COURT FILE NO.: CV-18-038 (Walkerton)
DATE: 2023-02-10
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Tim Metske and Amanda Herlick
Plaintiffs
-and-
Martin Metske and Roseanne Leona Metske
Defendants
Robert Scriven, for the Plaintiffs/Applicants
Dagmara Wozniak, for the Defendants/Respondents
Heard: November 9, 10, 12, 15, 16, 17, 18, 19. 22, 23, 2021, written submissions received December 10, 2021, January 31, 2022, and February 7, 2022; additional motion hearing October 4, 2022; further written submissions on proprietary estoppel received November 9, 2022, December 19, 2022, and December 28, 2022; all hearings by video conference
Justice. R. Chown
TABLE OF CONTENTS
Issues
Background
Summarizing the Parties’ Arrangement and Expectations
Issue 1: Unjust Enrichment
- Enrichment of the Defendant
a. Realized and Realizable Benefits
Corresponding Deprivation of the Plaintiff
No Juristic Reason
Remedy
a. Constructive Trust
b. Restitution
The Alleged Enrichments
Issue 1(a): Increase in the Amount of Quota Held
Enrichment
Corresponding Deprivation
Juristic Reason
Issue 1(b): “Premium” on Quota
Issue 1(c): Rise in Value of the Home Farm
Issue 1(d): Rise in Value of the Dairy Buildings
Issue 1(e): Rise in Value of Langside Farm (residential portion only)
Additional Facts Relating to this Issue
No Free Acceptance
Incontrovertible Benefit
Conclusion on this Issue
Issue 1(f): Improvements, Repairs, and Investments
Maintenance Expenses and Investments
Enrichment
Corresponding Detriment
Juristic Reason
Remedy
Issue 1(g): Tim’s Labour Between 2003 and 2011
Sub-Issue 1(g.0): Is Tim’s Claim for Unpaid Labour Statute Barred?
Issue 1(h): The Plaintiffs’ Labour 2012 to 2018
Issue 2: Proprietary Estoppel
Scope of Proprietary Estoppel
Elements of Proprietary Estoppel
Representation or Assurance
Reasonable Reliance
Detriment
Applicability of Proprietary Estoppel to the Quota
Remedy
“Satisfying the Expectation” v. “Compensating for the Detriment”
Other Remedial Principles in Proprietary Estoppel
Quantifying the Expectation
Quantifying the Plaintiffs’ Detriment
Result
Issue 3: Counterclaim
Issue 3(a): Use of Straw
Issue 3(b): Use of Sileage
Issue 3(c): Condition of Barn
Issue 3(d): Condition of Langside House
Issue 3(e): Setoff for Quota Rent
Disposition
REASONS FOR DECISION
[1] The plaintiffs are the son and daughter-in-law of the defendants. This action arises from their efforts and investment in expectation of acquiring the family dairy. With that expectation, the plaintiffs bought the defendants’ dairy herd and rented their milk quota and barn, expecting to buy the quota and barn over time on favourable terms. The parties’ relationship fractured after the plaintiffs took over the dairy and operated it for six years.
Issues
[2] The parties agreed to a list of 25 issues and sub-issues. I raised the issue of proprietary estoppel and received further submissions on that issue. I have re-stated and re-organized the issues as follows:
Issue 1: Have the plaintiffs established a claim for unjust enrichment for the following alleged enrichments of the defendants, and if so in what amount:
Increases in value of the defendants’ assets
(a) The increase in the amount of milk quota held by the defendants.
(b) The increase in the value per kg of the quota.
(c) The increase in the value of the buildings on the home farm.
(d) The increase in the value of the land for the home farm.
(e) The increase in the value of the residence at Langside farm.
Outlays by the plaintiffs that allegedly benefited the defendants
(f) The amounts paid by the plaintiffs for equipment and repairs for the dairy.
Services that allegedly benefited the defendants
(g) Tim’s labour between 2003 and 2011.
(g.0) There is a sub-issue here as to whether this claim is statute barred by the Limitations Act.
(h) The plaintiffs’ labour in the Metske operation (not the dairy) between 2012 and 2018.
Issue 2: Have the plaintiffs established a claim for proprietary estoppel?
Issue 3: Counterclaim:
(a) Did the plaintiffs use more straw than they paid for between 2012 and 2018 and if so, are they liable for the difference?
(b) Did the plaintiffs use more corn silage than they paid for between 2012 and 2018 and if so, are they liable for the difference?
(c) Are the plaintiffs liable to the defendants for the conditions of the barn/farm property upon them leaving in May 2018?
(d) Are the plaintiffs liable to the defendants for the condition of the residential property upon them leaving in May 2018?
(e) Were the defendants underpaid for quota rent?
Background
[3] I will refer to the parties and the Metske children using first names because of the common surname.
The Plaintiffs
[4] The plaintiffs Tim Metske and Amanda Herlick both grew up on family farms. The Metske and Herlick farms were both mixed operations with dairy operations.
[5] Tim is the third of four children. Mike and Jeff are older. Lisa Heyink is younger. Tim has limited literacy. He stopped attending high school in 2003 and worked at the farm full time. He left the farm after an intense argument with his father in 2011.
[6] Amanda grew up wanting to be a dairy farmer. She has three older brothers. She has a B.Sc. in animal biology from the University of Guelph, having graduated in 2005.
[7] Amanda met Tim through Phillip Watson, who is the defendant Roseanne Metske’s brother. Amanda and Mr. Watson both worked at the Ontario Livestock Exchange (OLEX).
[8] The plaintiffs were married on June 2, 2012. They have three children.
The Defendants
[9] The defendants, Martin and Roseanne Metske, started milking cows in 1993. In 1998, they moved from Cambridge and purchased their current home and farm in the Lucknow area in Bruce County. They gradually acquired further farm properties between 1989 and 1998. They own six farm properties totalling 543 acres, as well as a rental residential property and a cabin with four acres. They acquired dairy quota a little at a time and built up to 46.29 kg of quota by May 2012. In May 2018, they had 56.69 kg of quota. At the time of trial, they had over 60 kg.
[10] The defendants operated a dairy and mixed farming operation including beef, cash crop, and chickens. The home farm has 152 acres and has a tie-stall barn where the dairy is operated. The operation included four other farm properties, only one of which features here: Langside farm.
“Promise” Regarding Langside Farm
[11] Tim described an abusive upbringing. He said that his siblings all ran away between the ages of 14 and 17, but Lisa testified that she moved out in 2005 when she was age 18.[^1] Mike and Jeff did not testify. Tim described working very long hours for very little pay. What he was paid was put into a mutual fund account for him that he could not access.
[12] In 2006, the defendants hired Lewis Miller as a hired hand. By then, all the Metske children other than Tim had moved away. Roseanne described Mr. Miller as “hard working like his pants were on fire all the time.” He did a large majority of the milking and helped outside the dairy as well.
[13] When asked why he stayed working on the farm from 2003 to 2011, Tim said he was always told that Langside farm would be his. For instance, one time when he was helping his father paint the barn at Langside, Tim expressed indifference about the colour. His father suggested he should care because the barn would be his someday. This exchange occurred sometime between 2008 and 2010.
[14] Tim testified, and I accept, that his mother said to him more than once that when they were ready to leave the dairy farm, she and Martin planned to tear down the existing house at Langside and build a new house there. This may be inconsistent with the notion that Tim would have been given Langside, but people are often inconsistent over time.
[15] Tim also said that one time he was caught sleeping in the haymow and Martin “kicked him in the butt.” At the time, Tim complained that he didn’t get every other weekend off like the hired hand (Mr. Lewis), and Martin said, “Well he doesn’t get a farm given to him either.”
[16] Martin was asked to comment on the allegations that Tim was abused. His response was, “I don’t believe that Tim was abused. He’d get a kick in the ass when he needed it.” In response to Tim’s testimony that he was promised the Langside farm, Martin testified, “He was never promised nothing, we had three other kids too. Why would I give him one farm?”
[17] I accept Tim’s evidence over Martin’s about these exchanges.
[18] A video (exhibit 7) taken by Amanda on April 19, 2018 shows Tim and the defendants screaming at each other and shows that they were close to a physical confrontation. The video shows that Martin, Roseanne, and Tim were not always able to communicate calmly or effectively. From the video and other evidence, I infer that communication difficulties were a long-time feature of the defendants’ relationship with Tim.
[19] I accept Tim’s evidence that he was told, more than once, that he would someday be given Langside. However, no consistent or well-defined promise was made to Tim in this regard.
[20] Tim described no other options open to him between 2003 and 2011 that he decided to forgo based on promises made by the defendants. When he got engaged to Amanda and had an option of another place to go, he seized it.
Tim Moves Out in 2011
[21] The plaintiffs started dating in January 2010 and were engaged on Valentine’s Day of 2011.
[22] In February 2011, after he was engaged to Amanda for only one week, Tim moved out of the Metske residence. Tim described an incident with his father that precipitated his departure. He said that his parents were mad that he had gotten engaged without telling them. Then there was something wrong in the pig barn at the de Boer farm (a farm that the defendants rented), and Martin was going to “lay a beating on me,” so Tim grabbed a pitchfork and said, “Don’t touch me, I’m sick of being your punching bag,” and Martin walked away. Tim packed his clothes, had his own livestock trucked away, and moved in with the Herlicks. The plaintiffs soon bought a house in Stratford.
[23] Roseanne testified that Tim’s departure in 2011 was precipitated by his theft of cattle. She said Tim had stolen nine cattle out of the barn and sold them without her and Martin knowing about it. Martin confronted him about this and there was a big fight and Tim left.
[24] I do not accept that the alleged theft occurred, and I do not accept that it is what precipitated the argument that resulted in Tim’s departure, for the following reasons:
• When Martin testified about this, he said that it was a week or two after Tim left that he noticed Tim’s name in the paper for some top cattle sales. It was the notice in the paper that prompted him to count his cattle.
• Tim described trucking his livestock away when he left. Tim’s evidence is consistent with the sales having occurred after he left.
• Martin’s description of the alleged cattle theft was lacking in precision for such a grave allegation. For instance, Martin described that Tim had some cattle, but Martin didn’t know how many. He said that Tim had sold nine cattle at auction but also said based on the count he completed with Roseanne that they were missing nine head. So if Tim sold some cattle of his own, and Tim sold nine cattle, he did not sell nine of the defendants’ cattle.
• In his evidence, Martin acknowledged that it is hard to count cattle as they come and go out of the barn.
• Martin never described confronting Tim about this allegation. This undermines both Roseanne’s evidence that the confrontation preceded Tim’s departure, and the force of both defendants’ testimony on this point.
• The theft allegation was not fairly put to Tim in his cross-examination. All that was put to him was that the reason he left in 2011 was that his parents had confronted him for taking their cattle and selling it. Tim’s response, which I accept, was, “No they did not.”
[25] After Tim left the Metske farm in early 2011, he had no contact with his parents for some time.
Reconciliation
[26] In late 2011, Amanda contacted the defendants to let them know that Martin’s sister’s ex-husband had passed away. She also reached out to them at Christmas. These efforts re-opened the lines of communication between Tim and his parents.
Lewis Miller Leaves
[27] In early 2012, Mr. Miller gave notice that he would be leaving the defendants’ employment. He gave three to four months’ notice. His last day was April 6 or April 12, 2012.
[28] With Tim’s departure, none of the defendants’ children remained on the farm. As a result of Mr. Miller’s planned departure, the defendants faced a decision. They no longer wanted to milk cows or operate the dairy. The defendants decided to sell the cows and the quota and the milking equipment, and to strictly farm cash crops. They would invest the proceeds of the sale of the quota.
[29] If the plaintiffs had not expressed interest in taking over the dairy at that point, the defendants would have sold the quota on the exchange. As I will explain, there is a capped price for quota sold on the exchange. The defendants would have received the capped price. They would have left the barn empty. They would have continued with cash cropping but given up the dairy completely.
The March 2012 Meeting
[30] Phillip Watson told Amanda that the defendants were planning to sell the cows and the quota. As stated above, Mr. Watson was Roseanne’s brother and Tim’s uncle, and he worked with Amanda at OLEX.
[31] In February 2012, the plaintiffs went to see the defendants and the defendants confirmed their plans to sell the cows and quota. Amanda suggested that Mr. Watson was going through succession planning with his family so perhaps they could talk to him about succession planning for the Metske farm.
[32] The parties agree that a meeting occurred in March 2012 that led to an understanding. The meeting took place around the defendants’ kitchen table. The parties and Mr. Watson and his wife attended.
[33] The meeting took place on a Saturday. Tim testified that he went up to Lucknow from Stratford on the Friday. On the Friday, Martin told him the purchase price for the quota would be $1 million and the purchase price for the land would be $1 million. Tim agreed that the parties did not discuss these figures at the Saturday meeting. Although Amanda was not part of the Friday conversation between Tim and Martin, she heard about it from Tim afterward.
[34] Tim also testified that later, when Amanda wrote out a cheque to the defendants for $90,000 for the cows, he commented that this was “the biggest cheque that Amanda ever wrote out.” In response, Martin said it would not be the biggest cheque she ever writes because she would have to write a cheque for $2 million when they buy the farm and quota.
[35] I accept Tim’s testimony that Martin twice mentioned the $2 million figure, but do not accept that the comments rose to the level of a solid commitment.
[36] The plaintiffs both testified that the purpose of the March 2012 meeting was succession planning for the Metske dairy. The defendants resisted that characterization of the meeting.
[37] Roseanne testified that they invited Mr. Watson “to guide us in the right direction” so that they “were doing the right thing.” Roseanne did acknowledge in cross-examination that she did not remember much from the March 2012 meeting.
[38] Amanda agreed that the land price was not discussed at the meeting because they were not buying the land at that time. The purchase of the land would not occur for five years. She testified that it was agreed that they would buy the cows and then would buy the quota at the one-year mark. In cross-examination, Amanda was asked if she understood that they would pay fair market value for the farm and quota, and her answer was yes, but it would require the input of a succession planner and would depend on Martin’s position because “they have to make it so that it works for both of us.” She also testified that they discussed getting a succession planner when they were ready to buy the quota.
[39] Roseanne also denied that succession planning was considered in the spring of 2012. She said it was possible in future “but it really wasn’t one of our priorities.” She said, “There was nothing mentioned about them buying the quota or buying the farm.” This contradicts the “business plan” Amanda prepared, discussed below.
[40] Martin testified during his examination in chief that it was likely Roseanne or him who invited Mr. Watson to the meeting. He said Mr. Watson was invited because “he was having kids that were getting up in years and they were thinking of succession planning at the time.” He then said, “All I was interested in was giving them [the plaintiffs] a chance to see what they could do with the dairy.” He said “there was no plans of doing anything” regarding selling the quota and farm to the plaintiffs “until we seen how it went.”
