AirMax Vs HMQ Transcript

BETWEEN:
Court File No. 2010-3660(11)1

TAX COURT OF CANAA
1726437 ONTARIO IC. OIA A TECHOLOGIES
Appellant
-and-
HER MAJESTY THE QUEEN
Respondent
*****
TESTIMONY OF YASHV ANT SIGH PARMAR
HA BEFORE THE HONOURBLE JUSTICE HOGAN
at the Federal Judicial Centre, 4th Floor, Courtroom C, 180 Queen Street West,
Toronto, Ontario
on Friday, June 8, 2012 at 9:43 a.m.
APPEARANCES:
Ms. Julie Bond
M. Christopher Bartlett
Also Present:
Ms. Roberta Colombo
Ms. Deborah Elderhorst
******
fr the Appellant
fr the Respondent
Registrar
Court Reporter
A.S.A.P. Reporting Services Inc. 2012
200 Elgin Street, Suite 1105
Ottawa, Ontario K2P 1L5
(613) 564-2727
333 Bay Street, Suite 900
Toronto, Ontario MSH 2T4
(416) 861-8720
(ii)
IDEX
AFFIED: YASHV A SIGH PAR
Examination-in-Chief by Mr. Bartlett
Cross-Examination by Ms. Bond
Continued Examination-in-Chief by M. Bartlett
Continue Cross-Examination by Ms. Bond
Re-examination by M. Bartlett
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NO.
R-3
(iii)
LIST OF EXIBITS
DESCRTION
SR&ED Techical Review Report, Yashvat S. Panar
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Toronto, Ontario
--- Upon commencing the excerpt on Friday, June 8,
20 12 at 9:43 a . m.
AFFIRMED : YASHVANT SINGH PARMAR
MR. BARTLETT : Your honour , I wil l
be referring t o each of these documents and seeking
to have them mar ked as exhibits . For ease of
reference, I am also amenable to having the entire
book marked, if that is preferable . Subj ect to
identi fication or being referred to by the witnes s,
I request that this brief be mar ked as the n ext
respondent exhibi t, which is R-3 .
JUSTICE HOGAN : We are going to
hold off until I qua li fy him. It is j ust for
ident ification purposes for now.
E XHIBIT NO . R-3 : SR&ED
Technical Review Report,
Yashvant S . Parmar
E XAMINATION-IN-CHIEF BY MR . BARTLETT:
Q
. Mr . Parmar, could I as k you
to turn to tab 3 of that bri ef . It i s a document
at the top entitled "Resume Yashvant ( Yash)
Parmar . " Do you recognize this document?
A. Yes .
Q
. Who prepared this document?
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A. I did .
Q . I take it this i s your
resume?
A. That is correct .
Q. I would like to begin by
as king you about your education . What
post-secondary education do you have?
A. I have a BSc, honours in
electrical and electronic engineering from the
University of Leeds .
Q
. When did you obtain that
degree?
A. In 1974.
Q
. After obtaining that degree,
where did you work?
A. I firstly worked in General
Electric in England, and then I moved to Canada .
Q.
With General Electric, what
type of work did you do?
A. They are making telephone
switches and systems .
Q
. What did you do for them?
A. I was a design engineer after
graduat ion .
Q .
After General Electric, what
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did you do?
A. After that , I worked for NCR
in Canada . It is in Waterloo .
Q
. What did you do at NCR?
A. I developed algorithms in
software and other types of electrical circuit s .
Q
. After NCR?
A. I worked for ITT
Telecommunications .
Q
. What did you do with ITT?
A. T o look at this one, I worked
as a s enior design engineer . Let me have a look.
Yes . I was a lead engineer responsibl e for
designing the key system for the tel ephones .
Q
. I see next , in chronological
order on your resume, is Litton System Canada?
A. That ' s right.
Q
. What did you do with Litton?
A. There, I was a senior
engineer developing a display system for the
aircraft . That main work was there, then, was the
main research work, and we are working on that
time.
Q
. After that, on your resume
appears Amdahl Communications ?
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A. That ' s right . That company
develo ps switching systems for the
telecommunications on the data . Mainly, the data
work was being done there ; data transmiss ions .
Q
. At the top of page 2, first,
is Spar Aerospace . What was your pos ition with
Spar?
A. I was a system engineer and
developed or worked for the International Space
Station Program. I worked the electrical ,
electronics , controls and working with mechanical
engineers .
Q
.
position?
A.
Q.
A.
How long were you in that
From 1987 to 1995.
After Spar Aerospace?
I worked for Honeywell
Canada . At the time when I started, Honeywell
they used to call it -- first of all, it was Allied
Signal, then Al lied Signal was sold and became
Honeywell .
Q
. With Honeywell, what was your
position?
A. I was a system engineer .
Q
.
What did you do as a system
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engineer?
A. I was responsible for
designing and writing specifications for big powe r
supply systems for aircraft .
Q
. Aft er Honeywel l ?
A. After Honeywell, I came to
Revenue Canada.
Q
. What was your posi tion when
you first j oined the Canada Revenue Agency?
A. Resea rch and technical
advisor.
Q
. Are you continuing in that
position?
A. That ' s right .
Q.
What do you do as a research
and technology advisor?
A.
Q
.
A.
SR&ED.
Q
.
the CRA?
A.
Q
.
I review the number of files .
What do you revi ew. them for?
For el igibi lity for the
How long have you been with
About 10 years .
Approximately how many SR&ED
claims have you reviewed?
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A. Between 3 0 0 and 4 0 0 .
Q
. What, specifically, are you
reviewing them for? When you say "eligibility, "
what do you mean by that?
A. By el igibi lity, does this
claimed work meet the requirements of the Income
Tax Act 2 4 8 (1) ?
Q
. What do you look for when you
are looking for el igibi lity?
A. What I am looking for there
is, did the company carry out systematic
investigation in favour of science and technology
by means of experimental analysis or not ? That is
basically what I look for .
Q
. Did you review the
appellant ' s SR&ED claim for 20 07 and 20 0 8 ?
A. Yes .
MR . BARTLETT : Your honour, I
request that Mr . Parmar be qualified as an expert
in technological uncertainty, technological
advancement and the scientific method as they
pertain to the appellant's SR&ED claims .
JUSTICE HOGAN : I am going to let
Counsel ask her questions . Please answer the
questions , sir .
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CROS S-EXAMINATION BY MS . BOND:
Q
. I would j ust like to ask a
few questions . Good morning, Yash. How are you?
A. Good morning .
Q . You are an electrical
engineer?
A. That ' s correct .
Q. Did your curri culum a s an
electri cal engineer include HVAC des ign?
HVAC system?
A. No .
Q
. Have you ever designed an
A . No .
Q.
That ' s all.
JUSTICE HOGAN : I am going to
qualify this witness the same way I qualified the
other expert . I am going to enter the words -- the
quali fication that you mentioned to me earlier .
MR . BARTLETT : Thank you, your
honour .
CONTINUED EXAMINATION- IN-CHIEF BY MR. BARTLETT:
Q
. Mr . Parmar, can I ask you to
turn to tab 1 of R- 3, which is the brief that I
looked at earlier . This is a document entit led
"Scientific Research and Experimental Development
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( SR&ED) Technical Review Report . " Mr . Parmar, do
you recogni ze this document?
A. Yes .
Q
. Who prepared this document?
A. I did .
Q
. On the bottom of the first
page there is a s ignature . Do you recognize that
signature?
A. Yes .
Q. Whose signature is that?
A. I t i s mine .
Q
. When did you sign it?
A. November 2 6, 2 00 9 .
Q
. Thank you. Before we get
into the details, can I ask you to turn to tab 2 of
R-3 . This i s a document entitled "Addendum:
Scientific Research and Experimental Development
( SR&ED) Technical Review Report . " Do you recognize
this document?
A. Yes , I do .
Q.
Who prepared this document?
A. I did .
Q
. Can I ask you to turn to the
last page of this tab . There is a signature . I
take it that is your signature?
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A. Yes , that i s correct .
Q. When did you sign it?
A. May 23, 2011.
Q
. What was the context of why
you prepared this addendum?
A. I was provided additional
information after, I think, the court case was
supposed to take place . There were tonnes of
documents, and I reviewed all these documents .
Some of the documents I had already seen before, so
I pre pared this report to look at what was missing
or what was not missing there at that ti me . That
was the reason for preparing this report .
Q
. I will ask you to turn back
to tab 1 and in particular, the second page . I
direct you to the heading " Review Methodology . " Do
you see that ?
A. Yes .
Q
. What did you do as part of
your review of the appellant ' s SR&ED claim?
A. As you can see from here,
first I reviewed t he documents that were submitted
at the time with the T61 form. After reviewing the
documents , we had a number of site visits . I
recorded all the site visits and all the
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corruunications I had . You can see on this page
there, starting with the first s ite visit, I
vi sited them on that day .
Q
. Just going down the list, I
see that you referred to the April 23 , 2 0 0 9 site
visit?
A. Right .
Q
. What does that refer to?
What is a site visit?
A. "Site visit" means going to
the site of the claimant and discussing their claim
verbally, reviewing documents that they had at the
time , visiting their facility and requesting any
additional information, if re quired, to make our
decisions .
Q
. The next item is "May 22;
2009 Site Visit. " That is a second site visit?
A. That is correct .
Q
. On the final line is
"November 18, 2 0 0 9 Site Vis it . " What is that?
A. Yes , that i s correct .
Q
. Correct in what?
A. That is again a site visit on
that day .
Q
. In addition to vis iting the
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site, did you do anything else to review the
appellant ' s claim?
A. Yes . I reviewed the
documents submitted after the first site visit and
after the second s ite visit .
Q
. How much time did you spend
reviewing the documents submitted by the appellant?
A. I spent about two weeks for
the first one there, and the third one I spent
when I received, last year, the documents -- one
week for that purpose; in total , three weeks .
Q. May I ask you to turn to page
3 of your report . In the first paragraph, your
report refers to "s tandard engineering practices, ''
and in particular, it says :
"He explained the di fference
between standard engineering
practices for the company and
eligible activities under
this program. " (As read)
What do you mean by " standard
engineering practices " ?
A. Standard engineering practice
is when a company des igned a product or improved
the existing products by us ing the known knowledge
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in the public domain, which s imply implies there is
a concern with whatever the design, and they are
us ing all the knowledge they have in the field, and
they have the experienced people to do it .
On the other hand, when we are
tal king about the experimental development -- that
is what I tried to explain at the time, as part of
the education -- the experimental development in
the income tax is sl ightly different than in the
way the industry sees that R&D i s being done i n the
industry .
The di fference is experimental
development means systematic investigation carried
out in a field of science and technology by means
of experiment or analysis for the purpose of
achieving scientific or technological advancement .
What that s imply means i s , a
person must carry out some e xperimentations in
order to achieve the results or advance the
technology, as compared with the des igning a
product or improving the products based on the
knowledge they already have in the field .
Q
. You referred to
experimentation, and I direct you to the fourth
full paragraph on page 3, in particular, the third
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sentence , which begins towards the end of the
second line: ' 'They have test data for each try,
but not an experimental data . " What is the
di fference between test data and experimental data?
A. In case of a testing, it is
tes ting the design or validating the design . In
simple words , i f I des ign a pen to write in blue
ink, I will see that at the end of my design, does
it write blue or not? That way I have validated
what my design code was, and it is doing the j ob.
On the other hand, what the
experimentation is -- the outcome of what I am
trying to do is unknown at the time . There are a
number o f variables in the system or in the product
when I am designing it . How the behavior of those
experiments or the result of changing in the
variables could be resulted into is not known .
That is why we do an experiment .
We collect a series of data . After collection of a
series of data, one must go in there and analyse
that information .
JUSTICE HOGAN : I am not sure
there is a big difference of opinion between the
two experts in terms of the definition of what is
or what is not SR&ED for purposes of the Act .
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I think that, from having listened
to the other expert, what I am interested in
hearing from you -- the other expert tells me there
were three things that were important in this
project, which he describes as a project . One was
noise; one was static pressure, static pressure
being to ensure uniformity o f heat or cooling in a
town house; and the third was space . Making sure
that the unit was of a space and force using a
heating source other than just a dedicated heating
source ; being able to use a forced form of heat ing
source .
