Kon Construction Ltd. v. Terranova Developments Ltd. et al., (2015) 602 A.R. 327

• Judge: Côté, Slatter and Wakeling, JJ.A.
• Court: Court of Appeal (Alberta)
• Case Date: June 03, 2015
• Citations: (2015), 602 A.R. 327;2015 ABCA 249

Kon Constr. Ltd. v. Terranova Dev. Ltd. (2015), 602 A.R. 327; 647 W.A.C. 327 (CA)

MLB headnote and full text

Temp. Cite: [2015] A.R. TBEd. JL.098

Kon Construction Ltd. (respondent)

(plaintiff and defendant by counterclaim) v. Terranova Developments Ltd. (appellant)

(defendant and plaintiff by counterclaim) and Scheffer Andrew Ltd. (respondent)

(defendant by counterclaim)

(1403-0203-AC; 2015 ABCA 249)

Indexed As: Kon Construction Ltd. v. Terranova Developments Ltd. et al.

Alberta Court of Appeal

Côté, Slatter and Wakeling, JJ.A.

July 22, 2015.

Summary:

Terranova Developments Ltd. retained engineers, Scheffer Andrew Ltd., to design a residential subdivision. Terranova retained Kon Construction Ltd. to do the earth moving work required to grade the subdivision. Delays were experienced. Terranova terminated Kon Construction's contract and hired another contractor to complete the work. Kon Construction sued for its unpaid invoices. Terranova counterclaimed, alleging that Kon Construction abandoned the contract, it had not performed the contract in accordance with its terms, and it had not performed the work properly. Terranova also counterclaimed against Scheffer Andrew, alleging that it negligently supervised the work.

The Alberta Court of Queen's Bench, in a decision reported at [2014] A.R. Uned. 285, found that Terranova did not have grounds to terminate the contract with Kon Construction. The trial judge found that Kon Construction and Scheffer Andrew had inflated the quantities in some invoices as an indirect method of adjusting the 2005 quote to 2006 prices. The trial judge adjusted the invoices down accordingly, but granted Kon Construction judgment for the balance of the invoices. The trial judge dismissed Terranova's counterclaims. Terranova appealed on the grounds that: (a) the trial judge relied on hearsay and opinion evidence; (b) the trial judge failed to consider whether all of the clay acquired by Terranova had been delivered; and (c) the trial judge overlooked the legal consequences of the factual finding that Kon Construction continued to spread clay after compaction testing stopped.

The Alberta Court of Appeal dismissed the appeal.

Building Contracts - Topic 5500

Architects and engineers - Duties to owner - Supervision or inspection of work -Terranova Developments Ltd. retained engineers, Scheffer Andrew Ltd., to design a residential subdivision - Terranova retained Kon Construction Ltd. to do the earth moving work required to grade the subdivision - Delays were experienced - Terranova terminated Kon Construction's contract - Kon Construction sued for its unpaid invoices - Terranova counterclaimed alleging that Kon Construction abandoned the contract, it had not performed the contract in accordance with its terms, and it had not performed the work properly - Terranova also counterclaimed against Scheffer Andrew, alleging that it negligently supervised the work - The trial judge found that Terranova did not have grounds to terminate the contract - After adjusting some of the invoices down, the trial judge granted Kon Construction judgment for the balance of the invoices - The trial judge dismissed Terranova's counterclaims - Terranova appealed, arguing, inter alia, that the trial judge reversed the burden of proof - Terranova submitted that Scheffer Andrew was its agent, and under s. 13 of the Alberta Evidence Act, the burden was on the agent to demonstrate that it discharged its duty - The Alberta Court of Appeal rejected argument - Scheffer Andrew's duty to monitor and supervise Kon Construction's work did not mean that it became the guarantor of the performance of that work - Terranova was responsible for testing the work, and it retained JR Paine & Associates for that purpose - It was JR Paine's duty, as Terranova's agent, to find out if there was any insufficiently compacted clay on the site - In the end, the testing disclosed that 33 lots had insufficient compaction - Even if it could be demonstrated that the insufficient compacting arose from Kon Construction's work, that did not per se place any burden of proof, or impose any liability on Scheffer Andrew - See paragraphs 63 to 64.

