Nova Scotia Court of Appeal
Citation: Alva Construction Limited v. Wilsons Cove Estates Inc., 2023 NSCA 54
Date: 20230803
Docket: CA 518959
Registry: Halifax
Between:
Alva Construction Limited
Appellant
v.
Wilsons Cove Estates Inc.
Respondent
Judge: |
The Honourable Justice Joel Fichaud |
Appeal Heard: |
June 13, 2023, in Halifax, Nova Scotia |
Subject: |
Unjust enrichment |
Summary: |
Alva Construction Limited was awarded the contract to replace the Liscomb River Bridge. For the job, Alva needed quarried aggregate. Wilsons Cove Estates Inc. had nearby land with suitable rock, but the land was undeveloped for a quarry. Alva and Wilsons negotiated for Alva’s use of Wilsons’ land for a quarry.
Alva wanted both aggregate for its Liscomb project and a long-term lease to quarry aggregate for its future jobs. The long-term lease was necessary for Alva to recoup its costs to develop the quarry. Wilsons agreed to the first point but would not commit to a long-term lease unless Alva agreed, over the term of the lease, to supply Wilsons with gravel at a preferred price for Wilsons’ own projects. Despite their good faith negotiations, Alva and Wilsons could not agree on the preferred price. They ended their discussion of a long-term lease. By then, Alva had spent about $112,000 developing Wilsons’ land as a quarry and had used some of the aggregate for the Liscomb Bridge project. Alva sued Wilsons for unjust enrichment, i.e. Alva’s costs to develop the quarry on Wilsons’ land. The judge of the Supreme Court of Nova Scotia dismissed Alva’s claim. The judge held: (1) Wilsons was enriched, (2) Alva suffered a corresponding deprivation and (3) there was no juristic reason, in an established category, for the enrichment. However, according to the judge, there was a non-traditional juristic reason for the enrichment, i.e. – Alva had assumed its risk by incurring the development costs before negotiations for a long-term lease culminated and “it is not the role of unjust enrichment to act as insurer against hasty or unfortunate business decisions”.
Alva appealed to the Court of Appeal. |
Issues: |
Did the judge correctly determine that there was a non-traditional juristic reason for Wilsons’ enrichment? |
Result: |
The Court of Appeal dismissed the appeal. The parties’ reasonable expectations were that the negotiations toward a long-term lease would be in good faith. The negotiations were conducted in good faith, but the parties simply could not reach consensus. By incurring the costs before the negotiations culminated, Alva assumed the risk that its costs would not be fully recouped should good faith negotiations fail to conclude a long-term lease. Alva’s assumption of risk is a juristic reason for the consequence when the risk materialized. |
This information sheet does not form part of the court’s judgment. Quotes must be from the judgment, not this cover sheet. The full court judgment consists of 29 pages.
Nova Scotia Court of Appeal
Citation: Alva Construction Limited v. Wilsons Cove Estates Inc. 2023 NSCA 54
Date: 20230803
Docket: CA 518959
Registry: Halifax
Between:
Alva Construction Limited
Appellant
v.
Wilsons Cove Estates Inc.
Respondent
Judges: |
Wood C.J.N.S., Fichaud and Bryson JJ.A. |
Appeal Heard: |
June 13, 2023, in Halifax, Nova Scotia |
Held: |
Appeal dismissed with costs, per reasons for judgment of Fichaud J.A., Wood C.J.N.S. and Bryson J.A. concurring |
Counsel: |
John Kulik, K.C. and Michael Richards for the appellant James D. MacNeil for the respondent |
Reasons for judgment:
[1] Alva Construction Limited (“Alva”) was awarded the contract to replace the Liscomb River Bridge. For the project, Alva needed quarried aggregate. Wilsons Cove Estates Inc. (“Wilsons”) had nearby land with suitable rock but the land was undeveloped for a quarry. Wilsons has its own projects that use aggregate.
[2] Alva’s Project Coordinator and Wilsons’ principal tried to negotiate a mutually beneficial arrangement. Alva wanted both aggregate for its Liscomb Bridge job and a long-term lease to quarry aggregate for its future jobs. Wilsons agreed to the first point and Alva used aggregate from Wilsons’ land for the Liscomb Bridge project. However, Wilsons would not commit to a long-term lease unless Alva agreed to supply Wilsons with gravel from the quarry at reduced prices. The parties agreed to bargain in good faith but, after several discussions, Alva and Wilsons did not agree on the reduced gravel price. That impasse ended their negotiation toward a long-term lease.
[3] By then, Alva had cleared the land, installed an access road, readied the rockface and prepared a laydown area. The work was necessary for Alva to obtain the aggregate it used from this site for the Liscomb Bridge project. However, Alva needed a long-term lease to recoup these development costs for the quarry.
[4] Alva sued Wilsons for unjust enrichment. The judge of the Supreme Court dismissed the claim. He found Wilsons was enriched, Alva suffered corresponding deprivation and there was no established juristic reason for the enrichment. But he held there was a non-traditional juristic reason for the enrichment, i.e.: Wilsons had bargained in good faith as promised, Alva had assumed its risk by incurring the development costs before negotiations culminated, and “it is not the role of unjust enrichment to act as insurance against hasty or unfortunate business decisions”.
[5] Alva appeals. The issue is whether the judge correctly determined that there was a non-traditional juristic reason for Wilsons’ enrichment.
The Relationship Between Alva and Wilsons
[6] Alva Construction Limited is a heavy construction contractor with its head office in Antigonish. It builds roads, bridges and wharves. It has quarries and crushing equipment to pulverize the rock and uses the aggregate for its projects.
[7] A.G. MacDonald is Alva’s president and, with his brother, owns the company. A.G. MacDonald’s son, Connor MacDonald, is Alva’s Project Coordinator. Connor has a business degree from Memorial University.
[8] Wilsons Cove Estates Inc. has several businesses in northern Nova Scotia. They operate in forestry, real estate development and excavation. Its owner is Jason Wilson. He has a business degree from St Francis Xavier University.
[9] As we shall see, the issue is whether there is a non-traditional “juristic reason” for Wilsons’ enrichment at Alva’s expense. The authorities say that point turns on the parties’ reasonable expectations and considerations of public policy, and the analysis of those criteria looks to the circumstances of their transaction and how they organized their relationship.
[10] Consequently, to frame the analysis, I will relate in detail the evidence and findings on the development of the business relationship and negotiations between Alva and Wilsons. The evidence spans early May to mid-August, 2019.
[11] On May 6, 2019, the Province of Nova Scotia’s Department of Transportation and Infrastructure Renewal (“TIR”) awarded Alva the general contract to replace the bridge that spans the Liscomb River in Guysborough County. The project involved roadwork for which Alva needed aggregate rock.
[12] In early May 2019, Jason Wilson learned of Alva’s award. He contacted Alva’s site foreman to inquire whether Wilsons could supply materials for the Liscomb Bridge project. The foreman passed the message to Connor MacDonald, who telephoned Mr. Wilson to discuss it. Mr. Wilson said his company had a quarry at Spanish Ship Bay, near the Liscomb Bridge, with a source of aggregate. The short distance to the Liscomb Bridge would lower Alva’s trucking costs.