In your report, you say that noise
quali fies ; the noise reduction element, which you
have categorized as being a separate study, i f you
like . My first question that I am interested in
is : Do you have to test a whole system to be able
to figure out the noise level?
For example, if you change the
torque of the motor which is in the basement , and
you have changed the diffuser , and you have put
holes in the pipe, wouldn't you have to test a
whole system to make sure that it does operate? I f
you change j ust one piece, and you succeed in
changing that one piece, but then you change other
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things to accomplish other goals, don ' t you have to
test the whole system?
THE WITNESS : The way I look at
that i s , in this high speed velocity system, the
noise is a concern for everybody there , right?
Yes , you are right there as well, when you ask this
question regarding do you have to change the whole
system or not . But i f you change the motor, the
purpose of changing the motor first of all, what
is the source of noise? The source of the noise in
this system is
JUSTICE HOGAN: is ai r.
THE WITNESS : . -- is how fast you
blow the air . That i s the source of the air(s i c) ;
i t is the air .
The company was developing three
systems : Low, medium and high . For each one, they
have a di fferent air flow . For each air fl ow, you
have to have a certain noise level . The noise
level remains the same for all sys tems , whatever
they are , and they are functions of how much air
you blow and how fast you blow the air . You
understand that part . That is what I look at .
In order to do that study, from a
scientific point of view, one must go and do the
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study there . I f I do this much air flow at that
speed, what kind of duct and diffuser do I need
which will el iminate --
JUSTICE HOGAN : But in your study,
what did you authori ze? What did you say was
eligible, j ust the di ffuser and the duct or not the
duct?
THE WITNES S : When I look at what
the work was , what the data was there based on
the documentation in discus sion, from the people
and my knowledge , what I knew at that time and what
I know today -- what I look at there is the
diffuser was the maj or part they des igned
themselves . They can buy the diffuser for these
purposes --
JUSTICE HOGAN: -- but they did it
themselves . All right .
THE WITNESS : They des igned --
there were s ket ches in the documents showing that
they tried a different shape, a different size, a
different way of doing di ffusers . They also did
tests I am going to use the word "test data" --
in order to see how those diffusers were working .
I t is a small company . Whatever
the reason, they did not do a very theoretical way
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of doing the experiments, recording, whatever ; but
there was enough information there showing that
they had a concern, and they were doing that work
in some sys tematic way . For the diffusers --
JUSTICE HOGAN: What about the
rest of the system with the di ffuser on it? For
example, punching holes in the flex pipe , changing
the material of the flex pipe, changing the torque
speed of the engine? I sn't that all related to
noise?
THE WITNES S : What I want to say
is, there, when I look at that -- and that is what
I am trying to say. Yes , but changing the motor is
for a given area, they needed a certain amount
of tear to be there . That was calculated according
to Jack, as wel l . They knew what the requi rements
were, how much air they have to blow out . Leave
that part.
For the changing of the motor, it
was for di fferent purposes other than for the noise
purposes .
JUSTICE HOGAN : Why do you say
that? The CFMs that are going to come from the
motor are important to maintain the pressure , but
my question i s , i f you have difficulty maintaining
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th e ri ght pressure o r what ever changes you make to
the motor dis rupt the pressure flow, maybe your
di ffus er doesn ' t work properly . I s that not
possibl e ? Could there not be a connection?
I know when a car company de signs
a car, a lot of things go into f i guring out the
noi s e that you are going to hear within the car .
The amount of insulation you put in the car, the
de sign of the car, whethe r it is square or whethe r
i t i s rounded, how you form t he mirrors on the car,
the fenders, everything; it is a package .
You change what type of tires you
use on the car, whether th ey are high performance,
low profile, high profile -- all of those e l ements,
and then car companies today put into cars things
to mas k sound or to change the sound .
My question to you i s : Don ' t you
have to have the whole system and make sure that
all of the parts work together to produce the
optimum result that you are trying to achieve?
THE WITNESS : Right .
JUSTICE HOGAN : I f you te sted just
one part, and you made othe r changes, could it
affect what you have don e on the first part? That
is my question .
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THE WITNESS: The answer to that
question, in my view, i s : I f you are des igning a
system which is not available in the market at the
time you may be there , you build the one system
there . What would be the behavior of the air flow
in that situation? However, these systems -- high
speed velocity systems -- have been there for a
number of years .
JUSTICE HOGAN: Somebody said that
they were there, but they didn ' t work properly.
THE WITNESS : Fine . Every time
somebody does -- the example you have given to me
is car companies . Cars were des igned a long time
ago . It does not mean that a new car des ign does
not have technological advancements that did not
have to go through certain things . Similar things
apply in this cas e.
That i s what I did. When I look
at that claim there, how much air needs to blow?
Because the company understands what the
requirement was . They knew the requirement o f the
CFM
JUSTICE HOGAN : They know the
requirement ; I agree with you . They know. the
requirement . It is because the di fference in
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approaches .between the two experts , i f I understand
correctly, is that you have broken it into parts .
They view it as one proj ect . They are saying
and I want to hear you on thi s , and then I will let
Counsel come back .
He i s an expert . He is supposed
to be the friend of the Court, the amicus curiae .
He is there to help me arrive at my j udgement . I
will let you get back to questioning him in a
question, Counsel .
The company is saying , or the
appel lant is saying to me that the product
avai lable in the market didn ' t work. The
competitor ' s product didn't work . There were
lawsuits . They wanted to des ign a new product that
worked . They wanted i t to work in town houses , and
to work in a town house they had to reduce the
noise level , and they had to ensure that the right
pressure is built up to have uniform temperature,
so that there i s no temperature loss or variations
between the floors because a town house is vertical
as opposed to horizontal . Certainly, they had to
deal with space constraints .
Those are the three obj ectives .
The product that they are going to put onto the
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market has to meet those three requirements,
otherwise the product is going to fail . In that
context , when they do that, then they play with
parts of the s ystem, one being the diffuser, the
other part being the flex, how they des ign the
flex . Part of it is what type of motor they are
going to use to propel the air, and the other part
is the heating source .
They view it as one system, one
project . Why is it four projects in your mind?
THE WITNESS : If I am looking from
a scient ific point of view I can understand from
the total product point of view. I f I am looking
at the technology point of view, what technology,
technology says something is built into the
knowledge point of view . What knowledge they are
building at the end of the day or trying to build;
again, that is what I was looking for, and still I
am looking for that .
In order to do that , there has to
be shown certain things ; what experiment they did
and how they did that one . That is what I am
coring at . Now, do we have to build the system,
the whole thing there, to get the answers or the
result at the end? To my knowledge, the answer is
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no . They have to --
JUSTICE HOGAN : For the noise, how
could you not build the whole system and get the
right answer on the noise? That is my question .
question again?
THE WITNESS: Please ask the
JUSTICE HOGAN : My ques tion i s a
simple question . Just on the noise element ,
presumably you j ust can ' t test the diffuser alone .
You have to be able to have -- how you made all the
other parts and assemble them all together and test
the whole system to determine whether or not it is
meet ing the requirements because if you are
changing and playing with one of the elements , you
may increase or decrease the noise level .
THE WITNESS : In order to answer
that question, I would say the first time . That is
why, in the scientific community, they build the
prototypes -- they call them prototypes, the first
of the kind -- to understand what the source of the
noise is and what to do about that . That i s what
the main thing is there .
If they have to bui ld the first
system to find out what the noise would be under
these condit ions , that is what they -- the first
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year, if you look at their technical description,
at what the data was there , they built the one in
the lab and in the place and tried to find out
where the noise is and what the noise behavior i s .
That is how they started bui lding
the design and the di ffuser themselves . That is
the first thing they did . Now what they want to do
or the way that they did the work was they built
the required three systems . That is what is
required : high, low and medium. Other
competitors ' systems didn ' t work . I don ' t know why
they didn ' t work. I wasn ' t there, s o I am not
tal king about that .
They built three systems . If they
would have known in the beginning that there is
concern about noise or whatever else is there after
they start building three systems there, they would
have tackled those problems . In other words , if
they created their own knowledge
how to maintain
the noise, maybe based on the motor size, whatever
else, flex size and everything else
then they
would have created a prototype and got the
information out and then start bui lding sys tem one,
sys tem two, system three .
JUSTICE HOGAN : Are you s aying
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that you don ' t believe they tested the system after
they played with the torque of the engine? On your
review, are you saying that you found no evidence
to say that they tested the engine after they
changed the diffuser to make sure the whole system
worked together
THE WITNESS: No .
JUSTICE HOGAN : Not only the right
static pressure, but also the right noise level?
THE WITNESS : What I am saying is ,
initially, in 2007 if you look at the report
yourself, the original report and the information
provided to me -- they built the system and tested
it out . That is where the noise was concerned .
They are finding out themselves because testing
competitors ' systems and their own sys tems . They
did identify themselves as concerned . I f I am
al lowed, I can show one of these
JUSTICE HOGAN : No, I understand.
My question to you is : Were you aware of whether
there was other testing done afterwards of the
whole system?
THE WITNESS : I am aware o f that .
I have seen the documents . They were testing three
systems after that period of time, yes .
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JUSTICE HOGAN : What about that
subsequent period of time ?
. THE WITNESS : At that point,
during the first. site visit and subsequent
documentation, when they were testing the systems
in the town houses, they had a problem with noise .
They were changing the flexes and drilling the
holes . They were doing that .
JUSTICE HOGAN: Does that qualify
or not , according to you?
THE WITNES S: According to me,
when I look at the information there, it does not
qualify for two reasons : Reason No . 1 is they did
not have any records showing what they were trying
to study or trying to investigate . The second
reason is, they were doing this in a commercial
environment .
In other words, they already
understand that by drilling the holes it will give
us a better result . There is no information they
recorded or kept it so they can use for the next
one and the next one and so on and so forth. Only
they have learning . They were doing -- I don ' t
want to call it random, but that is what is coming
from my head right now.
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For this town house or these
condit ions , they have to dri ll three holes, or they
have to have larger holes at this place, and for
the other ones they have to drill somewhere else,
different holes, di fferent s izes . That is what
they were trying to do .
That is the reason it does not
qualify for this because if they are going to have
another 20 new houses , they will have the different
places and different hole sizes and di fferent s ize
of flexes for the new ones . From a knowledge point
of view, the gained knowledge -- whatever was done
earlier.
If you look at the report from
point of view as well, once they understand that
what needs to be done , they tested out the system
in the house . There were tested systems in a house
over three days , and that three days the report
shows that whatever they wanted to achieve was
achievable, and they were happy.
After that, there was a -- yes ,
people were troubleshooting, fixing the things,
whatever . That was happening after that . That is
what I saw. There was no other report done by any
third party before even -- yes , in --
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JUSTICE HOGAN : Did you see a
letter, for example, from a company that worked on
getting to the specs of the flexi tube and playing
with material and changing the material of the
flexi tube? Do you reca ll whethe r you saw that
letter?
THE WITNESS : I saw one letter
here which is email, and I can point it out . I
don ' t know if it is pa rt of it or not , but it is
part of I have it there . The Def lecto company
cal led . They were developing the flex . That
email, afterwards , it says 2 0 0 9.
JUSTICE HOGAN : Right .
THE WITNESS : Right . I f you look
at the emai l, it shows what kind of experimental
work should be done . Even i f this company was
doing -- AirMax was doing experimental work -- it
should have similar things , doing the flex side and
drilling the hole s .
That i s what I am trying to say,
but I could not see, when I reviewed after 20 07,
generally 2 0 07 I did not see anyone on that
nature type of work.
JUST ICE HOGAN: Counsel, I am
going to allow you to continue your cros s . Sorry .
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I wanted to really understand the di fferenc e of
opinions between the two experts rather than I
like a broad overview of the differences first,
before we get into the minutiae and the detail . I
will let you continue now, Counsel .
MR. BARTLETT :
Q
. Thank you, your honour . Mr .
Parmar, what is your understanding of what the
source of the noise or sound in the system was ?
What i s the source of the sound?
A. I t is the CFM, the air flow
at certain speed .
Q.