[41] In cross-examination, it was put to Martin that it was the settled intention that the plaintiffs would buy the dairy farm. He replied, “It was never my intention to turn it over to them after I seen the way that it was being operated. If they wanted to farm that way, they could do it on their own but not on my farm” [emphasis added]. This was a tacit admission that his position evolved.
[42] Exhibit 1-36 is a document prepared by Roseanne in connection with the March 2012 meeting. It listed expenses for the dairy that the plaintiffs could expect: $1500 per cow to buy the cows; barn rent of $500 per month; rent of $600 for the house at Langside; and estimated amounts for hydro, feed, vet bills, breeding and supplies. There was a blank beside an entry for “quota.” This suggests there was uncertainty at the meeting on how to deal with the quota. Apart from the quota, the business plan Amanda later developed correlated to the list.
[43] Mr. Watson testified that the defendants invited him to the meeting to discuss succession planning. He has 225 kg of quota, a new dairy barn built in 2019, and over 650 acres. He and his two boys developed a succession plan in 2017. He had worked with a few families before to assist them with succession planning as well as with his own father. He gave the parties some scenarios that he had worked through with other young couples to help them transition a farm from one generation to the next. He thought that the defendants were tired of the long hours of dairy farming, and said it is “more of a young people’s game.” Mr. Watson said they discussed different ways that a young couple can take over. He testified, “not too many young couples have … $3 million at their disposal” to buy a farm. Mr. Watson said that no formal agreement was reached at the meeting, but he was satisfied that there was a willingness to move forward talking.
[44] In cross-examination, Mr. Watson agreed that the purpose of the meeting was to set up a framework as to what transition would look like. He did not think that any specific timeline had been set for the purchase of the quota or the farm at the meeting. He did not know what the parties eventually agreed upon. A common approach is for the successors to notionally lease the dairy, including the quota, and to make monthly payments leading to acquisition of the farm and quota at market values at the time the acquisition is determined.
[45] Not only the testimony about the meeting, but also the circumstances leading up to it and the parties’ later actions compel the conclusion that the purpose of the meeting was succession planning. I do not accept the defendants’ extensive efforts in their testimony to distance themselves from this reality. Where there is conflict in the evidence about the meeting, I accept Amanda’s evidence.
[46] From the date of the meeting, all parties expected to work towards transition of the dairy to the plaintiffs. The plaintiffs felt adequately assured by the discussions at the meeting to proceed to obtain financing, quit their jobs, and move to Langside house.
Financing
[47] The financing of the parties’ arrangement provides more evidence of the parties’ intentions and expectations, as well the nature of the representations made and assurances given. The plaintiffs obtained a $90,000 loan from the bank to fund their purchase of the defendants’ cows. Martin co-signed for the loan. Martin’s support at that time shows that he encouraged succession of the dairy to the plaintiffs. The defendants would have known that the plaintiffs were relying on their support, and that the plaintiffs were about to commit to a major change in their lives with far-reaching consequences.
[48] The bank advanced funds by May 4, 2012. The cows were paid for by May 18, 2012.
[49] Amanda prepared a “business plan” (exhibit 2-8 and exhibit 3) in connection with the loan application. The business plan is consistent with the parties’ plans for succession. It says that in April 2012 the plaintiffs would “lease 46 kg of quota” and sets out other terms from exhibit 1-36. It also says, “April 2013 – Buy 44 kg of quota for $25,500/kg.” The 44 kg figure came from the amount of saleable quota held by Martin. The $25,500 per kg price represents a $500 per kg premium above the exchange price.[^2] The business plan also indicates, “2018 – Buy Martin Metske’s dairy barn.”
[50] Martin’s phone number appears on the business plan in the bank representative’s handwriting. Martin acknowledged in cross-examination that it would make sense that he discussed elements of the business plan with the banker at the time he co-signed for the loan.
[51] The business plan reflects the mutual goal and expectation held by the parties that the plaintiffs would buy the quota from the defendants and would buy land including the dairy barn. The language used, “Martin Metske’s dairy barn,” rather than “the farm,” demonstrates uncertainty among the parties regarding important details about how succession would work. I heard no evidence that the barn could be sold separately from the rest of the farm and I would be surprised if it could. I heard no evidence from anyone that any type of severance of the home farm was possible or that it was considered. Martin agreed that 150 acres is necessary for the dairy operation. Amanda testified that she and Tim would never have expected the defendants to leave the house at the home farm had they wanted to remain there. In terms of the transfer of land, precisely what succession would entail was hazy. The business plan nevertheless reflects the understanding of the parties in April 2012. The parties expected that the plaintiffs would buy the quota in one year and buy the farm in 2018, or that they would otherwise come to an arrangement for succession of the dairy that involved the use of the barn. In the balance of these reasons, I use the phrase “Martin Metske’s dairy barn” in reference to the understanding that the home farm would be transferred to Tim and Amanda, or that some other arrangement would be made to allow Tim and Amanda to continue to operate the dairy from the barn.
[52] The plaintiffs moved into Langside house and began milking by mid-April 2012. The parties agreed that the plaintiffs would be paid hourly for the few weeks of April that they were milking, until they took over the operation of the dairy effective May 1, 2012.
The Wedding
[53] The plaintiffs’ wedding took place on June 2, 2012, one month after they took over the dairy. Tim’s brothers did not attend the wedding. Roseanne acknowledges saying during her wedding speech that “some of the family was not happy with our decision” and “we could do with the farm what we wanted.” Roseanne also acknowledges that Tim’s brothers were not happy at the time of the wedding. However, she denies that these statements meant they would sell the plaintiffs the farm, only that they would have the plaintiffs operate the dairy.
[54] Lisa testified that Mike and Jeff did not attend the wedding because Mike’s wife was unhappy that they were not invited to the ceremony (which was in a small church) but only the reception. Roseanne’s version is that Mike and Jeff were not happy “with the decision to bring Tim home to milk cows.” Mike and Jeff’s subjective reaction was hearsay but perhaps admissible to explain Roseanne’s remarks. However, their reaction does not change the most likely explanation for Roseanne’s remarks: all parties expected that the defendants would eventually transfer the dairy to the plaintiffs.
[55] Roseanne’s wedding speech is important evidence of the parties’ expectations and adds to the reasonableness of the plaintiffs’ actions that followed. It amounted further assurance that the plaintiffs were on a path to succession.
Implementation of the Agreement and Operation of the Dairy
[56] Starting May 2012, the plaintiffs operated the dairy while the defendants continued to operate the rest of the farm operation.
[57] Each month, Amanda prepared and provided two lists and gave them to Roseanne. One list was for rent: barn rent and hydro, house rent for Langside, and quota rent. The other list was for feed supplied by the defendants. Roseanne would then write a cheque to Tim based on the amount of the “milk cheque” (i.e., the monthly milk revenue that the defendants received by direct deposit to their bank account for the milk produced by the dairy) minus the rent and feed amounts. This monthly cheque was the plaintiffs’ revenue.
[58] The parties described two broad sources of friction among them as the years between 2012 and 2018 progressed. The first was financial issues including, for example, the cost of repairs for the barn and equipment. The plaintiffs at first felt that the defendants should pay for repairs. The defendants insisted that the plaintiffs should pay for the repairs, and ultimately, they did.
[59] One early example is an expense for repairs to a milk cooler, including replacement of the compressor at a cost of $2,790. Although Tim testified that the compressor broke down in June 2012, based on the invoices reviewed during Tim’s testimony (specifically Ex 1-25 at p. 105 of the document brief) this occurred in March 2013. Tim told Martin he should pay for this repair. Martin told Tim that he and Amanda had to pay for the repair because they would be taking over the farm. Martin said, “It’s going to be yours someday so replace it.” I accept that Martin said something to this effect. The plaintiffs paid for the repair and continued to pay for all repairs associated with the dairy throughout the time that they operated it.
[60] The second source of friction was the way that the plaintiffs operated the dairy. The defendants felt that the plaintiffs did not maintain things properly and disagreed with some of their choices. Amanda felt the dairy was outdated in terms of equipment and procedures aimed at herd health, and although she held her tongue, it grated to be criticized by the defendants.
[61] I accept Amanda’s evidence that the criticism was relentless. I does not matter who was right. The parties (other than Amanda) were unskilled at dealing with conflict in a reasonable way. Amanda was perhaps not adequately willing to have a direct conversation about things left unsaid. Over time, the parties’ relationship deteriorated.
The Plaintiffs’ Profit
[62] The profitability of the arrangement for the plaintiffs is disputed. The revenue from the dairy operation was significant. The milk cheques totalled over $1,318,000 in the six years and one month that the plaintiffs operated the dairy. Of this amount, the defendants received almost $643,000, for quota rent, barn rent, straw, hay, and feed. (This does not include rent at Langside house.) The remainder represents the plaintiffs’ revenues: $675,000 over six years and one month, or $111,000 per year.
[63] During her evidence, Amanda was taken through a chart of her and Tim’s income totals, for both farm income and personal income. These show high five-figure and low six-figure losses from 2012 to 2018 for net farming income before adjustments, and mid to low four-figure income or losses for net farming income after adjustments. The plaintiffs’ personal incomes were net positive, but very modest.
[64] In cross-examination, Tim accepted from his 2011 return that he had earned $25,437 in T4 income. As Tim left the Metske farm in February 2011, this income was for a partial year while he transitioned to employment. He testified that with his first employer he did not get as many hours as promised because it was a wet spring, so he changed employers. The appropriate inference is that Tim could eventually have earned considerably more than that had he not returned to the Metske farm in 2012.
[65] Tax returns do not always paint an accurate picture of an individual’s finances, but the plaintiffs’ evidence about their reduced and limited income was not seriously challenged despite complete financial disclosure. Amanda testified, and I accept, that she and Tim made significant investments in farm equipment and put their money into the dairy operation, and that it is typical in the early years of farming that income will be minimal.
[66] Amanda also testified that, while operating the dairy, their personal debts increased, and their savings decreased. They had a loan for the cows and they each had lines of credit. Again, Amanda’s evidence on this point was not seriously challenged and presumably could have been if what she said was contradicted by the banking records.
[67] The plaintiffs both testified to the effect that, to the extent that the arrangement with the defendants was profitable for them, they funneled the profits back into the operation in expectation that they would some day acquire the farm and quota.
[68] Throughout 2012 to 2018, Amanda continued to work part time at OLEX. This is consistent with the limited farm income she testified to. The plaintiffs kept the house they owned in Stratford, and they rented it out throughout 2012 to 2018.
[69] As I will explain below, the dairy operation was taken over by Mirjam Olieman after the plaintiffs left, and she testified that she netted about $10,000 a month from the dairy operation. This aspect of her evidence was of interest because it suggested that she could operate the dairy profitably, while the plaintiffs’ evidence suggests it was not yet profitable on a net basis. However, no documentation was provided to support the profitability of the dairy during Ms. Olieman’s tenure.
[70] No detailed accounting examination was advanced by either side. That is not intended as a criticism. But overall, the evidence is less than precise on whether, financially, the plaintiffs benefited from the arrangement. On balance, I must conclude that they did not. Ms. Olieman’s evidence does not displace the plaintiffs’ evidence on this point, which was supported with complete financial disclosure. Also, as I will describe, the plaintiffs sold their dairy herd on a forced-sale basis and therefore did not recover full value for it.
[71] I conclude that, overall, the plaintiffs did not do well financially while operating the dairy. I accept that they were prepared to live with a lower income than they would have earned elsewhere because, at least at first, they felt assured that they would someday acquire the dairy.
Rate of Return for the Defendants
[72] Martin testified that when an agreement with the plaintiffs was reached, the quota rent was to be 5% of the value of the quota. His evidence was that he and Roseanne could have received a return of 7.25% for a 10-year loan to Hensall Co-op. He said they thought they would give the plaintiffs a break at 5%.
[73] The Hensall rates for member loans ranged from 3% for a demand loan, to 4.5% for a 2-year loan, and up to 7.25% for a 10-year loan. It is far from certain that, had they sold the quota, the defendants would have invested the full proceeds in a 10-year loan. In any event, the defendants agreed to, and received, a return of about 5% on the milk quota while renting it to the plaintiffs.
[74] Martin acknowledged in cross-examination that the arrangement with the plaintiffs was profitable from his perspective but, he said, “we could have made more if we’d have sold the quota and invested it.” This may be but they agreed to the profit level that they received and accepted the profit and risk from the arrangement over the other investment options they had. At the time, they preferred the option of receiving rent from the plaintiffs and advancing the possibility of succession of the farm within the family.
[75] I will note here that had the defendants sold the quota in 2012, it would not have grown.
The Forgone Opportunity at the Herlick Farm
[76] The Herlick farm is near Stratford. Glen Herlick, Amanda’s father, took over the farm from his parents. The farm includes 320 acres and they rent additional acreage. They slowly went from milking thirteen cows to sixty cows because, as Mr. Herlick described, quota was “hard to get” at that time.
[77] Before Amanda left the farm, the Herlicks had begun to consider succession planning. Mr. Herlick’s accountants and lawyers had been pushing him to get this underway because he was getting older. The family was trying to determine what the children wanted to do, and it was shaping up that Amanda and her brother Dan would take over the dairy. They had discussed building a bigger, modern, automated barn. When Amanda left, the plans to build a new barn “got put back a little.”
[78] The Herlicks later built a new barn, but it is a tie-stall barn with sixty stalls.
[79] Mr. Herlick testified, and I accept, that:
• It was about a year after Amanda left that he and Dan started looking at barns.
• It took about a year to select and build a barn.
• If Amanda had not left, they would have built a lot bigger barn. They would have built it for another thirty cows at least because it takes thirty cows to have any kind of living.
• If Amanda had stayed, they (that is, Mr. Herlick and his wife), would be a lot better off because he would be closer to a full retirement.
• Quota was easier to obtain in 2012 to 2018 and they would have been able to obtain it if Amanda had stayed.
• Dan now has an ownership in the Herlick farm. The succession planning is all done. Dan has taken over the cows and Adam (Amanda’s other brother) has taken over the other aspects of the farm.
• Mr. Herlick did not oppose Amanda’s decision to move to Lucknow and operate the dairy at the Metske farm, because he understood they had the opportunity to get the whole farm.
[80] I accept that Amanda could have been a part of the Herlick succession plan had she not accepted the opportunity that presented at the Metske farm.
The Defendants’ Wills
[81] Under their wills, prepared in March 2014, the defendants’ left all their property to each other. The wills go on to instruct the survivor’s trustee:
TO SELL, call in and convert into money all my estate not consisting of money at such time or times, in such manner and upon such terms and either for cash or credit or for part cash and part credit as my Trustee may decide upon, with power and discretion to postpone such length of time as my Trustee may think best, PROVDED ALWAYS that my Trustee may distribute all or any part of my estate in specie…
[82] The wills then instruct the trustee to pay the debts, funeral, and testamentary expenses of the survivor and to divide the balance then remaining equally among the Metske children.