Evidence - Topic 1586

Hearsay rule - Hearsay rule exceptions and exclusions - Business records - Regular entries - Computer or machine made records - The appellant, Terranova Developments Ltd., retained the respondent engineers, Scheffer Andrew Ltd., to design a residential subdivision - Terranova retained the respondent, Kon Construction Ltd., to do the earth moving work required to grade the subdivision - One of the issues at trial had been how much clay and other material Kon Construction had moved - The necessary data was extracted from survey measurements - The raw survey data was preserved in an electronic format - The raw data was processed and compiled by a computer program which generated reports that resulted in Exhibits 105 and 106 - Terranova argued that Exhibits 105 and 106 were expert evidence, and they could not be introduced through a lay witness - Further, it argued that those exhibits were inadmissible hearsay - The Alberta Court of Appeal stated that "The two arguments overlap to some extent, and raise a number of sub-issues: (a) The admissibility of records automatically collected and stored in electronic form. (b) The interaction of the admissibility of electronic records, and 'expert' evidence about the meaning of those records. (c) The admissibility of evidence from witnesses with expertise, who are not necessarily 'expert witnesses'. (d) How the exclusion of hearsay evidence affects the admissibility of electronic records and the opinions of experts" - The court discussed the issues - See paragraphs 9 to 52.

Evidence - Topic 1586

Hearsay rule - Hearsay rule exceptions and exclusions - Business records - Regular entries - Computer or machine made records - The Alberta Court of Appeal stated that "Mechanically generated evidence is accepted by the courts because of various indicia of reliability. First of all, the equipment and software are designed by experts in accordance with scientific and engineering knowledge; at a theoretical level, they should produce accurate results. Secondly, the prototype equipment is tested against known samples to ensure that it does provide accurate results. Thirdly, the field equipment is mass-produced in accordance with the precise design and specifications of the prototype, and each piece is usually tested before it leaves the factory. Fourthly, those who use the equipment follow established standards for maintenance, calibration and operation. Fifthly, the equipment and the data are then used on a day-to-day basis, and are shown by experience to be reliable. Once this threshold of reliability is met, the party tendering the evidence does not have to re-prove the underlying technology in every case ... Information gathered by electronic equipment is routinely relied on by the average citizen and the courts because of the indices of reliability just noted. The information may not be perfect, infallible, or accurate to a certainty, but it is sufficiently reliable to be used in court. The admissibility of evidence does not depend on proof to a certainty of exact accuracy; flawed evidence is routinely admitted, and its weight is assessed by the trier of fact" - See paragraphs 17 to 18.

Evidence - Topic 1586

Hearsay rule - Hearsay rule exceptions and exclusions - Business records - Regular entries - Computer or machine made records - The appellant, Terranova Developments Ltd., retained the respondent engineers, Scheffer Andrew Ltd., to design a residential subdivision - Terranova retained the respondent, Kon Construction Ltd., to do the earth moving work required to grade the subdivision - One of the issues at trial had been how much clay and other material Kon Construction had moved - The necessary data was extracted from survey measurements - The raw survey data was preserved in an electronic format - The raw data was processed and compiled by a computer program which generated reports that resulted in Exhibits 105 and 106 - Terranova argued that Exhibits 105 and 106 were inadmissible hearsay - The Alberta Court of Appeal stated, inter alia, that "The raw survey data in question here were a) collected, at least in part, by automated equipment called Total Station, b) stored in electronic format, and c) transferred automatically, at least in part, from the original collecting equipment to the storage device. The reliability of the collection and storage techniques depend on the underlying reliability of the electronic equipment. Total Station equipment is routinely used and relied on by the surveying profession, and there was no indication in this case of inherent inaccuracy. The respondents were not required to prove how this technology works, and it was not an error of law for the trial judge to rely on the data that resulted" - See paragraph 19.

