Expert Evidence and Testimony

By David Debenham

“If only you could see what I have seen with your eyes” (Blade Runner, 1982)

The role of the optometrist is to prescribe spectacles or contact lenses.  It is to assist the patient in seeing the world more clearly.  So too, expert witnesses should bring their skillset to bear to help a judge to better evaluate the evidence they are seeing.  Too often experts behave like the over-anxious, over-achieving student who shouts out the answer to the class rather than simply explains the steps to be taken by the class to get to the right answer. The expert’s role is to educate the judge by using technical expertise that the court is not privy to, not to supersede the judge or jury as decision maker. 

In Logix Data Products v. The Queen[1] the taxpayer claimed a Scientific Research and Experimental Development tax credit (a “SRED”) in relation to a solar panel it developed to replace shingles on a roof. CRA alleged that the panel did not advance the science by conducting scientific research, and therefore did not qualify for the credit.  The court disallowed the expert’s report on several grounds: (1) it purported to give an opinion on the ultimate issue before the court, being, whether the work done by the taxpayer constituted scientific research for the purposes of the Income Tax Act, rather than merely assisting the court in making that determination, (2) the expert report contains several opinions without setting out the facts and assumptions upon which those opinions are based, (3) the report does not set out the professional literature that supports the basis of his opinion, and was reviewed prior to giving his opinion(4) the report voices the opinion that the taxpayer’s claim meets the requirements of SRED was not an independent evaluation but was one sided advocacy, (5) giving an opinion of the proper interpretation of domestic law is inadmissible, as this is the purview of the judge.  The court noted:

“ An expert opinion may assist the court in evaluating technical evidence…. But, at the end of the day, the expert’s role is limited to providing the court with a set of prescription glasses through which the technical information may be viewed before being analyzed and weighed by the trial judge. Undoubtedly, each opposing expert witness will attempt to ensure that its focal specifications are adopted by the court. However, it is the prerogative of the trial judge to prefer one prescription over another.[2] 

[1] [2021] TCC 36

[2] Citing RIS-Christie Ltd. v. The Queen 1998 CanLII 8876 (FCA), [1998] F.C.J. No 1890, [1999] 1 CTC 132 (FCA) [RIS-Christie], at para. 12.

Filters, Folklore, Fake News, and Faulty Investigations

By David Debenham

I am myopic and color blind.  My father was hard of hearing.  We all have our perceptional strengths and weaknesses.  Less obvious is our beliefs about people, and the world in which we operate, form a filter through which we perceive the world as we experience it.  Known pejoratively as a “reality distortion field” in which the objective world is filtered through our view of the way the world operates to form the world we experience. Typically, a person’s Weltanschauung would include a person’s philosophic, moral, and religious conclusions about the individual, society, and existence (however tentative) at a particular time in their life used to filtering their life experiences. It is the personal barometer that determines “real” and “fake” news at an individual level.  It determines what is “dependable” data, and how that data is organized into “information”. Another popular word is “paradigm”.  Aa paradigm is a set of assumptions governing how we interact and interpret the world. Every human has a personal paradigm which is influenced by outside forces acting on them and their own experiences and internal beliefs in support of the paradigm. Cognitive dissonance is when one’s experience conflicts with our belief system, causing us to either (i) reject the experience as false data, (ii) or amend our belief system to account for the phenomenon. Usually rejecting the experience as false data is the easier path, and thus the one most taken. However, when the experiences that are inconsistent with the paradigm pile up to the point that they can no longer be ignored, the individual is forced to undergo a “paradigm shift’ in which they are forced to amend their old worldview to account for these experiences. The individual often says that the “scales impeding their vision of reality fell from their eyes” and they could see the world truly for what it was for the first time.

As an investigator, we have to be wary of the witnesses’ worldviews and our own.  Witnesses who are deceived by fraudsters are often lured into a distorted worldview, but one in which they believe they see the world for what it truly is for the first time.  Eventually the fraudster’s worldview must give way when the number of intensity of experiences convinces the mark that it can no longer be true, and the mark realizes that they have “gone down the rabbit hole” to share a false reality with the fraudster.  Thus, a fraud victim often two paradigm changes, the first being the worldview of the fraudster and their “black box” of miracles in which they cannot lose, and the second when they have so uncontrovertibly lost, that they now see the fraud for what it was. Thus, a fraud victim’s account of what is happening, or what has happened, varies radically depending on which paradigm they believe in and the time of your interview. 