[13] The discussion prompted an email exchange between Connor MacDonald and Mr. Wilson:
• Alva would need to dynamite the rock face to produce aggregate. For blasting approval, TIR required a signed consent from every homeowner within 800 meters. On May 9, 2019, Mr. MacDonald emailed Mr. Wilson with the addresses of homeowners within 800 meters of Wilsons’ quarry.
• On May 12, Mr. Wilson emailed Connor MacDonald and asked:
Do you need everyone to signoff or you can’t move forward, or you just need most???
• Later on May 12, Mr. MacDonald replied:
I need sign off from every house to move forward. There’s not really any way around it. …
• Mr. Wilson canvassed the neighbouring homeowners to request consent. However, one would not sign. On May 16, Mr. Wilson emailed Mr. MacDonald that this individual had declined. This meant the option of using Wilsons’ quarry at Spanish Ship Bay was off the table. Connor MacDonald testified:
Q. … So, what’s that mean if someone says no to this blasting request?
A. You no longer have the ability to quarry in that area.
[14] However, Mr. Wilson’s email of May 16 suggested an alternative:
I do have another lot with [a] cliff where there are no homes within 800 metres. It’s closer to bridge, but no access into it as of yet, but I own from highway into it. Would you be interested in looking at that?
This land was in Wilsons Cove about 5 kilometers from the Liscomb Bridge. It became the subject of this lawsuit.
[15] By a further email exchange on May 16, Messrs. Wilson and Connor MacDonald arranged to view the Wilsons Cove property together later that day. Mr. MacDonald described what he saw:
A. … This was another property, closer to the bridge, of raw land, which means it had not been developed previously for a quarry. So, it was treed and there was, I would say, buried rock on the land. So, no outcrop, no rock outcrop. And it was treed.
[16] Mr. Wilson said they “just walked into the woods to where the cliff face was and just kind of had a look at it”. He added:
A. And then we agreed that I’d have to get a machine there to take in to get him a sample so they could send it away for testing.
Q. Okay.
A. See if the rock was adequate for what they needed.
[17] On May 20, Connor MacDonald texted Mr. Wilson:
Any chance you would drop one of your machines at that piece of land we walked last week so I could get a rock sample?
[18] Mr. Wilson replied that he would have a machine and operator at the site on May 21, 2019 at 8 a.m., to which Mr. MacDonald texted “No problem”. On May 21, at 5:57 p.m., Mr. Wilson texted to ask whether Alva needed the machine any further. Mr. MacDonald replied: “I think I got what I need.” Alva had its samples.
[19] Nothing material transpired until Alva received the sampling results. By the second week of June, Alva had the results.
[20] Mr. Wilson testified:
Q. Okay. In terms of once you heard back about the samples, what were you told?
A. That they were good enough for gravel but not good enough for asphalt, I believe it was.
Q. Okay.
A. So, it was a viable option.
Q. Okay. And specifically, who told you that?
A. Connor.
[21] The next step was to obtain approval that the Wilsons Cove property be used as a quarry. As the Liscomb Bridge project was for the provincial government (TIR), it was unnecessary to obtain full Industrial Approval under Nova Scotia’s Environment Act. Rather, the quarry could operate with a temporary exemption issued by TIR, limited to the project. However, the temporary exemption required consents of homeowners within 800 meters of the quarry, of which there were only three, and the consent of the quarry-owner, i.e. Wilsons.
[22] On June 12, Connor MacDonald provided the forms to Mr. Wilson and Mr. Wilson had them signed by the three homeowners. On June 13, Mr. Wilson gave the signed forms to Mr. MacDonald. This was done by texts and emails between Messrs. MacDonald and Wilson.
[23] Between Thursday, June 13 and Sunday, June 16, 2019, Connor MacDonald and Mr. Wilson had an exchange that bears materially on their “reasonable expectations”, as I will discuss later:
• On June 13, 2019, Connor MacDonald texted Mr. Wilson that Alva was “dropping off a dozer at that driveway today”. His text added: “It won’t be working this week”. Connor MacDonald testified:
Q. And you say in this text:
“It won’t be working this week.”
Do you recall what work you’re referring to?
A. Yes.
Q. And what work was that?
A. To develop that land into a quarry.
• Later on June 13, Mr. Wilson replied by text: “No problem.”
• On June 14, Connor MacDonald texted Mr. Wilson:
Sending you 1 more letter
Just permission to operate on your property
TIR required a signed consent for the Liscomb Bridge project. However, the form sent to Wilsons by Mr. MacDonald would give Alva permission to operate a quarry indefinitely.
• Later on June 14, Mr. Wilson replied by email: “Can you please modify this to include start and end dates.”
• On June 16, Connor MacDonald replied by text:
I can change the duration of our access agreement to “upon the completion of Alva Construction Ltd.’s contract to replace the liscomb bridge”.
But I want your word that you’ll negotiate in good faith with us when we’re developing the lease.
I don’t want to do all the work to open it up then get booted out, know what I’m saying?
• Mr. Wilson replied by text: “Give me a call when you can”.
• Connor MacDonald called Mr. Wilson. Mr. Wilson agreed with Connor MacDonald’s condition that they negotiate in good faith toward a long-term lease. He testified:
Q. So, you agreed then with Connor you wanted to negotiate in good faith? Correct?
A. That’s right.
• On June 16, Connor MacDonald emailed Mr. Wilson with a revised form. His email said:
Changed permission length to last as long as the bridge contract.
The revised form said:
I hereby give Alva Construction Limited permission to operate a quarry and proceed with an access permit application for our property (PID # 35201441) located at Wilsons Cove, Guysborough County, Nova Scotia.
Permission for the use of PID # 35201441 for quarrying purposes will be for the duration of Alva Construction Limited’s project “Liscomb River Bridge”, Tender No. 2019-046.
Jason Wilson
Wilsons Cove Estates Inc.
• Mr. Wilson signed the revised form and returned it to Connor MacDonald.
[24] Connor MacDonald testified about this exchange and its aftermath:
Q. Thank you. And so, you say here in this third text:
“I don’t want to do all the work to open it up, then get booted out.”
What did you mean by booted out?
A. Revoke permission to use the quarry. Or not develop a lease.
Q. And so, you said revoke permission to use the quarry. So, how long was Alva looking to be in this quarry for?
A. Ten years plus.
Q. Okay. And did Mr. Wilson respond to this text?
A. Yes.
Q. And what did he say?
A. He said to call. Call him.
Q. And did you end up having that call with Mr. Wilson?
A. Yes.
Q. And do you remember what was discussed on that call?
A. Yes.
Q. And what was that?
A. Just that what was most important to him in negotiations.
Q. And what – did he say what the most important thing to him?
A. Yes. Yeah. Price of gravel. Gravel prices.
[25] Connor MacDonald summarized where the parties stood as of June 16:
Q. So, the agreement is, look, Jason’s going to give you permission – Alva, to come onto his property for the whole duration of the contract, correct? The bridge contract.
A. Correct.
Q. That’s one thing Jason’s giving to you. Alva says, “Great. We’re hoping for a long-term deal here. We want you to promise you’ll negotiate in good faith,” correct?