I f you change the motor in
the basement, how does that affect the sound?
A. I f you keep the same air flow
and same CFM, there will be no change .
Q.
Can you elaborate on that?
What do you mean? If you change the --
A. I f you change the motor for
whatever other purpose other than changing the CFM,
if y ou keep the airflow at the same speed and same
rate , then noise will remain the same . That is
what I am trying to say .
Q
.
If you change what the source
of the heat is for the coils -- if I understand the
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process, the air flows over a coil , correct? Is
that your unders tanding?
A. That' s right.
Q. I f you change the heat source
for tha t coi l, what effect does that have on the
sound?
A. None . I t is the same thing,
right? Air is coming, the same air, same RPM, and
the coil hea t source is changing, i t is jus t a
means of taking where the air is coming from.
Q. I f you don ' t change the CFM,
wha t will affect the noise? What can you change to
affect the noise?
A. Okay --
JUSTICE HOGAN : I s i t j us t CFM?
If you have a noisy compressor, you are going to
change the noise, are you not?
THE WITNESS : I f it is a noisy
compressor, yes . The compressor is part of outside
where you are trying to make the noise . The noise
is being made ins ide the room, where the outlets
are . The compressor, mostly, is outside .
MR. BARTLETT :
Q.
When you say "outside , " wha t
do you mean?
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A. Outs ide the building, outside
the room.
Q . Where is the noise that
matters ? Where is the noise that is being
measured? Where are you measuring the noi se?
A. The noise in this case is
being measured, or the requi rement is to measure
the noise in the room where the air is coming for
cooling or heating purposes .
JUSTICE HOGAN : You have said
motor; you have said coil; you have said motor --
as long as the CFM is the same , it shouldn' t affect
noise . You said coil shouldn ' t affect noise. What
about putting holes in pipes and changing the types
of f lex you are using ; could that affect noise?
yes .
constant?
THE WITNES S : That is correct,
JUS TICE HOGAN : I f CFM is
THE WITNESS: That is correct . It
is going to affect the noise coming out .
MR . BARTLETT :
Q
. When you put holes in flex,
what would that do to the CFM?
A. CFM i s being produced by the
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motor, how fast i t runs there, right ? I t is not --
it is j ust the amount of the air coming out of the
outlets, and some of the air leakage . That is why
if you have, say, bigger holes, there will be no
noise, but there wil l be no air coming out . That
is why
JUSTICE HOGAN : Or you could
create noise because the air -
THE WITNESS : That ' s right .
JUSTICE HOGAN : -- leaving the
hole l i ke a whistle .
THE WITNESS : That is correct . It
is very crit ical there, where you create the hole,
what si ze of hole you create , what patterns you
have . This is very critical , yes . This one
creates more noise if you make a small hole, and
high pressure air is coming through .
MR. BART LETT :
Q
. You mentioned testing
competitors ' sys tems . In your opinion, is there
technological uncertainty, technical advancement or
scientific methodology to that, in this case?
A. There was no scientific
uncertainty or advancement in test ing the
competitors ' systems , no .
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Q
. Why is that?
A. Because what you are trying
to do in that case is you are trying to compare
your system versus the other systems and
understanding the difference between two systems ;
how good is performance point of view rather than
from technol ogy point of view .
Q. I f the competitor says -- or
the specifications on the box that the system comes
in -- the competitor says , "It will produce this, "
and if you test your product to see it produces
what they claim, does that have the three e lements ,
the technologica l uncertainty, technological
advancement , scientific methodology?
A . No.
Q
. What are the components of
this sys tem? There is the motor, the fan, the
coi ls, the flex and the di ffuser . What i f you
purchased different o ff-the-shelf motors and tried
them? Is there technological uncertainty,
technological obstacle or scientific method i f you
take different motors, put it in the system and see
what the results are?
A. As long as it is doing the
same thing, right; the same CFM.. But changing the
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motor does not have the three elements .
Q
. Why not?
A. Why it doesn ' t have the three
elements? You are asking why I found certain --
because the motor is going to do what the motor is
supposed to do . I t is not bui lding knowledge .
That is why it is not there . There is no
uncertainty from a technology point of view.
JUSTICE HOGAN: What about
programming the motor so that you are able to
control it electronically, control the torque or
the speed of the motor?
Let ' s assume there is no motor on
the mar ket that allows for electronic control s . I f
you do programming and design to be able to provide
an electronic control of the torque or of the
speed, to be able to use it in this type of HVAC
system, would that quali fy or not qual ify?
THE WITNES S : I f a company i s in
the business of developing the motors, then they
may be doing some research work on that; how to
define the design of this specific motor for these
specific purposes . That company ' s work may quali fy
in that area .
Unless I look at that work they
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did, I cannot say, but generally, this kind of ECM
motor, electronically cont rolled motor, computator
motor, DC motors -- this was basi cally a DC motor
-- is in the market for a long time . Nowa days,
people call them variable speed motors . You can
see them all over places right now and entering
into these HVAC systems because of e conomic
reasons .
Those motors are required to be
programed. Some motors -- companies may deve lop
the motors for speci fic requirements and program
certain ways. However, they may have internal
capability to program them differently, and you can
request the manufacturer : "I would like to do
this . Can you program for me?" That is what they
can do for you .
There is no technological
adva ncement for the person who is us ing it and
programming i t .
MR. BARTLETT:
Q
. How about i f you take the
di fferent components. You try a different motor or
take a different fan, and because of di fferences in
sizes, you have to change the arrangement of how
they fit together. In this case, was there
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technological uncertainty, technological
advancement and scientific method to that , to
changing the structure to fit the components ?
A. No because each compone nt you
buy, it has a different way o f shapes o r whateve r
they are . You have to make engineering cha nges , so
that is a standard engineering practice to
incorporate the new components .
Q.
Can I ask you to turn to page
7 of your report; the second paragraph from the
bottom. Let me ask you this : Did you form a n
opinion as to whether there was systematic
i nvestigation related to the diffuser?
A . Yes .
Q . We have al ready discussed
what that conclusion was, but in terms of timing,
what was your conclusion about whe n the systematic
investigation related to the diffuser had occurred?
A. The timing - - when I look at
their documentation, specifically thei r test done
by third party -- it was between June 16 or
whatever that report is saying the n and January
2007.
Q. Why do you say it ceased in
January 2007 ?
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A. Because the report I reviewed
then was showing that at that time , there was no
concern regarding noise .
Q
. What about work done after
January 20 0 7 ?
A. As I said before, after
January 200 7 they were installing the system i n
different houses , and they had problems . They were
making holes many, many places . That is what they
were doing that . That is why it was not a
systematic i nvestigation after that period .
Q
. Just to be clear, why was
there not systematic investigation with regard to
the holes in the flex?
A. After the period there is no
record of that, showi ng that they were doi ng
systematic way or trying to understand what was
happening and how to apply the hole size pattern .
There is no record of that .
Q.
Did you discuss how the holes
were determi ned with Mr . Jack Va n Beurden?
A. Yes , a nd the first time we
talked about that , he said, ' ' We will j ust drill the
holes over there and over there . " That is what he
said at that time .
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Q
. What did you understand by
that ?
A. What I understand by that is
that they were randomly putting the holes . Of
course, they were making the holes as the
honourable j udge said, it is going to sometimes
create a whistle, sometimes gives you balance .
That is what they were trying to do there .
Q
. The last sentence of the
final paragraph on page 7 says , "The claimant
resolved the sound level by intuition . " What do
you mean by that?
A. Yes , same thing there . They
were j ust saying that '' I f I drilled the holes at
this point there, it may give the result that I am
looking for . I f it doesn ' t do that, rather than
drill over here, I wi ll drill over there . "
Q
. At the bottom of that page
there is a heading, "Cons tant Static Pressure . ''
Did you form an opinion as to whether the work
undertaken by the appellant involved technological
uncertainty, technological obstacle and scientific
methodology in respect of static pressure ?
A. Yes, I did .
Q
. What was that opinion?
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A. There was no technological
uncertainty or technological advancement that the
appellant was trying to achieve at that time .
Q . Why do you say that?
A. Because all the data I
received, the information there, was that they were
testing the different configurations and different
time frames , and there was no systematic work done .
No record was done . It was j us t testing out i f
they built one system and tested i t out , what the
results are .
JUSTICE HOGAN : Do you have to
have writing to have systematic investigation?
Know-how is know-how, right?
That is correct .
THE WITNESS : That is correct .
JUSTICE HOGAN : A lot of know-how
is not protected by patents . It is intellectual
grey matter. It is knowledge that the company
acquires . It is not always patent protected,
intel lectual property .
THE WITNES S : I want to say that
i f you go look into my sound analysis as well, as I
said at the . time, they wi ll look at the information
there, right , about the des ign and what they did
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then . In a similar way, I l ooked into the static
pressure as wel l .
When I looked a t the information
there , what was the changing and what the result,
what monitoring, and what were they doing, that is
where I could not see that experimental work was
being done . Or they changed the motor, changed the
things and j ust said, ''What do we get out of
there? " And " If it is not good, try something
else . " That is what I am trying to say .
There was a big difference -- the
work they did for this purpose versus the other
purpose they were doing that . That is the reason .
MR. BARTLETT :
Q
. Mr . Parmar, I would like you
to explain that a little more . What was your
understanding of what they did with respect to
static pressure? What was the work that they did
in this area?
A. They were bui lding a system
and getting results out .
Q
. When you say ."bui lding a
system, " what were the components used in that
system?
A. The whole s ystem.
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Q. After they got the result,
what did they do? What was your unders tanding of
what they did?
A. I could not see anything what
they did with the result .
Q
. Other than what they did with
the result after they built one system and
tested the result s , what is your understanding of
what they did next?
A. They built their next s ystem.
Q. What did they do there?
A. They tested again.
Q. They have done , now, two
tests related to two systems ?
A. Right .
Q. Why does that not involve
advancement and scientific method?
A. Because at the end of the
day, what they learned from the first systems was
not capped or could not explain why they were doing
the second one there . For many, many reasons they
were bui lding the second one there, right? Either
they were getting the bad motors -- if you look
into
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JUSTICE HOGAN : I j ust want to
understand . You are saying trial and error
experimentation is not SR&ED? Is that what you are
saying?
THE WITNES S : No, I am not saying
that trial and error is not an experimentation .
Trial and error, as long as you keep understanding
of what i s going on, what they do next
JUSTICE HOGAN : But i f it is in
your mind? I seem to be understanding that you are
saying they weren ' t very scientific; they were
operating on intuition, trying things , trial and
error and so forth . But there are a lot of things
that have been discovered in this world by trial
and error, and they have been great scientific
discoveries , I would think .
My question t o you i s , can trial
and error constitute SR&ED when it is not routine
and where the knowledge is not j ust out there?
THE WITNESS : As long as the trial
and error is being done with education -- in an
educated way
THE WITNESS : -- that is what I am
trying to say -- rather than in a non- educated
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way . You are absolutely right , your honour . The
number of discoveries are being done not by keeping
everything record there , but the result , how you
proceed from A to B and C has some logic behind i t .
I t may not be recorded 1 0 0 per cent, but there is
some .
JUSTICE HOGAN : My question is,
can you substitute your business j udgment to the
business j udgment of the company? The company
spent $ 1 million -- over $ 1 mi llion, I think, was
the evidence I heard -- developing this product , of
which they claim roughl y $ 30 0 , 000 as SR&ED. Are
you saying they were stupid business people; they
didn ' t proceed properly?
If it is all routine, then surely
you are not going to spend $ 1 million if you can
buy it all off the shel f? What was the $1 million
spent for? Wasn ' t a large part of the $1 million
t rial and error , experimentation?
THE WITNESS : I cannot answer that
question . I can answer the question differently.
Even for the routine engineering, you can spend
mill ions of dollars des igning new products if you
don ' t
h
ave particular knowledge . Sometimes they
take a long time for design purposes , even if they
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have all the knowledge there . That is the cost
there .
This company, from my
understanding, talking to Jack, was -- the first
time, they were trying to develop this sys tem.
Part of that -- i f I can say it, there is a letter
as well, which was written in, I think, 2 0 0 9 after
the submi ssions by Brian Jackson . He identified
what he was doing and what he was not doing and all
of the stuff in there, whatever you look at that
one there .