Evidence - Topic 1586

Hearsay rule - Hearsay rule exceptions and exclusions - Business records - Regular entries - Computer or machine made records - The Alberta Court of Appeal stated that "There is undoubtedly a point where a computer program is sufficiently idiosyncratic, sophisticated, and judgmental that the information it generates crosses over into the area of 'opinion'. Such computer programs might 'require specialized knowledge', or even rise to the level of 'novel or contested science'. That is not, however, true with all computer programs. ... Relying on output from equipment which has computer programs and formulas embedded in it does not invariably rise to the level of 'expert opinion evidence'. ... When a computer program reaches the point where it must be justified by expert evidence requires a decision by the trial judge as to whether it requires 'specialized knowledge', or is merely a manifestation of ordinary learning. Sometimes decisions must be made as to which data should be included in or excluded from the analysis, which may require the application of professional opinion. In addition, expert evidence will often be required where the witness purports to interpret the computer data, explain what it means, or draw inferences from it. Merely reading and relying on the results of an ordinary computer program will not rise to the level of opinion evidence. There is no automatic or universal rule that computer-generated reports are inadmissible hearsay, or only admissible through expert evidence" - See paragraphs 22 to 26.

Evidence - Topic 1586

Hearsay rule - Hearsay rule exceptions and exclusions - Business records - Regular entries - Computer or machine made records - The appellant, Terranova Developments Ltd., retained the respondent engineers, Scheffer Andrew Ltd., to design a residential subdivision - Terranova retained the respondent, Kon Construction Ltd., to do the earth moving work required to grade the subdivision - One of the issues at trial had been how much clay and other material Kon Construction had moved - The necessary data was extracted from survey measurements - The raw survey data was preserved in an electronic format - The raw data was processed and compiled by a computer program which generated reports that resulted in Exhibits 105 and 106 - Terranova argued that Exhibits 105 and 106 were inadmissible hearsay - The Alberta Court of Appeal stated, inter alia, "Terranova objects that it is not able to cross-examine the persons who actually gathered and entered the raw data. This argument is somewhat artificial, because it appears that much of the evidence was gathered electronically, and then transferred automatically to the computer that prepared the reports. As previously noted, the equipment in question has inherent reliability because of its acceptance by the professionals who use it, and its repeated use in the field ... In doing their day-to-day work, professionals routinely rely on the accuracy of the work done by others in the organization. Here the witnesses who testified relied on the work of other individual surveyors and data processors. The compilations of the raw data behind Exhibits 105 and 106 are not inadmissible just because they were prepared by teams of people not produced for cross-examination. The two disputed exhibits also have many of the characteristics of business records, and so are admissible as an exception to the hearsay rule" - See paragraphs 44 to 51.

Evidence - Topic 3017

Documentary evidence - General - Electronic documents - [See first Evidence - Topic 1586 ].

Evidence - Topic 7000

Opinion evidence - Expert evidence - General - The Alberta Court of Appeal stated that "there would appear to be at least three categories of 'witnesses with expertise', who in some respects are witnesses of fact, and in other respects opinion witnesses: (a) Independent experts who are retained to provide opinions about issues in the litigation, but were not otherwise involved in the underlying events. ... (b) Witnesses with expertise who were involved in the events underlying the litigation, but are not themselves litigants. An example is the family physician in a personal injury case who is called upon to testify about his or her observations of the plaintiff, and the treatment provided. (c) Litigants (including the officers and employees of corporate litigants) who have expertise, and who were actually involved in the events underlying the litigation. ... The final category of litigant-witnesses with expertise does not fall neatly into the White Burgess and Mohan analysis. First of all, it is unnecessary to prove that such a witness is 'impartial, independent, and unbiased' as discussed in White Burgess. Litigants are no longer disqualified as witnesses because of their obvious interest in the case. ... Secondly, it is generally not necessary to qualify the last class of witnesses with expertise as 'experts' under the Mohan procedure. As parties to the litigation they are entitled to testify, and generally they will have the most direct and relevant evidence about the issues. ... Since they were often only involved in the underlying events because of their expertise, it makes no sense to hold that they cannot explain why they acted as they did, if they stray into their expertise" - See paragraphs 35 to 40.