A. Correct.
Q. Okay, So, as of June 16th, that’s kind of the agreement at that point in time. Jason’s given you permission to get on it. In exchange, Jason, you’ve got to negotiate for us in good faith, right?
A. Correct.
[26] Alva did not disclose that Wilsons would be expected to pay the quarry costs, should their lease negotiations fail. Connor MacDonald testified:
Q. Okay. You would agree with me, at no point in time in your negotiations with Jason Wilson, did you ever tell him, “Hey, we’re keeping track of our hours and we’re going to bill you for those hours if we don’t do a deal.”
A. I would agree with you.
[27] Mr. Wilson gave his perspective on the exchange of June 13-16:
Q. Okay. If we go to the next tab, Tab 8, it’s an email from yourself to Mr. MacDonald in response. Still on the same day. You said:
“Can you please modify this to include start and end dates?”
Why did you want start and end dates?
A. I just don’t give anyone access to my property with an open-ended access.
…
Q. Okay. And what’s your rationale for always making sure there’s an end date?
A. So, there’s no ambiguity when it’s done. They’re done, they get out.
…
Q. Okay. Your response to the text, which is in the blue, “Give me a call when you can.” Was there a call?
A. Yes.
Q. Okay. And do you recall that call?
A. Yes.
Q. And what was discussed during the call?
A. I just wanted to make sure my points were clear that I didn’t want to – there’s certain things I didn’t want to lose control of. One was control of my property. I wanted to make sure any agreement we did put in place was mutually beneficial. And the main was I wanted cheap gravel.
[28] Mr. Wilson explained his condition for allowing Alva to quarry Wilson’s property over the long term:
Q. At this point in time were you willing to provide a long-term lease?
A. Yes.
Q. Okay. And why?
A. I wanted to get cheap aggregate, and this is probably the best way to get it.
[29] I will resume the chronology from mid-June 2019.
[30] Connor MacDonald sent Mr. Wilson’s signed consent to TIR’s Project Engineer for the Liscomb Bridge project. On June 21, 2019, the Project Engineer responded that Alva’s “entrance plan for the quarry will be acceptable and thus, you are permitted to utilize the TIR exemption for this quarry”.
[31] As noted above, on June 13 Alva had dropped off a dozer at the site. Alva’s work to develop the land as a quarry started in the latter half of June. Connor MacDonald explained what work was done over the following weeks:
Q. And we’d also discussed earlier about Alva dropping off a dozer at Mr. Wilson’s property, correct?
A. That’s correct.
Q. And so, did Alva end up performing any work on this property?
A. Yes, we did.
Q. And could you describe for me in general terms, what work did Alva perform?
A. Yes. So, we developed a quarry. So, we built a road into the area where the quarry would be. We removed the overburden from where the rock was, to expose it. We drilled into the rock, blasted. We built a laydown area, which is an area where you would set up your crushers or load your trucks. We set up a scale. And that’s about everything.
Q. And just – you mentioned a road. Do you recall how long that road was?
A. Roughly 300 metres.
[32] Alva wanted use of the quarry for the long term, continuing after the Liscomb Bridge project. To this end, on June 14, Connor MacDonald texted Mr. Wilson: “When did you want to set a time aside to discuss exactly what the lease would entail?” Mr. Wilson, who is a lobster fisherman, suggested June 25, the day after the lobster season ended. There followed some re-scheduling while they exchanged information on gravel pricing and waited for a draft lease from Alva’s lawyer.
[33] As of July 4, 2019, Alva and Wilsons had not discussed details of the long-term arrangement. Connor MacDonald testified:
Q. So, as of July 4, you would agree with me, you actually hadn’t got to the point where you and Wilson had even discussed types of rock that were going to come out of his own quarry, that you guys would sell to him, correct?
A. Correct.
[34] On July 5, 2019, Connor MacDonald and Mr. Wilson met at Mr. Wilson’s house, to discuss a long-term lease.
[35] Mr. Wilson testified that, at that meeting: “I told him I was looking like four to six and he didn’t give me a price at that point”. Mr. Wilson explained “four to six” meant $4 to $6 per tonne payable by Wilsons to Alva for processed aggregate to be provided by Alva to Wilsons from the quarry on Wilsons’ land. Mr. Wilson added:
Q. Okay. Were your – you already told us Connor’s initial response. Were prices countered? Was there a counteroffer to your prices?
A. No, the only time I seen any prices from them was when I received the draft agreement was at the end.
[36] Connor MacDonald testified that Alva’s president, A.G. MacDonald, made Alva’s decisions on pricing. A.G. did not attend the meeting of July 5 and Connor was not authorized to make pricing commitments. The meeting of July 5 left the gravel prices unresolved.
[37] On July 12, 2019, Connor MacDonald and Mr. Wilson exchanged texts to schedule another meeting. Mr. MacDonald texted Mr. Wilson “I’ll have the notes we talked about written up on the lease and a price list”. The list would state the gravel prices Alva would charge Wilsons for gravel produced by the quarry during the term of the lease.
[38] On July 17, Connor MacDonald emailed Mr. Wilson a revised draft lease, with notes of the points from their meeting of July 5, and a price list for various grades of quarried aggregate. The prices had been determined by A.G. MacDonald from Alva’s standard pricing. The quoted prices ranged from $8.75 per tonne to $9.25 per tonne. Alva’s price for basic 1-inch clear stone was $8.75 per tonne.
[39] There was a marked disparity between Alva’s quoted $8.75 to $9.25 per tonne and the $4 to $6 per tonne offered by Wilsons.
[40] Connor MacDonald and Mr. Wilson arranged to meet again on July 19, 2019, at Alva’s office in Antigonish. Also present, on this occasion, was A.G. MacDonald. Connor MacDonald explained the purpose of the meeting:
Q. Okay. And fair to say, the intent of the meeting was for Jason to be able to actually meet and talk to your father directly about those terms, correct?
A. Correct.
[41] The meeting did not resolve the gravel pricing. Mr. Wilson needed to compare Alva’s offered prices to those of Wilsons’ other suppliers. He was awaiting that information. Mr. Wilson testified:
Q. Okay. In leaving the meeting, what did you understand had been accomplished?
A. We worked out most of the terms. For me I needed to check out the prices with my current suppliers and then kind of get a sense of what I should be paying for the material.
[42] After the meeting, Mr. Wilson finished canvassing other companies’ prices to quarry and crush gravel at the site. That took over a week. With that information in hand, Mr. Wilson raised the amount he was willing to pay Alva to between $6 and $6.50 per tonne. He testified:
Q. At this point in time, August 5th, where were negotiations at on price? What was your price versus their price?
A. August 5th, I believe mine were the six and six fifty. I’m not sure where they were at that point.
[43] However, the gravel price Wilsons was willing to pay remained significantly below the prices Alva wanted to charge. By the first week of August, Mr. Wilson had determined that a consensus on gravel pricing was not in the offing. On the afternoon of August 5, 2019, he told Connor MacDonald that there will be no long-term lease. Connor MacDonald testified:
Q. Okay. Now, it’s after August 5th that things fall apart, so to speak, in terms of the negotiations, correct?
A. Correct.
Q. Jason notifies you first, “Look, I’m not going to do a deal with you guys. You can stay on my property, you can operate the quarry until the end of the project, but that’s it,” correct?