That letter clearly shows , even
though it was written after the fact , it clearly
shows what his main concerns were as a designer.
Why they spent so much money, I cannot answer that
question .
JUSTICE HOGAN : I s it because
maybe, perhaps , there was no product that worked on
the market? In other words , there was no high
velocity system that performed in the marketplace ,
that provided constant temperature and low noise .
Could that have been the reason why they spent the
$1 million?
THE WITNESS : As I said, I cannot
say that . What I can make a decision is what is
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given to me in documents for review. Yes , there
could be no system there with the town houses . It
may be true ; it may be not true . I don ' t know,
right? I didn ' t do any research on that because
when I reviewed the claim or CRA reviews the claim,
we do not compare the company we are reviewing with
what the rest of the world was there .
Even i f they have other systems
working simi lar ways or a better system and this
company trying to attempt to do that , because this
company may not have the knowledge that the other
company may have, we don ' t compare i t . We don ' t do
that . I don ' t do that part .
Why did they spend the $ 1 million?
I didn ' t look at the $1 mi llion . I only look at
the work.
JUSTICE HOGAN : Continue, Counsel .
MR. BARTLETT :
Q.
Thank you, your honour . Mr .
Parmar, I have asked you about the scienti fic
methodology . What is the scientific methodology?
A. I f you look a t what the
scientific methodology is, you have to have a
hypothesis; you have to have design of an
experiment . What are you going to design? What
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data or information are you looking at there?
Collecting information, analysing information,
drawing conclus ions ; this is the scientific
methodology that is used for larger companies ,
universities . That is what methodology is .
JUSTICE HOGAN : What is it in the
case of the smaller companies?
THE WITNESS : Smaller companies
will cut down some sort of -- not 100 per cent o f
that way . They may not have a very good written
record of hypothesis, whatever . They may not have
a very good plan of doing the work. That is where
we can do A, B and c . They may go and do the wor k .
As they deduce something, they are trying to
understand the power and trying to solve the
problem. That is what the small company would do .
They may have very limited records in that fashion .
JUSTICE HOGAN : Does the CRA
accept that or not accept that?
THE WITNESS : You can see from my
review as well, I am going to back in too much
sound . Even there was no such thing, it was
written exactly the same way as I described a
minute ago, I still accepted i t .
MR. BARTLETT :
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Q
. What is the difference
between the methodology that was foll owed by the
appellant wi th respect to the sound is sue versus ,
say, static pressure?
A. I n the case of the sound
issue, they did have a document , even though it is
in sketch form, which clearly showed that they had
a concern and then how they were trying to attempt
to overcome that particular concern . Not only
testing it out and saying that i f I have got this
diffuser, it works or not; if I got this diffuser
from somebody else, does it work or not ? What does
it do? Rather than doing that , they went into the
design themselves .
By the way, there are companies
who make the diffusers for high velocity systems .
Whether it works or not I am not going to debate
here , but there are people who are making them and
selling them.
This company -- i f you look Brian
Jackson ' s letter as well, he said if they cannot
meet this sound requi rement, the whole system will
die . There is no business , nothing of the nature .
They did understand that they have to do something
differently for that purpose, but the rest of the
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things of what the data was , they did not design
anything by themselves .
They bought the component off the
shelf . They call it off-the-shelf, whatever they
have available in the market to meet the
requirement . When they used that component in the
system, if they did not perform the way they wanted
i t to perform, they got some other parts and so on
and so forth . That is what they did in that other
case versus the sound case .
Q
. You said that there were
diffusers available in the market . I f they
acquired di ffusers in the marketplace, two
different di ffusers , and tested them, would that
involve a scient ific methodology?
A. No.
JUSTICE HOGAN : I f they acquired
diffusers in the market and made changes to them,
would that qualify?
THE WITNESS : That may qualify,
yes . It depends on what changes they have to make .
MR. BARTLETT :
Q
. What do you mean by that?
A. The diffuser allows you to
make certain types of changes . It i s des igned to
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make -- as we talked about the motors as well, a
minute ago . Given the programming in certain ways ,
i f you do that, i t is fine . There is no SR&ED
work .
I f that is not there , you have to
go and do a study to modi fy it in such a way as to
meet your requirements ; it may be there , yes .
Q. What about with regard to the
BTUs ? What is your understanding of what work the
appellant did related to BTUs?
A. In the case of the BTU, most
of the furnaces we see right now at the home, they
are us ing the gas or electric to heat . They wanted
to use instant water heaters to provide the source
of the heat , and they bought these three water
heaters from overseas . They wanted to comply those
heaters to North American standards . That is what
they did .
Q .
Did you form an opinion as to
whether their work with the heaters or boilers that
they acquired overseas -- whether that work
involved technological uncertainty, technological
advancement and the scienti fic method?
A. Yes , I did.
Q.
What was that opinion?
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A. I t did not meet the
requi rements of the program.
Q . Why is that?
A. Again, there was no
systematic investigation carried out . As I
explained before, in this case as wel l .
JUSTICE HOGAN : I f they did trial
and error, would it qualify?
THE WITNESS : As I said, when I am
saying "systematic investigation , " I am including
that part where you say "trial and error . " I
explained before . If they are doing a logical way,
even though it is not written down 10 0 per cent or
whatever, that , yes .
MR. BARTLETT :
Q
. In the appellant ' s work with
regard to the ECM motor, did you form an opinion as
to whether that work involved technological
uncertainty, technological advancement or the
scientific method?
A. Yes, I did.
Q
. What was that opinion?
A. I t still does not meet the
requirements of this program.
Q
. What was your understanding
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of what they did with the ECM motor?
A .
They replaced the existing
. motor, the ECM motor, and when they were doing
that , they had to program i t . That i s what they
did for the ECM motor .
Q
. Let me take a step back . The
evidence is that they acquired a General Electric
ECM motor and tested that . Does that involve the
three elements that I have asked about ,
advancement and scientific methodology?
A . No.
Q
. Why not?
A. Because they have the motors
from, say, General Electric and tested it out , and
the motor is gong to do what the motor is designed
to do .
Q
. How about the fact that the
results that they achieved didn ' t work? It wasn ' t
what they wanted, so they had to try something new.
Why does that not involve the three element s?
A. They have received this
motor, and the motor is going to give what the
motor is going to --
MS . BOND: Your honour --
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JUSTICE HOGAN : No. Later . Let
him finish his answer.
MS . BOND: But I obj ect to the
question, your honour .
MR . BARTLETT :
Q
. Sorry, Mr . Parmar. Continue?
A. Can you repeat the question?
I lost my thought .
JUSTICE HOGAN : Why are you
obj ecting to the question?
MS . BOND: Because the question is
whether a supporting activity meets the three
criteria o f a program. It never does . It is a
bogus question .
JUSTICE HOGAN : I am giving him
some latitude to ask the question. You can make
your arguments late r .
MR. BARTLETT :
Q
. Thank you, your honour . Mr .
Parmar, I believe the question was : I f you do a
test with a product that you acquired -- in this
case, the General Electric ECM motor -- you test
it, and the results aren ' t what you were hoping for
or what you need. You find some other way to build
the system. Why does that not involve
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advancement and the scientific method?
A. I f you say that they acquired
a motor from General Electric -- the motor is going
to do whatever it does -- and they make changes
somewhere else within the system to meet the
requirements with that motor, that may qualify,
yes .
JUSTICE HOGAN : What about if they
take the GM motor; they put it in their sys tem;
they see that it doesn ' t work . It doesn ' t produce
either the static pres sure they want, or it is too
noisy or whatever . They go and get motors from
somebody else. They try it, and it doesn ' t work,
so then they have to reprogram the motor to get i t .
The reprograming t o fit within their system, that
is not SR&ED?
THE WITNESS : As I said,
reprogramming the motor does allow the
capability to do the reprogram.
JUSTICE HOGAN : I understand, but
presumably -- what i f the evidence showed that they
reprogrammed the motor? They tried it at various
speeds and so forth and torque because they weren ' t
getting the right pressure, and then the motor
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overheated or was producing an amperage which was
too high? What if the evidence showed that they
had to play with the reprogramming to get it to
work so that its amperage was proper; it wasn ' t
overheating, and it was producing the right static
pressure? In a high velocity system, is that
SR&ED?
THE WITNESS : I f I understand your
question, they have a motor and they plug the motor
in, which is supposed to give certain CFM in this
case . That motor was giving certain CFM in this
case, and then was getting overheated doing
something other than or not giving static pres sure .
All I am trying to say is , there,
if you have the motor used in a way which gives you
the CFM main thing in this one is that you
requi red from the motor CFM, how fast you move and
how much air it can throw out . If you have the
right CFM, it will give you, given that s ystem, the
right static pressures .
JUSTICE HOGAN : Let me understand .
I am not a technical guy, but you put a motor in a
box , right? That is what you are doing in a high
velocity system. You take the motor; you put i t in
a box, and you put a fan on top of it . You may get
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an off-the shelf motor or you can order a motor
from somebody who manufactures motors . You put it
i n that box, and then it starts to spin. Maybe it
doesn ' t produce enough pressure because of the
design of the box, the fact that it is in a certain
cabinet space , because of the way the piping has to
be put into the box because there are confinements
in space and so forth .
Then you have to play with either
the engine speed or the torque of the engine to get
the right pressure . But when you start playing
with the engine speed and the torque, it starts to
overheat, so you have to cons tantly reprogram it to
try and get it at an optimal . Nobody has a
knowledge of how to program that engine for that
box at that particular time . If you spend money
doing that, is that SR&ED?
THE WITNESS : They don ' t want to
change - the way you explain to me -- the rest of
the system bes ides that motor . If that is the
case, right? If that is the case, yes , there could
be SR&ED there .
However , when you change the
motor, I presume that they will have the expert
person who is designing the system or working in
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the company. It is not j ust buying the motor and
putting the motor in . He will understand the
speci fications of the motors and matching of the
fan, whatever fan they are going to try. How much
space they need they will do all the
calculations and then put the motor in .
JUSTICE HOGAN : I f you spend that
money hiring that expert, working with you to
acquire and to do that, is that SR&ED? That is my
question .
THE WITNESS : I f this person
coming up and they design things with a known
knowledge o f how to des ign a particular system
us ing these components with known knowledge, then
the answer is no. I t does not qualify .
JUSTICE HOGAN : Known knowledge --
17 . but i f it is not known knowledge?
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knowledge, yes .
THE WITNESS : I f i t is not known
JUSTICE HOGAN : I t quali fies .
THE WITNESS : I t qual ifies, but
now you have to see if this one there, what it was
not known at that time for this company .
MR . BARTLETT :
Q
.
Mr . Parmar, I believe his
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honour ' s question -- your honour, I apologize i f I
misstate it -- was related to if you pay someone to
come in and figure out how the motor has to fit
into your system. What if that person is not paid
for by the appellant but , you say, works with the
motor manufacturer? Does that change your analysis
at all ?
JUSTICE HOGAN : That is a
different question you are as king . You are not
as king him a question based on his expertise now .
Who pays what and what expenses you are incurring
-- the question I was asking him was , doing work
related to spending money to be able to program the
engine properly, could that be SR&ED?
Who pays that expert if I am
incurring other expenses that might be a
different question .
MR. BARTLETT: I apologize, your
honour . I misunderstood your question .
JUSTICE HOGAN : I am not asking
him to comment on the evidence . Obviously,
evidence is a question of whatever factual findings
I will make after having heard the witnesses .
What I am as king him is, i f you
take something off-the-shelf, and it is not
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working, and then you have to spend a lot of time
and effort to get it to work within the confines of
your system because the confines of your system may
cause the engine to overheat -- it may be that
because it i s in the closet and there is a squared
angle, you are not getting the right static
pressure, therefore you have to change .
You have to play with the torque .
You have to play with the engine speed . When you
are reprogramming that engine speed, it may cause
the engine to overheat too . You are taking i t
outside i ts normal specs , so you have to make other
adj ustments . My question i s , it seems to me that
would be SR&ED.
THE WITNES S : Yes . In that case,
what they are trying to understand is how to get a
certain pres sure out of this motor .
