Stewart Estate v. TAQA North Ltd., 2012 ABQB 87

Court of Queen ’ s Bench of Alberta Citation: Stewart Estate v. TAQA North Ltd., 2012 ABQB 87 Date: 20120222 Docket: 0501 11695 Registry: Calgary Between: Lynda Calder in her capacity as Executrix of the Estate of Merville V. Stewart (Deceased), Lynda Calder, Morgan Stewart, Cody Stewart, Cody Stewart in her capacity as Administrator or Litigation Representative for the Estate of James D. Stewart (Deceased) and as Litigation Representative for Morgan Stewart, Jerome Development Limited, Bowen Family Properties Ltd., Ronald B. Pole, Kevin R. Pole, Danny G.

Oneil in his capacity as Executor of the Estate of Mabel B. Oneil (Deceased), Robert Copley, Karen Nell Copley, Margaret Alice Demers, Mary Jean Biggar, Goldie Alberta Danielsen, Edna Keam, Wilma Marshall and Laurel Lee McLaren and 1088924 Alberta Ltd. Plaintiffs - and - TAQA North Ltd., Nexen Inc., ExxonMobil Canada Ltd., Esprit Exploration Ltd., Bonavista Energy Corporation, Triquest Energy Corp. and Coastal Resources Limited Defendants _______________________________________________________ Memorandum of Rulings of the Honourable Madam Justice B.E.

Romaine _______________________________________________________ Introduction [ 1 ] Two important issues of evidence and procedure arose mid-trial in this action, involving the

interpretation of new Rule 5.35 on the admissibility and scope of expert evidence and Rule 9.13 on re-opening a case. These are the written reasons for my decisions.

A. Admissibility of Expert Evidence: Rule 5.35 [ 2 ] The plaintiffs allege in their pleadings that certain mineral leases held by the defendants as lessors have terminated due to lack of production, “ not as a result of a lack of or an intermittent market or any cause beyond the Lessee Defendants’ reasonable control.” [ 3 ] The parties entered into a litigation plan, approved during a case management process, that called for “primary” expert reports to be delivered by a certain date, “rebuttal” expert reports to be delivered about a month later and “sur-rebuttal” reports to be delivered a month after that.

While the parties did not meet their original timing goals, the plaintiffs served expert reports on the defendants on October 17 and 18, 2011 and the defendant Nexen Inc. served “rebuttal” expert reports on the plaintiffs on November 21, 2011. No-one filed sur-rebuttal reports. [ 4 ] On December 23, 2011, counsel for Nexen advised counsel for the plaintiffs in accordance with Rule 5.6 that Nexen intended to object to the admission of certain portions of the expert reports of Robert Edney and Paul Pedersen and the entire expert report of Ross Clark.

On January 10, 2012, the afternoon before the trial commenced, counsel for the plaintiffs advised the defendants that they had decided not to call Mr. Pedersen or Mr. Clark as witnesses in the trial and would be deleting certain portions of the report of Cameron Six, another of their experts. This letter noted that “we will be proceeding on the basis that you will not be calling rebuttal expert evidence from Mr. Schorning and Mr. Freeborn” (defence experts), and also noted that the plaintiffs reserved the right to decide whether they would be calling either Mr. Edney or Mr. Six on the balance of his report.

The letter says nothing about the defence expert Wazir Seth. The next morning, before the trial began, counsel for Nexen wrote to the plaintiffs asking for immediate confirmation that the plaintiffs would therefore not be pursuing certain allegations they had made in the pleadings relating to the defendants’ failure to produce from the Elkton formation. discriminatory production practices and claims arising from those allegations.

Counsel for the plaintiffs replied that the plaintiffs were not withdrawing any of their claims. [ 5 ] During opening statements on January 11, 2012, counsel for the defendants alerted the Court to this issue, and advised that they would be taking the position that they could still call their expert witnesses during the trial. [ 6 ] On Tuesday, January 24, 2012, counsel for the plaintiffs announced that he would be closing his case on the following Monday, having at that point called Mr. Edney but not Mr. Six. The trial was adjourned to the following Monday for other reasons.