[83] The defendants rely on the wills as contemporaneous evidence that they were not planning to sell the farm to the plaintiffs. At the time the wills were prepared, the parties were still getting along reasonably well. Roseanne testified that until the end of 2013, “The four of us got along real good.” She said that in 2014, “Things were starting to get a little edgy between us because things weren’t being looked after the way we looked after them.” Martin’s testimony was that up until the end of 2013, the relationship among the parties “wasn’t too bad.” He said in 2014, “things started to deteriorate” and in 2015 “things started to get rougher.”
[84] Lisa testified that in 2015 her parents advised her she was the executor under their will and that upon the death of her parents all the properties including the home farm and Langside were to be sold and the money divided among her and her brothers. She said there was no discussion about succession of the dairy by the plaintiffs, and she had no further discussion with her parents about these issues.
[85] In her testimony, Roseanne described the six farm properties they own, but did not provide evidence about the total value of their holdings, or whether it would have been possible to equitably divide their assets in four and still leave Tim with the dairy operation.
[86] The wills were apparently prepared by a lawyer. There is no evidence about what, if anything, was discussed or addressed with the lawyer. At that time, the plaintiffs were operating the dairy without help from the defendants. The other Metske children had left the farm long before. The plaintiffs were paying for all repairs on the barn, including major repairs. To the defendants’ knowledge, the plaintiffs had purchased stable mats and had installed fans in the barn. The compressor failure (see para. [59] above) occurred in March 2013, and that is when Martin said, “It’s going to be yours someday so replace it.” In February 2014, the month before the wills were prepared, the plaintiffs paid $5,300 plus HST to buy a plate cooler and to have it installed at the dairy and the defendants would have known about this investment.
[87] When these facts are considered, along with the robust evidence that succession of the dairy to the plaintiffs was the intention of all parties in 2012, it would have been readily evident at the time the wills were prepared that: (1) the estate faced a risk of a constructive trust claim for the dairy from the plaintiffs; and (2) that risk would grow as time went by. Yet the wills do not address this risk.
[88] The wills are unsophisticated considering the extent of the defendants’ assets. I would not draw an inference from the wills that the defendants did not intend succession of the dairy to the plaintiffs.
Relationship Breakdown
[89] The parties’ relationship was seriously strained at times. In late August and early September 2015, Amanda ran an ad in the Ontario Farmer stating, “YOUNG FAMILY looking for an ongoing Dairy operation with quota to lease to own.” She testified that she and Tim ran this ad because at the time Martin was threatening to terminate their agreement. He wasn’t happy with the number of hours Tim was putting in on the Metske operation. Amanda hoped that through the ad they could find a similar arrangement to what she felt they had with the defendants: a lease to own arrangement. She testified that things with the defendants blew over and so they continued as they had been going before.
[90] On February 7, 2017, Amanda emailed the milk inspector, Betty-Anne Elliott, saying:
We are almost 100% sure we will be selling the cows the end of the month. The family is not getting along and thing [sic] are just not working. I am not sure what Martin intends to do with the quota. Since Tim and Martin are not talking I don’t know what to do.
[91] Amanda testified that this occurred at a time when there was a lot of conflict between Tim and his parents. It was a reaction to what Martin had been saying to them, which included threats to sell the quota. In a reply email, Ms. Elliott included a list of succession planners. This must have resulted from a phone conversation that day between Amanda and Ms. Elliott that mentioned succession planning.
[92] Amanda also testified that the 2015 Ontario Farmer ad and the February 2017 discussion with Ms. Elliott were reactions to what Martin had said to them, but it was still her and Tim’s intention to continue with the arrangement. When disagreements arose, they simply carried on and the issues blew over, although there was growing conflict between the parties as time progressed. Amanda testified, and I accept, that in 2017 after receiving the list of succession planners from Ms. Elliott, she did approach Roseanne about hiring a succession planner and Roseanne said, “If that’s what you want, then get one.” But every time Amanda tried to advance this, the defendants “were too busy to sit down.” Tim also testified that the defendants would not sit down with them to discuss succession planning in 2017. In cross-examination, Tim acknowledged that at no point did he or Amanda obtain a valuation of the farm or arrange financing, but he replied that a succession plan was necessary first. I accept that Amanda raised succession planning with Roseanne in 2017 but it went nowhere.
[93] By November 2017, the parties’ relationship was so dysfunctional that the plaintiffs elected not to directly raise with the defendants the lack of heat at Langside house. The plaintiffs eventually paid, on their own, to replace the furnace.
[94] March and April 2018 were marked with serious arguments involving Tim and his parents. The reasons for the arguments are unimportant, but at one point, Roseanne said, “you guys are going to be out at the end of May.” Amanda testified that the defendants said things like that to Tim “all the time,” but they never told her that they had to leave until the day of the serious altercation that she video recorded in April 2018.
The Plaintiffs Move Out
[95] The plaintiffs moved out of Langside house and moved their equipment out of the barn at the end of May 2018. They took anything of theirs that was not affixed to the barn. They left behind the milkers, which were 4 years old, pasture mats (5.5 years old), fans (5 years old), plate cooler (5 years old), and concrete slabs. They took their oldest son out of school a month before the school year ended and moved to Stratford.
Liquidation of Herd
[96] When they left the Metske farm, the plaintiffs had no realistic option other than to immediately sell the cows they then had in their herd. They would have had to have quota to keep the cows. They arranged to ship almost their entire herd to OLEX for sale in a catalogue auction. Ninety-six head were sold in the auction. Of these, sixty-two or sixty-three were cows, with the remainder being heifers. They did not sell at least one cow because it had mastitis so it would not have fetched anything close to its value if sold at that time. Amanda emotionally described the day as “a very, very bad day.”
[97] None of the cows the plaintiffs had bought from the defendants in 2012 were still part of the 2018 herd. Amanda described that the cows they bought from the defendants were all “grades,” that is not registered with Holstein Canada or Jersey Canada. Cows that are registered are more valuable, even if they are only 50% purebred. In 2012, the plaintiffs had no heifers. By 2018, much of the herd was registered and at some point, they only bought registered heifers.
[98] The herd fetched $90,175.28 net of commission and transportation at the auction. The net amount received was therefore close to the $90,000 that the plaintiffs paid when they bought the defendants’ herd of sixty cows in May 2012, despite the increased numbers and improved quality of the animals.
[99] The plaintiffs also sold, at a reduced price, some of the equipment they had bought to run the dairy.
Subsequent Operation of the Dairy
[100] After the plaintiffs stopped operating the dairy, the defendants came to an agreement with Mirjam Olieman to rent the barn and quota to her. The agreement was reduced to writing. The terms were similar to the agreement that the defendants had with the plaintiffs, but with no expectation that Ms. Olieman would ever buy the quota or farm. Ms. Olieman bought her own cows. She paid two-thirds of the hydro, $800 per month for barn rent, $600 to rent Langside house, and 5% of the full value of the quota. She agreed to maintain the required equipment.
[101] Ms. Olieman started operating the dairy at the end of August 2018. She moved into Langside house around December 2018. She testified that she did not experience many issues with the stable cleaners, and she fixed them most of the time by herself. She neglected to mention that one of the stable cleaners was replaced during the time she rented the barn, at Martin’s expense (see para. [360] below).
[102] In September 2020, Ms. Olieman returned to the Netherlands where she now operates a dairy. Jeff Metske subsequently took over operation of the dairy.
[103] After the trial, the plaintiffs moved to re-open the evidence to file an affidavit from Jeff Metske. That motion was later abandoned, but it is acknowledged by both sides that Jeff is no longer operating the dairy. The defendants sold the quota in the fall of 2022. The parties agreed to preserve the proceeds of the sale pending the release of these reasons.
Milk Production Economics
[104] Betty-Anne Elliott is a field service representative with Dairy Farmers of Ontario (DFO). She has been with DFO for over 23 years. The Metske farm was within her geographic area of responsibility, and she inspected it regularly. Ms. Elliott provided evidence about milk production economics.
[105] Milk production is regulated in Canada. If you don’t own quota, you can’t sell milk. In Ontario, milk quota is distributed by DFO.
[106] Quota amounts are described in “kgs.” This is a measure of how much milk a farmer can ship, subject to and adjusted for the butterfat and protein content of the milk. One kg of quota roughly corresponds to the milk production of one cow, although with modern improvements one cow will now typically produce well over a kg per day.
[107] Generally, milk quota cannot be sold by producers directly to third parties. It must be bought and sold through the quota exchange.
[108] Starting in 2009, DFO capped the price of quota. Before 2009, what tended to occur is that the producer with the deepest pocket would get the quota first. DFO aimed to support smaller producers including family farms.
[109] Although the amount of the cap has changed slightly, a quota price cap is still in play. The capped price of quota in May 2012 was $25,000 per kg. In May 2018, the capped price of quota was $24,000.
[110] DFO exchange rules also limit the amount of quota a producer may acquire per year. That limit is 10% of the amount of quota they currently hold. However, at no point since 2009 has any producer been able to buy the full 10% of their quota. I infer that system-wide quota increases are limited, and the amount of quota available cannot meet the demand for quota. I further infer that enough farmers will take all the quota they are allowed, such that none of them can obtain 10%.
[111] Any producer can sell their quota on the exchange at any time.
[112] Ms. Elliott said that producers can bid for the quota. I infer from her evidence and the evidence of other witnesses that quota sold on the exchange is invariably sold for the capped price.
[113] There is an important exception that allows quota to be sold outside the exchange. Producers may sell their operation as an ongoing dairy farm, including the quota (some or all of it) plus the land. The sale of quota to a third party must include the land that the licence is attached to. This exception, combined with the reality that quota is scarce and demand for it is high, creates an opportunity for dairy farmers who are willing to sell their quota and land together. They can sell the package for premium price.
[114] Ms. Elliott testified that there are only three ways that someone can get into milk production in Ontario. The first way is through the new entrant quota assistance program. It allows only eight entrants per year. The second way is to buy an ongoing dairy operation with the quota. As stated, the purchase must include the parcel of land that the dairy barn is sitting on. The third way is a family licence ownership change. This allows for next-generation licence transfers. Again, this rules seems designed to encourage family ownership.
[115] There was also a new producer program that started in 2009. Applicants could buy 35 kg of quota. But DFO stopped taking names for this program in 2021.
[116] Quota owners are not allowed to lease out their quota, so no one can enter the milk production business by leasing quota. A straight lease arrangement by the defendants to the plaintiffs would not be permitted, but a succession plan that involved payments based on a rate of return for the value of milk quota can be readily structured within DFO rules.
[117] There was little or no testimony on the parties’ awareness of these rules in the spring of 2012; however, the fact that the business plan specifically indicates that “Martin Metske’s dairy barn” would be sold in 2018 implies at least some awareness that the milk licence was attached to the barn.
[118] Quota is based on consumption of milk. As more milk is needed in the system, a quota committee decides how to divvy up the increased quota to producers. Generally, the increase will be shared proportionally. The same is true for decreases. That is, each producer will get a “general increase” or “general decrease” in their quota. For some time, the general increase was non-saleable, that is the producer could not sell it. However, that was a limited-term circumstance. The defendants’ non-saleable quota was converted to saleable quota under DFO rules in July 2015, during the time that the plaintiffs operated the dairy.
[119] Much of Ms. Elliott’s testimony was confirmed by the plaintiff’s real estate appraiser, Marleen van Ham, and by Mr. Watson.
Summarizing the Parties’ Arrangement and Expectations
[120] To summarize:
• In the spring of 2012, the parties reached an understanding that the plaintiffs would acquire the dairy from the defendants. The acquisition would take place over time. The initial phase would involve the plaintiffs purchasing the defendants’ dairy herd. The plaintiffs would rent the barn, the quota, and Langside house.
• The business plan that Amanda submitted to the bank indicated that the plaintiffs would buy the quota in 2013 and “Martin Metske’s dairy barn” in 2018. This reflected the parties’ goal, but may not have been realistic without a financing guarantee from the defendants.
• The parties never agreed on price for the quota or “barn.”
• All parties expected that further succession planning would be undertaken in good faith.
• The family connection and the desire to keep the dairy in the family was a factor that motivated all parties to believe that they would work in good faith towards succession, and to believe that the defendants would transfer the quota and “barn” to the plaintiffs on favourable terms.
• The defendants’ motivations in 2012 included an element of donative intent. This conclusion is supported by:
The remarks made to Tim when he was younger that Langside farm would be left to him.
The loan guarantee that Martin provided.
Martin’s testimony that they could have sold the quota and invested the money at 7.25%, but that they decided to give the plaintiffs a break.
The remarks Roseanne made in her speech at the plaintiffs’ wedding.
The invitation the defendants made to Roseanne’s brother, Mr. Watson, to attend the 2012 meeting to discuss succession planning, and Mr. Watson’s perspective that family succession requires the older generation to help the younger generation financially.
The culture or societal norm among farmers in this region, where there are many multi-generational farms. This norm is further evidenced by, among other things, DFO rules that support family farming and succession within farm families.
The assistance the defendants had given to their other children. They helped Mike and his wife to buy the farm across the road in 2012. They helped Jeff and his wife buy a farm in 2017. Roseanne helped Lisa buy a car.
The fact that Tim was the defendants’ last child to leave the farm and had been the only child living at the farm for years.
• It cannot be said that any gift to the plaintiffs crystallized, but the parties all expected that the plaintiffs would be treated generously by the defendants and that the quota and barn would eventually be sold to them on favourable terms.
• As a result of the representations given by the defendants, the plaintiffs:
moved from the house they owned in Stratford and into Langside house;
gave notice to their employers and quit their jobs to work full time at the dairy and in the Metske operation; and
obtained a loan to fund the $90,000 to purchase of the defendants’ dairy herd.
• Martin co-signed for the loan. He would not have done so if he did not expect the plaintiffs to eventually buy the quota. There is no point in owning a dairy herd if you don’t have quota.
• The plaintiffs worked the dairy for six years and earned very limited net income, much less than they could have earned if they had been employed elsewhere.
• As a result of feeling assured that she and Tim could acquire the Metske dairy, Amanda passed on the opportunity to pursue succession planning with her father and brother.
• A dispute arose over who should pay for repairs to the barn and equipment. This dispute was resolved when the plaintiffs accepted the defendants’ argument that they should pay for repairs because the barn would be theirs someday.
• The plaintiffs made significant investments in the barn including stable mats, fans, new milking equipment, a water heater, electrical changes, and converting a room to a feed room.
• The plaintiffs paid for as much quota as they could afford in 2013, and this quota was added to Martin’s DFO licence (this is discussed below in more detail at para. [153]). Martin encouraged them to do this. The parties all expected at that time that someday the rest of the quota would be transferred to the plaintiffs.
• The defendants were aware of most or all of the investments and work that the plaintiffs did at the barn.
• The defendants freely accepted the plaintiffs’ investments and efforts to buy their herd and to add to their quota. The defendants knew the precise amounts the plaintiffs invested for quota. They would have known the investment was a very significant amount for the plaintiffs.