JUSTICE HOGAN : Or within the
confines of the s ystem, right? It i s clear if you
took the motor and j ust put it on the table, and
you caused it to spin, and there i s no heat problem
or the air is moving s traight up, maybe you . will
get your result . If you put i t into a box which
may look different, you may get a different resul t .
THE WITNESS : That ' s correct, but
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i n that case he was trying to do more experiments ,
more analysi s , whatever is requi red to achieve the
final result .
THE WITNESS : You may require
changing of the motor, changing of the system
itself, but when you say "programing the motor, " it
may change the characteristics of the motor .
The motor allows you to do certain
things . These motors are designed for that
purpose . Now if you go and change the motor or
program it in such a way, which it was not designed
for the purpose
JUSTICE HOGAN : Or nobody figured
out that program yet .
THE WITNESS : Or nobody figured
out that program because programming is -- they
already give you what the capabilities are .
JUSTICE HOGAN : Right , because if
programming is j ust push-button button 1 to get
this speed, button 2 to get this speed --
THE WITNESS : That ' s correct . You
are absolutely right .
JUSTICE HOGAN: That is not SR&ED.
THE WITNESS : Right .
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JUSTICE HOGAN : SR&ED would be , on
the other hand, i f you have to write a new program
or do something, change the circuits or do
something to produce a different result .
THE WITNES S : That ' s correct .
JUSTICE HOGAN : That would be
SR&ED, you are saying?
THE WITNESS : Yes . That is where
they try to go into that detail . Yes .
JUSTICE HOGAN : Thank you .
MR . BARTLETT :
Q
. I am even less of a technical
person, I think, than anyone in this room, so you
will have to explain for me . When you are
reprograming an ECM motor, what are you doing?
What are you changing?
A. The ECM motor changing
requires in most cases would be required to
changing the current, how much RPM you need and CFM
at the end of the day . Some others could be when
you want to cut it off if it got overheated . A
number of other items are required there . That
wi ll be reprogramming . Some of the ECM motors will
have - as the Judge said, it requires the buttons
there , you wi ll program A, B, C or dip switches,
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1 . they have .
2 In some cases, you may have to go
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to the manufacturers . The motor is fully capable
of doing that, but they are not the market
requirements . They can reprogram, write a small
program for your purposes as well . That could be
reprogramming as well .
Q
. I f I understand it, when a
motor comes - you have purchased one off the shelf
that is already programmed to, say, run at a
certain RPM; is that correct?
A. ECM motor comes with a motor
itself plus a controller, and a cont roller has a
programming mechanism that will provide you with
whatever you need out o f that .
Q
. When you say "whatever you
need out of that , " would that be one of the things
that
A. When I say what is the
capability o f this motor, that is what will be the
programming give it to you . A control ler comes
with the program, and you can use that .
JUSTICE HOGAN : It is like a fan,
a ceil ing fan, with a rotary switch . You turn the
rotary switch and you get more speed, less speed
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and so forth .
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THE WITNESS : Similar things .
JUSTICE HOGAN : The ECM, you would
have it a little more sophisticated, but what you
are saying though, i s : I f you have that ability to
program it , but nobody has tried to put it in this
box . You need to make and figure out how to adj ust
the speed using not j ust your normal cycle but new
things . That would be SR&ED . I f it was j ust a
switch that you had to turn, it would be SR&ED .
THE WITNESS : Yes . I f they
already have given you switches - - in most cases ,
they come with what they call dip switches or
whatever they are . They al low you to do certain
speeds, certain practices o f the motors . That i s
very normal . Every time they go there, they do
that .
On top of that, the manufacturer
also has the capability of providing other than
those dip switches to program it. Dip switches are
for 99 per cent of the market what they do, but i f
you have ten per cent of the market go to the
manufacturer and say, ' ' This is what I want from the
motor, " they can reprogram the internals whatever
they are . For your purposes, that is not SR&ED,
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but if you do anything other than --
JUSTICE HOGAN : But then the
manufacturer reprograms it, and it is trial and
error, right? Maybe the first time you tried it in
the box, it didn ' t work, so you have got to go
back, take it out and put it back in. That would
be all SR&ED, would it not?
THE WITNES S : That would be SR&ED
for the company who manufactures i t .
JUSTICE HOGAN : Why not SR&ED for
me , my know-how to figure out how to make my system
operate?
THE WITNESS : Because you do not
understand, this company would not unders tand the
properties of the motor itsel f. Those are
properties of the motor, how to design the motor to
do certain things .
MR. BARTLETT :
Q
. Mr . Parmar, as I understand
it : The motor comes with the switch that allows
you to change the RMP to, say, 1 6 0 0 RPM, and you
try it in your sys tem, and it doesn ' t produce the
results you want . You want to try it with a higher
RPM, but this switch doesn ' t allow you to go that
high . You ask the manufacturer to reprogram the
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motor so that it runs at a higher RPM .
First of al l , is that something
that can be done by reprogramming? You said a
manufacturer can reprogram i t . I s that something
that a manufacturer could reprogram? I s that what
you are saying .
A. I n mos t cases , the
manufacturers , when they put a product -- i n this
case a motor -- in the market, they would say this
motor is guaranteed up to that leve l . They have
done a s tudy whatever the reasons, whatever they
are -- speci ficat ions , they have there .
If you want to go higher than the
specifications , in most cases they wil l say it may
run the higher speed, but they will not guarantee
it or it will not be warranted .
Would they be able to program
them? They will go and study that . I f they ask
them to program for a higher speed, what will be
the implications? In some cases it may be okay; in
some cases , maybe not .
JUSTICE HOGAN : What was your
understanding of what the company did on the ECM
motors ? Based on your review, what did you think
the company did?
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THE WITNESS : In my review, when I
looked at that one there, initially they had the
motors , I bel ieve , from the GE . They started
working with that one, which was not producing the
high static results, the CFMs and whatever they
required there .
They ran that particular motor at
a higher RPM . That motor al lowed them to run it at
a higher RPM . They went to GE again, and GE said,
'' I f you run it at higher than what we are
recomending, the warranty won ' t be there . " As a
company, that may not be a business solutions , even
if the motor can do the j ob.
Then they started searching for
other manufacturers ' motors , and they found one .
It was in Japan, maybe Korea or wherever. They
found a motor from outside . They used this motor
JUSTICE HOGAN : Do you know what
they did to that motor from Korea? Were you aware
of whether they did anything to it or not?
THE WITNESS : Did they get?
JUSTICE HOGAN : Were you aware
that they did some programming, that they did some
testing on the motor and so forth?
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THE WITNESS : My understanding is
when they received the motor, they plugged it in it
there . It did not work. They went back to this
company and said, "We need to reprogram these
motors . " That is my understanding . The company in
Korea, they helped them out , or they did it
themselves to help them.
MR. BARTLETT :
Q
. Based on your understanding,
where they tested a motor and it didn ' t produce the
results they wanted, they requested that it be
reprogrammed to produce higher torque . They tried
that out . Does that quali fy as SR&ED? Is that
SR&ED?
A. As I said, i f they j ust
program it, right , it is not SR&ED .
JUSTICE HOGAN: What about t rying
it out in the box so that it works within the
confines of the box that they designed? A motor
can spin at a certain speed, have a certain torque .
THE WITNESS : That ' s right .
JUSTICE HOGAN : That is
meaningless unless you put it into whatever you
want to use it in with the right heat source and
everything, and then that is when you have to make
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sure it is not overheating , or the speed it is
turning at is producing the right result .
Is the testing of that , to get the
right result -- because nobody knows how to get to
that right result within the confines of the system
-- i s that SR&ED?
THE WITNES S : I f they are t rying
to find out -- we did talk about it a few minutes
ago as wel l . I t is the same subj ect in the same
way . I f they are trying to get out of the motor
more than what it is supposed to do in that
confined space without changing anything else
around it --
JUSTICE HOGAN : Or discovering
whether it works within the confined space? The
manufacturer might not have tried to build this
engine to work within their HVAC system. The motor
might be there to work in a hundred different types
of system, but when you take that parti cular motor
and put it within the confines of a HVAC system,
you have to know whether it i s going to develop the
right air pressure and not overheat, presumably,
and cause a fire .
I am guess ing those are really the
two critical elements, and testing to get to that
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result, is that SR&ED? That is my question .
THE WITNES S : The test ing is done
for two purposes in this case . One is there . Does
this particular motor give the result of what I
want?
JUSTICE HOGAN : Within the
confines o f my system.
THE WITNES S : Righ t . That i s one
purpose . If it works there, great . One is there .
The other one is there is, other test ing purpose is
to find out what does not work and why it does not
work.
THE WITNESS : Once you have found
out what does not work, why it does not work and
how to make it work --
stops .
JUSTICE HOGAN : Okay, then that
THE WITNESS : That is SR&ED work.
JUSTICE HOGAN : But everything to
get to the point of how will it work is SR&ED,
then?
THE WITNESS : How it will work .
What do we have to do to make it work? In my case,
finding out the motor does not work and why it does
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not work is normal tes ting, but once you find out
why it doesn ' t work and what does not work, now how
am I going to make it work --
JUSTICE HOGAN : Within my system.
THE WITNESS : -- within my sys tem.
How am I going to make it work, right? That
investigation is SR&ED. It could lead into the
SR&ED work because you have to study much more to
know that the motor or your whole area, air flow
and everything else .
MR . BARTLETT : Madam Registrar,
can I ask you to pas s Exhibit R- 2 , which is the
respondent ' s book of documents, to the witnes s .
Q
. Mr . Parmar, can I ask you to
turn to tab 2 3 . This is a document entitled "Max
Models with ECM Motors on Delhi Blowers" dated
August 2 4 , 2 0 07 . Do you recall seeing this
document before?
A. I don ' t know . I may have
seen it; I may not have seen it . I cannot really
pinpoint that .
Q.
That ' s fine . My question is :
I f the appellant undertook eight different tests
where they tried one of their models, tried the ECM
motor at a particular horsepower combined with a
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particular blower and the motor at a particular
speed, and they measured the torque, amps , CFM
i f they undertook that, would that qualify as
SR&ED?
A. If I am looking at this
information only I have not seen that before
it looks like to me what they are test ing it out ,
what they can get out of this system. There is no
uncertainty identified at this point . That is what
I am looking at right now .
I f I were trying to do, or even a
smaller company would like to do is try to find out
how good a Delhi blower is in my system there , I
will do for all different systems the different
speeds or whatever I was looking for, rather than
going for the motor, half a horsepower,
three-quarter horsepower and checking out the
system which is Max 50, which has a certain
capacity; 55 is a diffe rent capacity .
JUSTICE HOGAN : Are you
substituting your business j udgment for their
business j udgment? In other words , if they say, " I
am going to do my testing by trying these motors
and adj usting them within my system to see whether
or not they are going to deliver the capacity
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because nobody has designed a motor to satisfy the
needs of my system yet . " They may do it
di fferently than you do i t . They are using a
different trial and error methodology, but is it
SR&ED?
THE WITNESS : No because what they
are trying to unders tand is what they can get out
of this motor in this particular system. That is
what I am trying to say . They test it out . You
are right . They are saying, '' In this bus iness
model, I have this motor. What can I get out of
this system, out of this motor?''
MR. BARTLETT :
Q. Mr . Parmar, elaborate on why
is tes ting a motor that has never been used in this
fashion -- or I assume that -- why is testing it in
your system and measuring the results , why is that
not SR&ED?
A. Because that testing tells
you what its capacity or what this motor can do
there . That is all I understand about the motor,
about the system, what they can do . I t is not
advancing one ' s knowledge about how to achieve
certain things from science point of view .
JUSTICE HOGAN : Let me ask you a
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question : When Boeing builds the new carbon
aircraft it is building , the streamliner, and it
subcontracts to United Aircraft or Rol ls Royce the
design of an engine , and then Rolls Royce builds
the engine and does all the R&D and gets the
engine , at one point they are going to take the
engine and put it on the aircraft and make sure it
delivers to what they are promising Air Canada or
one of the airlines . In other words, lower fuel
consumption, efficiency and so forth .