A. Correct.
[44] On August 15, 2019, A.G. MacDonald made a last attempt to reach agreement. Referring to his notes as he testified, he related his phone call to Mr. Wilson on that day:
A. And August 15th, 2019.
“I made another call to Jason asking him about the lease, and he said he did not like my prices in the lease.”
And I said, we discussed, I said:
“What prices do you want – are you going to be good with?”
And my notes indicate that for 5,000 tonne of inch clear, he wanted six fifty. For 4-8, I don’t have a number there for some reason. Type 1 he wanted 10,000 tonne of that at seven dollars ($7.00) a tonne. And Type 2, 5,000 tonne he wanted at seven dollars ($7.00) a tonne.
So, I came back and said:
“I don’t agree with all your prices, but I will give you eight fifty for the inch clear; I’ll give you eight fifty for the 4-8, I’ll give you the seven dollars ($7.00) you requested for the Type 1 and I’ll give you the seven dollars ($7.00) you’re requesting for the Type 2”.
[45] The bottom line was, for standard 1-inch clear gravel, Wilsons would pay no more than $6.50 per tonne, and Alva wanted $8.50 per tonne. At that impasse, negotiations broke off.
[46] On August 19, 2019, Mr. Wilson emailed A.G. MacDonald:
Just a quick note to reaffirm that there will be no lease agreement for a permanent quarry on my property (PID 35201441) as I informed your project coordinator Conner [sic] MacDonald on August 5th, 2019 at 2:27 pm. Please ensure all activities on the property stay within the confines of the existing agreement signed June 16th, 2019 and attached to this email.
The document of June 16th, quoted above, was Wilsons’ permission that Alva could quarry the property for the duration of the Liscomb Bridge project.
[47] Before the lease negotiations broke off, Alva had made the property an operable quarry, at a cost of about $112,000. The work included clearing, preparing an access road and lay-down area and readying the rock face. There were blasts on July 9 and July 31, 2019, totalling over 31,000 tonnes. Connor MacDonald testified:
Q. Okay. But you would also agree, Alva has decided to proceed with developing the quarry, even though there’s not a firm deal in place on a lease, correct?
A. Correct.
…
Q. Because as of July 30, Alva is effectively already operating the quarry, correct?
A. Correct.
Q. Yeah. Because remember you and I talked about it before lunch. Road’s already in, laydown areas done, scales in, first blast had occurred. And by July 30th actually, second blast had occurred, correct?
A. Correct. Go to –
…
Q. And as we know, by August 5th, second blast is done, correct?
A. Correct.
Q. Not going to be any future blasting. So, Alva has kept working on the quarry, despite not having an agreement with Jason Wilson, correct?
A. Correct.
[48] After the negotiations on the long-term lease broke off in August 2019, Alva continued to have the use of the quarry and its aggregate for the duration of the Liscomb Bridge project. Connor MacDonald testified:
Q. Okay. But you did agree with me, he allowed Alva to finish out the project, use the quarry for whatever purposes they wanted to, until the end of the Liscomb Bridge Project, correct?
A. Correct.
[49] A.G. MacDonald testified that Alva used 1,958 tonnes of quarried aggregate from Wilsons’ quarry for the Liscomb Bridge project. He elaborated:
Q. Okay. So, what – sorry, so then what types did you use from Mr. Wilson’s?
A. Filling and structure, which is basically the same gradation as the Type 2 gravel. Just used for filling against the abutments, so they call it filling and structure. It’s harder to place, so it’s a different – they just don’t call it Type 2 because the placement of it is much more slow, so they give you another item, so obviously you price it higher.
[50] The draft lease, discussed in July, provided for a royalty payable by Alva to Wilsons for gravel from the quarry, but the lease was never signed. Consequently, Alva did not pay Wilsons for the gravel, taken from Wilsons land, that Alva used for the Liscomb Bridge project. However, after Alva sued, Alva reduced its damages claim for unjust enrichment by a credit for the value of that gravel.
[51] After Alva finished its use of the quarry for the Liscomb Bridge project, Alva vacated and Wilsons used the property as a quarry for its own business. This included use of some of the left-over aggregate that Alva had blasted in July 2019 but did not use.
The Litigation
[52] On June 29, 2020, Alva sued Wilsons for unjust enrichment.
[53] On September 12 -14, 2022, Justice James Chipman of the Supreme Court heard the trial. His Decision of October 5, 2022 (2022 NSSC 279) dismissed the claim.
[54] Justice Chipman found the witnesses for both parties to be credible and reliable (para. 3).
[55] The judge applied the tests for unjust enrichment from Garland v. Consumers’ Gas Co., 2004 SCC 25. Garland is quoted below (paras. 61, 63, 68).
[56] Justice Chipman held Wilsons was enriched and Alva was correspondingly impoverished by the value of the improvements to the quarry. His reasons, para. 44, say “I find there is no juristic reason from an established category”.
[57] However, the judge found there was a juristic reason on a non-traditional basis. He explained:
[44] … Accordingly, my analysis must proceed to the second stage, where Wilsons has the burden to rebut the prima facie case by showing that there is some residual reason to deny recovery and that the enrichment should be retained. I must examine all of the circumstances of the transaction between the parties in order to determine whether Alva [sic – should be “Wilsons”] has shown that there is another reason to deny recovery.
[45] In keeping with the Supreme Court of Canada’s guidance, I have borne in mind two factors in this analysis: the reasonable expectation of the parties and public policy considerations.
[46] … I note that as Connor acknowledged on cross-examination, Alva decided to proceed with developing the quarry on the Property even though there was not a lease agreement in place. …
…
[48] … Based on all the evidence, I find that Alva reasonably expected that the lease would be long term and Wilsons must have known this to be so. At the same time, I find that the evidence overwhelmingly demonstrates that all along, Wilsons wanted to have a supply of four grades of aggregate at preferred (reduced) prices and Alva must have understood this to be the case. There is no evidence that either party turned their mind to what would occur if no long term lease was executed.
[49] Unfortunately for Alva, they did not pause the process to attempt to come to terms on a lease agreement – inclusive of the critical issues of aggregate supply and pricing – before moving forward with developing the Property. Nor did they attempt to reach an agreement to share the cost of any improvements made by Alva to the Property if no lease agreement was ever formalized. To my mind, in the circumstances, they forged ahead at their peril.
[50] … the parties are (and were at the material time) sophisticated commercial enterprises engaged in the construction business in northern Nova Scotia. They became involved in an ongoing negotiation that ultimately broke down after a three-month period. Alva dropped their requirement of accessing the Property indefinitely, and agreed to Wilsons’ term of the duration of the Bridge Project. After making this concession, Alva asked for negotiations to continue in good faith and Wilsons responded that any agreement would have to be mutually beneficial. On all the evidence, I cannot find that either party exercised bad faith. As a mutually beneficial agreement, there obviously was no agreement.
[51] Public policy considerations dictate that I must deny recovery. Once again, sophisticated parties entered into a negotiation in what was a transparent process. Talks ultimately broke down in mid-August 2019. On my reading of the evidence, this was squarely because A.,G. and Jason could not come to terms on aggregate prices. … Wilsons expected reduced prices for the simple reason that they owned the Property. From the evidence of A.G. (he ultimately offered Wilsons lower than Alva’s standard aggregate prices) alone, I find that Wilsons’ expectation was reasonable; the question remains as to what would have been a fair price for the two grades of aggregate that the parties could not agree on.