On Thursday, in response to an inquiry from the defendants, counsel for the plaintiffs advised that they would not be calling Mr. Six. On Saturday, counsel for the plaintiffs advised the defendants that they would object to the defendants calling Mr. Seth or any other expert to give evidence at the trial. [ 7 ] On Monday morning, January 30, 2012, the plaintiffs tendered read-in evidence and closed their case.

The defendants applied for a direction that the evidence of their experts was admissible and the plaintiffs objected. [ 8 ] The basis of the plaintiffs’ objection was that the defendants elected not to submit “primary” expert reports as provided for in the litigation plan and under the Rules of Court , and since the plaintiffs did not call any expert evidence other than that of Mr. Edney, there was nothing to rebut. The plaintiffs submitted that it was “crystal clear” from the decision of the Court of Appeal in Freyberg v.

Fletcher Challenge Oil and Gas Inc. [2005] ABCA 46 that the defendants bear the onus of establishing that the circumstances allow them to fit within the exception to the provisions of the leases that terminate them for non-production.

Thus, said the plaintiffs, the defendants should have filed ”primary” expert reports, and it would be an abuse of process to allow them to call their rebuttal experts after the plaintiffs had closed their case. [ 9 ] The first reason why the plaintiffs’ objection must fail is Rule 5.36, which requires the party receiving an expert report to provide reasonable notice to the other party of any objection it may have to the admissibility of the report at trial. Notice the day before trial with respect to the reports of Mr. Schorning and Mr. Freeborn and almost three weeks into trial in the case of the report of Mr.

Seth is not reasonable notice of objection, particularly given that the state of affairs that gave rise to the objection was created by the plaintiffs. Beyond this, however, any abuse of process, to the extent there is such abuse, can be claimed by the defendants. [ 10 ] In answer to the question of why the plaintiffs filed primary reports if it was clear that the onus on these issues was on the defendants, counsel for the plaintiffs cited “an abundance of caution”.

[11] The plaintiffs’ submissions are rooted in the “simultaneous disclosure” theory of expert reports described by Slatter, J. inWade v. Baxter 2001 ABQB 812 at para. 57 when interpreting the previous rules. Under this theory, all parties who intended to callexpert evidence would file “primary” reports, regardless of which party had the burden of proof on a particular issue, followed by allparties filing rebuttal reports. If this theory prevailed, the scope of rebuttal reports was narrowly construed, so as not to start a whole newwaterfall of sur-rebuttal reports.

Under the alternative “sequential” approach to expert disclosure endorsed by the Court in Wade, oneparty (which Slatter, J. noted was generally, but not necessarily the party who bears the burden of proof) filed its expert reports first andthe other party then filed rebuttal reports. Slatter, J. suggested at paragraph 71 of Wade that under the sequential approach, “a `rebuttal’report should not be so narrowly construed that the rebutting expert must accept the way the original expert has defined the issue”, andthat the report could raise new theories and information.

With respect to the burden of proof, Slatter, J. made the following comment atpara. 72: I notice the warnings in Pocklington Foods that the burden of proof is not always easy to identify. I do not suggest that the rules mandatethat the party with the burden of proof has to file first. This is just the practical reality in most cases.

There may be cases where bothparties will simultaneously file primary reports. ...However, because there may be some cases where it is difficult to identify the exactburden of proof is not a sufficient reason to interpret the rule as universally requiring simultaneous disclosure, with rebuttal reports to bestrictly confined. [12] It is clear from the language of new Rule 5.35 that the sequential approach to expert disclosure has won the day. Rule 5.35describes the sequence of service of expert reports that are intended for use at trial.

It is essentially a service rule, and it was followed bythe parties to this litigation. It is true that Rule 5.35(2)(

a) provides that the party who bears the primary onus of proof must serve thatparty’s report on the other parties first in sequence, but the questions of which party bears what onus of proof, and on what issue, and thedifferences between onus of proof and evidentiary onus relating to a particular issue are not always incontrovertible or clear. [13] The majority decision of the Court of Appeal in Freyberg refers at para. 75 to the principles that apply when determiningwhich party bears the onus of proof in a civil case as set out by the Supreme Court of Canada in Farell v.