For investigators, the danger is in forming a worldview that leads us to conclude what type of person is most likely to have committed this offence, and then filtering the evidence based on this view.  As they say in “Casablanca”, we “round up the usual suspects”. For fraud cases this is extremely dangerous because the fraudster’s ability to be liked, trusted, respected is their stock and trade, as it makes them the least likely to be suspected by victim and investigator alike. Just as fraudsters prey upon people of their own sociological group because trust is presumptively the default (“affinity fraud”), so too fraudsters attempt to prey on our similar interests (sports, cars, etc) in an effort to win our trust. We have to ask ourselves, (1) am I focusing on a suspect because I dislike them and therefore don’t trust them? (2) am I minimizing the involvement of a potential suspect because they don’t seem the type? (3) if I gave all the evidence to another investigator with a background different from my own, would they weigh it in the same way as I have?

Let us take some examples from history.

I don’t believe the traditional account of the Battle of Gettyburg during the Civil War.  The traditional view is (1) Robert E. Lee was a brilliant battlefield tactician at the height of his powers during the Civil War, (2) during the third day of the Battle of Gettysburg he simply ordered the main line of his infantry to charge the cannons in what has been known as Pickett’s Charge, where they were mowed down, losing the battle and ultimately the war.  Now how do historians deal with this dissonance?  The traditional views are (1) hubris, Lee believed and his Army was invincible after a string of victories or (2) ill health, a heart attack earlier in the campaign had affected his judgment. These seem like poor attempts at reconciling the folklore of the battle, as a heart attack does not affect one’s faculties after one has recovered, and I doubt that a general on the most important day of his life abandoned his skills as a tactician.

What do I believe? At the Battle of Brandy Station shortly before Gettyburg Stuart’s cavalry engaged the Union cavalry in a fierce battle that resulted in a draw.  That battle revealed the increasing competence of the Union cavalry to the point that they were a match for Stuart’s Invincibles.   That, however, was unknown to Lee when Stuart rejoined Lee on the second day of the Battle of Gettyberg.   I believe Lee instructed Stuart to ride his cavalry around the union line and attack it from the rear, on the road between the Union troops and their retreat route to Washington. When they reached that point, Stuart would fire 4 cannon shots and charge the union position, with Pickett’s forces then charging the main line, and Longstreet from the other side of the Union line. The three pointed pincer attack would see the Union forces surrounded, leaving them no choice but to surrender. Unfortunately for Lee, Longstreet refused to attack and Stuart was repelled by Union General Custer after he had fired the 4 cannon shots, leaving only Pickett’s Charge proceeding as planned. 

What is interesting is not whether I am right or wrong, but the ire and fury visited upon me by my university Professors for attacking the “settled” fork lore of the battle.  Rather than entertaining a new theory that would keep the “settled” view of Lee intact, and explaining why Pickett’s Charge proceeded as it did, the new theory challenged the deeply ensconced views of the Professors at the hands of an “amateur” like myself, and was not be entertained no matter how much “proof” I provided. 

So too, my explanation of the Battle of Stalingrad during World War 2.  I explained it as the tactical equivalent of General Grant’s siege of Vicksberg to cut off Mississippi River, with the Volga River being used by the Soviets in the same manner as the Confederates.   I explained the difference in result being solely to a Gernan intelligence failure that had allowed the Soviet Union to ship the bulk of its forces in Siberia to the Volga undetected at the same time as it was shipping the bulk of its manufacturing plants in the opposite direction.  The result was to double the Soviet forces opposite Stalingrad, and then encircle Stalingrad before the Germans could believe what was happening.   To go from the cusp of ultimate victory to Germany’s largest defeat in history was too much to fathom.   So too, for Professors to believe that Stalingrad was anything other than a military, rather than intelligence failure, and my explanation was once again rebuked.  While university purports to be the place to explore new ideas, my experience was the opposite.   So too may be the case when you are doing an investigation that is led by seasoned professionals with deeply ensconced beliefs. 

