41. Alva Construction Ltd v Wilsons Cove Estates Inc 2022 NSSC 279 (NS SC: Chipman J)

Anticipated contract that fails to materialise—reasonable expectation—public policy

The plaintiff held a contract to replace a bridge. The completion of that job required a source of gravel. The defendant owned a gravel-bearing property that was close to the bridge. While the parties negotiated the terms of a lease, the plaintiff was given access to the property. It spent approximately $112,000 clearing trees and building a 300-metre access road. It did so despite knowing that no contract was in place. The negotiations ultimately collapsed because the parties in good faith failed to agree on terms. The plaintiff sued the defendant for unjust enrichment.

Decision: Claim dismissed.

Held: The defendant was enriched because its property “was transformed from raw land to a developed quarry with a 300-meter access road”, and the plaintiff suffered a corresponding deprivation because it “spent in … ‘considerable time and money’ for the Property” (at [43]). Canadian law uses a two-part test of injustice: Garland v Consumers’ Gas Co 2004 SCC 25; [2004] RLR §62. Having demonstrated that none of the “established categories” of juristic reason apply, the plaintiff is prima facie entitled to restitution. The defendant, however, has an opportunity “to rebut the prima facie case by showing that there is some residual reason to deny recovery” (at [44]). That inquiry is guided by reasonable expectations and public policy. The plaintiff “reasonably expected that the lease would be long term”, while the defendant “wanted to have a supply of … aggregate at preferred (reduced) prices. … [N]either party turned their mind to what would occur if” negotiations failed (at [48]). “Unfortunately [the plaintiff] did not pause the process to attempt to come to terms on a lease agreement … before moving forward with developing the Property. … [T]hey forged ahead at their peril” (at [49]). Unjust enrichment is “an equitable remedy [that] involves discretion and questions of fairness. … [T]o exercise my discretion to make an award of unjust enrichment in the circumstances of this case would be profoundly unfair” (at [50]). Similarly, “public policy considerations militate against allowing the claim” (at [53]). The parties are sophisticated and experienced businesses. They simply failed to agree on lease terms. “It is not the role of unjust enrichment to act as insurance against hasty or unfortunate business decisions made by sophisticated parties” (at [53]).