COURT FILE NO.: CV-12-458715 DATE: 20250227 SUPERIOR COURT OF JUSTICE - ONTARIO RE: 1815212 ONTARIO INC. BEDROS (PETER) AVEDIAN, CLAUDIO PETTI and MARIO D'ORAZIO, Plaintiffs AND: ENBRIDGE GAS DISTRIBUTION INC. operating as ENBRIDGE GAS DISTRIBUTION, ENBRIDGE SOLUTIONS INC. operating as ENBRIDGE ENERGY SOLUTIONS, ENBRIDGE INC ., and LAKESIDE PERFORMANCE GAS SERVICES LTD. operating as LAKESIDE GAS SERVICES, Defendants AND: ALPHA DELTA HEATING CONTRACTOR INC. and AUBREY LEONARD DEY, Third Parties AND: TOB HEATING and AIR CONDITIONING, BRENTOL BISHOP a.k.a. BRENT BISHOP, ENBRIDGE SOLUTIONS INC. operating as ENBRIDGE ENERGY SOLUTIONS and ENBRIDGE INC., Fourth Parties BEFORE: Schabas J. COUNSEL: Christine G. Carter for the Plaintiffs James G. Norton for the Defendants C. Kirk Boggs and Michael Dunk for the Third Parties Christopher I.R. Morrison and Margaret Klassen for the Fourth Parties HEARD: February 19 and 20, 2025 Ruling on expert evidence Overview [ 1 ] This is a trial dealing with damages, in particular, whether the plaintiff 1815212 Ontario Inc. (“1815”) suffered economic losses following an explosion and fire at an apartment building it owned at 399 Markham Road in Toronto, which occurred on September 14, 2010. The building suffered some physical damage. 1815’s insurer, Intact, paid for repairs. [ 2 ] The plaintiffs, which include the three individuals who were shareholders of 1815 from 2010 to 2015, seek consequential economic losses arising from, among other things, claims that the building experienced higher vacancy rates following the incident, there was an inability to increase rents, the plaintiffs were unable to proceed with a plan to create several additional apartments in unused or underused spaces on the ground floor and basement thereby losing additional rent, lost opportunities to charge for parking, laundry and storage fees, and a diminution in value of the building. [ 3 ] For the first several days of the trial I heard from the principal fact witness for the plaintiffs, Mr. Bedros Avedian, who, through a numbered company, was one of the three owners of 1815 and who, through another company owned by him, Orion Group Properties Ltd. (“Orion”), managed the building. Orion manages and owns apartment and commercial buildings. Mr. Avedian gave detailed evidence about, among other things, the acquisition of the building and what happened in the building after the explosion. This included evidence about vacancies, rental income, potential rent increases, financing and other issues such as modernization of the elevators. He also testified about the plan to create 17 additional units, which did not go ahead. [ 4 ] The third witness called by the plaintiffs was Mr. Ivor Gottschalk, whom the plaintiffs sought to have qualified as an expert in forensic accounting with expertise in the quantification of damages and in particular the quantification of revenue losses. He prepared a report calculating lost rent revenues which the plaintiffs wished to have entered as expert opinion evidence. [ 5 ] The defendants [1] did not dispute Mr. Gottschalk’s expertise. This was not surprising as Mr. Gottschalk is a Chartered Professional Accountant with over 35 years of experience as an investigative and forensic accountant who has been qualified as an expert witness many times in this Court and elsewhere on forensic issues and quantification of losses. His evidence has been well-received by judges in other cases: see, e.g., Moses v. Metzer , 2016 ONSC 1765 at para. 87 . Further, and of relevance to this case, Mr. Gottschalk has been active and well-recognized in his profession, including serving as the Chair of the Standards Committee of the Chartered Professional Accountant Canada’s Alliance for Excellence in Investigative and Forensic Accounting. [ 6 ] However, the defendants submitted that Mr Gottschalk’s report and his evidence relating to it should not be admitted. They argued that the methodology followed by Mr. Gottschalk, and his report, are fundamentally flawed and do not meet the requirements necessary to admit opinion evidence. [ 7 ] By agreement, I heard all of Mr. Gottschalk’s evidence in a voir dire . Mr. Gottschalk reviewed his methodology and the conclusions in his report, and was cross-examined at length. Following submissions, I gave a very brief ruling orally, holding that Mr. Gottschalk’s evidence was not admissible, with reasons to follow. These are my reasons. The principles [ 8 ] Opinion evidence is presumptively inadmissible. Exceptionally, it is admitted when the criteria set out in Supreme Court of Canada decisions in R. v. Mohan, 1994 80 (SCC) , [1994] 2 S.C.R. 9, and White Burgess Langille Inman v. Abbott and Haliburton Co. , 2015 SCC 23 , [2015] 2 S.C.R. 182, are met. [ 9 ] As a starting point, one must be alive to the risk that expert opinion evidence can distort the fact-finding process. Trials are decided by triers of fact based on the facts as they find them and must not “devolve to trial by expert”: White Burgess at para. 18. Expert evidence must be carefully limited to situations where specialized knowledge or skill is required to assist the trier of fact. [ 10 ] As the Supreme Court stated in White Burgess , there are two steps to deciding whether to admit expert opinion evidence. First, “the proponent of the evidence must establish the threshold requirements of admissibility.” This requires meeting the four factors in Mohan : (1) relevance; (2) necessity in assisting the trier of fact; (3) absence of an exclusionary rule; and (4) a properly qualified expert. If the evidence does not meet these criteria, it must be excluded. [ 11 ] Mohan also underlined the important role of trial judges in assessing whether otherwise admissible expert evidence should be excluded because its probative value is overborne by its prejudicial effect — a residual discretion to exclude evidence based on a cost-benefit analysis. This has become known as the second, “gatekeeping” step, in which the trial judge must exercise discretion by balancing “the potential risks and benefits of admitting the evidence in order to decide whether the potential benefits justify the risks.” The Supreme Court quoted Doherty J.A. in R. v. Abbey , 2009 ONCA 624 , 97 O.R. (3d) 330, who stated that at this stage 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.” [ 12 ] It must also be borne in mind that the burden is on the party seeking to adduce the evidence to satisfy the court on a balance of probabilities that the evidence should be admitted. [ 13 ] White Burgess also addressed the duty an expert witness owes to the Court to be independent and unbiased. This includes ensuring that expert evidence is “the independent product of the expert uninfluenced as to form or content by the exigencies of litigation”: para. 27, quoting from National Justice Compania Naviera S.A. v. Prudential Assurance Co. , [1993] 2 Lloyd’s Rep. 68 (Q.B.) at p. 81 . [ 14 ] The Supreme Court elaborated on this duty in para. 32 of White Burgess : Underlying the various formulations of the duty are three related concepts: impartiality, independence and absence of bias. The expert’s opinion must be impartial in the sense that it reflects an objective assessment of the questions at hand. It must be independent in the sense that it is the product of the expert’s independent judgment, uninfluenced by who has retained him or her or the outcome of the litigation. It must be unbiased in the sense that it does not unfairly favour one party’s position over another. The acid test is whether the expert’s opinion would not change regardless of which party retained him or her: P. Michell and R. Mandhane, “The Uncertain Duty of the Expert Witness” (2005), 42 Alta. L. Rev. 635, at pp. 638-39. These concepts, of course, must be applied to the realities of adversary litigation. Experts are generally retained, instructed and paid by one of the adversaries. These facts alone do not undermine the expert’s independence, impartiality and freedom from bias. [ 15 ] The Court went on to find that compliance with this duty should be addressed at the admissibility stage, and not simply “go to weight” at the end of the trial. As Binnie J. stated in R. v. J.-L.J, 2000 SCC 51 , [2000] 2 S.C.R. 600 at para. 28 , quoted at para 45 of White Burgess : “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.” [ 16 ] The Court must be satisfied, therefore, that an expert has met the test of independence and impartiality, failing which the expert’s evidence is inadmissible. Further, even if the test is met, “remaining concerns about the expert’s compliance with his or her duty should be considered as part of the overall cost-benefit analysis which the judge conducts to carry out his or her gatekeeping role”: White Burgess , para. 34. [ 17 ] This requirement of independence and impartiality is found in the Rules of Civil Procedure. Rule 53 requires experts to certify that they are aware of and will comply with their duty to the court. In this case, Mr. Gottschalk has signed the required Form 53 in which he has acknowledged that it is his duty: a) To provide opinion evidence that is fair, objective and non-partisan; b) To provide opinion evidence that is related only to matter that are within my area