When Boeing takes that engine and
plugs it onto their aircraft , which they designed,
and then they run it through a series of tests to
make sure that it is going to deliver what they
promised to deliver, is that SR&ED?
THE WITNESS : In the case of
Boeing, in this example , when Boeing asks for the
development of an engine, they give a specification
to whatever the company is . They are not designing
the engine themselves; they are des igning the
aircraft .
JUSTICE HOGAN : But then they have
to take that engine, which gets delivered to them
in a prototype , presumably, and they have to bolt
that onto the air frame and they have to try it .
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They have to make sure that what they promised Air
Canada -- that there is going to be 20 per cent
less fuel consumption, and the engine is not going
to overheat because of the design of the wing and
so forth
SR&ED?
all of that is satis fied . Is that
THE WITNESS : Yes , that will be a
-- mostly, it is a new, the A3 liner, the new
aircraft coming to Boeing . I f you look at the work
on that particular ai rcraft, it is not all -- I am
not going to end here on this one .
JUSTICE HOGAN : I understand, but
a new HVAC system -- it might be a smaller and less
sophis ticated product , but it is a new product in
the marketplace that didn ' t exist. The old one
didn ' t work . Assume the evidence showed that the
old one didn ' t work . It was too noisy. People
were filing lawsuits and so forth . You come out
and you have to redesign a whole new sys tem and put
engines in them and try to make sure the whole
system operates .
Isn ' t there a certain analogy with
what Boeing does when it takes the engine and gets
it from United Aircraft or from Rolls Royce?
THE WITNESS : All I wanted to say
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in case of Boeing was -- or I can come back to this
as well
is everything they did on designing the
whole aircraft is not SR&ED. That is what I wanted
to say . There may be a portion of the work that
may be SR&ED required; not everything, but a
portion of the work.
large portion .
JUSTICE HOGAN : I would as sume a
THE WITNESS: Maybe a large
portion, right ; as I said, maybe the large portion,
right? But there will be certain activities, some
work done, which may not be SR&ED work . That is
all I am trying to say.
When you are looking at a system
point of view, you are integrating a number of
components . Some of the components they may have
to design themselves , in a case like the Boeing
example you gave . The engine design itself may
have a very large portion of the SR&ED work.
JUSTICE HOGAN : The integration i s
important .
A. The integration of those ones
could be a very large portion of SR&ED work.

JUSTICE HOGAN : The question is :
Is the integration of these motors into the system,
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SR&ED?
74
THE WITNESS : The integration of
the motors is what we call in our document , sys tem
level uncertainties , whi ch means you are
integrating different components off the shelf and
trying to get a system out of that .
THE WITNESS : In that cas e, you
identify, as I have identified, what is the
technological limitation or advancement you are
trying to achieve when you are integrating that?
That uncertainty or advancement you are looking
there, once you do that , has to lead into some
changes in underlying technologies .
JUSTICE HOGAN : If it leads to
reprogramming an engine to get it to operate within
the confines of your system -- let ' s assume that
was the uncertainty -- can I find an engine that
will operate within the confines of my system and
deliver the right static pressure without too much
noise?
THE WITNES S : As I said before,
what changes do you make to underlying technology
in this case the engine -- to deliver the motor?
If they make changes to the motor, not just the
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programming that they are already capable of -- -
JUSTICE HOGAN : But if they don ' t
have the capability to program simply, in other
words if they have to spend money to reprogram?
THE WITNES S : I understand that .
It may require redesigning of the motor itself. I
don ' t know what level of programming
w
as done in
this case, but yes , in some cases yes , you go may
have to go and complete the underlying technology
of motor itself. If they have to go into that
length, yes .
JUSTICE HOGAN: Counsel , continue,
sir .
MR . BARTLETT :
Q
. Thank, your honour . What
about the constraints related to the space that
they had to deal with or that they were striving
for, the space constraints? What is your
understanding of whether anything related to the
space itself was SR&ED? By that I mean that it had
the technological uncertainty, technological
advancement and scientific method?
A. Space cons traint is new,
coming to me right now. We didn ' t talk about that
-- you can see in my report as well -- either or
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during the three site visits that I made talking at
that point .
I could not even see that one;
what was done in order to minimize the space or
build the space constraint, so I cannot really say
that . I didn ' t see any document which shows that
i f I had this one , what do I have to do that? All
of the data, whatever was presented to me, we
didn ' t even talk about that .
Q
. The fact that when the
product is finished, and they are putting it to the
market , they want it to have a particular size,
footprint or whatever space constraint -- is it
your understanding that there is anything inherent
in that that would have technological uncertainty,
technological advancement or scientific
methodology?
A. As I say, I did not even look
at that . We never talked about that , so I don ' t
know what to say about that . I can ' t say that
there was an uncertainty or not unless I see that .
What was really constrained? Yes, I can see that I
would like to make this -- this is more what I want
to do it, unless you do . So what, in order to
achieve that?
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In my view, they say whatever the
design, give them space , that is what they got it .
That is what my understanding i s .
Q
. Mr. Parmar, can I ask you to
turn to tab 2 4 of R-2 of the respondent ' s book of
documents . Do you recognize this document?
A. Yes , I do .
Q
. Earlier, you referred to an
email . Is this the email?
A. That is correct, yes .
Q
. What is your understanding of
this email?
A. There are two points I got
from this emai l . One is that this company,
Deflecto, was trying to develop a product l ine for
flex cables ; that was No . 1 . No . 2 , AirMax was
trying to acquire different components which are
part of the system, one of the flexes from this
company. They were keeping in touch with that , who
is making it and how they are making i t . The third
one, if I can make it, this one is even though it
is a very simple email, is showing up what,
systematically, they were trying to achieve and how
they were trying to achieve the results .
Q
. When you say "they, " what do
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you mean?
A. Deflecto.
Q . Can I ask you to turn to tab
12 of the respondent ' s book of documents .
JUSTICE HOGAN : Before you leave
there, did you know who was doing work for whom
when you reviewed this?
THE WITNESS : No. Can you repeat
the question, please?
JUSTICE HOGAN : The question is :
Do you know who had asked for the work to be done?
Do you know whether AirMax asked Deflecto to do
this work for it?
that?
THE WITNESS : No .
JUSTICE HOGAN : You didn ' t know
THE WITNESS : No .
JUSTICE HOGAN : Would it change
your answer if you knew it?
THE WITNESS : I f I knew that?
JUSTICE HOGAN : Yes .
THE WITNES S : Yes , then I think it
may change the answer . Yes .
MR . BARTLETT :
Q. I f Deflecto was tes ting
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different materials and different hole si zes to
produce a product that would be sold to AirMax,
does that change your assessment of whether the
work was eligible for SR&ED for AirMax?
A. I f Deflecto was doing the
work on behalf of AirMax, then yes . In that case
Ai rMax is the one who is doing the work. They hire
the subcontractor to do the work on their behal f .
However, i f Deflecto was doing the work as one of
the product l ines they are making so many
products there -- one of the products making for
that purpose is there , then it doesn ' t change the
answer.
Q . Sorry . If you say it is done
on behalf of AirMax . What i f it is done at the
request of AirMax, but the product would be
Deflecto ' s product?
JUSTICE HOGAN : Why don ' t you ask
the further question, Counsel : What i f it is done
at the request of AirMax . Deflecto does it, but
the product will be sold only to AirMax,
exclusively to AirMax.
THE WITNESS : In that case, yes
because AirMax has the right what they ask for to
do i t . Rather than doing i t by themselves, SR&ED
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work, they are asking somebody else on thei r
behalf .
MR . BARTLETT :
Q
. When you say they have the
right , what do you mean by " the right" ? In your
answer there, you j ust said ' ' because they have the
right . "
A. "The right " means they have
knowledge , whatever they --
JUSTICE HOGAN : The know-how.
THE WITNES S : exclusively. As
the Judge said there a minute ago, they only can
sell to AirMax, so they are exclus ive rights . That
is what "right' ' means . Intellectual property
rights . Whatever they did the work, they had the
right to do it, right? So they have got all the
knowledge behind that and the information coming
from AirMax?
Q
. You are saying that the
intellectual property right -- who has that will
determine whose work, who would be el igible under
the SR&ED program?
JUSTICE HOGAN : And "right" would
be j ust know-how, right? . It is not patented right .
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THE WITNESS : No, it is know-how.
Yes , it is knowledge .
JUSTICE HOGAN : I f I have the
knowledge, and i f I have the benefit of using that
knowledge through an exclusive l icence, then that
could be my property, my SR&ED?
THE WITNES S : That ' s correct .
MR. BARTLETT :
Q
. Could I ask you to turn to
tab 12 of the respondent ' s book o f docuent s .
JUSTICE HOGAN: Counsel, I am
going to take a ten-minute break * I am going to
stop as king this witness questions . I am going to
give you ten minutes because I have as ked him a lot
of questions . I asked a lot of questions because
he is not l i ke a normal witness in the box . He i s
a friend of the Court . He i s an expert . He is
here for me , not as an advocate but as an ainicus
curiae . Thank you .
Recess taken at 1 1 : 2 5 a . m.
Upon resuming at 11 : 4 0 a . m.
MR . BARTLETT :
Q
. Mr. Parmar, did you discuss
AirMax ' s work involving the flex with anyone from
AirMax?
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A.
82
No .
Let me
work related
to flex design, flex use? Which way?
Q
. At all related to flex . Can
I ask you to turn to your report which is at tab 1
of R-3 ; page 7 of that report . I direct you to the
last paragraph on page 7. It begins , "The claimant
tested system at Home Comfort site . " Do you see
that?
A.
Q
.
Yes .
The paragraph reads :
"The claimant tested system
at Home Comfort site and at
2 5 Golden Spruce Line , Maple
site . During testing at Home
Comfort site, the claimant
again identi fied a noise
issue and resolved it by
using perforated flex that
had sets of small and large
holes . '' (As read)
Mr . Parmar, did you discuss the
use of perforated flex with anyone from the
appellant?
A. Not beyond this extent of
what we already have in the report .
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Q . What do you mean by that ?
What discussions , if any, did you have about the
flex?
A. The only discussion we had
with the flex was , they were using the flex, but
for the flex that they used -- that is the whole
discuss ion . Nothing of the design, nothing of the
other design, what they were using .
Q
. The next sentence says :
"Since use of perforated flex
helped reducing sound level ,
the claimant stated using
this technique whenever they
had noise issue . " ( As read)
What was the basis for that
sentence that you wrote in your report?
A.
again?
Q .
Can you read the sentence
Sure . It is the sentence
that begins on the third line :
" Since use of perforated flex
helped reducing sound level,
the claimant stated using the
technique whenever they had
noise issue . "
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When you say ' ' the claimant , " who
is "the claimant " ?
A.
Q
.
the company?
A.
Q
.
else?
A.
Q .
referring to?
A.
Q .
The company .
Who did. you speak with from
Jack.
Did you speak with anyone
No .
What technique are you
The drilling of the holes .
Did you discuss the dril ling
of the holes with Jack?
A. Drilling the holes, yes .
That was discussed during the first meeting and
subsequent meetings as wel l , that they drilled the
holes, yes . But this test was done at the Golden
-- whatever the place is there . That is a
reference before , as well . That was a third party
test ; did some tests at the time .
Q
. On the fourth line from the
bottom, there is a sentence that begins :
"Note dated February 27,
2 0 0 8 . Calls for a flex with
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small holes, flex with large
holes and flex with no
holes . '' (As read)
Do you recall what the note said
or what the note was?
A. Yes . The note was regarding
W
they were testing the system in some houses,
maybe one of the houses , and they had some noise
issue coming up . At the time, the note i s also
noting that, why don ' t we order all three types
flex, with holes , with no holes and small holes
larger holes . That is what the note is saying .
That is what i t is saying .
of
and
Q
. Did you say they ordered the
flex or did they create the flex? What was your
understanding?
A. They ordered the flex.
Q
. Do you know who they ordered
it from?
A. The notes

I could not see
where they ordered it from.
Q
. During your review, did Jack
Van Beurden or anyone else from AirMax talk about
Deflecto?
A. No.
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Q. Was there any reference to an
agreement for the exclusive sale of a Deflecto
product?
A. No .
Q
. Are you fami liar with UL
li stings related to flex?
