Executive Summary: Key Legal and Evidentiary Issues

• Uncertainty surrounded whether an oral agreement existed between the parties regarding a $12 million fee for consulting services in a cattle ranching share acquisition.

• March 16, 2021 email exchanges demonstrated that LBJ Capital Inc., not Monette Farms Ltd., had acknowledged responsibility for the $12 million payment.

• Credibility findings favored the respondents' witnesses, with the trial judge characterizing Mr. Monette's conduct as "duplicitous behaviour and statements" and a "deceit by half-truth."

• The Court of Appeal determined there was no meeting of the minds on the essential payment term, despite agreement on parties and scope of services.

• Unjust enrichment was established as the appellants benefited from the respondents' introduction and expertise without providing compensation.

• Quantum meruit damages were reassessed from $12 million to $2.7 million based on an industry standard introduction fee and actual work performed.

The dispute over consulting services in a major BC ranching acquisition

This case arose from a dispute over compensation for consulting services provided in connection with the purchase of shares in Blue Goose Cattle Company Ltd. (BGCattle), a substantial British Columbia ranching operation comprising 16 ranches on 45,000 acres of ranch land in approximately 21 locations in the interior of British Columbia. David Dutcyvich, an entrepreneur and experienced cattle rancher, along with his company 3L Developments Inc. (3LD), originally assisted LBJ Capital Inc. in negotiating the purchase of BGCattle shares from Blue Goose Capital Company Ltd. (BGCapital), a subsidiary of Dundee Corporation.

The original LBJ engagement and extensive due diligence work

In the spring of 2020, Mr. Dutcyvich and 3LD were retained by LBJ to assist in purchasing the BGCattle shares, which were being offered for sale at a price of slightly over $100 million. The fee arrangement entitled 3LD to half of the difference between BGCapital's $100 million asking price and the price ultimately agreed upon for LBJ's purchase of the Shares. Mr. Dutcyvich and 3LD's chief financial officer (CFO), James MacIntyre, a forensic accountant by experience, performed extensive due diligence work, with Mr. MacIntyre estimating he worked 450 hours and reviewed 6,000–6,500 pieces of paper for accuracy and relevance. Their investigation uncovered significant concerns, including that BGCattle had significantly overrepresented the number of its cows—Mr. Dutcyvich counted 5,000 cows instead of 14,000 as represented in the Appraisal. This work resulted in reducing the purchase price to $76 million. Under Mr. Dutcyvich's fee agreement with LBJ, the $24 million reduction in the Share price entitled him or his nominee, 3LD, to a $12 million fee.

LBJ's failure to complete and Mr. Monette's entry into the transaction

Despite various promises, LBJ could not come up with the funds to complete the purchase, and by the fall of 2020, BGCapital became frustrated. On January 4, 2021, Tochi Lewis-Asonye, BGCapital's and Dundee's representative for the sale, said he would no longer deal with LBJ or its principals, referring to them as "untrustworthy." Unbeknownst to Mr. Dutcyvich or 3LD, in the late summer and fall of 2020, Darrel Monette became involved with LBJ. Mr. Monette is the sole owner and shareholder of Monette Farms Ltd. (MFL), a large ranching and agricultural corporation with operations and land holdings in Saskatchewan and the USA. On November 27, 2020, Mr. Monette met with LBJ and Silver Stone Industries to discuss a transaction involving MFL's lands, BGCattle, and a ranch in Saskatchewan.

The alleged oral agreement and introduction to BGCapital

Mr. Dutcyvich testified that he first met Mr. Monette in early March 2021, after BGCapital said it would no longer deal with LBJ. According to Mr. Dutcyvich, Mr. Monette said that he was going to "leave those three buggers and do the deal on his own," and would like Mr. Dutcyvich's help in introducing him and MFL to BGCapital as prospective purchasers of the Shares. Mr. Dutcyvich asked Mr. Monette whether he understood and would live up to "the deal" and pay Mr. Dutcyvich. Mr. Dutcyvich said, "[Y]ou know the deal it's $12 million?", and Mr. Monette responded, "I know the deal…" and that he would pay the fee. Mr. Monette said that there was no contract as between the parties because there was no meeting of the minds.

The pivotal March 16, 2021 email exchange

A critical series of emails on March 16, 2021 became central to the dispute. Mr. MacIntyre emailed MFL, attaching a direction to pay $12 million. Mr. Monette forwarded the email to LBJ, copying 3LD, asking "is this what you are paying David? Not sure why I got it". Mr. Bunker replied on behalf of LBJ, copying 3LD, saying, "this email you received from [3LD] has nothing to do with you or [MFL] and should not have been sent to you. LBJ … will pay the fees to [3LD], not you. Please disregard this email". In response, Mr. MacIntyre emailed Mr. Monette saying he wanted him to "disregard the draft agreement that was sent earlier today. LBJ … has indicated that they will honour the previously signed agreement between 3L[D] and themselves."