Snell, (SCC),[1990] 2 S.C.R. 311 at 320, including the observation that the burden of proof is not immutable but is to be determined in reference toassumed knowledge and fairness. Applying these principles, the Court held at para. 82 that, while the onus of proving her case remainedwith the plaintiff, the burden of proof regarding deemed production rested with the defendants given

a) their reliance on an exception tothe lease’s termination and

b) Voyager’s specialized knowledge and awareness of relevant facts not available to the plaintiff. Theminority decision characterizes this as a distinction between a legal or ultimate burden that remained with the plaintiff and an evidentialor tactical burden that may have rested on the defendants. [14] While there may be a strong argument that the same analysis with respect to onus and burden as expressed by the majority ofthe Court in Freyberg will apply in this case, that is not an issue I can or should decide with finality at this stage of the trial.

Thedefendants have signalled their intention to make further submissions on this issue after the evidence is called.

The defendant CoastalResources Limited, for example, noted that the plaintiffs chose to read-in as part of their case evidence from her client to the effect that ithad no knowledge or awareness of relevant facts relating to the shutting-in of the well in question in this litigation. [15] Even if the defendants were in error in failing to file simultaneous “primary” reports on the issue of whether they were entitledto rely on the exception to the termination provisions of the leases, there is no doubt that such evidence is relevant to this trial.

Excludingit for a technical failure to comply with an order of service procedural rule would be a very heavy price for the defendants to pay,unjustified in the circumstances. As noted in Wade, the previous rules with respect to disclosure of expert evidence were “prejudice-based”, and the new rules are no different.

The prejudice to the defendants of excluding this evidence, particularly if the plaintiffs arecorrect in their assertion that the defendants bear the onus of proof of these issues, would be enormous. [16] The plaintiffs submitted that they would be prejudiced if such evidence was allowed, as they could have called additionalfactual or public domain evidence to counter Mr. Seth’s report.

The plaintiffs have been aware since the beginning of this trial that theadmissibility of the defendants’ expert reports was a live issue that may be decided against them and had the opportunity to call suchevidence as part of their case in chief.

It was hardly the situation that they were surprised by the defendants’ application. [17] The flexible approach to rebuttal reports and their scope and content described in Wade as being appropriate even under theold Rule 218.1 has been adopted specifically in the new Rule 5.35(2)(b), which specifies that a rebuttal report may include issues notraised in the initial expert’s report. The plaintiffs said that their objection was not that the rebuttal reports went beyond their properscope: the allegation was that they are “purely” rebuttal reports and merely counter the opinions of experts that have not been called.

To

that end, while counsel to the plaintiffs originally took the position that I should not read the reports in advance of argument on the application, they later submitted that it was necessary that I do so in order to properly assess this argument. There was no objection from the defendants, and I agreed to read the defendants’ expert reports in a voir dire . [ 18 ] I do not agree that the reports cannot stand alone. While they respond in part to issues raised in opinions given by the plaintiffs’ expert witnesses, they present additional information and new and competing theories.

While certain parts of the reports would have to be disregarded if the plaintiffs’ expert reports were not in evidence, they are in part original reports on the issues in question in that they reflect the independent analysis of the expert. I did not find it necessary to read the plaintiffs’ expert reports to evaluate this submission. [ 19 ] In

summary, the emphasis in these new rules is on a fair and workable process for disclosure. The comments of Slatter, J. at paragraph 52 of Wade with respect to the purpose of the old rules on expert disclosure remain valid with respect to the new rules: The purpose of Rule 218.1 is obvious. It is designed to avoid one party surprising the other with expert testimony. . .The rule is designed to require parties to give notice of their expert evidence (i.e., waive the privilege) in time to allow the other side a reasonable chance to respond, and to know the case he or she has to meet.

This avoids unnecessary adjournments, and leads to more just results. It allows the experts to focus on what is truly in dispute. The rule was never intended to be a chess game between counsel. . . . [ 20 ] The plaintiffs cannot have been surprised by the admission of this evidence. The surprise, and the potential prejudice, lay in the last minute change of strategy sprung on the defendants by the plaintiffs the day before trial.

The plaintiffs are surely entitled to put in their case the way they wish, but they are not entitled to rely on a technical objection to deprive the defendants of the opportunity to present their case or to a ruling that may exclude relevant evidence on the ultimate issues before the court, particularly in the absence of any real prejudice. [ 21 ] While it was not raised as an issue during the Freyberg trial, nor, I understand, during the appeal, Ritter, J.A. found that expert evidence as to the existence of an economical and profitable market was not necessary in that case, as adequate lay evidence existed on the issue.

