce proceeding, not for litigation purposes;

(g) In 2021 (the year in which he delivered in October and November his reports in this case) he began self-studying for accreditation as a Chartered Business Valuator offered by the CBV Institute. Four courses are prescribed each requiring at least one hundred hours of study. He wrote the qualifying two-part exams in September 2022 and didn’t pass for reasons which he attributed to a neurological condition (ADHD);

(h) Mr. Martin reapplied to the CBV Institute to take the member-qualifying exam (“MQE”) again and rewrote it two days before he testified. The results will be reported in December 2023;

(i) In June or July 2023, he was accredited as a Certified Valuation Analyst (“CVA”) by a U.S. organization based in Salt Lake City, Utah and as a Financial Modelling and Valuation Analyst (“FMVA”), also a U.S. based designation;

(j) Mr. Martin testified that, in his opinion, the CVA designation was comparable to a CBV designation although there were different regulatory and legislative environments. In cross-examination he acknowledged that the CVA designation required a five-day course followed by a five-hour multiple choice exam and a case study estimated to take about 150 hours. As far as licensing was concerned he said that the two designations were similar despite their different learning paths because both involved independent value advice;

(k) In the context of his evidence about comparative accreditations, Mr. Martin was cross-examined about the areas of CBV expertise sanctioned by the CBV Institute. On Business and Asset Valuation involving tax compliance and planning, he acknowledged that this topic was covered in his CVA course but in the U.S. context. On Financial Reporting-Related Valuations, this ‘was mentioned” in the CVA course. On Litigation Support and Disputes, Mr. Martin did not take any course in that area. On Corporate Finance, Deals and Transaction Advisory he couldn’t remember whether that was covered in the CVA course. As for Strategic Advisory services this topic was mentioned in terms of practice management, but it wasn’t a key part of the CVA course. Mr. Martin acknowledged that with respect to all the requirements needed for CBV accreditation the CVA course only touched upon those requirements “lightly or differently”;

(l) Although he has been holding himself out for years as being capable of doing business valuations, he has only done it recently under CBV reporting guidelines (this retainer was the first time) and he hoped to do that soon too pursuant to CVA reporting requirements. He had just launched a website, but it was not fully operational. Most of the work he has been doing has been transactional, advising clients about buying a business or buying into one but this (referring to his engagement in this case) “is different”;

(m) Mr. Martin has never been qualified as an expert in any kind of court proceeding;

(n) He had never taught in the area of business valuations except internally for investment analysts or written any academic paper about business valuation.

[9] There was no evidence that Mr. Martin had been mentored in the area of litigation support in family law business valuations or that he had ever sought out such assistance before or after he accepted his retainer.

A properly qualified expert

[10] In Laderoute v. Heffernan, a family law case involving a valuation of a business, Summers J. declined to qualify as an expert a witness (Kostaras) proffered by the respondent owner Heffernan. During the voir dire, Kostaras testified that that he was a CPA by training with a specialty in corporate finance and business valuations. He was not a CBV but stated that his corporate finance designation qualified him to do business valuations. Echoing in several respects the evidence in this case, the court observed,

[11] Mr. Kostaras acknowledged that none of his past valuation work was done for the purposes of family law. The report he prepared for Mr. Heffernan was his first. He confirmed that he has never been qualified as an expert witness. His prior valuation engagements did not involve litigation.

[12] Mr. Kostaras did not identify any professional affiliations, presentations or articles written by him in the field of business valuations…

[13] In my view, business valuation is a highly specialized area of the accounting profession. It is a pursuit that is often described as being an art as well as a science. Mr. Kostaras does not hold the recognized CBV professional designation and did not testify to any particular experiential learning, mentoring, or guidance that in certain circumstances might be considered as an acceptable substitute for the formal certification.

[11] Exercising her gatekeeping duty Summers J. also commented on the personal relationship between Kostaras and Heffernan.