[52] Rather than attempting to answer that question, I will simply observe that I do not envision the role of the Court as somehow entering into the fray in an attempt to sort out this issue. …
[53] Given all of the evidence and law, I have determined that public policy considerations militate against allowing the claim. In the circumstances, Wilsons’ retention of the enrichment is not unjust. There is no evidence of any wrong doing by Wilsons that it is profiting from. The Property was enriched because Alva decided to proceed without a long term lease in place, on the assumption that such an agreement would be forthcoming. Through the fault of neither party, that assumption turned out to be incorrect. It is not the role of unjust enrichment to act as insurance against hasty or unfortunate business decisions made by sophisticated parties (see, for example, Weisberg v. Dixon, 2020 ONSC 2536, aff’d 2021 ONCA 491). In all the circumstances, Wilsons has met its burden in demonstrating that Alva should not be awarded special damages for unjust enrichment.
[58] On November 8, 2022, Alva appealed. Wilsons did not file a Notice of Contention to request that the judge’s ruling be upheld on an alternative basis.
Issues
[59] Alva’s factum submits the judge improperly applied the test for unjust enrichment and erred in his analysis of juristic reasons.
Standard of Review
[60] The judge found both parties’ witnesses to be credible and reliable. Both parties accept the trial judge’s findings of fact. The issue is whether there is an error of law, for which the standard of review is correctness.
The Tests for Unjust Enrichment
[61] In Garland v. Consumers’ Gas Co., Justice Iacobucci stated the three elements of unjust enrichment:
30 As a general rule, the test for unjust enrichment is well established in Canada. The cause of action has three elements: (1) an enrichment of the defendant; (2) a corresponding deprivation of the plaintiff; and (3) an absence of juristic reason for the enrichment. [citations omitted]
[62] Justice Chipman found Wilsons was enriched and Alva suffered a corresponding deprivation. On the appeal, those findings are not challenged.
[63] Justice Iacobucci explained the third element and its rationale:
(b) Absence of Juristic Reason
40 … While both Canadian and English causes of action require an enrichment of the defendant and a corresponding deprivation of the plaintiff, the Canadian cause of action requires that there be “an absence of juristic reason for the enrichment” while the English courts require “that the enrichment be unjust” [citation omitted]. It is not of great use to speculate on why Dickson J. in Rathwell, supra [Rathwell v. Rathwell, [1978] 2 S.C.R. 436] expressed the third condition as absence of juristic reason but I believe that he may have wanted to ensure that the test for unjust enrichment was not purely subjective in order to be responsive to Martland J.’s criticism in his reasons that application of the doctrine of unjust enrichment contemplated by Dickson J. would require “immeasurable judicial discretion” (p. 473). The importance of avoiding a purely subjective standard was also stressed by McLachlin J. in her reasons in Peel, supra [Peel (Regional Municipality) v. Canada, [1992] 3 S.C.R. 762], at p. 802, in which she wrote that application of the test for unjust enrichment should not be “case by case ‘palm tree’ justice”.
…
42 Professor Smith [L. Smith, “The Mystery of ‘Juristic Reason’ ” (2000), 12 S.C.L.R. (2d) 211] argues that, if there is in fact a distinct Canadian approach to juristic reason, it is problematic because it requires the plaintiff to prove a negative, namely the absence of juristic reason. Because it is nearly impossible to do this, he suggests that Canada would be better off adopting the British model where the plaintiff must show a positive reason that it would be unjust for the defendant to retain the enrichment. In my view, however, there is a distinctive Canadian approach to juristic reason which should be retained but can be construed in a manner that is responsive to Smith’s criticism.
43 … As McLachlin J. wrote in Peel, supra, at p. 788, the Court’s approach to unjust enrichment, while informed by traditional categories of recovery, “is capable, however, of going beyond them, allowing the law to develop in a flexible way as required to meet the changing perceptions of justice”. But, at the same time, there must also be guidelines that offer trial judges and others some indication of what the boundaries of the cause of action are. The goal is to avoid guidelines that are so general and subjective that uniformity becomes unattainable.
44 … Consequently, in my view, the proper approach to the juristic reason analysis is in two parts. First, the plaintiff must show that no juristic reason from an established category exists to deny recovery. By closing the list of categories that the plaintiff must canvass in order to show an absence of juristic reason, Smith’s objection to the Canadian formulation of the test that it required proof of a negative is answered. The established categories that can constitute juristic reasons include a contract (Pettkus, supra) [Pettkus v. Becker, [1980] 2 S.C.R. 834], a disposition of law (Pettkus, supra), a donative intent (Peter, supra) [Peter v. Beblow [1993] 1 S.C.R. 980], and other valid common law, equitable or statutory obligations (Peter, supra). If there is no juristic reason from an established category, then the plaintiff has made out a prima facie case under the juristic reason component of the analysis.
45 The prima facie case is rebuttable, however, where the defendant can show that there is another reason to deny recovery. As a result, there is a de facto burden of proof placed on the defendant to show the reason why the enrichment should be retained. This stage of the analysis thus provides for a category of residual defence in which the courts can look to all the circumstances of the transaction in order to determine whether there is another reason to deny recovery.
46 As part of the defendant’s attempt to rebut, courts should have regard to two factors: the reasonable expectations of the parties, and public policy considerations. It may be that when these factors are considered, the court will find that a new category of juristic reason is established. In other cases, a consideration of these factors will suggest that there was a juristic reason in the particular circumstances of a case which does not give rise to a new category of juristic reason that should be applied in other factual circumstances. In a third group of cases, a consideration of these factors will yield a determination that there was no juristic reason for the enrichment. In the latter cases, recovery should be allowed. The point here is that this area is an evolving one and that further cases will add additional refinements and developments.
[64] In short, if there is no established juristic reason such as contract, statute, operation of law or gift, the defendant must show an atypical juristic reason based on two criteria: the reasonable expectations of the parties and public policy considerations.
[65] Justice Iacobucci’s application of those two criteria is instructive.
[66] Since 1981, Consumers’ Gas Co., a regulated utility, had levied late payment penalties. The penalties were at a rate that had been approved by orders of the Ontario Energy Board, further to provincial legislation. However, the penalties exceeded the interest limit under s. 347 of the Criminal Code, R.S.C. 1985, c. C-46. Due to this operational conflict between provincial and federal laws, the Board’s approval orders were inoperative under the paramountcy doctrine (para. 53 of Justice Iacobucci’s reasons). In 1994, Mr. Garland started a class action against the utility to challenge the approval orders on this basis and to recover the excessive penalties.
[67] Justice Iacobucci concluded: (1) the Ontario Energy Board’s approval was a “juristic reason” for the utility’s enrichment from 1981 to 1994, but (2) that reason ended in 1994 when the utility received notice of the class action. The claim for unjust enrichment was allowed for the excess payments after notice of the claim in 1994 and dismissed for the excess payments before that date.
