Executive Summary: Key Legal and Evidentiary Issues

• Appellants sought $32,350 in damages for unsatisfactory accounting and bookkeeping services but were awarded only $521.33 at trial.

• Fresh evidence (an email) was denied admission on appeal as the Appellants failed to meet the due diligence requirement, having strategically chosen not to introduce it at trial.

• Procedural fairness challenges regarding the trial binder disclosure and exclusion of King's Bench Proceeding materials were rejected by the appeal court.

• Credibility and reliability findings by the trial judge were upheld, with the appeal court finding no palpable and overriding error in the evidence assessment.

• Arguments regarding judicial bias, piercing the corporate veil, and entitlement to costs were all dismissed as unsubstantiated or improperly raised for the first time on appeal.

• The appeal was dismissed in its entirety, and the Respondents were collectively awarded $1,000 in lump sum costs against the Appellants.

Background and the parties involved

Ron Smith, Cindy Schmidt, and 1424672 Alberta Ltd. ("142AB") retained Laura Waters, Waters and Associates, and 1345413 Alberta Inc. ("134AB") to provide accounting and bookkeeping services. Those services were not provided to the satisfaction of the Appellants. The Appellants commenced a civil claim in the Alberta Court of Justice and, at trial, sought $32,350 in damages. On October 25, 2024, the trial judge granted $521.33 in damages to 142AB against 134AB for negligence and dismissed all other claims and counterclaims. The Appellants asked the Court of King's Bench of Alberta to overturn that decision and grant them all of the damages they sought, as well as costs. Ron Smith and Cindy Schmidt appeared as self-represented litigants for the Appellants, while the Respondents were represented by Frank PK Friesacher and Klarissa Jeiel M. Rivero of McCuaig Desrochers LLP.

The accounting services and the payroll account dispute

The Appellants testified that they hired the Respondents to do the 2018 personal and corporate taxes. The personal taxes were completed, and the Respondents provided evidence of the work they had completed prior to the termination of their services. A central issue at trial concerned whether the Appellants had agreed to 134AB opening a payroll account with the Canada Revenue Agency ("CRA") on behalf of 142AB. The trial judge found, on a balance of probabilities, that 134AB opened a payroll account with CRA on behalf of 142AB, based on instructions from the Appellants to split Mr. Smith's income between salary and dividends. The Appellants contested this finding, pointing to an email they said was directly contradictory to the finding that they agreed to the course of action taken by 134AB with their taxes. The Appellants also provided uncontradicted evidence that they were subjected to audits because of the fallout from the payroll account and that CRA had not refunded the money they paid. However, the trial judge concluded that the Appellants had not met their burden of proof on whether the Respondents were negligent or in breach of contract for opening the payroll account.

The appeal and standard of review

The Appellants raised numerous grounds of appeal, including procedural unfairness, misapprehension of evidence, insufficient reasons, improper handling of counterclaims, failure to award costs, and judicial bias. Justice L.M. Angotti noted that some of the Appellants' grounds of appeal and arguments were founded on the incorrect standard of review, which the Appellants submitted was the reasonableness standard of review applicable to administrative tribunals. Since the Alberta Court of Justice is not an administrative tribunal, Canada (Minister of Citizenship and Immigration) v. Vavilov, 2019 SCC 65, does not apply. The proper appellate standard applied: errors of law are reviewable on the standard of correctness, while decisions involving fact finding, inferences of fact, or mixed law and fact are entitled to deference, unless the trial judge made a palpable and overriding error, as set out in Housen v Nikolaisen, 2002 SCC 33.