I have not heard any factual lay evidence from the defendants on this issue, and have no basis at this point of the trial for deciding whether or not expert evidence is necessary. My decision on the admissibility of expert evidence in the face of the plaintiffs’ current objection does not preclude any later arguments that the expert evidence is unnecessary on the basis that there is a sufficient factual basis in this case to decide an issue. B. Re-opening the Plaintiffs ’ Case - Rule 9.13 [ 22 ] Following my decision on the admissibility of the defendants’ expert evidence, the plaintiffs applied to either

a) call their experts in rebuttal to the defendants’ case or

b) re-open their case to call Messrs Six, Pedersen and Clark. They also applied, in either event, for leave to submit a further report from Mr. Pedersen to respond to the report of Mr. Freeborn. [ 23 ] There was no justifiable reason to allow the plaintiffs to depart from their pre-trial characterization of expert disclosure set out in the approved litigation plan, and to re-characterize these reports as rebuttal reports. [ 24 ] Counsel for the plaintiffs suggested that the effect of the previous application had been to re-characterize the defendants’ expert reports as primary reports.

While that may be so if they were required to stand alone, this would not be necessary if the plaintiffs were allowed to re-open their case. [ 25 ] Nor was there any justifiable reason to allow the plaintiffs to prepare a sur-rebuttal expert report when they had ample opportunity prior to the trial to do so. [ 26 ] The only remaining issue was whether the plaintiffs should be allowed to re-open their case.

[ 27 ] Rule 9.13 provides that at any time before a judgment is entered, the court may if satisfied there is good reason to do so hear more evidence. The Rule gives the court the discretion to allow a party to re-open its case, guided by the requirement of being satisfied that there is a good reason to do so. [ 28 ] The defendants cite a number of cases where leave to re-open was refused, but most of these arise from circumstances where the application to re-open was brought after final arguments, or after trial but before judgment, or even after a decision was communicated, but not formally entered.

This application was not brought at such a late point in the trial, but before the defendants led any evidence.

There is thus little prejudice to the defendants of the kind what was present in other cases, other than the use of trial time to hear these applications. [ 29 ] Allowing the plaintiffs to re-open their case to call expert evidence that has previously been disclosed to the defendants and in fact responded to by the expert evidence of the defendants does not give rise to the mischief of allowing the plaintiffs the opportunity to reargue their case or even, in the circumstances of this case, the requirement that witnesses be recalled. [ 30 ] The defendants complain, with some justification, that the plaintiffs’ initial decision not to call this evidence was a tactical move, a deliberate decision taken with the goal of prejudicing the defendants by preventing them from calling crucial expert evidence.

They submit that this type of trial strategy should not be encouraged, and that the plaintiffs’ should bear the consequence of their actions.

They cite cases where courts have found that the fact that such a strategic decision back-fired and was then reconsidered by counsel did not constitute a sufficient reason to allow a party to re-open its case or adduce fresh evidence. [ 31 ] While these arguments may have greater force had the application been made at a later point in the trial or if the defendants would suffer any irreparable prejudice or undue extension of trial time, the evidence sought to be adduced in re-opening the trial is relevant and was previously disclosed.

I allowed the plaintiffs to re-open their case to the limited extent of calling the experts whose reports had been previously disclosed to the defendants. I do not foreclose any submissions the parties may make on this issue at the end of the trial when arguing costs. Dated at Calgary, Alberta this 22nd day of February, 2012. B.E. Romaine J.C.Q.B.A. Appearances: Peter T. Linder, Q.C. and Gavin Matthews of Peacock Linder & Halt LLP for the Plaintiffs Richard Steele and Kevin Tuohy of Burnet, Duckworth & Palmer LLP for the Defendants Nexen Inc. and ExxonMobil Canada Ltd.

R. Craig Steele of Carscallen Leitch LLP and Jeffrey Geib of McMillan LLP for the Defendant Bonavista Energy Corporation Catherine Crang of Carscallen Leitch LLP for the Defendant Coastal Resources Limited April Grosse of Bennett Jones LLP for the Defendant Esprit Exploration Ltd. Michael D. Aasen of Bryan & Company Calgary LLP for the Defendant TAQA North Ltd.