• The plaintiffs bought equipment, including a new loader tractor, a skid steer, a disc bind, and hay and bale wagons. The plaintiffs would have been aware of all major purchases. Indeed, at times they used some of the equipment. When the plaintiffs left the farm, not all of this equipment could be repurposed.
• Amanda’s life history, education, and circumstances, and her testimony, all reflect that it was a clear goal on her part to be a dairy farmer. The evidence is very compelling that Amanda, in particular, would not have gone into the arrangement with the defendants if she did not expect to someday acquire the dairy operation. The defendants must have known this.
• The arrangement between the parties should be characterized as having rental elements and a wider understanding for succession. The wider understanding for succession included the purchase of the dairy herd (which was completed) and an “agreement to agree” or an understanding that the parties would negotiate terms for succession of the dairy. The rental elements of the arrangement included rental of the barn, the quota, and Langside house.
Issue 1: Unjust Enrichment
[121] The essence of unjust enrichment is that “something must have been given by the plaintiff and received and retained by the defendant without juristic reason."[^3] Canadian law permits recovery whenever the plaintiff can establish three elements: (1) an enrichment of or benefit to the defendant; (2) a corresponding deprivation of the plaintiff; and (3) the absence of a juristic reason for the enrichment.[^4]
[122] Unjust enrichment is not fault-based. It is “animated by the belief that, regardless of any wrongdoing, unwarranted transfers ought to be reversed."[^5]
[123] Liability for unjust enrichment is strict. “Restitution is triggered, regardless of any wrongdoing, by an unwarranted transfer between the parties."[^6] Despite this, parties usually find it irresistible as an element of advocacy to inject an emotional element – wrongdoing – into the analysis, but again, wrongdoing is not required.
1. Enrichment of the Defendant
[124] The first element of unjust enrichment requires the plaintiff to show that the defendant has been enriched, that is, the defendant has received an objective benefit: “something of market value."[^7] But a person is not inevitably enriched when they receive something that has market value. If the benefit is “forced upon” the defendant or is one that the defendant would have preferred to decline if given a choice, it is hard to argue that the defendant has been enriched.[^8] The defendant’s freedom of choice and autonomy must be respected.
[125] The phrase “subjective devaluation” is used to refer to the situation where the benefits received by the defendant “have value in the marketplace but hold no value for the defendant and do not constitute a benefit in the defendant’s hands."[^9] If a defendant has not freely chosen to accept financial responsibility for the benefit, that defendant should not be held liable. In that case, subjective devaluation applies, and the defendant has not been enriched.
[126] However, subjective devaluation can be overcome by the plaintiff “by showing that restitution would be consistent with the defendant’s freedom of choice."[^10] If the defendant requested or freely accepted the benefit, if it is something that the defendant can readily return, or if the benefit is an “incontrovertible benefit,” the defendant may be held liable.[^11] If any of these elements is present, it does not impair the defendant’s freedom of choice to reverse the transfer.
[127] To establish free acceptance, the plaintiff must show “an expectation of payment, the defendant’s knowledge of that expectation, and a reasonable opportunity to reject."[^12]
[128] To establish an incontrovertible benefit, the plaintiff must show that the benefit is “an unquestionable benefit, a benefit which is demonstrably apparent and not subject to debate and conjecture."[^13]
While the principle of freedom of choice is ordinarily important, it loses its force if the benefit is an incontrovertible benefit, because it only makes sense that the defendant would not have realistically declined the enrichment. For example, choice is not a real issue if the benefit consists of money paid to the defendant or paid to a third party to satisfy the debt of the defendant that was owing to the third party. In either case there has been an unquestionable benefit to the defendant. In the first case, he can return it or repay it if he chooses; in the second, he had no choice but to pay it, the only difference is that the payee has changed.[^14]
[129] In these circumstances, “freedom of choice as a problem is absent."[^15] Thus, even a benefit a defendant says it did not want can be an “enrichment” and can satisfy the first element of the cause of action if it is an incontrovertible benefit.
a. Realized and Realizable Benefits
[130] If a defendant receives a benefit from which it realizes a financial gain, it has also received an incontrovertible benefit.[^16] For example, if through error the plaintiff improves the defendants land and the defendant sells the land, receiving an increased price as a result, the defendant has received an incontrovertible benefit in the amount of the increase in price received. However, if this example is changed slightly, and the defendant has not sold the land, in that case the defendant has merely received a realizable benefit.
[131] Whether the plaintiff should be compensated for a realizable benefit is a matter of controversy. It has been suggested that a plaintiff should recover for a benefit received by the defendant only if it is a readily realizable benefit.[^17] Professor McInnes notes that Canadian jurisprudence has been liberal in allowing recovery for any realizable gain, although he cautions that this may be a step too far.[^18]
[132] It is not controversial, however, that whether the gain from an alleged enrichment is an incontrovertible benefit, and whether it is realizable, should be measured at the time of judgment. If it was realizable at an earlier date but is not realizable at the time of judgment, it should not be considered an enrichment.[^19]
[133] In this case, the question of realizable benefits comes into play because the defendants received some realizable benefits from the plaintiffs’ efforts, but they never realized on them. As noted above (see para. [103]), in the fall of 2022 the defendants sold all their quota on the exchange. They no longer operate the farm as a dairy. They can no longer realize the “premium” that would have been available on the sale of the quota if they sold it with the farm (see para. [113] above and para. [185] below), and they can no longer sell the farm at its highest and best use as a dairy (see para. [193] below). It is inappropriate make them liable to pay for a gain that was realizable but is no longer realizable.
2. Corresponding Deprivation of the Plaintiff
[134] If a defendant has been enriched, but not at the expense of the plaintiff, the plaintiff will have no standing to sue. The plaintiff “must demonstrate that the loss he or she incurred corresponds to the defendant’s gain, in the sense that there is some causal connection between the two."[^20] The defendant will not be liable unless “the benefit was unjustifiably subtracted from the plaintiff. It is that connection between the parties — a plus and a minus as obverse manifestations of the same event — that uniquely identifies the plaintiff as the proper person to seek restitution."[^21]
[135] Because unjust enrichment relates to unwarranted transfers, when a defendant receives something of value it is often self evident that the plaintiff has been deprived. Cory J. said in Peter v. Beblow[^22] that “once enrichment has been found, the conclusion that the plaintiff has suffered a corresponding deprivation is virtually automatic.” The defendants argue that a finding of corresponding deprivation is not “virtually automatic” except in cases involving matrimonial or long-term common law relationships.[^23] This is not correct. Cory J.’s statement is equally applicable in other contexts.[^24]
[136] This element is straightforward here. The plaintiffs sustained deprivations that correspond to the enrichments of the defendants.
3. No Juristic Reason
[137] The third element of unjust enrichment is that there must be no juristic reason for the enrichment received by the defendant. Again, unjust enrichment is concerned with unwarranted transfers. A transfer is not unwarranted if there was a legal reason or basis for it.
[138] There are “established categories” of juristic reasons. For example, “donative intent” and “contract” are established categories of juristic reason. In general, a person who gives something to someone else has no legal claim against the recipient if the something was a gift, or if it was given within the context of a contractual exchange. In either case, although the recipient may have been enriched, the enrichment is not unjust. There was a juristic reason, or legal basis, for it.
[139] Plaintiffs have the burden to show that their claim does not fall within an established category of juristic reason. “If that burden is discharged, restitution is prima facie available."[^25] The burden then shifts to defendants. Defendants may defeat a claim for unjust enrichment if they can “show that there is another reason to deny recovery” from “all the circumstances of the transaction,” such as (1) public policy; or (2) the parties’ reasonable expectations.[^26]
[140] Here, the defendants argue that there are two juristic reasons that preclude the plaintiffs’ unjust enrichment claim, both of which fall under established categories.
Contract. That is, the benefits the defendants received from the plaintiffs were received under the agreement between them.
Acting voluntarily in self interest. That is, the benefits the defendants received from the plaintiffs result from the plaintiffs knowingly acting in their own self interest.[^27]
[141] The concept of “acting voluntarily in self interest” applies only to some of the enrichments alleged by the plaintiffs. Also, this category is at least partly subsumed with the “contract” category here because it is the arrangement between the parties that is the source of the plaintiffs’ self interest. For instance, the defendants argue that the plaintiffs bought more quota because it allowed them to sell more milk (see para. [153] below), and they bought better milking equipment because it made milking easier (see para. [233] below). The argument is that the plaintiffs bought these things to enhance their profit.
[142] The established category of “contract” will typically overlap with “the reasonable expectation of the parties” when there is a contract, because the reasonable expectation of the parties will always be informed by any contract between them. However, “if an established category of juristic reason applies, the analysis ends and the claim for unjust enrichment fails. Reasonable expectations and public policy cannot oust an established category of juristic reason where it is found to apply."[^28] In this case, if the enrichment is explained by a contract, the claim fails, and it is not open to the plaintiffs to argue that the parties’ reasonable expectations differ from the contract and should govern.
[143] The circumstance is complex here because the arrangement between the parties consisted of a wider understanding, with assurances, of succession of the dairy, but in the meantime an agreement that the plaintiffs would rent the barn and quota. In some ways the “rental agreement” and the wider understanding support different conclusions on whether there was a juristic reason for the enrichment.
4. Remedy
a. Constructive Trust
[144] In unjust enrichment cases, a declaration of constructive trust is sometimes available as a remedy. However, the default remedy in unjust enrichment cases is a monetary award.[^29]
[145] The plaintiffs advance claims for constructive trusts in the quota, the home farm, and Langside. A constructive trust cannot be justified here because a monetary award would be a sufficient and appropriate to remedy, and there no concern that security for payment is required.[^30]
b. Restitution
[146] Restitution is the appropriate remedy in most unjust enrichment cases. The term “restitution” is often used loosely, but in unjust enrichment cases, it does not mean putting the plaintiff in the position it was in before the defendant committed the wrong. It also does not mean stripping the defendant of an ill-gotten gain. Unjust enrichment does not depend on the defendant committing a wrong but is designed to address unwarranted transfers.
[147] Restitution in the context of unjust enrichment refers to a remedy by which the defendant returns the benefit that it acquired from the plaintiff.[^31] The purpose of the award “is limited to reversing an enrichment that the defendant received from the plaintiff."[^32] Restitution “redresses the defendant’s enrichment, but only to the extent that the plaintiff suffered a corresponding deprivation."[^33]
The Alleged Enrichments
[148] I will now review each of the enrichments that the plaintiffs say the defendants received.
Issue 1(a): Increase in the Amount of Quota Held
Enrichment
[149] The quota that the defendants held increased by 12.8 kg between May 2012 and the end of May 2018 during the time that the plaintiffs operated the dairy. In May 2018, quota sold on the exchange for $24,000 per kg. The value of 12.8 kg of quota was therefore $307,200.
[150] The 12.8 kg increase in the defendants’ quota came from: (1) general increases; (2) the conversion of non-saleable quota to saleable quota; and (3) quota purchased on the exchange and paid for by the plaintiffs.
[151] The general increases account for roughly 7.5 kg of the 12.8 kg increase.
[152] The conversion of non-saleable quota to saleable quota that the DFO instituted in 2015 accounts for roughly 4.8 of the 12.8 kg increase.[^34]
[153] In May, June and July 2013, the plaintiffs paid for 0.10 kg, 0.21 kg and 0.20 kg of quota, for a total of 0.51 kg of quota. This quota was purchased on the exchange and added to the quota total on Martin’s DFO licence.[^35] Martin told the plaintiffs they should buy the quota. It made sense at the time, because everyone expected the plaintiffs to eventually acquire all the quota. The cost of these purchases totalled $12,250 plus quota service charges and HST on the service charges for a total of $12,266.95. The plaintiffs purchased this on their line of credit. Amanda testified that after their line of credit was maxed out, they could not purchase more. Amanda acknowledged that she and Tim did benefit from the increased quota because it allowed them to produce more milk, but I would not find that this was a significant motivating factor. They bought the quota not for short-term gain, but because they were expecting to someday acquire the dairy.
[154] After May 2018, and after the plaintiffs got a lawyer and made a demand, the defendants reimbursed the full $12,266.95 amount.
[155] Between 2012 and 2018, the plaintiffs ran the dairy operation without significant assistance from the defendants, and with no financial contribution from the defendants. In cross-examination, Martin was asked to show a single receipt for money he spent on the dairy operation. He admitted they had spent nothing. The plaintiffs did everything to maintain and preserve the dairy quota including the inspections, fees, and paperwork. They paid for all supplies, repairs, maintenance, and equipment. They maintained the dairy’s grade A status.
[156] The plaintiffs’ position is that they were responsible for the 12.8 kg increase in the defendants’ quota, and without their effort and investment, it would not exist.
[157] In contrast, Martin testified that “The quota increase was on my money.” This position was re-stated in the defendants’ written submissions where it is argued that, apart from the quota that the plaintiffs purchased, the plaintiffs played no role in causing the increase in quota, nor in triggering the conversion of quota from non-saleable to saleable. The defendants argue that conversion of non-saleable quota to saleable quota was initiated by the DFO in response to industry forces. They also argue that they “would not have received 12.8 kg of Quota between 2012 and 2018 if they hadn’t already amassed 46.29 kg of Quota by 2012.” They further argue that the increase in quota, and the conversion of non-saleable to saleable quota “was not the product of the Plaintiffs’ efforts and thus, cannot constitute an enrichment.” They argue that the defendants “had options, only one of which was the sale of Quota. If the plaintiffs hadn’t started milking cows, others would have, and did, seize the opportunity to do so.” Finally, they say that to receive the same benefit that they received from the plaintiffs’ efforts, they “would simply have had to hire an employee like Lewis Miller, or enter into a similar arrangement as with the plaintiffs, which they did, with Mirjam Olieman and then Jeff Metske.”
[158] These arguments are flawed because, on the defendants’ own evidence, they would have sold the quota if the plaintiffs had not taken over the dairy. The suggestion that the defendants “would simply have had to hire an employee like Lewis Miller” to continue to enjoy the increase in value of the quota cannot be sustained because that is not what they intended to do. There is no evidence that they considered trying to find someone like Mr. Lewis again. There is no evidence that in 2012 they even considered trying to find someone like Mirjam Olieman to operate the dairy. On their own evidence, they would have sold the quota on the exchange and invested the money. But for the efforts and investments of the plaintiffs, the defendants would not have enjoyed the increase in their quota in the amount of $307,200. It is true that the quota increase would not have been possible if the defendants did not already own 46.29 kg of quota, but in terms of effort, the increase is attributable almost exclusively to the efforts of the plaintiffs.
[159] The principle of subjective devaluation does not apply to the increase in quota. The increase in quota did not interfere with the defendants’ freedom of choice and it is not a benefit they might have declined. The increase in quota represents an “incontrovertible benefit.” Quota can be converted to cash almost immediately on the quota exchange.