Fresh evidence application and procedural fairness claims

The Appellants sought to introduce an email at the appeal stage, which they said would provide proof that Ms. Waters provided inconsistent evidence under oath. The appeal court denied this application. The Appellants confirmed that they had the email prior to trial but made the strategic decision not to introduce it, despite knowing it was available. The court found they had not met the first element of the test for fresh evidence set out in Barendregt v Grebliunas, 2022 SCC 22. Furthermore, the appeal court agreed with the Respondents that the email was similar to the evidence given by Ms. Waters at trial and would not have affected the result. On the procedural fairness issue regarding the trial binder, the appeal court found that the trial judge directed an adjournment to allow each party a sufficient opportunity to look through the opposing party's trial binder and provided each party with his trial binder containing the opposing party's documents. During witness testimony, if the Appellants required a document entered by the Respondents, the trial judge provided them with his copy. At no time did the Appellants request an adjournment so that a full trial binder of the Respondents' documents could be provided to them, or an adjournment of the trial to another day. The appeal court concluded that the trial was conducted in a fair manner and the trial judge did not err in the procedure he adopted.

The King's Bench Proceeding and jurisdictional issues

Two years prior to filing their civil claim and five years prior to the trial, 142AB commenced an application in the Court of Queen's Bench (as it then was) against Ms. Waters and Waters and Associates for the return of the corporation's documents. On October 2, 2019, Applications Judge Birkett granted an order to 142AB, requiring Ms. Waters and Waters and Associates to return 142AB's documents and to reimburse 142AB for its $250 filing fee. The trial judge refused to consider any materials from, hear any references to, or address in any manner, the King's Bench Proceeding. The appeal court upheld this decision, noting that the Alberta Court of Justice is an inferior court and its judges do not have any jurisdiction to deal with matters that are before the Court of King's Bench, the superior court, including issues of enforcement or contempt. Additionally, fact findings made in a chambers application before an Applications Judge are never binding upon a trial judge, as a chambers application inevitably has an incomplete evidentiary record and does not involve oral evidence.

Credibility findings and sufficiency of reasons

The appeal court found no misapprehension of the evidence by the trial judge. The trial judge explained that Mr. Smith would not admit to signing documents, because Mr. Smith believed the Respondents to be dishonest and thus did not trust the documents to be authentic. He noted that Mr. Smith did not testify that this was not his signature; he simply refused to admit his signatures because the Respondents were dishonest. The trial judge saw and heard the witnesses and considered all the evidence in reaching his conclusions on credibility and reliability, which conclusions were reasonable. The appeal court stated that a disagreement as to the interpretation or weight of evidence does not demonstrate a misapprehension of the evidence. The trial judge's reasons were found to be abundantly sufficient, as he set out each issue to be decided, spoke to the evidence he relied upon, addressed conflicts in the evidence as well as the credibility or reliability of each witness, and provided his reasoning on how he came to his conclusions.

Counterclaims, costs, and bias allegations

Ms. Waters brought a counterclaim for her travel costs of attending various court dates, which the trial judge dismissed as improper, as travel costs are appropriately dealt with in a costs award. Waters & Associates and 134AB also brought a counterclaim for outstanding accounting fees owed by the Appellants, which the trial judge dismissed as being outside the limitation period. The appeal court declined to consider the Appellants' new arguments that the counterclaims were vexatious, an abuse of process, and an improper collateral attack on a tribunal's ruling, as these were not raised at trial. The trial judge did not award any costs to either party in his reasons. The appeal court upheld this, noting that while the successful party generally receives costs, a trial judge may decide not to award costs if the success is minor in comparison to the claim made, and that the lack of an award of costs to the Appellants was not unreasonable in the circumstances of this case. The Appellants' allegations of judicial bias were also rejected. The transcripts showed that the trial judge explained the trial process and conducted the trial in a manner that was fair and equal to both parties, and his interventions were reflective of his need to ensure he properly understood both the evidence and the arguments before him.

The ruling and outcome

Justice Angotti dismissed the appeal, concluding that the Appellants did not demonstrate that the trial judge committed any reviewable error in making his decision. The original trial decision — awarding $521.33 in damages to 142AB against 134AB for negligence and dismissing all other claims and counterclaims — was upheld. The Respondents were collectively entitled to one set of lump sum costs in the amount of $1,000, for which the Appellants are jointly liable.