of expertise; and c) To provide such additional assistance as the court may reasonably require, to determine a matter in issue. [ 18 ] Mr. Gottschalk has also acknowledged that this duty “prevails over any obligation which I may owe to any party by whom or on whose behalf I am engaged.” Application of the principles [ 19 ] The plaintiffs have not satisfied me that the evidence of Mr. Gottschalk should be admitted as expert opinion evidence. The evidence is not necessary [ 20 ] The evidence fails the necessity requirement, which is at the heart of why opinion evidence is, exceptionally, admitted: when an issue calls for special knowledge or skill that the judge or jury lacks. As the Supreme Court observed in White Burgess at para. 14, quoting C. Tapper, Cross and Tapper on Evidence (12th ed. 2010), at p.530, “the law recognizes that, so far as matters calling for special knowledge or skill are concerned, judges and jurors are not necessarily equipped to draw true inferences from facts stated by witnesses. A witness is therefore allowed to state his opinion about such matters, provided he is expert in them.” [ 21 ] Here, Mr. Gottschalk’s evidence is not necessary. While “forensic accountants” are commonly employed to assess data to calculate losses, there is often little, if any, specialized knowledge or independent professional judgment applied. Rather, as in this case, Mr Gottschalk, and his colleague who did much of the work, simply reviewed data and applied figures provided to them by the plaintiffs to come up with a calculation of total losses. [ 22 ] Mr. Gottschalk and his colleague reviewed rent rolls for the period of time requested by the plaintiffs, from September 2010, when the explosion occurred, to July 2015 when the individual plaintiffs sold their interest in 1815 and the building. From those rent rolls – versions of which were entered as evidence by Mr. Avedian – Mr. Gottschalk found that there was no change in occupancy for 89 of the apartments during the period, and that 159 apartments on the rent rolls saw changes in tenants. The rent rolls also provided information about the amount of rent paid by the tenants during the five-year period, which was added up by Mr. Gottschalk, or his colleague. [ 23 ] The information in the rent rolls is factual evidence found in the record in this trial. Extracting information such as how many tenants moved out or the total amount of rent received requires no special expertise. Mr. Avedian and his staff at Orion extracted this type of information from earlier rent rolls when considering whether to buy the building. [ 24 ] Mr. Gottschalk then applied a number of assumptions, or adjustments, as requested by the plaintiffs, which would have increased the rent paid in the two categories of apartments, and calculated the difference in rent revenue as part of the loss to the plaintiffs. [ 25 ] The first assumption Mr. Gottschalk made to reach a loss calculation was to apply the “guideline rent increases” which are set by Ontario but which were not imposed on tenants during the five-year period. These rates are readily available. Mr. Gottschalk obtained them from the internet. He simply calculated the increased revenue that would have been obtained had the rents been increased in accordance with the provincial guidelines. [ 26 ] Second, an Order had been obtained from the Landlord Tenant Board (“LTB”) in 2010 permitting specific increases due to capital improvements in the building. The LTB Order was entered as an exhibit through Mr. Avedian. The increases were not imposed, and so Mr. Gottschalk calculated the additional rent that could have been obtained if they had been applied to include as part of the losses. [ 27 ] Third, in May 2010, due to a reduction in the amount of property taxes charged by the City of Toronto, the building's tenants became eligible for a twelve-month rent reduction of 1.23%, which was then amended for certain tenants to 0.74%. Mr. Gottschalk obtained this information from the LTB Order. Those percentages have been applied by Mr. Gottschalk to the rental calculations of what could have been obtained. [ 28 ] Fourth, Mr. Gottschalk was asked by the plaintiffs to assume that as a result of a planned elevator modernization, the base rent for all tenants would have been subject to an annual increase of 1.13%, beginning with each tenant's first annual renewal on or after August 1, 2012. The evidentiary basis for this figure came from a report prepared by another witness, who applied provisions of the Residential Tenancies Act, 2006 , SO 2006, c 17, and Ontario Regulation 516/06 , to calculate the