[68] Justice Iacobucci explained:
48 In this case, the only possible juristic reason from an established category that could be used to justify the enrichment is the existence of the OEB orders creating the LPPs under the “disposition of law” category. The OEB orders, however, do not constitute a juristic reason for the enrichment because they are rendered inoperative to the extent of the conflict with s. 347 of the Criminal Code. The plaintiff has thus made out a prima facie case for unjust enrichment.
…
53 … It therefore falls to Consumers’ Gas to show that there was a juristic reason for the enrichment outside the established categories in order to rebut the prima facie case made out by the appellant.
54 The second stage of juristic reason analysis requires a consideration of reasonable expectations of the parties and public policy considerations.
55 When the reasonable expectations of the parties are considered, Consumers’ Gas’s submissions are at first blush compelling. Consumers’ Gas submits, on the one hand, that late payers cannot have reasonably expected that there would be no penalty for failing to pay their bills on time and, on the other hand, that Consumers’ Gas could reasonably have expected that the OEB would not authorize an LPP scheme that violated the Criminal Code. …
…
57 Finally, the overriding public policy consideration in this case is the fact that the LPPs were collected in contravention of the Criminal Code. As a matter of public policy, a criminal should not be permitted to keep the proceeds of their crime. …
58 In weighing these considerations, from 1981-1994, Consumers’ Gas’s reliance on the inoperative OEB orders provides a juristic reason for the enrichment. …
59 However, in 1994, when this action was commenced, Consumers’ Gas was put on notice of the serious possibility that it was violating the Criminal Code in charging the LPPs. … After the action was commenced and Consumers’ Gas was put on notice that there was a serious possibility the LPPs violated the Criminal Code, it was no longer reasonable for Consumers’ Gas to rely on the OEB rate orders to authorize the LPPs.
[69] The Supreme Court has reiterated Garland’s tests for unjust enrichment: Pacific National Investments Ltd. v. Victoria (City), 2004 SCC 75, para. 23, per Binnie J. for the Court; Gladstone v. Canada (Attorney General), 2005 SCC 21, para. 18, per Major J. for the Court; Kingstreet Investments Ltd. v. New Brunswick (Finance), 2007 SCC 1, para. 36, per Bastarache J. for the Court; Jedfro Investments (U.S.A.) Ltd. v. Jacyk, 2007 SCC 55, para. 32, per McLachlin C.J.C. for the Court; Ermineskin Indian Band and Nation v. Canada, 2009 SCC 9, para. 183, per Rothstein J. for the Court; Kerr v. Baranow, 2011 SCC 10, paras. 112-13, 121-23, per Cromwell J. for the Court; Moore v. Sweet, 2018 SCC 52, paras. 56-59, per Côté J. for the majority.
[70] I will turn to this case.
Established Category of Juristic Reason
[71] On June 16, 2019, Mr. Wilson signed the form giving Alva permission to operate the quarry. The form was needed to satisfy TIR’s requirement for a temporary exemption to operate a quarry. Then Alva operated the quarry and used some of the aggregate for the Liscomb Bridge project. It could be proposed this arrangement constituted a contract and provided an established basis for the enrichment under Garland’s primary test.
[72] In my view, that proposition would be unpersuasive.
[73] Unjust enrichment applies flexibility and common sense to determine whether, in the context and circumstances, it is unjust that the defendant retain the benefit conferred by the plaintiff: Peel (Regional Municipality v. Canada, [1992] 3 S.C.R. 762, paras. 57-63; Garland, paras. 39 and 45; Kerr, para. 34; Peter v. Beblow, [1993] 1 S.C.R. 980, page 990. Clearly, the approach promotes substance over form. To treat the Liscomb Bridge aggregate as the subject of a stand-alone contract would not reflect the reality of the parties’ circumstances and relationship. The Liscomb Bridge project was only part of the overall contract that Alva and Wilsons contemplated.
[74] Alva was not interested in a stand-alone contract to obtain aggregate for the Liscomb Bridge project. Alva could obtain that aggregate elsewhere for well under the $112,000 needed to develop the quarry on Wilsons’ land. It was only from prospective revenues under a long-term lease that Alva would recoup those development costs. Alva made this clear to Wilsons and developed the quarry only in return for Wilsons’ agreement to bargain in good faith toward a long-term lease. Alva’s deprivation occurred because those negotiations did not reach a consensus. This case is about a deprivation occasioned by a failed contractual negotiation, which is not an established category of juristic reasons under Garland.
[75] The royalty to Wilsons for aggregate taken by Alva was to be specified in the formal lease. The draft lease provided for a royalty. That fact exemplifies the connection between the Liscomb Bridge aggregate and the contemplated long-term lease. As the lease was not signed after negotiations broke off, Alva did not pay Wilsons for the Liscomb Bridge aggregate. Only when Alva sued, did Alva subtract a credit in the quantification of its unjust enrichment claim.
[76] My view is supported by the approach of the judge and parties in this litigation. Justice Chipman, para. 44, found there was no juristic reason based on established categories, such as contract. Wilsons did not cross-appeal or file a notice of contention to request that the judge’s ruling be upheld on an alternative basis. The proposition that there was an established juristic reason by contract was not argued on the appeal.
[77] This issue is whether there was a non-traditional juristic reason under Garland’s secondary test.
Categorical and Principled Approaches
[78] Alva’s factum, para. 106, cites Glavasky v. Stadnick, [1937] 1 D.L.R. 473 (O.C.A.), where Justice Macdonnell said:
13 … Though the general rule is that “A person who has expended money for the benefit of another, or on property in which he has no interest, has, as a rule, no lien in respect of such expenditure against such other person or against the owner of the property”, yet there is an exception that “where the owner of property stands by and allows a person to spend money thereon in the expectation that he will receive the benefit of it, such person is entitled to a lien”.
[79] It is helpful to trace the evolution of the categorical approach applied in early cases, like Glavasky, to the modern principled framework.
[80] In Pettkus v. Becker, [1980] 2 S.C.R. 834, para. 38, Justice Dickson (as he then was) wrote: “there are three requirements to be satisfied before an unjust enrichment can be said to exist: an enrichment, a corresponding deprivation and absence of any juristic reason for the enrichment”. He said this tripartite test draws from “general principles of equity that have been fashioned by the courts for centuries”. Justice Dickson cited his similar ruling in Rathwell v. Rathwell, [1978] 2 S.C.R. 436, para. 40.
[81] In Peel, Justice McLachlin (as she then was) harmonized the earlier categorical approach with the need for an overall principled approach. She wrote “we must choose a middle path”, i.e. the tripartite test which “thus is seen to have grown out of the traditional categories of recovery”, which “is informed by them”, and which “seeks to reconcile the principles with the established categories of recovery” with “general principles” (paras. 27, 31-32, and see also paras. 57-58).
[82] In Garland, Justice Iacobucci commented on his formulation for “juristic reasons”:
47 In my view, this approach to the juristic reason analysis is consistent with the general approach to unjust enrichment endorsed by McLachlin J. in Peel, supra, where she stated that courts must effect a balance between the traditional “category” approach, according to which a claim for restitution will succeed only if it falls within an established head of recovery, and the modern “principled” approach, according to which relief is determined with reference to broad principles. …
[83] Today, the tripartite test developed in Rathwell, Pettkus, Peel and Garland is the “middle path” that governs the analysis of unjust enrichment. The categorical applications from earlier decisions have not been abolished: Kerr, para. 32. But, as Justice McLachlin said in Peel, they must “reconcile” to the general principles of the tripartite test. Alva’s factum, para. 107, aptly says the categorical rulings have been “reframed” in conformity to Garland’s analytical structure. The harmonizing implement is the treatment of juristic reasons.