[160] It follows that the defendants have been enriched by the increase of 12.8 kg of quota, having a value of $307,200. The $12,266.95 that they reimbursed the plaintiffs for after May 2018 should be subtracted leaving a net enrichment of $294,933.05.
[161] Martin’s point that the quota increase “was on my money,” that is, that the quota increases would not have been possible if the defendants had not already amassed quota, is valid. The circumstance is analogous to a mutual conferral of benefit in unjust enrichment cases arising from cohabitation. In those cases, the defendant’s contribution is considered at the remedy stage.[^36]
Corresponding Deprivation
[162] The plaintiffs’ corresponding deprivation is manifest. If they had not expected to acquire the dairy, they would have devoted the six years to other opportunities. Most importantly, they would have pursued succession planning with the Herlicks.
[163] The point of restitution in the context of unjust enrichment is to reverse an unwarranted transfer and thereby restore the parties to where they were before their interaction.[^37] Here, the defendants would not have had the 12.8 kg of quota worth $307,200; the plaintiffs would have devoted the six years to other opportunities.
Juristic Reason
[164] Next, it is necessary to assess whether there is a juristic reason for the enrichment. If there is a juristic reason, the claim fails. I have found no authority to suggest there is some middle ground if, for instance, there is a juristic reason, but it does not seem like a good enough reason for the defendant to keep the whole benefit.
[165] Under the test set out in Garland, the plaintiffs must establish that the increased 12.8 kg of quota was not received by the defendants pursuant to a contract between the parties. If the plaintiffs could succeed with that (they cannot), the defendants would have to show that the parties’ reasonable expectations provide a juristic reason.
Which Aspect of the Parties Arrangement is Applicable for the Garland Analysis?
[166] As I have already said, it is appropriate to characterize the arrangement between the parties as having two elements: (1) a wider understanding that the plaintiffs would acquire the dairy on favourable terms that were never defined (other than the terms for purchasing the dairy herd); and (2) in the meantime, a “rental agreement” under which the plaintiffs would lease the quota and barn.
[167] Separating the analysis into the components set out in Garland is not straightforward here. The question arises, what aspect of the parties’ arrangement should be considered the “contract” for the first step of the Garland analysis: the rental agreement or the wider understanding?
[168] Applying the first step of Garland requires a proper articulation of the contract and the determination of how far it extends as a juristic reason.[^38] Restitution will be denied if there is a contract on point, but there must be a contract on point.[^39] “[R]estitution may be awarded, despite the existence of an enforceable agreement, as long as the impugned transfer occurs outside the risks that the parties had contractually allocated between themselves."[^40]
[169] On one analysis, the reason for the defendants’ enrichment of the increased 12.8 kg of quota is that it was a natural consequence of the rental agreement. The simple fact that the plaintiffs operated the dairy meant the quota would increase. In this analysis, the “rental contract” provides a juristic reason for the enrichment.
[170] An alternate analysis is that the increase in quota was a benefit acquired by the defendants pursuant to a juristic purpose that ultimately failed. That is, the wider understanding that the plaintiffs would acquire the dairy on favourable terms failed. In this analysis, the increase in quota is a windfall to the defendants generated by the plaintiffs’ effort, and it arguably fits within a gap in their arrangement.
How Was Risk Distributed Under the Parties’ Arrangement?
[171] To resolve this issue, it is necessary to step back and consider why contract generally trumps unjust enrichment: it is “the need to protect the integrity of contractual allocations of benefits and burdens."[^41] If, after voluntarily agreeing to accept a risk, a plaintiff could recover restitution in a manner that is inconsistent with that agreement, it would put the foundations of contract law at risk.
[172] In any given arrangement, it is not always the case that all risks and benefits are allocated. It should not be automatically assumed that the parties distributed all risks and benefits. Certain benefits or risks might fall in a gap in a contract.[^42]
[173] Before I proceed with the analysis, I will note that the quota remained in the defendants’ hands throughout the parties’ relationship. The plaintiffs did not have the financial ability to buy the quota in 2013 as they had hoped when they entered the arrangement in 2012. In cross-examination, Amanda said that in 2013 she discussed obtaining a loan to buy the quota with the bank representative. He told her that such a loan “would only be put over 10 years” because the quota needed to be attached to land, and she recognized this would not work. They would “need it put over a longer time.” I infer from her description that the bank would not offer a long-term amortization on a loan for quota alone. An amortization of more than 10 years would be available only on a loan that included land as security. I infer also that the cash flow from the dairy would not support a loan for the quota with a 10-year amortization.
[174] There is no evidence that this information was reviewed with the defendants. There was no significant discussion between the parties about succession between 2013 and 2017. There was no further discussion about the timing of purchasing the dairy or the price. Amanda also acknowledged in cross-examination that the price of quota could change before an arrangement was put in place.
[175] DFO issues both general increases and general decreases in quota, as demand for milk fluctuates. The quota holder wins on increases and loses on decreases. In this sense, the risk of loss associated with the quota was with the defendants and favours the defendant’s position. But the risk of loss is negligible. General increases are far more common than general decreases. General increases are very reliable. In addition, under the parties’ arrangement the defendants received a 5% rate of return on the quota they held, suggesting they were content with this compensation for the risk they accepted. Furthermore, the enrichment in question is the increase in quota generated by the plaintiffs’ efforts, not the quota held at the start of the arrangement, and the parties simply had not addressed who would benefit from it.
[176] One other feature in the evidence favours the defendants’ position. In January 2013, DFO issued a rare general decrease in the value of the quota. The plaintiffs relied on this to pay reduced quota rent.[^43] This is consistent with the defendants bearing the risk of a decrease in the value of quota. That is, in the plaintiffs’ eyes, at that point, the risk of a decrease in the value of the quota was allocated to the defendants. If that is the case, the benefit should also be allocated to the defendants. At the same time, this rental decrease reflects a brief episode in the parties’ relationship. Other general increases and general decreases were ignored by the parties. The parties’ relationship was not static. Even so, the quota rent decrease is perhaps the only feature in the evidence when the parties specifically adverted to who should benefit or lose from general increases and decreases. In January 2013, when it suited their interests, the plaintiffs thought the defendants should.
[177] A technique for analyzing how parties have allocated risk is to consider a theoretical disaster. To apply that technique, one could imagine that the milk industry was instantly deregulated with no compensation for dairy farmers, such that quota became worthless. Let’s imagine this occurring in 2012 shortly after the plaintiffs took over the dairy, and in 2018 shortly before they were told to leave.
[178] If this occurred shortly after the plaintiffs had taken over the dairy, the 12.8 kg increase in quota would not have existed yet. The defendants would have lost the ability to sell their 44 kg of saleable quota, with imposing consequences to their net worth. The plaintiffs would also be affected, perhaps with consequences even more imposing to them in terms of their net worth and life goals. They would have lost the opportunity to market the milk from their newly acquired dairy cows through the marketing board. Presumably the price of milk would become volatile and likely fall, and their anticipated revenue may or may not have supported the dairy.
[179] The disaster I have just described reflects risks that both sides took in renting the quota. In exchange for the risks taken, both sides enjoyed benefits: the defendants enjoyed the rent, and the plaintiffs enjoyed the milk revenue. Again, the alleged enrichment here is not the quota that existed in 2012, but it is the 12.8 kg increase in quota that accrued by 2018.
[180] If the same disaster happened in 2018, the defendants would have lost the value of the 12.8 kg of quota, as well as the value of the rest of their quota (which, of course, they had held during the intervening years and could have sold earlier thereby averting the risk of holding it). The plaintiffs would again have lost the right to market their milk through the marketing board and would have faced reduced revenue. They would also have lost the opportunity to buy the quota on favourable terms.
[181] If things had gone according to the parties’ expectations, and if the plaintiffs had acquired the quota in 2013, and if the described disaster occurred in 2018, the plaintiffs unquestionably would have sustained the full loss of the value of the quota, including the value of the 12.8 kg increase. The defendants would have been unscathed.
[182] This analysis shows that the risk of loss in value of the quota was primarily (although perhaps not completely) with the owner of the quota, and that general increases and decreases in the quota should also be considered part of the risk and benefit of owning quota.
[183] It seems unsatisfactory that the outcome of this issue should be determined based on the miniscule risk borne by the defendants of a devaluation of the quota. Similarly, the January 2013 quota rent decrease that the parties applied is too small a fact to carry the day on this issue. However, it cannot be denied that the parties’ arrangement allocated the risk of losses and benefits associated with owning the quota mainly to the defendants. This is true whether one focusses on the “rental” aspects of their agreement or the wider arrangement.
[184] The proper conclusion is that the contractual arrangements between the parties provide a juristic reason for the defendants’ enrichment of the increase in milk quota. This aspect of the plaintiffs’ claim fails.
Issue 1(b): “Premium” on Quota
[185] The plaintiffs claim that the non-exchange value of quota increased between 2012 and 2018 and thus that the defendants were enriched by $220,880.[^44] This claim is largely based on the evidence that a farm with quota will sell for more than the market value of the farm plus the exchange-traded value of the quota. Put differently, when a farm with quota is sold as an ongoing dairy operation, a “premium” can be recovered on the quota. Ms. van Ham gave evidence about the value of this “premium.”
[186] Ms. van Ham’s report states, at page 1235 of exhibit 1-77:
As a result of the DFO rules and quota value cap there has been a “premium” created for on-going farms. The package of real estate (land, buildings) plus the quota is generally being sold for a higher price than if we were to take quota at it[s] price of $24,000 per kg and added the real estate portion. Discussions with real estate agents involved in these transactions indicate the “true” value allocated to milk quota ranges from $24,000 to $28,000 per kg.
[187] That is, the “premium” was $0 to $4,000. The plaintiffs submit that it is appropriate to use the upper end of this range to assess the amount by which the defendants have been enriched. They argue that solely through their efforts, the defendants have been enriched by $4,000 per kg on 55.22 kgs of quota, for a total of $220,880. Put differently, as of 2018, the market value of the farm was $220,800 more than it otherwise would have been because of the plaintiffs’ investment and efforts between 2012 and 2018. This argument assumes the quota premium was zero in 2012.
[188] I have limited evidence to assess the 2012 premium for quota sold off exchange (sold with an operating dairy). Amanda testified that at the 2012 meeting, Mr. Watson suggested a price for the quota of $25,500, because people were paying a premium for quota. Neither side asked Mr. Watson about this when testified, but in response to a question from me Mr. Watson disagreed with this. He said that this is not done – that is premiums are not paid – in a succession plan. I inferred this is because the older generation will typically treat the younger generation favourably. However, Mr. Watson said that in arm’s length deals, premiums are paid and “the sky’s the limit.” Also in evidence is a chart showing quota prices going back to 1991 (exhibit 1-38). This shows that the price peaked in July 2008 at $33,805. Ms. van Ham testified that the price for quota was running at $32,000 before the $25,000 cap was announced. The price for quota was forced lower by the regulatory environment, so even in 2012 buyers would likely have been willing to pay a premium. I therefore do not accept that the quota premium was zero in 2012. I do, however, agree that the upper end of the range suggested by Ms. van Ham should be preferred for the premium. I say this because the evidence universally acknowledged that quota is a precious commodity and because I accept Mr. Herlick’s evidence that the sky is the limit for what is paid in premium.
[189] Weighing these factors, I would assess the “premium” at $200,000. That is, I accept that because of the plaintiffs’ efforts, in May 2018 the value of the 56.69 kg of quota that the defendants then owned, if sold with the home farm and the rest of the dairy as an ongoing operation, would have been $200,000 higher than the exchange price for that quota.
[190] That said, I do not accept that the defendants were enriched by this amount. The premium on quota sold as part of an operating farm is not a readily realizable gain. It depends on the farm and quota being sold together. The defendants will not realize the gain because they sold the quota on the exchange in the fall of 2022.
[191] Some might consider the decision by the defendants to sell their quota on the exchange as squandering an opportunity to maximize their recovery. If they had sold the home farm together with the quota, they would have made $200,000 more. But that argument would not respect the defendants’ freedom of choice and autonomy. Subjective devaluation applies. When they sold the quota, the defendants obviously did not want to move from the home farm, where they have lived since 1998. They were prepared to lose the “premium” they might have recovered by selling it with the quota. Their freedom to make that choice must be respected.
Issue 1(c): Rise in Value of the Home Farm
[192] Ms. van Ham gave evidence that the Metske home farm increased in value from May 2012 to May 2018 by $345,000.
[193] The plaintiffs argue that their efforts increased the value of the home farm and enriched the defendants because the dairy operation and the Metske operation were significantly integrated. For instance, the Metske operation grew and stored feed for the dairy cows. The dairy operation supplied manure for the Metske operation and increased the fertility and productivity of the land. The argument is that the highest and best use of the farm was as a dairy, and by working the dairy, the plaintiffs contributed to the increase in value of the home farm.
[194] I accept these arguments, but the plaintiffs’ claim must again fail. The increase in value was not a readily realizable benefit because the defendants would have had to sell the home farm to realize it. Because they sold the quota, the defendants will never realize the benefit. They have not been enriched.
[195] For added clarity, in the event I am incorrect on this point, I will add that I accept all the valuations that Ms. van Ham determined in her report. In conducting her appraisal, Ms. van Ham broke the total appraisal value into components. I accept the values set out in the schedules found at page 1244 and 1246 of exhibit 1-77 and the valuations set out at page 1249.
Issue 1(d): Rise in Value of the Dairy Buildings
[196] The plaintiffs rely on an aspect of Ms. van Ham’s evidence for this aspect of their claim. Ms. van Ham said that as soon as the quota and the cows are sold, the buildings associated with the dairy have a value of “next to nothing.” This is because they are older buildings purpose-built for dairy farming.
[197] In a schedule at page 1246 of exhibit 1-77, Ms. van Ham calculated the “contributory value” of each of the structures on the home farm towards the property’s overall value. It is submitted by the plaintiffs that the collective contributory value of all the “dairy buildings” as of May 2018 was $345,000 (rounded from $344,767). The plaintiffs claim that because they operated the dairy, they maintained the contributory value of these buildings.
[198] The plaintiffs’ argument acknowledges that they did not use all the dairy buildings, but they claim they maintained all the buildings’ values. The plaintiffs’ alternative argument is that the increase in the contributory value of the buildings they used is $189,247.
[199] The plaintiffs’ theory is that if they had not assumed operation of the dairy, the defendants would have “lost” the value of these buildings. Along with Ms. van Ham’s evidence, one fact that supports this conclusion is that the defendants had said that if the plaintiffs had not taken over the dairy, they would have sold the quota and left the barn empty.
[200] This argument is again based on the potential that the defendants could sell the farm and, because of the plaintiffs’ efforts, they might have realized more for the farm than they otherwise would have. That is, the increase in value of the dairy buildings was a realizable gain. For the same reasons given above, this is not recoverable. The defendants have now sold the quota and have closed the dairy. They did not realize on the extra that might have been available had they sold the farm and quota together as an operating dairy.