[19] I also note Mr. Kostaras’ testimony that he has come to consider Mr. Heffernan as a friend – someone he holds in high regard. He subsequently assured the court of his independence and the objectivity he brought to bear in the preparation of his report, however, at this gatekeeping stage of the admissibility test, I would be remiss to disregard their current relationship entirely…

[12] In Denman v. Radovanovic, Ferguson J. declined to qualify a proposed expert witness because, among other concerns, the witness had an ongoing personal relationship with the party who tendered his evidence and had failed to disclose that friendship in any of his reports. In this case, Mr. Martin never disclosed or otherwise commented upon his friendship with Adragone either in his Acknowledgement of Expert’s Duty or anywhere in his reports. [8]

[13] Ms. Casey urged the court to follow O’Neill v. O’Neill, a 2007 case in which one of the issues involved valuation of the husband’s business interest. Harvison Young J. (as she then was) had qualified as an expert the wife’s witness (Melanie Russell) who was an accredited CBV and the husband’s witness (Johanne Blake) who held a CA designation. The weight attributed to the latter’s evidence was discounted in preference to the former ‘s evidence even though Ms. Blake (who had been tutored by Ms. Russell for her third, but ultimately unsuccessful, attempt at writing the MQE) had completed thirty-eight kinds of valuations in support of litigation for shareholders’ disputes, personal injury matters and family law disputes (eight valuations involving business shares of a spouse) and she had been qualified as an expert witness in one family law trial involving a business valuation.

[14] In my view, O’Neill is of no assistance to Adragone because:

(a) The case was decided before White Burgess which addressed the now disfavoured path of least resistance analysis that would rule the evidence admissible subject only to the weight to be afforded such evidence; White Burgess at para. 45 quoting Binnie J. in J. v. L.J., 2000 SCC 15;

(b) Ms. Blake had prepared over three dozen litigation support valuations, including in family law litigation: Mr. Martin has prepared none before his retainer in this case;

(c) There is no evidence that Mr. Martin has had (to quote Summers J. in Laderoute) “any particular experiential learning, mentoring, or guidance that in certain circumstances might be considered an acceptable substitute for the formal certification;”

(d) Like the husband and Mr. Kostaras in Laderoute, and Drs. Redekop and Ter Brugge in Denman, Adragone and Mr. Martin have a social relationship, a fact that cannot be totally disregarded and one which, in this court’s opinion, should have been disclosed by Adragone and Mr. Martin when he delivered his reports. This omission calls into question Mr. Martin’s Form 20.2 Acknowledgement of an opinion that is fair, objective and non-partisan.

[15] Ms. Casey also argued that while this was the first time that Mr. Martin had been called upon to prepare a valuation using CBV institute standards that should not disqualify him as an expert, a proposition with which this court agrees. Obviously, not every family law case in which a spouse has a business interest requires expert valuation assistance. And not every business valuation requires the assistance of a CBV. But where there are marked differences in such areas as experiential learning, mentoring and guidance, and, for example, litigation support the court must have confidence that the witness proposed has acquired what Sopinka J. in Mohan described as “special or peculiar knowledge through study and experience in respect of the matters on which he or she undertakes to testify”. R. v. Mohan, at para. 31. A party choosing to retain a lesser accredited witness as an expert risks that witness not being qualified to testify.

[16] While Ms. Casey urges the court to qualify Mr. Martin and then assess the weight to be given to his evidence compared to that of Mr. Rudson that is really asking the court to ignore White Burgess. Bottom-line, Adragone proposes to have qualified as an expert an unsuccessful CBV candidate with no litigation support experience and who possess virtually none of the qualifications (i.e., CA, CPA) or experience commonly expected of a business valuation expert and with whom she has had a four to five year social relationship. A court must have confidence in a proposed expert’s qualifications and objectivity. This court does not have that confidence in Mr. Martin. He is not qualified to provide expert opinion evidence about the value of Ierullo’s business interests.

[17] Even should this court’s disqualification of Mr. Martin be in error, he would be disqualified in the exercise of this court’s gatekeeping discretion. At this stage, the court must balance the potential risks and benefits of admitting the evidence in order to decide whether the potential benefits justify the risks. Ms. Casey submitted that saving trial time should never be a consideration, again a proposition with which this court agrees. But allowing a questionably qualified witness to testify as an expert only to reject that testimony is a slippery slope and one that must lead, like in Palmer v. Palmer, a case upon which Ierullo relies, to the court having to pick and choose between the experts’ different experiential and learning paths, applied concepts and opinions in order to jerry-rig a valuation, a task in which this court will not engage. While the court wishes Mr. Martin every success in his studies and career, business valuation, as observed by Summers J. in Laderoute, is “a highly specialized area of the accounting profession” and a trial is not an audition.

The Honourable Justice D.A. Jarvis

Date: September 25, 2023