Evidence - Topic 7000.3

Opinion evidence - Expert evidence - General - Opinion evidence - What constitutes - The appellant, Terranova Developments Ltd., retained the respondent engineers, Scheffer Andrew Ltd., to design a residential subdivision - Terranova retained the respondent, Kon Construction Ltd., to do the earth moving work required to grade the subdivision - One of the issues at trial had been how much clay and other material Kon Construction had moved - The necessary data was extracted from survey measurements - The raw survey data was preserved in an electronic format - The raw data was processed and compiled by a computer program which generated reports that resulted in Exhibits 105 and 106 - Marinus Scheffer (a principal of Scheffer Andrew) and Klaver (a surveyor assigned to the work by Scheffer Andrew) had testified about Exhibits 105 and 106 - Neither of them was qualified by the trial judge as an expert witness - Terranova argued that Exhibits 105 and 106 were expert evidence, and could not be introduced through a lay witness - The Alberta Court of Appeal stated that "Klaver testified that he confirmed the amounts certified in the invoices by analyzing the raw data compiled in Exhibits 105 and 106. It would have been possible for the respondents to have attempted to qualify him as an expert to that extent, but the failure to do so is not fatal. ... It is not apparent that the Mohan process has to be applied to a witness like Klaver, but in any event there was no miscarriage of justice. To the extent that professional judgments had to be made about which surveys to select, and which computer programs to use, Marinus Scheffer and Klaver could also be cross-examined to test the evidence. They may have justified some of their choices because of their expert opinions about the proper procedures to use, but that does not render their evidence inadmissible as 'expert evidence'. The litigation alleged that they had not properly exercised their expertise, and they were entitled to defend themselves by explaining why they did what they did" - See paragraphs 42 to 43.

Evidence - Topic 7000.3

Opinion evidence - Expert evidence - General - Opinion evidence - What constitutes - [See fourth Evidence - Topic 1586 ].

Evidence - Topic 7014.1

Opinion evidence - Expert evidence - Re computer generated opinion evidence - [See fourth Evidence - Topic 1586 ].

Evidence - Topic 7018

Opinion evidence - Expert evidence - General - Special knowledge and experience (incl. what constitutes) - [See fourth Evidence - Topic 1586 ].

Evidence - Topic 7112

Opinion evidence - Nonexpert evidence - Admissibility - [See first Evidence - Topic 7000.3 ].

Cases Noticed:

R. v. A.K. (2004), 373 A.R. 141; 44 Alta. L.R.(4th) 308; 2004 ABQB 875, refd to. [para. 17].

Abbott and Haliburton Co. Ltd. et al. v. WBLI Chartered Accountants (2015), 470 N.R. 324; 360 N.S.R.(2d) 1; 1135 A.P.R. 1; 2015 SCC 23, refd to. [para. 21].

R. v. Graat, [1982] 2 S.C.R. 819; 45 N.R. 451, refd to. [para. 21].

R. v. George (M.G.) and Hunter (T.B.) (1993), 146 A.R. 107; 14 Alta. L.R.(3d) 106 (Prov. Ct.), refd to. [para. 23].

Westerhof v. Gee Estate (2015), 331 O.A.C. 129; 124 O.R.(3d) 721; 2015 ONCA 206, refd to. [para. 31].

Diotte v. Canada, 2008 TCC 244, 2008 DTC 4558, refd to. [para. 41].

R. v. Lavallee, [1990] 1 S.C.R. 852; 108 N.R. 321; 67 Man.R.(2d) 1, refd to. [para. 45].

J.H. Ashdown Hardware Co. v. Singer, [1952] 1 D.L.R. 33; 3 W.W.R.(N.S.) 145, affd. [1953] 1 S.C.R. 252; [1953] 2 D.L.R. 625, refd to. [para. 46].

R. v. Scheel (1978), 42 C.C.C.(2d) 31 (Ont. C.A.), refd to. [para. 46].

R. v. Prosser (F.B.A.) (2015), 430 N.B.R.(2d) 154; 1121 A.P.R. 154; 2015 NBCA 7, refd to. [para. 47].

Advance Rumely Thresher Co. v. Laclair, [1917] 1 W.W.R. 875 (Alta. C.A.), refd to. [para. 47].

Statutes Noticed:

Evidence Act, R.S.A. 2000, c. A-18, sect. 3, sect. 4 [para. 39]; sect. 13 [para. 63].

Authors and Works Noticed:

Baker, J.H., An Introduction to English Legal History (4th Ed. 2002), p. 91 [para. 39].

Counsel:

M.A. Pruski, for the respondent, Kon Construction Ltd.;

C.L. Plante, for the appellant, Terranova Developments Ltd.;

S. Delblanc and G.S. Ranu, for the respondent, Scheffer Andrew Ltd.

This appeal was heard on June 3, 2015, before Côté, Slatter and Wakeling, JJ.A., of the Alberta Court of Appeal. The Court of Appeal delivered the following memorandum of judgment on July 22, 2015.