All of this may tempt you into believing that there is a great more individual or social psychology in play during the investigative process that you might have previously believed.  Please adjust your worldview accordingly.

Is There a Need for an Expert to Prove Damages?

By David Debenham

Documents do not speak for themselves. A document tendered by itself as here is hearsay, and hearsay is presumptively inadmissible. Unless there is a “hearsay” exception that admits them documents prove nothing in themselves[1].  They need a live witness to testify as to the truth of the documents’ contents to prove their contents. 

A primary source is a document written by someone who was a witness to the events described in the document.  By contrast, a secondary document is written by someone who was not a witness to the events described in the document.[2]  Thus a source document is proven by someone with first hand knowledge of its contents, while a secondary document is generally proven by someone who collated source documents already admitted into evidence. Otherwise it is ”double hearsay”, an unsworn document based on other unsworn documents.

In accounting we start with the bookkeeper recording (journalizing) transactions in a daily record, using double entry methodology.  From there entries are transferred (posted) into ledgers, which are secondary documents that provide a summary of similar transactions during the accounting period, such as the ledger of purchases account. From the ledger, the various items are posted as specific entries in the financial statements. It follows that to prove financial statements in court that you need to prove the ledger and the journal by one or more witnesses unless an exception to the hearsay rule applies.

What about an expert witness?  The role of the expert witness is to assist the court through the provision of an independent and unbiased opinion about matters coming within the expertise of the witness and beyond the ken of the ordinary person.  The expert gives an opinion based on what they are told or read before trial, which is hearsay. The expert disclosed this second-hand evidence (hearsay) to show the information on which their expert opinion is based, not as evidence going to the existence of the facts on which the opinion is based.  In other words, the hearsay upon which the expert bases his or her opinion must be proven by other witnesses for the expert’s opinion to have any weight at all. 

There is no rule governing the necessity of expert evidence to prove damages.  Where actuarial calculations are necessary, for example, there is no requirement that they be introduced into court by an expert.  There is no question that expert actuarial evidence is valuable in cases involving complex calculations, such as claims for future lost income or medical care which must be discounted for various contingencies.  Nonetheless, the jurisprudence suggests that there is no requirement per se that a plaintiff obtain an actuarial assessment in every such case.  Indeed, one could easily conceive of a situation in which the plaintiff did not have the resources to retain an expert, but had other persuasive documentary or testimonial evidence at their disposal.  

Although it is customary that expert evidence is called there is no legal requirement to do so.  I would adopt the position expressed by Ferguson J. in Buksa v. Brunskill

The usual instruction to the jury is to suggest that if it finds that there will be a future loss of income it should determine the average annual loss and then consider the present value and then consider the various contingencies.  These calculations are customarily explained by an expert witness but in my view the jury must make its own calculations whether or not there is expert evidence.[3]

One case has suggested to some that expert evidence is necessary to collate and present damages to a judge or jury. n Fermar Paving Limited v. 567723 Ontario Ltd. o/a Winter’s Pit[4] the Plaintiff 2010, Fermar entered into a construction contract with the Ontario Ministry of Transportation (“MTO”) to provide road construction on a portion of Highway 26 in Simcoe County (the “Project”). To complete the Project, Fermar required two types of aggregate: granular “A” and granular “B”. The aggregate was required to meet the Ministry’s specifications.  The Defendant operating as Winter’s Pit (“Winter’s Pit”), approached Fermar to discuss Fermar’s needs for aggregate. After some discussion, Fermar sent a document (“the Document”) to Winter’s Pit setting out the proposed terms of an agreement. Winter’s Pit requested a higher price for the granular A and granular B but asked for no other changes. The Document was signed by both parties on September 3, 2010.[5]  A few days later, through its solicitor, Winter’s Pit said that it could not provide as much aggregate as it was required to in accordance with the signed Document. There were discussions over several months, but no new signed agreement was reached. In November 2010, Fermar was told to leave the site or Winter’s Pit would commence proceedings for trespass. Fermar brought an action for breach of contract by repudiation of the agreement and sought damages to compensate Fermar for the cost of having to source the aggregate from elsewhere. a) The Document was an enforceable agreement; and (b) c) Winter’s Pit repudiated the terms of the agreement such that it was responsible to pay the respondent damages in the amount of $816,436.37. The Ontario Court of Appeal found that the trial judge erred in her determination of damages, and referred the issue of damages back to the trial division for re-trial. 