amount of increase above the guidelines which might have been approved by the LTB due to the modernization of the elevators. Mr. Gottschalk was provided with this figure and simply applied it to his calculation of the rent that could have been obtained for the apartments. [ 29 ] Mr. Gottschalk also calculated possible lost revenues for 17 additional units that the plaintiffs claim would have been built and ready for occupancy on January 1, 2012, based on “market rents” provided to him by Mr. Avedian and as instructed by the plaintiffs’ counsel. Mr. Gottschalk then applied the 1.13% increases reflecting the elevator modernization. As Mr. Gottschalk was told to assume these new units would have been available January 1, 2012, he also applied the guideline rate increases to these units starting on January 1, 2013. [ 30 ] After making these calculations, Mr. Gottschalk compared the projected rents based on his adjustments to the actual rents paid to come up with a “calculation” of lost revenues. [ 31 ] This is, essentially, all Mr. Gottschalk did. He took figures provided to him and made mathematical calculations to come up with a projected figures that could be compared to the revenue actually obtained, and stated his conclusion that the difference was the loss suffered by the plaintiffs. [ 32 ] In my view this is not expert evidence. It involved simple math. While there was considerable data to review on the rent rolls, and several calculations had to be made, it required no special skill. Counsel, or a witness such as Mr. Avedian, could look at the rent rolls to determine which tenants left and which units turned over, and calculate the rent actually obtained. Calculation of the losses simply involved using the numbers provided to Mr Gottschalk or obtained from public sources, to adjust the rent income accordingly. [ 33 ] Mr. Gottschalk’s calculations are helpful, in that he has made the mathematical calculations, but the fact that evidence may be helpful does not mean that it is necessary. As Cromwell J. stated in White Burgess at para. 21, quoting from R. v. D.D. , 2000 SCC 43 , [2000] 2 S.C.R. 275 at para.. 46: “the necessity requirement exists ‘to ensure that the dangers associated with expert evidence are not lightly tolerated’ and that ‘[m]ere relevance or ‘helpfulness’ is not enough’.” [emphasis added] [ 34 ] To meet the necessity test, an expert must engage in skilled analysis to reach conclusions that involve applying expertise that a trier of fact lacks. As stated in Piccolo v. Piccolo, c.o.b. Sam’s Auto Body Shop , 2014 ONSC 5280 , at paras. 13 – 15 , the necessity requirement is not met unless the expert performs his own “skilled analysis” uninfluenced by the expert’s client or clients. Where it is simply a series of mathematical calculations based on a client’s instructions, the necessity test is not met. Despite being dressed up as opinion evidence, it is not really expert opinion evidence at all. [ 35 ] The Saskatchewan Court of Appeal addressed this issue in Graff v. Bennett , 1995 4000 (SK CA) , in which the Court noted that “the ‘expert’ services of a ‘chartered accountant’ or ‘forensic’ accountant were not required to make the calculations that were placed before the jury.” As Tallis J.A. continued, “the calculations involved relatively simple mathematics” that could be “easily prepared”, even by computer programs. [ 36 ] Similar circumstances exist here. Mr. Gottschalk’s evidence is not necessary as it is simply arithmetic calculations The calculations require no special expertise and could be completed by counsel or lay witnesses. Accordingly, on this basis the evidence is inadmissible. Lack of independence and impartiality [ 37 ] I also conclude that the evidence does not meet the test for independence and impartiality, as Mr. Gottschalk did not challenge or question any of the assumptions he was asked to apply. He simply did what he was instructed to do. This is particularly concerning when Mr. Gottschalk, based on his knowledge and experience, ought to have questioned the assumptions to comply with his professional obligations and his duty to the Court. [ 38 ] Mr. Gottschalk agreed that, as a forensic account and as an expert witness, he is governed by the CPA’s Standard Practices for Investigative and Forensic Accounting Engagements , published in 2006. Mr. Gottschalk is very familiar with these Standards as he chaired the committee that created them. [ 39 ] The Standards contain specific requirements for expert witnesses, similar to the Court’s requirements, which include the duty to be independent and unbiased, to be clear when something