Executive summary: Key legal and evidentiary issues

• Liberty Land Corporation alleges its real estate agent, Kenneth Kinnear, disclosed confidential pricing information to the Statham family sellers during 2007 land transactions near Olds, Alberta.

• Lyle Statham's account of the critical meetings changed at least three, if not four times over the last 16 years, creating an intractable credibility issue unsuitable for summary resolution.

• The Applications Judge dismissed the action on the basis that Liberty relied on inadmissible hearsay and could not demonstrate a genuine issue for trial.

• On appeal, Justice Reed admitted new evidence under the low threshold of Rule 6.14(3) and conducted a de novo assessment of the amplified record.

• The Court clarified that respondents to summary dismissal applications must show proffered hearsay would be admissible at trial, rejecting the older "free-ranging" approach to hearsay by responding parties.

• Threshold procedural reliability was satisfied for the Lyle September 21 Email and the Lyle Harris Draft because Lyle remains available for cross-examination, but Jean Statham's unsigned draft statement was excluded due to insufficient reliability indicators.

Background of the dispute

In 2007, Liberty Land Corporation, through its principals Seann Spence and Braeden Criddle, sought to purchase two quarter sections of farmland near Olds, Alberta, that were expected to be annexed by the town. Liberty retained Kenneth Kinnear and Barry McCurdy of Mountain Aire Realty Ltd. and 1243867 Alberta Ltd. o/a Re/Max Mountain Aire as its buyer's agents to locate properties and negotiate with the sellers, the Statham family. Lyle and Loretta Statham owned the Northwest Quarter (NW 30-32-1-W5th), while Lyle's parents, Leslie and Jean Statham, owned the Northeast Quarter (NE 30-32-1-W5th).

The offers and counteroffers

The Real Estate Defendants prepared two offers on Liberty's behalf at $35,000 per acre: $3,850,000 for the Northwest Quarter, less 50 acres, from Lyle, and $5,600,000 for the full Northeast Quarter from Leslie and Jean. These were presented to the Stathams at a meeting in late June 2007. Kinnear's evidence — which has never been directly challenged in cross-examination — was that he presented the $35,000 offer as a "great offer and a remarkable offer," made clear he was representing only Liberty and was not acting on the Stathams' behalf, and did not disclose any confidential information, including that Liberty would pay up to $40,000 per acre or that Liberty would allow them to rent the land for $1 per year. The Stathams countered at $40,000 per acre for both properties, with additional rental and residency terms. Kinnear recalled recommending that Liberty not accept the terms of the counteroffers, as he did not think rental terms were warranted at the per acre price being requested. Nonetheless, Spence and Criddle accepted the counteroffers. The final purchase agreements were executed by Spence and Criddle on July 18, 2007, and the Stathams on July 19, 2007.

The commission structure

A Buyer's Commission Agreement between Mountain Aire and Liberty, entered into on June 26, 2007, set a commission rate of $75,000 per parcel (if they both sell), an undivided interest in the Northeast Quarter equal to one acre regardless of whether both quarters were sold, and a floating bonus equal to 5% of any savings between purchase prices of $35,000 and $40,000 per acre. The Court noted that the effect of this agreement was to incentivize the Real Estate Defendants to get a better price for Liberty, and that obtaining a sale at a higher price would not result in higher compensation for them.

Lyle Statham's evolving account

The central controversy revolved around what Kinnear said during the meetings with the Stathams. Three years after the transactions, in September 2010, Lyle emailed Spence stating that Kinnear had told the Stathams that while the offer was for $35,000, he thought Liberty would go to $40,000, and that at no time did they ever negotiate on price or conditions. In August 2011, Liberty's former counsel Murray Harris attended the Stathams' residence with a legal assistant, Ashley Diamond, and prepared draft witness statements from Lyle and Jean, which remained in draft form and were never signed. Both draft statements attributed the $40,000 figure to Kinnear, stating he told them on June 27, 2007 that "it looked like they would offer between $35,000.00 and $40,000.00 per acre." Loretta declined to give a statement. After consulting a lawyer, Jean refused to participate any further in the process, and Lyle substantially redrafted his statement on August 15, 2011, materially changing the information in it. In the redraft, Lyle indicated that Kinnear presented the $35,000 offer and that "[s]omehow a counteroffer price of $40,000.00 was suggested," removing the specific attribution to Kinnear. Lyle expressly asked Harris to "[d]isregard and delete the previous statements which you typed up." By the time of his sworn examination in 2023, Lyle testified that it was he, not Kinnear, who raised $40,000, based on knowledge that a neighbouring property — the Miller lands — had sold at $40,000 per acre approximately a year prior.