A. UL li stings?
Q
. UL.
A. Yes , I know . UL listing to
flex? No, I am not aware of them.
Q
. Could I ask you to turn to
tab 12 of the respondent ' s book of documents . This
is a letter on Clear Ai r Design Inc . letterhead
dated March 4 , 2 0 0 9 . Do you see this document?
document ?
A . Yes , I have seen it .
Q
. Do you recogni ze this
A. Yes , I do .
Q
. Earlier , you referred to a
letter from 2 0 0 9 , I bel ieve you said . I s this the
letter?
Q
. Under ' ' Potential Sources of
Failure, " there are some items l isted. What was
your understanding of those items listed under
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" Potential Sources of Failure '' ?
A.
One was the noise, which is
more a scientific way they were trying to work on
that one ; the capacity; longevity; ease o f
instal lation . That is the one ; I understand that,
yes .
Q
. Other than noise, did you see
anything related to those other potential sources
of failure in terms of technological uncertainty,
technological obstacle or a systematic
investigation?
A. No, I did not see .
Q. I n the paragraph above
" Potential Sources of Failure , '' under the heading
' ' PSC Motor Stage, " it says :
' ' Before the devel opment
stage , we spent over a year
reviewing what was
commercially available, what
the limitations were and what
the weaknesses were of the
systems that could heat, cool
and ventilate specific
designs of residential
dwellings . '' ( As read)
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I bel ieve I as ked a general
question, but more speci fically, is reviewing what
is commercially available
is that SR&ED
eligible?
A. No.
Q. Why not ?
A. Because by reviewing the
existing systems , you understand what a system can
do and what the limitat ions are . You are not
really advancing any technology .
MR. BARTLETT : Thank you, Mr .
Parmar . Thank you, your honour. Those a re my
questions .
CONTINUED CROSS-EXAMINATION BY MS . BOND:
Q. I will be as king questions
related to your expertise in SR&ED and also
specifically on the case at hand, but they are not
the same thing . Let me first go to SR&ED-type
questions , j ust general, related to the regulations
because that is your area of expertise .
No supporting activity, by itsel f,
meets all three criteria of the program; is that
correct?
A. If you do only supporting
activities, it does not meet the criteria .
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Q . That is not what I asked you .
I asked you does a supporting activity meet the
three criteria of the program?
We know that supporting activities
are eligible . We will assume that the Court knows
that there are supporting activities that are
eligible if there are three criteria that have been
met, but a supporting activity by itself never
meets the three criteria of the program. A test,
by itself, is not an advancement . That is correct .
A. That is correct, yes .
Q.
I think I have made my point
on that . Data collection is an el igible activity .
Once again, we will assume the three criteria have
been met for these hypothetical quest ions .
Data collection is one of the
activities that is listed as an eligible activity
i f the three criteria of uncertainty, advancement
and so forth have been met , so data collection is
one of the activities that is eligible, that is
commensurate with the needs of a proj ect .
A. I f I understand the question
correctly, if the data collect ion is in support of
eligible SR&ED activi ties , then the answer is yes .
That data collection is -- yes , eligible work.
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Q. Other activities that are
eligible, potentially, j ust going right off the
guidelines, are mathematical analys i s , correct?
Engineering is an eligible activity if it is in
support of those three criteria, correct?
A. Yes . There are eight
activities listed in the Act which are in support
of the SR&ED work i f you are doing three -- i f the
activities are in support of the three criteria,
trying to do that .
Q. By its nature , engineering is
always a l ittle bit routine because engineering is
engineering . Data collection is always data
collection . We don ' t seek technological
uncertainty in the engineering itsel f . We say it
supports a higher uncertainty . Would that be a
proper interpretation o f how you would look at a
case with your interpretation of the Act?
Q
. Routine engineering as I
understand i t, and perhaps you understand it in the
same way -- one of the important things about
routine engineering is that the results are
predictable . Therefore there is no uncertainty .
Therefore you don ' t meet the criteria of the
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program, so you should be looking for predictable
results . That is an aspect , a characteristic , a
generalization?
A. Activity, routine engineering
in all cases , it does not mean that the result
is unpredictable . That is what I would say . It is
one of the things . In some cases , yes . I f you are
unpredi ctable , it could be said that yes , there is
uncertainty, but it is not always t rue .
Q
. Isn ' t that part of what I see
in the 8 6 4 0 3 and recognizing experimental --
JUSTICE HOGAN : You are striving a
little off. The purpose o f the expert is not to
tell me what the law says , because the law -- that
is my j ob. I t is not the expert ' s j ob. That i s my
j ob. You can question him and challenge him on his
opinions that he has made vis-a-vis this proj ect ,
having regard to the information that he looked at .
MS . BOND:
Q. I n this particular proj ect,
it is your opinion that uncertainties were
eliminated in January 2 0 0 7 and that all of the work
from January 2 0 07 until they went to the market in
May 2 0 08 was all routine and did not involve
uncertainties ; is that correct?
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A. Yes , that is correct . Yes .
Q . Does that sound reasonable to
you, that all the results were predi ctable, and it
still took another year and a half ; a year and a
half of predictable, standard, routine engineering
through methods that were known, when there was no
performing product on the market for them to
compare it to?
A. As I said before, when
results are not predictable, it does not mean that
there was uncertainty there . In many cases , there
may be no predictabil ity there at all , and still
there would be no uncertainties . I f you want me to
elaborate , I can do that too .
Q. When you look at a proj ect --
you are not a financial reviewer , I know that , but
you do have some mandate with regard to
reasonableness of expenditures, some scope .
I f the company made $ 1 million in
a year and spent $1 million on R&D, you might say
to your manager, "I don ' t think that is reasonable .
That is inconsis tent with R&D . '' You have some
ability to look at the picture of a company as far
as -- were the expenses o f a reasonable magnitude
or amount . It is in your scope .
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A. I am looking for a question .
What is the question?
Q
. Is it in your scope as a
technical reviewer to look at the reasonableness of
the expenditures?
A. No.
Q
. I t is not?
A. I t is not .
Q
. I f you were given $ 1 million
worth of expenditures, and the company made $ 1
mill ion dollars in revenue , you wouldn ' t advise
your financial reviewer that that seems odd? There
is no mandate whatsoever for you to make any
reasonable projection on your own?
experience .
A. That i s correct .
Q
. It is different than my
JUSTICE HOGAN : He gave his
answer . You have to move off the question .
MS . BOND:
Q
. You agree that SR&ED is
mandated to be in the context of a business of the
taxpayer; that ' s correct?
Q
. AirMax is in the business of
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HVAC equipment ?
A. Yes , that ' s right .
Q. You were aware that the
competing products in the market didn ' t work?
A. That is what I was told .
Q
. Were you aware of that at the
time o f the review?
A. I did not look at the AirMax
product and the rest of worldwide, what product
they are trying to compare, which works and which
does not work. No.
Q.
In your technical report,
which is in a few different documents -- this
document here is from the respondent . It is your
technical report, page 9 of 14 . On the first line
of the second paragraph, I read:
" It is evident from these
documents the claimant
attempted to develop low,
medium and high capacity,
three models based on the
model already avai lable in
the market . " (As read)
Correct?
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Q. You don ' t mention anywhere in
thi s technical report, however , that those models
didn ' t work. Isn ' t that relevant?
A.
I did not test those models .
I don ' t know whether they work or not .
Q
. I f you are making a reference
to what is in the public domain, and you are making
a j udgment about the relevance of what is known and
what is not known, how can you simply say it is
known and then not put in the relevant factor of
whether it actually works or not?
A. Put it this way . This is
what I am saying about what is known, is not known :
No . 1 . , when I look at the experiment or the data
presented to me, that also has the models from some
competitors . No. 2 , when we visited the company,
they also said they tested out -- even , we looked
at the letter a few minutes ago - for first year,
they were looking at the competitor ' s system, what
they have . Based on the fact, I can say that there
were models available - - high , low, and medium --
in the marketplace . Whether they work or not work,
what their deficiencies are, I did not go to study
those ones .
Q.
Don ' t you think that is
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relevant? If the Income Tax Act or the policies
define an advancement of knowledge as an increase
of capacity or performance over the products that
are in the marketplace, and that is almost
identical to what it says in the 8 6 4 0 3 -- I can
find the note -- how can you not compare to what is
available when that is the criteria? It is to
compare it to what is available .
These products perform better than
what is in the market . That is part of the
criteria of an advancement of a product or device ,
so don ' t you have to know how the other products
perform in order to make the comparison?
A. One can ' t go and look at the
performance of all the parts or all the systems in
the world, wherever they are . They can only look
at the specifications . I t is not really the
technology behind them. I f I can go a little bit
further, that is one of the reasons why, when we
review it, we review the company on a company basis
itself, not comparing with anybody else . That is
the reason .
We look at it -- company ' s
technology, company ' s base knowledge; that is the
level we look at that . Otherwise, we compare the
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rest of the world, and we can say this i s better
than the others , and this is not advancement in
there .
here .
Q
. I have to find the reference
JUSTICE HOGAN : You don ' t need
that , Counsel . You put the question to him. You
can move on . You made the point . The point is
made .
MS . BOND :
Q. You received the documents --
I think you would recogni ze them here, or something
similar to these five distinct folders
on August
1 1 , 2 0 0 9 . Does that sound correct ? I have a
document here with your signature .
A. Sure, fair enough . Yes , I
did receive documents .
Q
. You wrote your technical
report in November 2 0 09?
A.
Q
.
That ' s correct . Yes .
That was three months . In
those three months , did you call the claimant ?
A. Did I call the claimant? I f
my report i s saying that I did not cal l , I did not
cal l .
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Q
. I am as king do you recall
ever -- if there were any uncertainties in the
documents or things that were unclear, did you call
them?
A. The answer is no .
Q
. In your technical report that
you wrote -- I can find the line there are a few
places . For example, on page 10 of 1 4 , section
( e) , the last line on your technical report -- I
think it is tab 1 , page 10 of 1 4 :
" I t i s not evident what
technological limitations and
what technol ogical
advancement the claimant was
seeking by carrying out the
above work . " (As read)
That indicates to me that you
don ' t know why they are doing BTU work, or it
wasn ' t evident to you, but you didn ' t call them.
You had three months to go through all of this
documentat ion . You could have picked up the phone
and clari f ied .
Why do you think the client would
j ust give you evidence related to the BTU? You
can ' t figure out why it is relevant, and you don ' t
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call? You think they j ust gave you reams of data
for no reason . I t i s not evident to you, but what
action did you take?
A. What we did was , before I
wrote this report, we visited the third time to the
claimant .
Q
. Yes ?
A. I f I look and go back i n the
page numbers here, say at the third site vi sit, and
the purpose of the site visit was to discus s what
the outcome was . I t was the time given to them s o
that i f they disagreed with what I am saying, we
can talk about i t . That was the reason .
JUSTICE HOGAN : Did you give them
a copy, a draft of your report at that meeting?
THE WITNESS : No, we did not . We
personally went out , and we discussed all the
outcome of the report . That i s what we did .
MS . BOND:
Q
. You testified a moment ago
that you had no knowledge of footprint being an
i s sue . Does that sound similar to what you
testified to a moment ago with my friend here?
Footprint was not a known issue to
you during your assessment; is that correct? Do
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you agree with that?
A.
100
Yes . Footprint is sue was not
discussed during the meetings . Yes , that is what I
am saying - - or was not listed out in part of the
evidence , discuss ing that .
Q. On Clean Air Design ' s
document, which was written for you as part of this
review -- it is in the respondent ' s book of
documents, page 12 if you want to look at it
Brian Jackson specifically mentions the is sue of
small footprint on multiple storeys , so footprint
was known to you to be an issue .
A. Yes . This document showing
up -- when I am saying that we did not discus s or
anything was given to me what was done to overcome
these footprint issues, that is what I am saying .
I am not saying that it was not listed out .
Not only that, if you look at the
footprint , even my report, if I can go back to the
second site visit when Brian Jackson was there, the
reference to one of the systems and the wal l says ,
" I f you do this, it will be that big . " But it was
not discussed in a sense that means what was done
what was really constrained, 2 0 ft by 30ft . That
part was not discussed. That is what I am saying .