is outside their expertise, and to “never assume the role of an advocate.” The Standard s also call on accountants to adopt an “investigative mindset” which, the Standards state: …requires a sceptical attitude in the identification, pursuit, analysis and evaluation of information relevant to each engagement, contemplating that it may be biased, false and/or incomplete. This is applicable in identifying and assessing relevant issues, assessing the plausibility of the underlying assumptions, assessing substance over form, and developing hypotheses for the purpose of addressing the issues under investigation. [ 40 ] Mr. Gottschalk agreed that this investigative mindset must also be applied in cases of loss quantification and dispute engagements, such as in this case. In my view, adopting an investigative mindset is consistent with the independence required of an expert in fulfilling their duty to the Court to provide “fair, objective and non-partisan” opinion evidence. [ 41 ] Unfortunately, in not challenging any assumptions, Mr. Gottschalk did not adopt an investigative mindset. Instead, when confronted with his failure to do so, Mr. Gottschalk responded by saying that as long as he states the assumptions in his report he has met the Standards . I cannot accept that answer. It is inconsistent with the plain wording of the Standards and with Mr. Gottschalk’s position that the Standards apply. Assumptions must of course be clearly stated, but they must also be assessed and scrutinized by the expert to determine whether their application makes sense, regardless of which side has retained the expert. [ 42 ] The failure to assess the assumptions means that the report is not the independent product prepared by Mr. Gottschalk applying his specialized expertise and judgment. It is simply a platform to illustrate the plaintiffs’ case or, put another way, is advocacy. As O’Connor A.C.J.O. stated in Alfano v. Piersanti , 2012 ONCA 297 at para. 108 : …experts should not become advocates for the party or the positions of the party by whom they have been retained. It is not helpful to a court to have an expert simply parrot the position of the retaining client. Courts require more. The critical distinction is that the expert opinion should always be the result of the expert’s independent analysis and conclusion. While the opinion may support the client’s position, it should not be influenced as to form or content by the exigencies of the litigation or by pressure from the client. An expert’s report or evidence should not be a platform from which to argue the client’s case. As the trial judge in this case pointed out, “the fundamental principle in cases involving qualifications of experts is that the expert, although retained by the clients, assists the court.” [Emphasis added] [ 43 ] One example in the evidence which illustrates the bias which can result from the lack of independent analysis and an investigative mindset relates to the “market rents” used by Mr. Gottschalk. [ 44 ] As has been noted, Mr. Gottschalk was provided by Mr. Avedian with what were represented to be market rents for the apartments in 2013. Mr. Gottschalk simply accepted those figures and referred to them as “market rents” in his report, albeit noting that they were provided by Mr Avedian. However, despite having done valuations of this kind in the past and knowing that real estate appraisers can provide analyses and expert opinions on market rents, Mr. Gottschalk did not question these numbers at all. He did not inquire about where or how Mr. Avedian came up with his “market rents” or ask if the plaintiffs had obtained any expert opinion on market rents. [ 45 ] When pressed on this, Mr. Gottschalk, somewhat remarkably, defended his lack of investigation by saying that he found Mr. Avedian’s rent figures “plausible” based on his experience as a “lay person” who pays rent. He then said that “forensic accountants do this all the time”, relying on assumptions from other people, and asserted again that this is fine as long as one clearly states the assumptions. But stating assumptions, while important, does not make a report independent and unbiased, or “fair, objective and non-partisan.” Nor, of course, does stating assumptions make a report the product of independent analysis or an investigative mindset. [ 46 ] This does not mean that every assumption made in an expert report must be explored and tested; there may be assumptions that are rooted in common sense or are obvious in the circumstances of the case. Mr. Gottschalk was not challenged, for example, on his use of guideline rate figures, or the above