The Applications Judge's decision

The Real Estate Defendants brought a summary dismissal application filed January 27, 2021 under Rule 7.3(1)(b) of the Alberta Rules of Court. In brief oral reasons, the Applications Judge found that Kinnear's evidence was sufficient to establish a case for summary dismissal. He noted that Liberty relied on hearsay evidence, some of which constituted double hearsay, and that no affidavit evidence was before the Court as to what Harris heard or was told by the Stathams in the creation of the draft statements. The Applications Judge concluded that the case law concerning hearsay had evolved toward the exclusion of such evidence on summary judgment applications, found Liberty had not presented "real hard evidence that it intends to introduce at trial in order to evaluate whether there is an issue of merit for trial," and dismissed the action. The decision was issued November 15, 2022.

The appeal and new evidence

Liberty appealed on November 23, 2022 and filed substantial new evidence, including a supplemental affidavit from Spence filed April 3, 2023, an affidavit from Criddle filed April 3, 2023, and an affidavit from Harris filed March 20, 2023 (who was subsequently questioned on that affidavit). Liberty also examined Lyle and Loretta pursuant to Rule 6.8 of the Rules. The Real Estate Defendants did not strenuously contest admission of this evidence, given the low threshold under Rule 6.14(3), which requires only that new evidence be considered "relevant and material."

Hearsay analysis on appeal

Justice Reed undertook a thorough analysis of whether Liberty, as respondent, could rely on hearsay evidence to resist summary dismissal. After reviewing competing lines of authority, the Court concluded that authorities standing for the more "free-ranging" approach to the admission of hearsay evidence in summary judgment or dismissal applications ought not be followed. Instead, the Court adopted the approach taken in recent case law requiring a respondent to show that proffered hearsay would be admissible at trial, either under a known hearsay exception, the principled approach to the admission of hearsay evidence (necessity and threshold reliability), or to otherwise show some expansion of the rules governing admissibility is justified in the circumstances of the case. Applying this framework, the Court found the Lyle September 21 Email and the Lyle Harris Draft met threshold procedural reliability because Lyle remains available for examination on these documents. The Jean Harris Draft was excluded on the basis that Jean is deceased, never adopted the statement while alive, there was no other reliable written statement she made while alive, and there were insufficient procedural or substantive indicators of reliability. The hearsay contained in the Spence and Criddle evidence was given no real weight as it was found to be almost entirely self-serving, unsupported, and containing bald statements, opinions, and conclusory statements.

The ruling and outcome

Justice Reed found that the real issue requiring a trial was the intractable credibility issue surrounding Lyle's changing evidence, the reasons for that change, and whether it is open to a trier of fact to accept Liberty's theory of the case over that of the Real Estate Defendants after making the requisite credibility findings. Having altered his account at least three, if not four times in the last 16 years — each time refining it and adding more detail as more time passed from the events in question — the Court found there were multiple facts on the record to suggest why Lyle may have been motivated to change his story and why his earlier versions of what happened in 2007 may be the truth. The Court concluded it could not say, on this record, that this critical credibility issue was resolved in a manner that would permit dismissal. The appeal was allowed and the decision of the Applications Judge was set aside. The parties were directed to set the matter into Civil Appearance Court in Calgary to set a litigation plan and seek leave to set the matter down for trial at the very earliest opportunity. Liberty is presumptively entitled to its costs under Rule 10.29 as the substantially successful party, with leave granted to file costs submissions not to exceed five pages within 30 days of the decision if the parties are unable to agree on a quantum and method of calculating same. No exact damages amount was determined at this stage, as the merits of Liberty's underlying claim — that it paid $40,000 per acre for the Lands when it could have purchased them from the Stathams for $35,000 per acre — remain to be determined at trial.