The Court of Appeal agreed that Fermar had a right to source its aggregate elsewhere and sued Winter’s Pit for breach of contract. The trial judge correctly held that as a result of Winter’s Pit’s repudiation of the agreement, Fermar was entitled to be restored to the position that it would have been in had Winter’s Pit met its obligation to supply all necessary aggregate. Fermar was required to find other sources of aggregate and incurred costs for equipment rental, cost of the aggregate, transportation, labour and other valid expenses.  The trial judge awarded Fermar damages in the amount of $816,436.37, which she found to be the difference between what Fermar would have paid to Winter’s Pit and the amount it did pay to the third-party suppliers for the aggregate.  In so doing, the trial judge relied on only two documents. The first was a document entitled, “Cost Summary for Alternate Sourcing of Granular “A” and Granular “B” by Supplier”, which purported to summarize approximately 1000 pages of invoices and other documents. The second was a document entitled, “Production Cost Analysis”, which compared the costs that Fermar says it would have paid to Winter’s Pit and the costs it paid to third parties for the aggregate. These documents were adduced at trial through E, Fermar’s project manager.

The trial judge noted that E was responsible for planning all assigned projects, preparing contracts, progress certificates, payments and completion of the projects. He oversaw the completion of this project and obtained alternate sources of aggregate. E testified that Fermar obtained the requisite Granular A from Brock Pit and Granular B, as well as some additional Granular A, from Walker’s Pit.  E testified that he had to approve all invoices used in the analysis when they were originally received and did not review them again for purposes of preparing the summary. 

E prepared the cost analysis using the costs that were prepared, analysed and collated by the Accounting Department of Fermar. He stated that he did not do an independent analysis himself, as the information came from a reliable source, namely Fermar’s Accounting Department. 

It was the position of the defendant that these costs were not valid and should be rejected, given that they were not prepared by an accountant or an expert in the area, but rather by the Project Manager of Fermar, who was not an accountant. Further, it was the position of the defendant that the evidence given was opinion evidence and he had not been qualified as an expert. Finally, the defendant submits that the evidence was not “business record evidence” and no backup material was provided in support of the summaries. This was argued at the time of trial and it was the position of the plaintiff, and acknowledged by the defendant that approximately 1000 backup documents had been provided by the plaintiff as regards the cost summary but not produced at trial.

The trial judge found that the evidence adduced by the plaintiff pursuant to the testimony of E was not “opinion evidence”. He presented evidence in the form of a cost summary based on Fermar accounting information, including the invoices he had previously reviewed and approved for payment, on the basis of which approval, said invoices had been paid and that he had compiled with the assistance of the accounting department. “This was substantive evidence” according to the trial judge.  Further, the trial judge found that “while it would have been useful to have the supporting documentation, I am not satisfied that this was necessary in the circumstances of this case. I find Mr. E’s evidence to be credible. He testified in a straightforward clear, uncontradicted manner.”

The court of appeal found that it was not possible on this record to calculate the amount of the appellant’s damages because the source documents were not part of the trial record, nor was there agreement on the quantum of damages at trial. Because it is not possible for this court to make the factual findings necessary to determine these issues on the existing trial record, the Court of Appeal returned these issues to a judge of the Superior Court to quantify the damages.

So what does all of this mean?

  1. Expert opinions may be introduced at trial to give an opinion as to damages if the damages calculation is complex, and involves factors upon which the expert has expertise.  On the other hand, it is not necessarily the case that an expert opinion is required.
  2. An accountant or other professional may be collating information from source documents and introducing them in court.  That does not make the witness an “expert”, such that they must meet the qualifications of an expert as possessing expertise beyond the scope of the ordinary citizen.  Where the case involves the calculations that are relatively simple mathematics, no expert is required,[5] and the witness should not be qualified as an expert to testify regarding the calculations.
  3. Collated secondary/summary documents remain hearsay, such that the underlying source documents need to be produced, and proven at trial, before the secondary 

[1] Cambie Surgeries Corporation v British Columbia (Attorney General), 2017 BCSC 861 (CanLII), 

[2] Chippewas v Attorney General (Canada), 2016 ONSC 672 (CanLII),para 4

[3] [1999] O.J. No. 3401 (S.C.J.) at para. 5:

[4]  2020 ONCA 173 (CanLII), varying 2018 ONSC 5485.