[84] Whether there was a juristic reason under Garland’s secondary test involves the appraisal of the parties’ reasonable expectations and public policy considerations. Glavasky’s passage would impose a lien on the land whose owner “allows a person to spend money thereon in the expectation that he will receive the benefit of it” [emphasis added]. Glavasky’s “expectation” has evolved into Garland’s test of “reasonable expectations”. Alva’s submission must be examined through that lens.
Reasonable Expectations
[85] In Garland, para. 45, Justice Iacobucci said the court “can look to all of the circumstances of the transaction” to determine whether there is a juristic reason. In Moore v. Sweet, Justice Côté said:
[62] … Each of these categories [of established juristic reasons] points to a relationship between the plaintiff and the defendant that justifies the fact that a benefit passed from the former to the latter … [Justice Côté’s emphasis]
As for the non-traditional juristic reasons under Garland’s secondary test, Justice Côté cited “considerations relating to the way in which the parties organized their relationship” (para. 83); see also Kerr, paras. 45 and 122.
[86] In Kerr, Justice Cromwell’s summary included:
124 … It is the mutual or legitimate expectations of both parties that must be considered, and not simply the expectations of either the claimant or the defendant.
[bolding added]
[87] In Sipekne’katik v. Mi’kmaw Family and Children’s Services of Nova Scotia, 2023 NSCA 44, this Court discussed mutuality:
[51] A juristic reason stems from the transaction or relationship between the parties. Their shared awareness may arise from discussion, notice as in Garland, the joint experience of their dealings or obvious common sense. Without some connection to their transaction or relationship, a “juristic reason” could emerge simply from one party’s uncommunicated aspiration. In a commercial setting, privately held subjective expectancies are not juristically enforced against the other party. …
[88] The qualifier “reasonable” is the court’s instrument of oversight. In Garland, para. 59, Justice Iacobucci said: after Consumers’ Gas received notice of the class challenge in 1994, “it was no longer reasonable for Consumers’ gas to rely on the OEB rate orders to authorize the LPPs”. Before that, despite any contrary views Mr. Garland may have held privately, Consumers Gas’ reliance on the OEB’s publicly accessible order represented a reasonable expectation.
[89] Alva says it expected a long-term lease and would not have developed the quarry without one. That point is the platform of its submission.
[90] In my respectful view, there is more to it.
[91] The prospect of a long-term lease was always contingent on their reaching consensus on the gravel price. The contingency failed in August 2019. It is not for the court to rule that Alva’s last offer of $8.50/tonne is more “reasonable” than Wilsons’ $6.50/tonne and, consequently, a lease at Alva’s number was a reasonable expectation. An unjust enrichment claim is not a final-offer interest arbitration.
[92] When Alva incurred the costs in June and July 2019, the long-term lease was a contingent aspiration, not a mutual reasonable expectation under Garland.
[93] As for a Plan B, Justice Chipman found:
[48] … There is no evidence that either party turned their mind to what would occur if no long term lease was executed.
[94] The absence of a mutual expectation about an ultimate outcome does not mean reasonable expectations are irrelevant. Alva and Wilsons had short-term expectations. As Justice Côté said in Moore v. Sweet, the threshold question is – when Alva incurred those costs, how had Alva and Wilsons “organized their relationship”? From the answer, their reasonable expectations may appear.
[95] The key evidence is set out above (paras. 23-28, 31, 47-50):
• On Thursday, June 13, Alva left its dozer at the site. According to Connor MacDonald, the dozer would be used “to develop that land into a quarry”, but the work would not begin until the following week.
• Before that work started, Connor MacDonald texted Mr. Wilson on June 16: “But I want your word that you’ll negotiate in good faith with us when we are developing the lease. I don’t want to do all this work to open it up then get booted out, know what I’m saying?”
• Mr. Wilson agreed to bargain in good faith.
• After that exchange and over the following few weeks, Alva cleared the overburden, installed the access road and lay down area, prepared the rock face, blasted and used some of the aggregate for the Liscomb Bridge project. The development cost about $112,000.
• Alva used whatever aggregate it wished from Wilsons’ land for the Liscomb Bridge project. Without the quarry preparation, Alva would not have been able to access this aggregate.
[96] On June 16, Alva could have said: “We will not do the work until we have a signed lease.” Or: “We will not do the work unless Wilsons agrees to compensate us, in the event good faith negotiations for a lease fail.” Alva said neither. Instead, as Connor MacDonald testified:
Q. Okay. So, as of June 16th, that’s kind of the agreement at that point in time. Jason’s given you permission to get on it. In exchange, Jason, you’ve got to negotiate for us in good faith, right?
A. Correct.
[97] When Alva developed the quarry, Alva and Wilsons had organized their relationship so: (1) Alva would prepare the quarry, with the dozer work to start in late June 2019, before any lease was concluded, (2) Alva would use whatever quarried aggregate it wished for the Liscomb Bridge project, and (3) the parties would negotiate in good faith toward a potential long-term lease. These were their mutual reasonable expectations when Alva incurred the development costs.
[98] There was no evidence from either party of an expectation that Wilsons would pay for Alva’s development costs. As Connor MacDonald acknowledged, at no point during the negotiations did Alva suggest this to Wilsons (above, para. 26). Alva expected to recover its costs, not from Wilsons, but from its business revenues over the lease term, if good faith negotiations could generate a lease.
[99] The judge found the parties negotiated in good faith. There is no appeal on factual grounds and both factums accept the judge’s findings. At the appeal hearing, Alva’s counsel confirmed Alva does not contend Wilsons negotiated in bad faith. The evidence supports the judge’s finding:
• As Connor MacDonald acknowledged, Mr. Wilson made it clear from the outset, before Alva developed the quarry, that Wilsons’ key demand would be preferred prices for aggregate from the quarry.
• Wilsons owned the land. Its insistence on a preferred price did not signify opportunistic bad faith. The price reduction would equate to a royalty for Wilsons’ material or a land use fee for access.
• Mr. Wilson initially offered to pay $4 to $6 per tonne. Later, after their second meeting, he raised that to $6 to $6.50 per tonne. Alva initially offered to charge $8.75 to $9.25 per tonne. By the end, Alva had reduced its price to $8.50 per tonne for standard 1 inch gravel. This was $2 per tonne higher than Wilsons’ number. Despite their good faith efforts, the negotiations could not close that gap.
[100] In short, their mutual reasonable expectations were satisfied.
[101] Their reasonable expectations involved a risk there would be no lease if good faith negotiations foundered. The implications of that risk are addressed by Garland’s remaining criterion: public policy considerations.