Continued work and the undisclosed LBJ relationship

Unaware of the arrangements between LBJ and MFL, Mr. MacIntyre said that 3LD continued to work for MFL until May 2021, to ensure that $76 million was the right price for the Shares. Mr. MacIntyre and Mr. Dutcyvich were involved in weekly conference calls with Mr. Monette to review issues such as the identification of assets, cattle counts, inventory, and human resource issues. Mr. Dutcyvich also accompanied Mr. Monette on a helicopter flight to tour BGCattle's ranches. Critically, on March 16, 2021, and unbeknownst to Mr. Dutcyvich and 3LD, MFL and LBJ signed a term sheet under which LBJ agreed to purchase 75% of the shares of MFL for $630 million.

The trial court's findings and award

The trial judge found the two witnesses for the respondents, Mr. Dutcyvich and Mr. MacIntyre, both credible and reliable. She did not find the primary witness for the appellants, Mr. Monette, to be either credible or reliable. Mr. Monette's evidence lacked credibility, flowing, in part, from his "duplicitous behaviour and statements" in concealing his initial role as a "front" for LBJ, that the trial judge described as a "deceit by half-truth", because Mr. Monette knew that BGCapital had refused to deal with LBJ. The trial judge found that "in early March 2021", the parties entered into an oral contract under which, in exchange for a $12 million fee, the plaintiffs would introduce the defendants to BGCapital, promote the defendants as viable purchasers, and provide whatever assistance requested in settling the terms of their ultimate purchase. The trial judge also accepted the respondents' alternative claim in quantum meruit, concluding that respondents did $12 million worth of work.

The Court of Appeal's analysis of contract formation

The Court of Appeal reviewed the requirements for an enforceable oral contract: an offer by one party, accepted by the other, with the intention of creating a legal relationship, and supported by consideration, with terms that must be sufficiently certain. While the Court saw no error in the trial judge's factual and credibility findings, or in her conclusion that the parties agreed on the scope of the work and the parties to the contract, the Court found a palpable and overriding error in the finding that the parties had agreed to a payment of $12 million.

The Court determined that on a plain reading, and in their totality, the March 16, 2021 emails do not confirm that Mr. Monette (or MFL) agreed to pay Mr. Dutcyvich (or 3LD) $12 million for their services. In fact, they confirm that the obligation for making such a payment was LBJ's. When the four emails are read together, they show that Mr. Monette was surprised at what LBJ had agreed to pay Mr. Dutcyvich, and did nothing further about it when LBJ said it would be responsible for the payment.

The unjust enrichment analysis and reduced award

The Court upheld the trial judge's conclusions that Mr. Monette and MFL accrued an enrichment, that there was a corresponding deprivation, and that there was no juristic reason to deny recovery. The trial judge found that Mr. Monette and MFL relied on the good will and trust that Mr. Dutcyvich and 3LD had built with BGCapital and leveraged that to get the introduction that was instrumental in moving the deal forward. Without that, given his undisclosed ties with LBJ, the trial judge concluded that there was no doubt that Mr. Monette would have faced obstacles in securing a deal for the Shares and may not have been a successful purchaser.

However, the Court found the trial judge made a palpable and overriding error in assessing the respondents' claim in quantum meruit at $12 million. In a quantum meruit assessment of this sort, the court must ultimately focus on the value of the service to the benefitting party rather than on the cost to the other party of providing the service. On the record, while Mr. Monette and MFL benefitted from the work that Mr. Dutcyvich and 3LD had done for LBJ, it was clear that the additional work done for Mr. Monette and MFL was less onerous and could not be valued on the same basis. It occurred over about a three-month period between March and May 2021. Mr. Dutcyvich and 3LD's prior work had already reduced the price for BGCattle to $76 million by the time MFL came into the picture.

The ruling and outcome

The Court of Appeal allowed the appeal and set aside the award for breach of contract. The Court awarded Mr. Dutcyvich and 3LD the alternate claim set out in the March 28, 2023 amended notice of civil claim, consisting of an industry standard introduction fee, plus $1 million for work performed, for a total of $2.7 million. The fresh evidence application seeking to introduce a 2023 appraisal of the assets purchased by the appellants was denied, as evidence about the value of the assets two years after the purchase closed is not relevant to assessing the contractual terms or quantum meruit damages. Restitutionary quantum meruit damages are measured by value of the respondents' services to the appellants, when those services were rendered and are not tied to the current value of the assets.