Business relationships that stand to continue for a number of years might seem like a great way for two parties to mutually benefit for a long period of time. However, when one party makes a move that fundamentally alters the business relationship, disputes are sure to arise. This was the case in a recent decision from the Prince Edward Island Court of Appeal.

A long-term deal goes sideways

The parties involved in the dispute are a defendant and a company who develops land (“the developers”). The defendant and the developers entered into an agreement in 2005. The farmer owned land on PEI. The agreement called for the developers to develop a portion of the land for blueberry production. The ultimate goal was for wild blueberries to be harvested. The developers agreed to incur all the expenses of work and equipment to bring the property into production. The defendant was not to incur any expenses. As part of the agreement the developers were to receive all proceeds from harvests until the cost of the development was recouped. The total cost of development was $113,971.80.

From 2009 to 2013 there were four bi-annual harvests on the land. The proceeds of these harvests were applied against the balance owed by the farmer. However in 2013 the defendant sold the property, including the blueberry fields, to a third party, which ended his ability to repay the developers. The developers went to court in an attempted to be reimbursed for the outstanding balance of their work, totaling $101,909.90.

The trial

The developers claim stated there was an implied contract that had been broken. In the alternative, they argued there had been unjust enrichment on the part of the defendant. The trial judge referred to a 1964 Supreme Court of Canada decision outlining the law of implied or inferred contracts. The test calls for an objective observation of an accepting party’s conduct. In this case, the trial judge found the defendant’s intention and conduct can be reasonably construed as the acceptance of an implied contract.

The court summarized the trial judge’s decision as follows,

“(The defendant) had testified as to the terms by which he intended to be bound.  He thought that (the developers) was going to enter his lands, finance and undertake all of the work required to develop the land to commercially viable blueberry harvests, take the proceeds of two (or four) blueberry crops, and then continue to manage the lands for him.  However, she found, (the defendant) ended Kings County’s ability to continue to recoup its expenses when he sold the land.  The trial judge did not accept the ‘two-crops‘ version advanced by (the defendant).  She preferred the plaintiffs’ evidence that (the developers) would receive the proceeds of harvests until its expenditures were recouped in full.  She found that when (the defendant) sold the land to a third party, he ended (the developer’s) ability to recoup its expenses and thereby breached the terms of an implied contract that she determined existed between the parties.  The trial judge assessed damages in the amount of (the developer’s) outstanding account of $101,900., which she found was justified as reasonable.”

On appeal

The defendant appealed on the grounds that the trial judge did not properly consider the evidence available as well as improperly applying the test for an implied contract. However, the court did not agree, finding the trial judge applied the proper test, and properly interpreted the evidence. The decision stated, “In my assessment, the finding of implied contract is supportable by the evidence, is reasonable, and is reflective of the whole relationship between the parties.  Employing the proper test, the trial judge interpreted and applied the test correctly.” The court added, “if a person knows that the consideration is being rendered for his benefit with an expectation that he will pay for it, then if he acquiesces in it being done, taking the benefit of it when done, he will be taken to have impliedly requested it being done; and that will import a promise to pay for it.”

The court upheld the trial judge’s decision, finding that “liability could be based on restitution founded on implied contract or on restitution based on unjust enrichment irrespective of agreement.”

Contact the experienced commercial dispute team at HMC Lawyers if you are involved in a corporate or commercial dispute. Regardless of the size of your venture, if you are facing a potential dispute over breach of contract, property, or corporate matters, you need practical, proactive legal advice that is responsive to your needs and circumstances. We act on behalf of corporate and commercial plaintiffs and defendants throughout Alberta and Western Canada, taking pride on our proven track record of success against parties represented by large, national law firms. Our clients receive exceptional litigation advice and tireless advocacy, along with personal service and close, undivided attention to their individual needs. To make an appointment with one of our lawyers about a commercial or business litigation matter, contact us online or call 1-800-480-3534.