[5] Graff v. Bennett, 1995 CanLII 4000 (SK CA)

Fraud Psychology 201

By David Debenham

When we discuss fraud psychology we start and end with the fraudster, and we usually focus of Cressey’s Triangle and its variants that include not only rationalization, pressure, and opportunity, but capability as well.  As an accountant and a lawyer, I can usually tell who the fraudster is by the means they use to perpetrate their fraud(s). Professionals are “comfortable” with abusing the types of techniques they use in everyday practice, such that a lawyer commits certain types of frauds, and accountants commit other types. When I was confronted with an exception to this rule recently, I said I bet the lawyer was aided and abetted by his firm’s bookkeeper, and it turned out he was.

This type of fraudster finds an opportunity in their everyday life, and is pressured by circumstance to step across (or erase) the ethical line for the greater good of the family or community that depends on them.  Once the pressure is removed, the fraudulent behavior continues because the ethical line is hard to retreat to.  

But frauds of opportunity are only part of the puzzle.  Many fraudsters have a long history of latent misconduct that only becomes apparent when their frauds are too large to hide or ignore.   They aren’t the “one-off opportunist” but are persons who made the wrong choice at a certain fork in the ethical road, and simply cannot find their way back without being caught and punished. 

Then we consider the “underachiever”.  There is a fraudster who has been told from childhood that they are gifted, and yet they go through school with grades that bely this assessment, so they cheat.  They lie and cheat at school, sports, games as a way of ensuring other assess them as they have self-assessed as superior.  The rules don’t allow them to show what they can really do, so avoiding the rules proves their ability.  They are often assessed as narcissists, psychopaths and the like because they obsess about their own image and ignore or the minimize the consequences to others.

There is also the grifter, who commits fraud in the same way that others steal or sell drugs for a living.  Fraud is simply a way to earn a living. 

But wait, this is only part of the picture.

What about the psychology of the “victim”?  Is there an employer that invites fraud by its employees by encouraging management fraud?  By treating those who join the business as family, without any vetting of the employee?   Affinity frauds are the marriage of fraudster with a certain sub-group of society?  Do fraudsters find their victims based on particular characters of the victims? If we identify a fraudster, can we identify which groups he or she might have victimized by the groups he has connected with in the past?

And what about facilitators?  Is there a certain psychology that identify certain persons as shills?  The fraudster rarely can perpetrate a fraud without help.  Some people won’t initiate a fraud, but will facilitate others in doing so, such as secretaries, personal assistants, junior colleagues.  Is it the charisma of the fraudster?  Is it that the fraudster financially rewards them? Is it that the fraudster promotes them above their abilities or otherwise charms with praise?  How do we identify the facilitators and distinguish them from “dupes”.

Dupes, or marks, are the ideal victim of fraud.  Not only are they susceptible to the fraudster’s message, but they are also likely to become “true believers” and lure others into the scheme (usually friends and family) based on their false believe in the fraudster.  Unlike the rank-and-file victim, they are the most likely to become evangelical in their belief in a fraudulent venture such that they lose everything and yet are the last to realize that they have been defrauded until, at last, the evidence becomes so overwhelming that the scales finally fall from their eyes and the fraud is revealed to them. 

Is there a type of person that makes an ideal dupe?  Do fraudsters intuitively identify them because of certain characteristics? Are there people uniquely vulnerable to fraud schemes?  Is there way to treat them to escape from such schemes and reveal the fraud before the scheme itself has run its course and victimized everyone?

As forensic investigators we need to understand everyone in the fraud food chain properly not only to allocate blame and compensation properly, but to move our practices from reactive investigations to proactive auditors.