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Q. On page 8 of 14 o f your
technical report, in the thi rd paragraph under
section 1, it says, "The letter also l ists
potential sources of failures . '' We talked about
them, and they are on here at tab 1 2 , noise,
capacity, aesthetics and so forth . " Potential
Sources of Fai lure, " you put in quotations , and
this is :
''Anticipated Is sues in the
Future . This implies that
the claimant had no other
is sues than noise is sue . '' (As
read)
I am j ust wondering how you could
come to that conclusion, to write that sentence ?
This document was written in March 2 0 0 9 . The
product went to mar ket in May 2 0 0 8 , and these are
clearly the is sues that they dealt with in those
five volumes of evidence given to you .
How is it that you have determined
that the potential sources of failure are in the
future, when these are in fact the issues that they
were dealing with over the last three years? Is
that a misunderstanding, in your technical report,
of the language, potentially, of the heading?
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A.
Can I get two minutes to go
through this document?
MS . BOND: Yes .
JUSTICE HOGAN : How much longer do
you think you are going to be, roughly?
MS . BOND : Maybe 2 0 minutes ,
maximum, and then I should be finished . I am close
to the end of my questions .
Q
.
Did you want me to repeat the
question?
A. Give me a second, there .
Okay . It could be an error when I was reading this
document .
Q
.
your part?
A.
Q .
That could be an error on
It could be an error, yes .
Clearly, you recognize now
that the potential sources of failure are not
future as of March 2 0 0 9 , but these are comparable
to the issues that were in the proj ect?
A. Okay. The only thing what I
see is there , I have to go back in there and
reconstruct my thought when I was reading this .
What I am looking in here, it says
apart from the capacity, the product will
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eventually be third party verified performance .
That is where I may have picked up this word that
is from the future . It would be third party even
though thi s was written in March 2 0 0 4 after we went
to the site visit . I think this was written after
that fact .
Brian was hi red in 2 0 0 6 , so that
may be the little bit of confusion in that, when I
was writing it down .
Q
. But these are issues . These
are issues that potentially should have come under
your purview because they were the issues of the
project?
A. Okay.
Q
. You met with Jack Van Beurden
and other profess ionals at AirMax . Did you meet
with Brian Jackson?
A. On one occas ion, yes .
Q
. Is he a profess ional
engineer?
A. I did not check his
credentials . He was an experienced person, yes .
Q
. It is important for you to
know whether the people working on the project are
qualified . Did you find that Brian Jackson was
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quali fied?
JUSTICE HOGAN : He answered . He
said yes, he was quali fied .
THE WITNESS : Yes .
MS . BOND:
Q
. When you are conducting an
SR&ED review, you are not simply limited to the
information on the page . You are also al lowed to
consider credibi lity .
For example, you might not have
seen the hypothesis written, but you saw the tests ,
and they are consistent with what they told you .
Therefore, you take it as a picture and say, '' I
believe that this is a credible as sertion, that
they have the hypothesis . " You are al lowed to make
certain leaps in your review?
A. Yes . As I said this morning,
there is not everything when I look at that . The
example I gave this morning as well, that
everything is written very nicely . I look at the
information provided like tests , experiments . Even
though there were some gaps , we tried to bridge it
by looking and talking to the people and what
information we have, yes . That is what I did in
this case as well .
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Q
. On page 10 of 14 of your
technical report, again you use the language in the
first paragraph :
" It i s evident from the above
documents that the claimant
identified issues related to
unburnt gases in July
2 0 0 8 . " (As read)
You go on to say, '' It is not
evident what systematic invest igation or search . . .
was undertaken . "
It appears to me that in many
cases, you have identified or recognized the
issues, but then you use a very blanket statement
that "It is not evident to me" what they did . You
don ' t have the ability to read between the lines
when you see an obs tacle and not put that together
with the commercial prototype that was developed?
A. When I say this statement --
I went through . There were, as you already know,
tonnes of documents . I spent lots of time and went
through everything line by line . Whenever
can patch something, I try to do that one .
i f I
If you look at the specifications
in this case, unburnt gases -- yes, there are
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emails talking about unburnt gases . Now, what did
he do to overcome that is sue of unburnt gases ? Did
he use the current knowledge avai lable at that time
or not ? That is not evident in that case . That is
what I am trying to say there .
They went out , the expert . There
i s a reason for going to the expert or the people
who are test ing it out, and they give you guidance
even if you have a problem.
" I ssue" does not mean a
technological is sue . " Issue " means there is a
problem. You did identi fy the problem. There were
many, many problems there . Those problems were
solved by the known knowledge or from the guidance
or recommendations from the experts .
Q
. Why does it take s ix trials
to come up with a des ign if it is based upon known
knowledge? Why are so many trials necessary?
A. I can ' t answer, in this case,
why there was so many trials . I can ' t say that ,
right? I already said they were changing the
component s . They were changing the parts . That is
all they were doing . They were testing it out,
what comes out of there .
Q.
Then one can assume that you
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believed that they were making incompetent trials
not based upon competency . If they had standard
methodologies available to them, then for them to
pursue six trials of different variations of flex
designs that were designed on their behalf, they
must be idiots . Why would they need six versions
i f the only one version i s predictable ?
A. I don ' t know why they had to
do six trials . I can ' t say why.
Q
. Isn ' t that your j ob to assess
whether six variations are reasonable , and if not ,
you can simply refer to the standard methodology
that was avai lable to them to point out to them
that it wasn ' t necessary? Isn ' t that your j ob?
A. I don ' t know what to say
about this, right . We look at the work. I looked
at the work that they did based on what they
described to me, what documents were presented, and
tried to patch it up i f they are missing
information. Yes, we do that .
Why they did six trials? You can
see from their documents as well , they were trying
to do the different motors , different coils, and
the different flexes . They were trying to do all
those things, but trying and evaluating because
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evaluations of those parts in the system, that is
what they were doing . That is why there were so
many tests .
There are many ways to design new
products, and one of the ways is doing a very
systematic way . I am not going to go there . The
other way of doing it is to see what the competitor
is doing . That gives them ideas , concepts . I t is
not saying copying, but unders tanding how the other
people ' s system works . It may not work 1 0 0
percent; whatever that means . Then, trying to
build your own either with the same parts or
similar parts or different part s , and testing it
out ; what you get it out .
When I saw there, that is what I
saw. The testing -- there was no modificat ion they
had done to any one of the underlying technologies .
That i s what I wanted to say .
Q. But the claimant testified
that they did modify material s . They modified
flex . They modified ducts . They modified
diffusers, and they modified motors after not being
able to find any motor on the market . I don' t see,
in your short description on ECM motors on page 10
of 14, where you describe the failures of motors
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and the reprogramming of motors on behalf of Ai rMax
-- it is not in here .
A. I t is maybe not i n here . I t
is somewhere in the documents . I t is there that
they did reprogram the motors . That is what Jac k
said. Look at that . That was acknowledged at the
time, and I am still acknowledging, yes, they did
reprogram the motor .
His honour asked me so many
questions regarding programming and not
programming . I did not deny that, the programming .
We talked about that many, many times .
JUSTICE HOGAN : You said
sometimes, depending on the circumstances , it could
be --
THE WITNESS : Depending on what
they do with that --
JUSTICE HOGAN : -- one system or
not, and I have your answers .
THE WITNESS : Right . I already
answered those questions . Now, talking about the
other parts, the flexes and the di ffusers , I did
acknowledge where I saw the changes in the design
and the technology of the diffuser . I also said
that if they would have bought the diffuser from
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the market and tried di ffuser 1 and 2 and 3 ,
whether they work or all of them all of them don ' t
work or if little bit of work at the end, there is
no uncertainty.
In this case, I saw they tested
and in one case here they also went not only
testing of the system, but somebody else ' s house as
well, called Frank. I t is part of my report . I
can pull it out as well .
All those things, even though they
were not written very nicely in a methodological
way, I did patch up, trying to do what you are
as king me to do or what you intend to say that if
they are miss ing information, would I not look at
that? I did that one on those cases as well .
Similarly, I went through all the
pages, all the drawings, all the emails for this
one, trying to find out where I can support my
argument for eligibility .
MS . BOND:
Q
. You determined that all
technological is sues related to this proj ect were
completed on January 2 0 07 , yet they didn ' t go to
market until May 2 0 0 8 , and your own documents show
that ECM motors were assessed and designed in the
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2008 fiscal year for which you gave zero bene fit,
zero dollars out of the entire pool . It was zero,
and the tests that they did were in the fiscal 2008
for the prototype home, yet you still contend that
all work related to the entire prototype system was
completed and they had no more technological is sues
as of January 2 0 0 7 . How is that possible?
JUSTICE HOGAN : You have made the
point . I am going to ask you to move on . Part o f
it i s argument , and you can write it all in your
submiss ion .
MS . BOND: I think that is
sufficient , your honour .
JUSTICE HOGAN: Thank you . Any
redirect, Counsel? Brief redirect .
MR . BARTLETT : Very brief, your
honour. Thank you .
RE-EXAMINATION BY MR . BARTLETT :
Q
. Mr . Parmar, during the
cross-examination, you were asked about discuss ions
with the appellant before your report was
finalized . Did you discuss your findings before
your report was finalized?
A. That i s correct .
Q
.
When did you do that?
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A. That was on the third site
visi t, November 1 8 , i f I remember that . I am j ust
reading it . Novemer 18, 2 0 0 9 . Page No . 5 of 14 .
Q. On page No . 5 of 14 of your
report, which relates to this third site visit on
November 1 8 , 2 0 0 9 , the second paragraph s tates :
"The RTA stated he has reviewed the additional
information . " First of all, who is the RTA that is
referred to here?
A. That i s myself .
Q
. What is the additional
information that you are referring to?
A. After the second s ite visit
and the first site visit, they gave two submiss ions
of information .
Q
. If I can ask you to refer to
the -- earlier on page 5, before the ''Thi rd Site
Vi sit'' heading the second full paragraph before
that heading . It says :
''The RTA stated ' according to
Jack, there are four areas
where experimental
development was carried
out . ' " (As read)
You list four things there . First
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of all, when you say, "according to Jack, " what do
you mean by that?
A. This May 2 2 , 2 0 0 9 - when we
went to the site visit, before that site visit,
Jack sent tonnes of information for review
purposes . Then I reviewed that information there,
and we started discuss ing this information . When
discussing this information there, and we come to
conclusions -- it is Jack or we are all together in
the same meeting there -- and at that time we come
up with these five areas of that .
four?
Q .
A.
Q
.
A.
Q .
You say five areas , but I see
It is four areas, yes .
The next paragraph states :
' ' The RTA stated that items 1
to 3 were discussed in a
previous meeting . However,
item 4 was not . Accordingly,
the RTA requested more
information and documentation
to understand the work done
for item 4 above . " ( As read)
That ' s correct .
What do you mean, that ' s
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correct ? Did you request additional information?
A. That ' s right .
Q
. Did you review the additional
information?
A. I did .
Q. Back to the paragraph on page
5 related to the third site visi t . The second
paragraph, the second sentence : "The purpose of
this meeting is to discuss the RTA ' s findings . ''
Did you discuss your findings at that time?
A. Yes, that ' s right .
Q. Did you provide an
opportunity for additional information to be
reviewed before your report was finalized?
A. They did provide time i f they
requested they want to provide information there,
yes . That was the purpose there of going to the
meetings .
Q.
After you discussed your
findings , did you review anything, or would you
have reviewed anything that was provided subsequent
to finalizing your report?
A. Yes , we would have .
MR. BARTLETT : Thank you, your
honour . Those are my questions .
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1 JUSTICE HOGAN : Thank you . You
2 may step down, sir.
3 Whereupon the proceeding concluded at 12 : 2 8
4 p. m.
(613) 564-2727 (416) 861-8720
I HEREBY CERTIFY THAT I have , to the best
of my s kill and ability, accurately recorded by
shorthand and transcribed theref rom, the foregoing
proceeding using real-time computer aided
transcription .
-
Deborah Elderhorst, Court Reporter
ASAP Reporting Services Inc
(613) 564-2727 (416) 861-8720

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