Issue 1(e): Rise in Value of Langside Farm (residential portion only)
[201] The plaintiffs presented appraisal evidence from Jason Wharram to show that the house they occupied at Langside farm increased in value from 2012 to 2018 by $30,000. I accept this evidence.
[202] The plaintiffs replaced the furnace at Langside house in December 2017. Mr. Wharram testified in cross-examination (and I accept) that, in his estimation, the conversion from oil to propane with a new furnace contributed $5,000 to the increase in value of the property. The installed furnace cost $5,188.94 inclusive of HST (see exhibit 1-59).
[203] The plaintiffs claim the full $30,000 should be awarded. It is their position that the defendants were unjustly enriched by their maintenance and expenditures on the property.
[204] The defence position is that the rise in value of Langside is attributable to market forces and the furnace was an “unrequested benefit.” The phrase “unrequested benefit” is used in Campbell v. Campbell[^45] but is part of the broader concept of “subjective devaluation,” discussed above.[^46]
[205] Although the facts are more nuanced than the defendants suggest, I agree that the concept of subjective devaluation applies. However, I also find that the furnace is an incontrovertible benefit and therefore the defendants were enriched by it.
Additional Facts Relating to this Issue
[206] In cross-examination, it was suggested to Tim that whenever he or Amanda asked the defendants to address a problem with Langside house, it was addressed. Tim disagreed. He acknowledged that the defendants fixed a basement light that was not working. He also acknowledged that the defendants supplied them with smoke detectors, but further testified that this resulted from a 2015 insurance inspection of the house that revealed that it had no smoke detectors. Tim testified in chief and re-iterated in cross-examination that he asked Roseanne to address problems with the water system in the house and she told him to deal with it because they did not have time. He replaced the pump and pressure tank and still had problems. He testified that because the same system was used for water for the defendants’ cattle at the Langside barn, the defendants were eventually forced to address this issue. Martin testified that one of the only times he was in the Langside house was when he was in the basement with a plumber, so I infer that this was a reference to the same occasion.
[207] Tim testified that at one point, the steps going into the basement were caving in. He asked Roseanne to fix this, and Roseanne told him to do whatever he had to do to make it work because they planned to rip the house down some day and put up a new house when the plaintiffs moved into the dairy farm. He understood that the defendants were not going to put any money into the house.
[208] The plaintiffs bought a new propane furnace in late November 2017, converting the premises from oil. They paid for the furnace. The new furnace was necessary because the fuel oil delivery company would not deliver oil without an inspection of the heating system. Tim testified that he was bringing his own fuel in (presumably in small containers). Then the furnace quit. Tim testified that he called Mike Campbell who said, “I cannot leave this place without cutting the lines to the furnace.” This tracks with Mr. Campbell’s testimony. He said that he condemned the furnace as unsafe because of a hole in the heat exchanger. As it was late November, there was an urgent need to replace it.
[209] In cross-examination, Tim acknowledged knowing that there was a functional spare furnace on site and available for installation.
[210] The defendants called Mr. Campbell. He testified that he saw the spare furnace and thought it was in “useable” condition. Tim testified that Mr. Campbell felt that a new oil tank would be needed. Mr. Campbell told Tim that he would be unable to install the tank or replace the furnace for two weeks. When he testified, Mr. Campbell could not recall whether he looked at the oil tank but acknowledged it would need inspection.
[211] Martin had purchased the spare furnace “from a Mennonite around the corner” about three years before the plaintiffs had moved into Langside, or roughly in 2009 (eight years before replacement was needed), but Martin said it was “only a couple years old” and was in working order before it was taken out. It had been stored in a shed. Martin bought it because he felt it might be useful for Langside or for another house he and Roseanne owned at one of the other farms.
[212] I do not trust Mr. Campbell’s evidence on the question of the condition of the spare furnace. It seems unlikely he would remember this minor call from so long ago. And because he told Tim he could not install it for two weeks, despite the urgent nature of the job, I suspect that he may not have wanted to attempt to install it. Waiting two weeks was not a realistic option.
[213] At that time, the relationship between the parties was so dysfunctional that the plaintiffs did not directly raise the problems with the furnace with the defendants. They felt they were on their own for repairs because of the dysfunctional relationship at that time, and because of the defendants’ earlier resistance to address issues at Langside. Tim testified, however, that the installer would not instal the new furnace and propane tanks without the permission of the owner. Tim understood that the installer called Martin and got his permission before installing the furnace. When Martin testified, he denied having any prior awareness that the plaintiffs were putting a new furnace in.
[214] The need for the new furnace arose urgently when the existing furnace quit. The option of installing the other oil furnace that Martin already owned does not appear to me have been realistic in the circumstances. Lucknow Fuels had stopped delivering oil. The oil tank likely also needed replacement. Urgent replacement of the furnace with a propane furnace was the only rational option.
[215] The parties did not directly communicate about the problems with the furnace, but I do not accept that the defendants were completely unaware of the problems:
• Martin attended Langside often for chores because he had cattle there.
• He and Roseanne owned the fuel tank that needed inspection and to which Lucknow Fuels had stopped deliveries.
• Tim was hauling his own heating oil in small containers.
• Mike Campbell had condemned the furnace.
• Lucknow is a small community and the parties used the same suppliers and service providers.
No Free Acceptance
[216] While it is unlikely that the defendants “had no idea” that there were major problems with the furnace, their knowledge did not reach the level of “free acceptance” of financial responsibility. As already noted above, free acceptance “requires the plaintiff to establish an expectation of payment, the defendant’s knowledge of that expectation, and a reasonable opportunity to reject."[^47] None of these elements is present here.
Incontrovertible Benefit
[217] But the issue does not end there. Subjective devaluation can be defeated by proof of an incontrovertible benefit.[^48] An incontrovertible benefit need not take the form of a payment or transfer from the plaintiff to the defendant. It can also take the form of a payment or transfer by the plaintiff to a third party that eliminates a debt or burden of the defendant. “Being relieved of a $5,000 burden is essentially the same as receiving $5,000."[^49]
[218] This principle applies here. The defendants were relieved of the burden of replacing the furnace by the steps taken by the plaintiffs. The benefit the defendants received was an incontrovertible benefit. The money spent by the plaintiffs on the new furnace saved the defendants an equivalent expense, as they had an obligation to provide a working heating system at Langside house. In addition, the new furnace and conversion to propane added $5,000 to the value of the house. Furthermore, the defendants subsequently rented the house to Ms. Olieman and therefore the furnace was put to immediate use.
Conclusion on this Issue
[219] There was therefore an enrichment and a corresponding deprivation. No juristic reason for this enrichment was advanced in argument and I can think of none. The rental agreement does not provide a juristic reason because it was an implied term of the agreement that the house would have heat.
[220] Market forces, not the plaintiffs’ actions, are responsible for the remaining $25,000 of the $30,000 increase in value of Langside house.
[221] I allow $5,000 for this aspect of the claim.
Issue 1(f): Improvements, Repairs, and Investments
[222] The plaintiffs have shown that during their operation of the dairy they:
• paid for repairs associated with the dairy;
• paid for parts for equipment associated with the dairy; and
• purchased new dairy and other equipment.
[223] The plaintiffs argue that the defendants have been unjustly enriched by these expenditures. The defendants argue that under their arrangements, the plaintiffs were responsible for maintenance and repairs of the barn and the equipment, that any new equipment purchases the plaintiffs made were for their own benefit, and, if there is liability, the value of any equipment has depreciated.
[224] The amount claimed is $88,363.98. For the reasons below I allow $28,700 for this aspect of the claim.
Maintenance Expenses and Investments
[225] Based on the invoices in evidence, the first major expense the plaintiffs incurred was for stable mats. This was in June 2012. Stable mats (also called pasture mats) make the cows more comfortable in the stable for milking and reduce the amount of straw needed. They help prevent injuries. They were an investment in herd health. There is no evidence that the plaintiffs discussed this investment in advance with the defendants, or that the defendants approved it.
[226] The next major expense was for repairs to the stable cleaners. Stable cleaners are a trough with a conveyor mechanism to convey manure from inside the stalls to outside the barn. The first stable cleaner repairs funded by the plaintiffs were in December 2012 and January 2013. Tim’s evidence was that the stable cleaners were bought used in 1986 and were in poor condition when the plaintiffs took over the dairy. The stable cleaners needed repairs often and were a source of friction. Martin’s view was that the plaintiffs did not properly maintain or look after the stable cleaners. He observed that they would turn on the stable cleaner and walk away from the switch, so that if the stable cleaner jammed the motor would be at risk of getting burned out.
[227] The next major expense was for the repairs to a milk cooler (discussed above – see para. [59]).
[228] The next major expense was for barn fans. These keep the barn cool in summer and were important for herd health and productivity, and for the comfort of the person doing the milking. The plaintiffs bought twelve fans in April 2013 and had them installed in May 2013.
[229] The plaintiffs purchased a plate cooler in May of 2013. A plate cooler cools the milk quickly and saves energy and refrigeration costs.
[230] The plaintiffs put cement slabs down in several areas. Specifically, in July 2014, they put cement slabs down and poured cement around the water troughs to keep the cows out of the mud in that area.
[231] In her examination in chief, Amanda reviewed many photographs of other improvements that she and Tim made or attempted to make to the dairy. As one example, at some point, Tim changed a feed room attached to the barn to a storage room. This work included installing sheet metal on the walls. The plaintiffs purchased the materials for this work in December 2014. Amanda testified that she had reviewed the past DFO inspection sheets for on the dairy. One deficiency noted by the DFO was the feed room. Amanda testified that for heard health, you are not supposed to be walking in and out of a barn through a feed room. As a result, Amanda initiated this change.
[232] Broken stanchions were a repeated problem. The plaintiffs’ perspective was that the stanchions were degraded when they took over, and they made many repairs to them. The defendants’ perspective was that the stanchions were not being maintained by the plaintiffs.
[233] The plaintiffs also invested in new milking equipment. The new milking equipment included new milkers with automatic take-offs, with associated labour for installation and analysis. The milkers were purchased in September 2014. Tim testified that the milking equipment had to be replaced because it was worn out and they were having frequent problems with the milkers. The existing milking equipment was old, dating from 1999. The plaintiffs had frequent problems with mastitis and the new milkers would improve this and improve herd health. The plaintiffs did not make this investment simply to reduce labour for Amanda.
[234] The defendants’ perspective is that the milking equipment was old but it “was working just fine,” according to Roseanne, and the reason the plaintiffs wanted new equipment was that the new equipment had automatic take offs. In cross-examination, Roseanne acknowledged that: (1) the new milking system that the plaintiffs purchased was still in the barn; (2) Ms. Olieman used it after the plaintiffs left; and (3) the defendants benefited from the barn rent the collected from Ms. Olieman. Roseanne also acknowledged that Jeff Metske used the new milking equipment and the defendants benefitted from the barn rent paid by Jeff. The same is true of the pasture mats and fans.
[235] The plaintiffs replaced the water heater in the barn in May and June of 2016.
[236] Parts of the septic system associated with the barn required replacement in 2016 or 2017. Tim blamed the need for these repairs on the historic use of the septic system and the fact that Roseanne flushed chicken eggs down the system. The repairs included excavation of the septic bed and replacement of clogged piping and installation of vents. Tim did the labour for this, but the claim is for the outlays for components and an invoice from an excavator who did some of the work, as well as drainage stone for the weeping bed.
[237] The plaintiffs did not consult the defendants about the investments they made in the dairy. However, the defendants were aware of all the changes and almost all the repairs and maintenance that the plaintiffs carried out. The defendants were in the barn often. They had chickens upstairs in the barn so needed to attend to the chickens twice a day. At various times, the relationship was such that the parties were avoiding each other and at those times it is less likely that the defendants specifically knew the work that the plaintiffs were doing. Even so, they would have had a strong sense of it because they were in the barn so often.
[238] In cross-examination, the plaintiffs both acknowledged that there were immediate benefits to them for many of their investments. However, Tim adamantly said that they would never have bought the new milking equipment, for example, if they weren’t expecting to take over the farm.
[239] In general, the defendants were aware of the investments and repairs that the plaintiffs carried out and at the same time knew that the plaintiffs were conducting the repairs and making the investments in expectation of taking over the dairy some day. The defendants expected, indeed insisted, that the plaintiffs pay for all repairs of equipment.
Enrichment
[240] Prior to the plaintiffs taking over the dairy, the parties did not discuss who would be responsible for major repairs and expenses. They had agreed the plaintiffs were responsible for supplies.
[241] Some of the items claimed in the list reviewed above were necessary to keep things going because of equipment breakdowns. Examples include the stable cleaner and water system repairs. These should not be characterized as enrichments of the defendants because the benefits of these expenditures flowed primarily to the plaintiffs. They promoted the continued operation of the dairy but did not add lasting value to it.
[242] Other items on the list represent lasting improvements. Examples include the stable mats, milking equipment, fans, water heater, and septic system. These benefited the plaintiffs but also added lasting value to the dairy. The defendants undeniably received “something of market value.” The difficult question is whether the principle of subjective devaluation applies to these items.
[243] Defendants are often well-positioned to assert that they did not want and would not have spent money on a benefit they received. Similarly, they are often well-positioned to argue that a service or improvement to property is not an incontrovertible benefit by denying its utility to them. Courts must respect defendants’ freedom of choice and autonomy but should measure these at the time the benefit arose, not at the time of trial, and not through the application of hindsight. At the same time, even where defendants are subjectively delighted with a benefit, it may be inappropriate to force them to pay for it. “Liabilities are not to be forced upon people behind their backs…”[^50] The question is whether requiring defendants to provide restitution is inconsistent with their autonomy.
[244] The first major expense, the stable mats, are not something the defendants would have agreed were necessary. They had never used them. Amanda considered them important for animal welfare, but I do not think it can be fairly said that she expected the defendants to pay for them when she made the purchase. She did not discuss the purchase with them, probably because she was intuitively aware that they would not agree with it.
[245] It is less clear that the defendants were unaware of the plaintiffs’ decision to buy additional fans. It is likely that the defendants were aware, in advance, of the plaintiffs’ decision to replace the milking equipment. However, the plaintiffs did not seek the defendants’ approval or input for these expenditures. Amanda wanted to improve and modernize. The defendants were content with the way they had done things.
[246] As a result, in my view, the principle of free acceptance does not apply. To establish free acceptance, the plaintiff must establish “an expectation of payment, the defendant’s knowledge of that expectation, and a reasonable opportunity to reject."[^51] The plaintiffs cannot establish these here.
[247] I have considered the counterargument that the expectation of payment here was not an expectation that the defendants would reimburse the plaintiffs for these expenses, but rather an expectation, shared by all parties, that the expenditures would benefit the plaintiffs in the long term in that they would someday acquire the dairy operation. The defendants knew of that expectation. And at no point did the defendants take the daily opportunities open to them to tell the plaintiffs that their expectations had changed. They saw the plaintiffs making these expenditures and did not say anything.