Public Policy Considerations
[102] This factor does not invite impromptu sermonizing from the bench. The public policy must be grounded in juristic principle, which may be a broad one such as “a criminal should not be permitted to keep the proceeds of their crime” in Garland, para. 57. In Garland, para. 40, Justice Iacobucci noted “[t]he importance of avoiding a purely subjective standard” that generates a “case by case ‘palm tree’ justice”. He adopted the statement of McLachlin J. in Peel, page 802. To similar effect see: Pacific National, paras. 13, 23, 58, per Binnie J.; Kingstreet, paras. 37-38, per Bastarache J.; Kerr, para. 43, per Cromwell J.
[103] Mitchell McInnes, The Canadian Law of Unjust Enrichment and Restitution, 2nd ed (Toronto: LexisNexis, 2022) expands on the point:
… the reference to “public policy” is not an invitation to intuitive justice. The defendant instead must adduce proof of some discrete policy that militates against liability. In Garland itself [para. 57], for example, Iacobucci J. reduced recovery on the basis of the policy against allowing the defendant to retain the benefits of its crimes. [p. 77]
… As previously discussed, “public policy” simpliciter is either a meaningless phrase or an invitation to palm tree justice. The concept becomes legitimate and workable only when it is expressed in terms of specific principles. In Garland, for instance, Iacobucci J. invoked the “overriding public policy” that “a criminal should not be permitted to keep the proceeds of their crime”. [p. 327]
[104] Justice Chipman said Alva “did not pause the process to attempt to come to terms on a lease agreement” and “they forged ahead at their peril” (para. 49). He said Alva and Wilsons were “sophisticated parties” negotiating in “a transparent process” (para. 51) and:
[53] … It is not the role of unjust enrichment to act as insurance against hasty or unfortunate business decisions made by sophisticated parties …
[105] Alva submits these comments reflect a misapprehension of basic principles. Alva’s factum says:
139. … the existence of a contract has always been considered a juristic reason to deny recovery in unjust enrichment.
140. The lack of a contract between the parties is the very reason that one needs to turn to a claim in restitution.
…
144 By holding that commercial parties should not be entitled to recover in unjust enrichment where they have proceeded without a formal contract, the Learned Trial Judge’s Decision runs counter to the very reason claims in restitution exist.
[106] If Justice Chipman had ruled that a contract is a pre-condition to unjust enrichment, then I would agree. This would be a clear error.
[107] However, with respect, Alva misinterprets the judge’s ruling.
[108] Garland, para. 45, directs the court to consider “all of the circumstances of the transaction”. Our circumstances involve the unsuccessful negotiation toward a lease. It is unavoidable that the analysis considers the interplay between the failed negotiation and the enrichment/deprivation.
[109] The judge’s point was that, in June and July, Alva knowingly channeled its risk into an agreement with Wilsons that lease negotiations would be in good faith (evidence cited above, paras. 95-96).
[110] Personal autonomy is a historical underpinning of restitution and an animating value for the analysis of juristic reasons: e.g. Kerr, paras. 41 and 45. In June and July, Alva freely assumed a risk by choosing to develop the quarry in return for Wilsons’ commitment to bargain in good faith. Then in August, the risk materialized because of positions freely taken in good faith, by both parties, during negotiations. The exercise of negotiating autonomy inheres in juristic principles of contractual freedom.
[111] McInnes, The Canadian Law of Unjust Enrichment and Restitution, pp. 532-33, sets out the underlying principle:
While mistakes support restitution, mispredictions do not. The distinction turns on timing and risk.
A mistake involves a misapprehension of past or present information. …
A misprediction, in contrast, involves an error as to future information. The plaintiff provides a benefit to the defendant in the expectation that some specific event subsequently will transpire. Without proof of additional facts, that transfer will not be reversible even if the anticipated event fails to materialize. The explanation once again lies in the law’s respect for personal autonomy. People are required to take responsibility for voluntarily incurred risks and, as everyone knows, the future is uncertain. The plaintiff therefore cannot, after the fact, shift the burden of a disappointed expectation onto the defendant.
[author’s italics]
[112] McInnes’s text, p. 931, explains the application of this principle to the failed negotiation of a contract:
… Given the nature of the marketplace, payment for benefits conferred is presumptively contractual matter. As a result, one who confers a benefit in anticipation of a contract – i.e., with knowledge that a contractual right of remuneration has not yet been created – is normally taken to have accepted the risk of disappointment. That risk constitutes a juristic reason for restitutionary purposes. The defendant is justified in retaining the benefit because the plaintiff, having assessed the situation and having chosen to gamble on the creation of a contract, will not be heard to complain. The law of unjust enrichment does not provide insurance against lost wagers and “there is nothing unjust about being visited with the consequences of a risk which one has consciously run” [citation omitted]. [author’s italics]
[113] Alva and Wilsons agreed that their lease negotiations would proceed in good faith while Alva developed the quarry. Alva assumed the risk that, if good faith negotiations failed, Alva’s development costs would be uncompensated beyond what Alva might partially recoup from using the aggregate on the Liscomb Bridge project. Alva’s assumption of risk is a juristic reason for the consequence when the risk showed its face.
[114] The judge’s conclusion demonstrates no error.
“No evidence of any wrongdoing”
[115] The judge’s reasons said (para. 53): “There is no evidence of any wrongdoing by Wilsons that it is profiting from.”. Alva’s factum submits this comment signifies the judge misunderstood the tests:
82 Respectfully, this introduction of a requirement for evidence of “wrong doing” amounts to an error in applying the test for unjust enrichment.
…
86 It is not necessary to show that a party did, or did not, do anything “wrong” to promote this transfer.
‘’’
89 Here, there was no evidence of a juristic reason that would permit Wilsons Cove to retain the value of the Improvements without providing compensation to Alva. Rather, the Learned Trial Judge’s articulation of a lack of evidence of “wrong doing”, suggests that he was under the mistaken apprehension that it was necessary for Alva to show that Wilsons Cove engaged in some underhanded or nefarious conduct during the negotiation of the Agreement that made the transfer of the benefit to Wilsons unjust. [underlining in Alva’s factum]
[116] Unjust enrichment is not based on fault (Peel, para. 61). The defendant’s absence of wrongdoing is not a freestanding juristic reason for its enrichment. The judge’s comment – “There is no evidence of any wrongdoing by Wilsons” – does not advance the analysis.
[117] However, it is not a material error.
[118] Alva and Wilsons agreed that good faith would govern their negotiations, while Alva developed the quarry. In these circumstances, whether negotiations proceeded in good faith properly pertains to the analysis of juristic reasons.
[119] An earlier passage of Justice Chipman’s reasons had explained his finding that Wilsons had negotiated in good faith (paras. 50-51). The judge’s concluding comment, in para. 53 – “There is no evidence of any wrongdoing by Wilsons” – merely synopsized that finding. Later in para. 53, the judge said the long-term lease was not forthcoming “[t]hrough the fault of neither party”. The judge’s references to “no … wrongdoing” and “fault” were shorthand for his finding that Wilsons and Alva had negotiated in good faith, under the standard the parties had set for themselves.
[120] The judge’s phrasing did not reflect a misapprehension of principle.
Conclusion
[121] I would dismiss the appeal with costs for the appeal of $7,500, all inclusive, payable by Alva to Wilsons.
Fichaud J.A.
Concurred in:
Wood C.J.N.S.
Bryson J.A.