guideline figures permitted by the LTB Order of 2010. [ 47 ] The failure to question or otherwise adopt an investigative mindset to the “market rents” supplied by Mr. Avedian, and the continued use of those rates in Mr Gottschalk’s report is also concerning as other evidence of market rents for the apartments existed at the time the report was prepared. When Mr. Avedian testified, he was confronted with an email he had written to a lender in May 2013 which set out his view of the rental rates he believed he could obtain for the apartments he proposed to construct, and for which he would need financing. Those suggested rents are lower than the figures Mr. Avedian provided to Mr. Gottschalk several years later for use in this litigation. Mr Gottschalk was not aware of Mr. Avedian’s email until it was shown to him in cross-examination. [ 48 ] Further, after Mr. Gottschalk prepared his report in 2018, the plaintiffs obtained a report from a real estate appraisal expert in 2019 whose opinion was that the rental rates provided by Mr. Avedian were above market, preferring the lower, actual rates charged to the 89 units that did not have tenancy changes as being “in line with market rental rates.” Mr. Gottschalk learned about this in cross-examination, despite the fact that the appraisal report was prepared for this lawsuit several years ago. [ 49 ] The fact that other information about market rates existed illustrates the importance of adopting an investigative mindset and highlights the mischief that can result from a report that simply parrots assumptions and lacks independence. As Mr. Gottschalk stated when confronted with these different rent rates, had he been informed of them he would have investigated and sought an explanation. Mr. Gottschalk agreed that this raised a concern that he was being used as an advocate for the plaintiffs. He agreed that he has an obligation to remain objective and not be a dupe for his client. [ 50 ] Of course, it is ultimately for me at the conclusion of this trial to decide the revenue losses, if any, suffered by the plaintiffs. However, an expert report that addressed the reasonableness of market rates and where they derived, rather than uncritically adopting figures provided by the plaintiffs would have been in accordance with the expert’s professional obligations and his duty to the Court. The current report meets neither standard. [ 51 ] There are other examples of the lack of questioning of assumptions by Mr. Gottschalk which can also illustrate why the conclusions lack independence and reliability. However, a discussion of them is not necessary for this interlocutory ruling during the trial and I will go no further. [ 52 ] I do observe that Mr. Gottschalk exercised some independent judgment in a few ways in making his calculations, such as how he chose to treat extended vacancies and his treatment of market rates provided as “averages.” However these assumptions did not involve the application of any special knowledge or expertise and did not appear to be grounded in the evidence. This raises additional concerns about the scope and appropriateness of the proposed expert evidence. [ 53 ] In short, Mr. Gottschalk simply took the plaintiffs’ information and manufactured a report to reflect the plaintiffs’ position. He did not provide an independent and objective opinion of the plaintiffs’ losses which was the product of his independent judgment “ uninfluenced by who has retained him … or the outcome of the litigation”: White Burgess , para. 32. This is a threshold requirement, and I would exclude the evidence on this basis as well. The gatekeeping step Even if the threshold requirements of necessity, independence and objectivity were met, I would also exclude the proposed evidence exercising my gatekeeping function. Applying a cost-benefit analysis, the mere helpfulness of having Mr. Gottschalk’s calculations is of little benefit and is outweighed by the lengthening of the trial process which would flow from its admission as expert evidence. Further, White Burgess instructs that my “remaining concerns about the expert’s compliance with his or her duty should be considered as part of the overall cost-benefit analysis.” In my view, in the circumstances of this case, these concerns also favour exclusion of the evidence. Conclusion [ 54 ] In conclusion, Mr. Gottschalk’s evidence is not admissible as expert opinion evidence. Schabas J. Date: February 27, 2025 [1] For convenience, and because they are aligned in interest at this trial, I refer to the Defendants and the Third and Fourth Parties collectively as the “defendants.”
minicounsel