[248] This argument fails because I accept that at the time the expenditures were made, the defendants would not have agreed to them. Forcing the defendants to pay restitution based on free acceptance would be inconsistent with their autonomy.
[249] At the same time, the fact that the plaintiffs made these investments shows that they must have felt assured they would eventually acquire the dairy on favourable terms. The defendants’ “standing by” when they saw these investments occurring is conduct that serves as an element of assurance and will be relevant in the proprietary estoppel analysis.
[250] The next step in the analysis requires an assessment of whether any of these expenditures were an incontrovertible benefit. Taking the milking equipment as an example, the plaintiffs did not take it with them when they left because it was affixed to the barn. It was put to use by Ms. Olieman and Jeff Metske, and the defendants indirectly benefited from it. There was evidence that used milkers are sometimes available for purchase, but I did not receive specific evidence that the milking equipment in question here could be sold. As I understand it, and it is now sitting unused in the barn. It may have value. The existing milkers were old. It is fair to infer that they would not have lasted throughout the time that the plaintiffs, Ms. Olieman, and Jeff Metske operated the dairy. The appropriate approach is to consider the milking equipment an incontrovertible benefit but to discount it for depreciation to reflect the fact it was used somewhat by May 2018 when the plaintiffs were told to leave.
[251] The same approach is appropriate for the fans, the water heater, and the septic system.
[252] In result, I find that the defendants were enriched by the milking equipment, the fans, the water heater, and the septic system. Subjective devaluation is overcome because these were incontrovertible benefits.
[253] Tabs 1 to 30 of the plaintiff’s document brief (exhibits 1-1 to 1-30) consist of invoices supporting the plaintiffs’ claims for improvements, repairs, and investments made to the dairy building. The total claimed is $88,363.98. All figures are, appropriately, before HST as the plaintiffs can claim an HST input credit.
[254] The table below shows the amounts claimed and the depreciated amounts I have found to be enrichments.
| Category | Sources and details | Amount Claimed | Amount allowed |
|---|---|---|---|
| Stable cleaner repairs | Tabs 26, 27 | 4,518.60 | 0 |
| Miscellaneous equipment repairs | Tabs 2, 3, 5, 6, 8, 9, 10, 18, 19, 20, 23 | 4,037.49 | 0 |
| Water system repairs and parts | Tabs 11, 12 | 1,695.13 | 0 |
| Silo repairs | Tabs 14, 15, 16, 17 | 3,795.74 | 0 |
| Unproven items | Tab 7, 24, and the balance of the pages in tab 25 | 33,681.32 | 0 |
| New stable mats | Pages 100 and 102 of tab 25 | 7,092.30 | 0 |
| Water heater | Tab 22 | 1,215.20 | 1,000 |
| New milking equipment | Pages 107, 108, 112, 113, 114, 125 and 126 of tab 25 | 25,373.25 | 22,000 |
| New fans | Tab 1 and page 106 of tab 25 | 4,854.12 | 4,000 |
| Septic system | Tabs 28, 29, 30 | 1,755.83 | 1,700 |
| Claims to be reimbursed | Tabs 4, 13 | 345.00 | 0 |
| Totals[^52] | 88,363.98 | 28,700 |
[255] For added clarity, if any of these items remain in the barn, going forward they shall be treated as the defendants’ property and the defendants may detach and sell them.
Corresponding Detriment
[256] The corresponding detriment to the plaintiffs for the proven enrichments is patent as they paid for these items.
Juristic Reason
[257] Unlike the claim for the increase in quota, the arrangement between the parties does not provide a juristic reason for the defendants to have been enriched by the plaintiffs’ expenditures for the milking equipment, fans, water heater, and septic system.
[258] The plaintiffs can meet their onus under the first branch of Garland. The parties resolved their dispute over who should pay for major repairs after the plaintiffs accepted Martin’s argument that maintenance and repairs were their responsibility because they would be taking over the dairy someday. Given the basis for the resolution of this dispute, the defendants cannot now argue that these enrichments are explained by the rental agreement. Rather, they are explained by the wider understanding between the parties. They are benefits acquired by the defendants pursuant to a juristic purpose that ultimately failed. That is, the wider understanding that the plaintiffs would acquire the dairy on favourable terms failed.
[259] The defendants have not met their onus under the second branch of Garland, because the expectations of the parties were that the plaintiffs would benefit from these expenditures.
Remedy
[260] In result, I allow $28,700 for this aspect of the plaintiffs’ claim.
Issue 1(g): Tim’s Labour Between 2003 and 2011
[261] Tim claims that he was not properly compensated for his efforts on the farm from June 2003 when he finished high school at age 17, to February 2011, when he was 25. It is submitted on his behalf, based on his evidence as to the number of hours that he worked, that he was paid about $3.50 per hour on average during this time.
[262] Tim’s evidence was that he worked from 5:30 a.m. to somewhere between 7:00 or 7:30 p.m. during the slow season, and until 11:00 p.m. or even 2:00 or 3:00 in the morning during busy times. On Sundays he would work three hours in the morning and three hours at night, longer if there were issues such as a cow down. Roseanne denied that Tim worked doing evening chores after supper, except maybe in the busy seasons. At the same time, she said the busy seasons were in the spring, summer, and fall.
[263] Tim’s evidence was that he received room and board and $1,000 per month, with this amount going up a little every year. He started getting paid $1,300 per month when Mr. Miller was hired as that is what Mr. Miller was paid. But, Tim said, the defendants supplied Mr. Miller with a house and he had weekends off.
[264] In cross-examination, Tim acknowledged that his mother cooked for him. He ate what he needed. He did not contribute to groceries. His mother generally did his laundry. His mother generally cleaned house. He did not contribute to household expenses or utilities.
[265] The plaintiffs’ position is that the informal benefits had a value of $400 per month. Roseanne’s evidence was that she did not think you could put a value on the informal benefits Tim received. No one kept track of it. In submissions, the defendants estimated the value at $600 per month.
[266] Roseanne said that between 2003 and 2006, Tim used their truck and they never asked him to pay for fuel. Tim said he did not get his driver’s licence until he was 18, which would mean he did not start driving until about 2004. He also said he would fill the vehicle at the gas station when he was out in it.
[267] In cross-examination, Tim acknowledged that during 2003 to 2011 he acquired 100 meat chickens, 10 to 12 cattle, some billy goats, and up to 100 sheep. He said he paid for the feed for the meat chickens but used his parents feed for the cattle. The sheep and chickens stayed in a barn that his parents rented for $50 per month and he did not contribute to that rent.
[268] The defendants’ submission is that a reasonable estimate for the total value of the benefits Tim received is $3,000 to $3,500 per month. This figure is not supported by the available evidence.
[269] Tim does not advance a claim for his labour on the farm before finishing high school. This distinguishes Tim’s claim from the claims made in McDonald v. McDonald.[^53]
[270] Tim’s claim is based on the difference between what he was paid per hour and minimum wage under the Employment Standards Act, 2000, S.O. 2000, c. 41 (ESA).
[271] Tim claims $109,144 for this aspect of his claim. Tim’s calculation of this amount depends on his evidence about the hours that he worked and the compensation he received. He asserts he worked 84 hours per week on average. He says a figure of $1,700 per month represents a fair estimate of his total compensation between 2003 and 2011. Multiplying 84 hours a week by the applicable minimum wage and subtracting a figure of $1,700 per month yields his $109,144 figure.
[272] On his own evidence, Tim worked Wednesdays from about 1:00 p.m. to 3:30 p.m. at the Lucknow Sales Barn and sometimes at special sales. He also worked for Fred De Boer. The date ranges for this work were not fleshed out in evidence. Tim also acknowledged that looking after his own personal livestock would have taken some of his time, but he minimized this.
[273] Mr. Miller testified that he worked Monday to Saturday with every other weekend off, from 5:30 a.m. to 7:30 p.m., with more free time in the winter. Mr. Miller estimated he worked 70 hours per week from June to August and 50 to 60 hours a week in the winter. He did not work more than 70 hours per week very often. He testified that he was paid $1,300 a month but this was raised to $1,500 a month in 2012. He also received a bonus or “tip” at the end of the year. He also lived rent-free (with utilities included) at a house owned by the defendants. The agreed value of rent and utilities was $600 per month, meaning that Mr. Miller’s gross pay was $1,900 per month. He said that Tim did not look after the cows, that was Mr. Miller’s job, but Tim’s work schedule was pretty much the same as his.
[274] I accept Mr. Miller’s evidence that he rarely worked more than 70 hours in a week and Tim worked about the same hours as he did. I do not accept that on average Tim worked 84 hours per week. Tim’s calculation also understates the value of the “informal” benefits he received (room and board, feed, etc.).
[275] The figures submitted on behalf of Tim do not hold up to scrutiny even if minimum wage under the ESA is the appropriate standard by which to measure his pay. Tim has not established his claim for damages for this aspect of the claim.
[276] I will add here that the parties’ submissions did not address the applicability of the ESA. Under clause 12 of s. 3(5) of the ESA and s. 2(2) of O.Reg. 285/01, minimum wage and overtime rules “do not apply to a person employed on a farm whose employment is directly related to the primary production of … milk, grain, … cattle, sheep, goats ....” Given this, the ESA minimum wage is not necessarily a valid standard for assessing whether Tim was underpaid. In my view, the best evidence available for assessing whether Tim was underpaid is the evidence of what Mr. Miller was paid. At times, Tim was paid less than Mr. Miller, but not so much less that I am able to say Tim was grossly underpaid or exploited from 2003 to 2011.
[277] This aspect of the claim fails.
Sub-Issue 1(g.0): Is Tim’s Claim for Unpaid Labour Statute Barred?
[278] The defendants argue that even if Tim was underpaid for the years 2003 to 2011, his claim for wages for these years is statute barred. Tim left the farm in February 2011. He did not pursue a remedy until this action was commenced on June 18, 2018.
[279] Given my findings on issue 1(g), it is not necessary to decide this issue.
Issue 1(h): The Plaintiffs’ Labour 2012 to 2018
[280] The plaintiffs claimed that the defendants used their equipment without their authorization and benefitted from it, such that the plaintiffs should receive an award as compensation for this use. However, the plaintiffs abandoned this aspect of the claim in their written submissions, acknowledging that they had not led evidence on the value of the use of the equipment.
[281] The plaintiffs maintain their claim for unpaid labour. They claim that from 2012 to 2018 they did work for the defendants in respect of the Metske operation. That is, primarily, the cash crop operation.
[282] Under the parties’ arrangement, the defendants paid the plaintiffs on an hourly basis for their work for the Metske operation. The plaintiffs submitted time sheets for their hours. Roseanne would receive these time sheets and pay them. There is no dispute that the plaintiffs were paid for whatever time they listed on their submitted time sheets. No amounts were left outstanding. However, the plaintiffs say that they did a great deal of labour for which they did not submit time sheets.
[283] The plaintiffs gave detailed testimony about the hours they worked for the Metske operation. However, their failure to track or submit the hours they now claim casts doubt on the reliability of their evidence on this point. Their failure to submit their hours cannot blamed on the defendants. It is a fair inference that had the type and amount of work they did been such that it justified submitting a time sheet, they would have done so. The perspective they now bring is so coloured by this dispute and these proceedings that I cannot accept this aspect of the claim. The hours worked are speculative at this point and not proven.
[284] In addition, it is a fair inference that pay was conditional on submission of a time sheet. If the plaintiffs could delay by many years claiming for hours worked, this would not allow for contemporaneous oversight by the defendants. The plaintiffs failed to meet this implied condition.
[285] I therefore dismiss this aspect of the plaintiffs’ claims.
Issue 2: Proprietary Estoppel
[286] I asked the parties for additional submissions on proprietary estoppel. My request arose because, as should be apparent, I heavily consulted McInnes. Late during the preparation of these reasons, I came across the section of that text on proprietary estoppel (§6.02[1]). It describes the elements of proprietary estoppel as set out by the Supreme Court of Canada in Cowper-Smith v. Morgan:[^54] (1) representations or assurances made to the claimant, on the basis of which the claimant expects to enjoy some right or benefit over property; (2) the claimant relies on that expectation by doing or refraining from doing something, and the claimant’s reliance is reasonable in all the circumstances; and (3) the claimant suffers a detriment as a result of the reasonable reliance, such that it would be unfair or unjust for the party responsible for the representation or assurance to go back on its word.
[287] McInnes then states:[^55]
The most common example today [of proprietary estoppel] involves the family farm. In a typical case, a parent’s promise of a future property interest induces an adult child to forgo other opportunities in order to stay and work the family farm. Years later, when the circumstances change or the relationship sours, the parent purports to send the child away empty-handed. In the absence of a contract, the child responds by suing for proprietary estoppel. Equity will intervene to prevent the injustice if the claimant satisfies the doctrine’s criteria.
[288] The potential applicability of proprietary estoppel to the facts in this case is readily apparent from this description.
[289] The statement of claim sets out the elements of proprietary estoppel but does not refer to proprietary estoppel as a cause of action. Proprietary estoppel is normally pled, but there is ample authority that specific reference to the phrase “proprietary estoppel” is not required in a pleading.[^56] Having read McInnes and other authorities on proprietary estoppel, it seemed inappropriate to leave the issue unconsidered. I therefore asked for additional submissions and have received detailed submissions. With these submissions in hand, it is appropriate to decide the issue.[^57]
Scope of Proprietary Estoppel
[290] Proprietary estoppel is rooted in cases in which the plaintiff made improvements to land owned by the defendant in the mistaken belief that he or she would benefit from the improvement.[^58] However, the doctrine has come to be applied in diverse circumstances.[^59] Often, proprietary estoppel is applied when an owner dies and a claimant’s expectation of being granted an interest in property under the owner’s will has not been honoured. It also often arises in family farm cases, as noted in the above passage from McInnes.
[291] One issue that remains unsettled (in Ontario[^60]) is whether proprietary estoppel may attach to an interest in property other than land.[^61] I will return to this as there is a question here of whether proprietary estoppel can apply to the milk quota.
Elements of Proprietary Estoppel
1. Representation or Assurance
[292] The first element of proprietary estoppel is “a representation or assurance made to the claimant, on the basis of which the claimant expects to enjoy some right or benefit over property."[^62] Professor MacDougall labels this requirement as a “statement,” and describes it as “a representation or promise or assurance."[^63] This statement must lead to a mistake or misapprehension on the part of the claimant, in the sense that the claimant “must be acting under a mistaken belief about his or her rights to the property in question. This misapprehension could relate to existing rights or to a right or interest that it is to acquire from the owner in the future. The owner will be implicated in this mistaken assumption or misapprehension in some way."[^64]
a. Does the representation or assurance have to be unambiguous?
