In a recent decision of the Alberta Court of Queen’s Bench, Canadian Natural Resources Limited v ShawCor Ltd, 2016 ABQB 21, the Court confirmed that the Alberta Rules of Court could be used in to “read-in” evidence of a consultant’s employee against an oil and gas company. This case is an important reminder to industry to ensure that consultants are chosen with care and their activities monitored closely, because their evidence could become “some of the information” of the company in later court proceedings.
Canadian Natural Resources Limited (“CNRL”) brought an action against ShawCor Ltd., and Shaw Pipe Protection Ltd. (“ShawCor”), IMV Projects Inc. (“IMV”), Flint Field Services Ltd. and Transline Ltd. (“Flint”) alleging that the defendants negligently provided a pipe coating and insulation system related to a 32 km underground pipeline owned by CNRL. ShawCor third partied Dunn Hiebert & Associates (“Dunn Hiebert”) and Ram River Pipeline Outfitters Ltd. (“Ram River”). In addition, ShawCor claimed against its co-defendant Flint and Flint claimed against its co-defendants ShawCor and IMV. The allegations include that coating failure resulted in defects in the pipeline, requiring the removal and replacement of the pipeline, including a new insulation system, the cost of which is estimated at $65 million.
Dunn Hiebert was engaged by CNRL to provide inspection services in relation to the pipeline and Dunn Hiebert was to inspect and examine the coating and approved it on several occasions.
Rule 5.18 of the Alberta Rules of Court (“ARC”) provides a mechanism by which the evidence of persons who has provided services to a corporation can be questioned and their evidence is treated as if that person was an employee of the corporation. The importance of this is that the evidence of employees of the corporation must be adopted as “some of the information” of the corporation, and therefore could bind the corporation, for the purposes of litigation proceedings.
This is a case of first instance on the application of rule 5.18 of the ARC where the evidence in question is given by another party to the litigation (Dunn Hiebert) that is adverse to the corporation (CNRL) at least on some issues.
In short, the Court found that there was no unfairness to CNRL by allowing the application of ARC 5.18 to occur, even where the person providing the services or the entity providing the services, within the meaning of ARC 5.18, is a party to the action.
The overwhelming evidence was that Dunn Hiebert’s witnesses were the eyes and ears of CNRL and that there was no other party at CNRL that could offer this first hand evidence.
CNRL argued that Flint was adverse in interest to Dunn Hiebert and raised concerns relating to sweetheart cross-examination. The Court acknowledged that in complex litigation parties may be adverse on some issues and not on others and that fair practice requires it to be vigilant of sweetheart cross-examination in these circumstances. However, sweetheart cross-examination concerns could be handled at trial where the Court must identify when and on what issue a party is adverse in interest to determine what kind of questioning is allowed in any event.
CNRL further alleged that Dunn Hiebert was adverse in interest to CNRL because Dunn Hiebert had alleged that CNRL permitted high temperature emulsion to pass through the pipeline causing the failure of the coating system. The Court agreed that Dunn Hiebert and CNRL were adverse in interest.
Although the Court acknowledged that The Alberta Law Reform Institute’s Consultation Memorandum 12.2, did not contemplate the issue before it, and agreed with CNRL that what was contemplated in the Consultation Memorandum is that it would apply to persons or entities not a party in an action, the Court disagreed with CNRL’s argument that ARC 5.18 was intended to apply only to “a stranger to the action”. The Court held that ARC 5.18 encompasses all situations where a service provider has the only available evidence, stranger or not.
Accordingly, in Alberta evidence of one party to complex litigation may be treated as though it is the evidence of another party to the same action, even where the parties are adverse in interest on some issues. However, this case does not appear to be a blanket statement that such will be the case in every instance. The facts will be important. Here the employees whose evidence was at issue were the only ones that could provide that evidence and were contracted by CNRL. Further, the employees in question had not given any evidence on issues in which they and CNRL were determined to be adverse in interest.