The appellate court found that Monette Farms Ltd. and 3L Developments did not have a fee agreement
The British Columbia Court of Appeal has reduced a $12 million award for a Vancouver-based consultant to $2.7 million, finding there was no confirmation that the owner of Monette Farms Ltd., a Saskatchewan and US-based ranching and agricultural company, had agreed to pay the consultancy a $12 million fee to help him broker a ranching deal.
In a decision on Tuesday, the appellate court said a trial judge “drew inferences” about the parties’ agreement that was not supported by available evidence.
The appellate court also rejected the trial judge’s finding that the business consultant, the Vancouver Island-based 3L Developments, was alternatively entitled to an unjust enrichment award of $12 million. Instead, the court approved a fee comprising $1 million for the work that 3L performed, plus $1.7 million, which is the industry standard fee for introducing the parties in a business transaction.
The events leading up to the case date back to 2020, when LBJ Capital Inc. approached David Dutcyvich, 3LD’s owner and an experienced cattle rancher, for assistance in purchasing shares of BGCattle, which owns ranch properties and interests in BC.
As part of its work for LBJ, 3LD developed a relationship with BGCapital, which owned the BGCattle shares, assessed the financial health of BGCattle’s operations, inspected each ranch, reviewed documents and leases, assessed the equipment, and counted the cattle. 3LD valued the BGCattle shares at $76 million, and BGCapital agreed to sell the shares to LBJ at that price.
LBJ also agreed to pay 3LD $12 million for its work on the deal.
The deal eventually fell through when LBJ was unable to come up with enough funds, and BGCapital’s representative in the transaction informed 3LD that he would no longer deal with BGCapital or its principals, calling them “untrustworthy” and “dodgy/discordant.”
Without Dutcyvich or 3LD’s knowledge, LBJ had begun talking to Darrel Monette, the owner of Monette Farms Ltd., while the deal was pending. When LBJ’s attempt to purchase Monette Farms also fell through, LBJ told Monette about the opportunity to acquire shares of BGCattle and introduced Monette to Dutcyvich. Monette told Dutcyvich he planned to stop working with LBJ and hoped to purchase the BGCattle shares on his own.
In response, Dutcyvich asked if Monette would live up to the “deal” to pay him for his work on the transaction. He also asked Monette if he knew the deal was $12 million. Monette said he was aware of the deal and agreed to pay the fee.
Without informing Dutcyvich or 3LD, Monette agreed to sell 75 percent of the shares of his own company to LBJ, while 3LD continued to help Monette with the BGCattle transaction.
In 2021, 3LD emailed Monette, directing him to pay the $12 million fee. Monette forwarded the email to LBJ, stating that he did not know why he received the email, and LBJ said they would take care of the bill. By November of that year, after the deal between Monette’s company and BGCapital closed, 3LD had still not been paid the fee and reached out to Monette.
3LD sued Monette when the invoice remained unpaid.
At trial, a BC Supreme Court judge found that Monette lacked credibility due partly to his “duplicitous behaviour and statements” when he concealed his initial role as a “front” for LBJ, which he knew BGCapital had refused to work with. The judge concluded that Monette and 3LD had entered into an oral contract in which Monette would pay $12 million to the company in exchange for its work on the BGCapital transaction. The court ordered Monette to pay the fee, or alternatively, $12 million in quantum meruit damages.
However, the court of appeal disagreed with the trial court’s conclusion, which partly hinged on the email exchanges between the parties regarding the fees.
“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,” the appellate court wrote. “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 court added.
The appellate court also found that the work that 3LD performed for Monette could not be valued on the same basis as the work the consultancy did for LBJ.
In a statement on Wednesday, Connor Bildfell, a partner at McCarthy Tétrault LLP who represents Monette, said, “The Court of Appeal’s decision confirms the bedrock principle that when essential terms such as price are missing, there is no contract.
“This bedrock principle plays an important role in promoting certainty and predictability in commerce,” Bildfell added. “So while we are disappointed that the Court of Appeal did not dismiss the claim in its entirety, we are pleased that the court reaffirmed this bedrock principle.”
Counsel for Dutcyvich and 3LD declined to comment on the case because it is still before the courts.