[293] In Cowper-Smith, the facts were that, at the urging of his sister, the claimant quit his job and his life in England and moved back home to Victoria, B.C. to care for the parties’ elderly mother. The sister had assured the claimant that he could live in the mother’s house indefinitely and could buy the sister’s anticipated share of their mother’s house from the estate after the mother died. After the parties’ mother died, the sister (who was the executor) reneged. She refused to allow the claimant to buy her share of the house from the estate. Ultimately, the court ordered that the claimant could buy the sister’s share of the house from the estate, upon accounting for certain expenses incurred by the estate in maintaining the property.
[294] As is the case here:
• The arrangement between the parties was somewhat ill-defined. No price for the house had been discussed.
• There was an assurance given but no agreement that reached the level of a contract.
• The claimant acted on the assurance to his detriment.
[295] McLachlin C.J. held that “The representation or assurance may be express or implied."[^65] For this proposition, she cited Wolff v. Canada (Attorney General), where it is stated that “the assurance or representation need not be express and can be inferred from the conduct of a party, and that acquiescence can amount to an assurance or representation."[^66] The conduct relied on by the claimant in Wolff was the owner’s acquiescence in the claimant’s use of a laneway.
[296] In discussing the requirement for reasonable reliance on the representation, McLachlin C.J. said:[^67]
Reasonableness is circumstantial. As Lord Walker put it in Thorner, “to establish a proprietary estoppel the relevant assurance must be clear enough,” that is, “[t]he promise must be unambiguous and must appear to have been intended to be taken seriously. Taken in its context, it must have been a promise which one might reasonably expect to be relied upon by the person to whom it was made.”
[297] The court in this passage was discussing the reasonable reliance issue – that is, the second element of proprietary estoppel. The court was emphasizing that the reliance must be objectively reasonable.
[298] The submissions of the defendants emphasize the point in this passage that the promise “must be unambiguous.” They also refer to the decision Grasso v. Bhatt[^68] to emphasize this point and to argue that an assurance does not arise if it is conditional or predicated on certain events happening. These submissions miss required nuances.
[299] In the passage quoted above, McLachlin C.J. was referencing Walker L.J.’s speech in Thorner v. Majors[^69] that includes the statement, “What amounts to sufficient clarity, in a case of this sort, is hugely dependent on context."[^70] Walker L.J. was talking about the first element of proprietary estoppel, and he said that the relevant assurance must be “clear enough."[^71] Rodger L.J. agreed that “clear enough,” as in clear enough for the plaintiff to understand, was an appropriate formulation.[^72]
[300] In Thorner, the claimant expected to inherit his uncle’s farm. A “representation was never made expressly but was ‘a matter of implication and inference from indirect statements and conduct.'"[^73] The claimant had “relied upon the assurance by not pursuing other opportunities,” but the uncle/owner had not known about these opportunities.[^74] Rodger L.J. noted that “clear and unequivocal statements played little or no part in communications between the two men,” but “they were well able to understand one another."[^75] Walker L.J. said that there are many cases in which an owner’s “conduct in standing by in silence serves as the element of assurance."[^76] Proprietary estoppel was made out.
b. Does the representation have to be repeatedly and consistently maintained?
[301] Proprietary estoppel cases typically require analysis of long-term relationships. Over time, people’s interactions with each other may be full of stops and starts; assurances and undermining of those assurances; understandings, misunderstandings, and clarifications; changes of position; indecision; and promises, re-neging, and reformulation. It would be wrong not to acknowledge that change and inconsistency regularly feature in human relationships. The law should resist imposing excessively rigid requirements about the “representation or assurance” requirement in proprietary estoppel claims.
[302] Davies v. Davies, a decision of the Court of Appeal of England and Wales, is instructive. In Davies, the claimant was one of three of the owner’s daughters. The other two daughters left the farm. The claimant stayed but came and left several times between 1989 and 2012 after arguments. The parties’ communications about succession and their actions were complex and changed over the years. The subject and nature of the assurances changed. The farm grew. Despite this, the assurances given were adequate to found a claim of proprietary estoppel. The court held that:
no claim based on proprietary estoppel can be divided into watertight compartments. The quality of the relevant assurances may influence the issue of reliance; reliance and detriment are often intertwined, and whether there is a distinct need for a “mutual understanding” may depend on how the other elements are formulated and understood [citations omitted].
[303] Another instructive example is Wettstein v. Wettstein,[^77] a decision of the B.C. Supreme Court cited with approval in Cowper-Smith. The plaintiff was the ex-daughter-in-law of the defendant owners of a property that had two houses on it. The owners lived in one and the plaintiff and her ex-husband lived in the other. The parties’ statements and actions over many years pointed in contradictory directions on whether assurances had been given to the plaintiff that she and her ex-husband had acquired an interest in the property. Rent was paid in stops and starts. The owners loaned money to the plaintiff and their son to fund an addition to the house the younger couple lived in. The owners accepted payments on the loan for a time and then forgave the loan. The parties investigated subdividing the property and found it could not be subdivided. The available documentation (a will, several loan applications made by the ex-husband, several tax returns over the years, and the building permit application for the addition) pointed towards different conclusions about whether an interest in the property had been transferred. The older couple paid the property taxes and insurance on both houses throughout. The court ultimately did not decide whether proprietary estoppel was made out but found for the plaintiff on unjust enrichment.
[304] The facts of Thorner, Davies, and Wettstein show that “In situations of alleged oral agreements over many years it can be difficult to distill the parties’ intentions..."[^78] It is wrong to say that to support a claim for proprietary estoppel, the promise and the reliance made must be objectively, unambiguously, and consistently maintained over time. As I will explain, the remedy may reflect fluctuation of position over time, but in assessing liability the question is:
whether (and if so to what extent) it would be unjust or inequitable to allow the person who has given the assurance to go back on it. The essential test is that of unconscionability [citations omitted].[^79]
c. Application
[305] The “representation or promise or assurance” requirement is made out on the facts of this case. Tim reasonably understood before he left in 2011 that his parents wanted him to continue farming on their property and would give him part of it. Like the claimant in Davies, he left but returned to the farm. The succession planning, the wedding speech, and other circumstances described above provide abundant evidence of assurances (see para. [120] above). The “standing by in silence” as the plaintiffs invested their money and time in the dairy also serve the element of assurance (see paras. [241] to [249] and [300] above). There is overwhelming evidence that the discussion and course of conduct of the parties satisfy the requirement of “representations or assurances made to the claimant, on the basis of which the claimant expects to enjoy some right or benefit over property.”
2. Reasonable Reliance
[306] The second element of proprietary estoppel is that the claimant relies on the expectation by doing or refraining from doing something, and his reliance is reasonable in all the circumstances. This requirement is easily met for reasons that I have already discussed (see para. [120] above). It is true that there were repeated episodes discord and uncertainty. After these, Amanda would regain a sense that things could be worked out. The plaintiffs’ reluctance to abandon their hope for succession was understandable in the circumstances, given the investments of money, time and effort they had made.
3. Detriment
[307] The third requirement of proprietary estoppel is that the claimant suffers a detriment as a result of reasonable reliance on the assurance received, such that it would be unfair or unjust for the party responsible for the assurance to go back on its word or on the assumptions the parties have operated under. This requirement is also easily met here. I have explained that the plaintiffs lived on minimal net income when they could both have earned more by working off the farm; they gave up a chance to pursue a succession with the Herlicks and the possibility of participating in the expansion of the Herlick operation; they invested in the defendants’ herd and later sold the descendant herd in a forced sale; they invested equipment including the milking equipment and fans they could not take with them.
Applicability of Proprietary Estoppel to the Quota
[308] McLachlin C.J. in Cowper-Smith noted that limiting proprietary estoppel to interests in land “is arguably arbitrary” and that the English courts have gone much further, allowing proprietary estoppel claims in relation to chattels and other forms of property.[^80] However, the court did not need to decide the issue.[^81] As such, the issue remains unsettled in Canada.
[309] The defendants cite jurisprudence under the PPSA to argue that interest in quota is not even “property” and therefore there can be no property interest in it.[^82] In context, those decisions make perfect sense. However, I agree with the plaintiffs that quota gets treated according to the context being considered. For instance, quota has been held to be property within the meaning of the Family Law Act.[^83]
[310] Milk quota in Ontario is connected to the land where the dairy is situated. It can be sold on the exchange and transferred to the licences of other dairy farmers (with DFO approval) or can be sold off-exchange (with DFO approval) if sold as part of a land transaction that includes a licenced dairy. The defendants acknowledge in their submissions that without the farm, purchase of quota by the plaintiffs did not make sense.[^84]
[311] The defendants’ quota is but one of the dairy’s assets. Proprietary estoppel claims in inter-generational farm family disputes often do not distinguish between the farm business and the farmland, treating them as indistinguishable. A common fact-pattern is that farmers tell their children they will inherit the farm, without clarifying whether they mean both the land and the business.[^85] This never prevents the court from doing justice between the parties.
[312] Although I did ask for submissions on the point, on reflection, I do not think it is necessary to decide whether proprietary estoppel may attach to quota. The assurances and representations involved here specifically included “Martin Metske’s dairy barn,” meaning there was an understanding that some land would be transferred to the plaintiffs.
Remedy
[313] MacDougall states that “there is an extraordinary flexibility in terms of the remedies available to satisfy the equity raised by the proprietary estoppel” and he notes that due the fact specific nature of the cases, other cases often have limited value as precedents.[^86]
“Satisfying the Expectation” v. “Compensating for the Detriment”
[314] Courts have struggled with the proper approach to determining the remedy in proprietary estoppel cases. One approach is to give effect to the claimant’s legitimate expectation. The representation made or assurance given to the claimant is enforced. The other approach is to compensate the claimant for the detriment the claimant sustained by relying on the representation or assurance.
[315] The question of whether the remedy for proprietary estoppel should focus on “satisfying the expectation” or “compensating for the detriment” was very recently addressed by the Supreme Court of the United Kingdom in Guest v. Guest.[^87] The court narrowly divided (3-2). The decisions cannot be easily summarized, but the ratio in the majority decision is perhaps found at para. 94, where it was held that “neither expectation fulfilment nor detriment compensation” is the aim of the remedy, but the aim is “the prevention or undoing of unconscionable conduct.” Briggs L.J. then said:
In many cases, once the equity is established, then the fulfilment of the promise is likely to be the starting point, although considerations of practicality, justice between the parties and fairness to third parties may call for a reduced or different award. And justice between the parties may be affected if the proposed remedy is out of all proportion to the reliant detriment, if that can easily be identified without recourse to minute mathematical calculation, and proper regard is had to non-monetary harm.[^88]
[316] The practical difference between the majority and minority decisions in Guest is limited. The minority decision offered a formulation that depended on the type of case involved, but with a greater emphasis on addressing detriment rather than expectation. Leggatt L.J. held that in cases where the “promise” to be performed has fallen due for performance[^89] and where the claimant’s reliance loss “is of a kind which is very difficult to quantify in money terms” and the value of the expectation loss “is not clearly disproportionate” to the reliance loss, the court should give effect to the promise.[^90] However, where the “promise” has not yet fallen due, the court should consider whether any offers were made by the owner to address the detriment the claimant sustained. If no offers were made, the court will have to decide between an expectation-fulfilment based remedy and a detriment-compensation based remedy. An expectation-based remedy would need to be discounted account for acceleration – the fact that “an immediate remedy gives [the claimant] property or money sooner than was promised and without fulfilling all the conditions of the promise. … [T]he aim is to award a remedy which does all that is necessary, but no more than is necessary, to prevent [the claimant] from suffering detriment as a result of having relied on [the promise].”[^91]
[317] Although the controversy addressed in Guest had been described well before 2017,[^92] in Cowper-Smith our Supreme Court did not directly advert to it. But the court seems to have had it in mind. McLachlin C.J. described an approach to remedy that somehow seems to fall in between the majority and minority decisions in Guest. She said that courts must “strike a balance between vindicating the claimant’s subjective expectations — which, in their full context, may or may not reflect a reasonable valuation of the claimant’s detriment — and correcting that detriment, which may be difficult or even impossible to measure. In no case, however, may the claimant obtain more than he expected."[^93]
Other Remedial Principles in Proprietary Estoppel
[318] McLachlin C.J. also stated that courts “must take a principled approach, and cannot exercise a completely unfettered discretion according to the individual judge’s notion of what is fair in any particular case.” But, “A claimant who establishes the need for proprietary estoppel is entitled only to the minimum relief necessary to satisfy the equity in his favour."[^94]
[319] Applying this statement requires care. It stems from the “well-known but often misunderstood dictum”[^95] of Scarman L.J. in Crabb v. Arun District Council about “the minimum equity to do justice."[^96] The minimum equity to do justice between the parties in that case was an easement or licence to the plaintiff over the defendant’s land. In other words, the remedy was fulfilment of the expectation. Similarly, in Cowper-Smith, the remedy was fulfilment of the claimant’s expectation that he could buy his sister’s one-third share of the house. The “minimum relief” requirement is not referring to how the claimant’s detriment is to be compensated, but is “about fine-tuning the fulfilment of the expectation."[^97] “Scarman L.J.’s reference to the minimum does not require the court to be constitutionally parsimonious, but it does implicitly recognise that the court must also do justice to the defendant."[^98]
[320] McLachlin C.J. also stressed proportionality and reasonableness in the remedy:
• “Since the equity aims to address the unfair or unjust detriment claimants would suffer if the defendants were permitted to resile from their inducement, encouragement or acquiescence, ‘there must be a proportionality between the remedy and the detriment which is its purpose to avoid.’”[^99]
• “[W]hile propriety estoppel arises where the claimants’ expectations are frustrated, the reasonableness of the claimants’ expectations must be assessed in light of, among other things, the detriment the claimant has actually suffered."[^100]
[321] In Cowper-Smith, the minimum required to protect the claimant’s equity was to enforce the sale. McLachlin C.J. said that “[v]indicating [the claimant’s] expectation will satisfy the equity in his favour, which arose at the time of his reliance, by avoiding the unfair and unjust detriment that he would suffer if [his sister] were permitted to break her promise."[^101] The court had no need to analyze the claimant’s detriment. The claimant had “valued that detriment as being worth the concessions he obtained from [his sister]” before he moved back from England to care for their mother.[^102]
[322] In the case before me, it would be wrong, not to mention impossible and impractical, to force the sale of the dairy to the plaintiffs. The price they would have to pay was never defined. Even if an appropriate price could be determined, the plaintiffs could not finance it. Furthermore, forcing the defendants to sell the dairy to the plaintiffs would not be a proportionate response. In addition, since the quota has been sold, a sale is not even possible. Vindicating the plaintiffs’ reliance is best addressed with a monetary award.
[323] Assessing the award is difficult. It must strike a balance between vindicating the plaintiffs’ subjective expectations and correcting the detriment they sustained. It must be justified and grounded in the facts of the case, not in my discretion.
[324] McCreary J. faced a similar problem in Kennett v. Diarco Farms Ltd.[^103] The plaintiff was the ex-son-in-law of the defendant owners of a ranch. In 1999, a year after the plaintiff married the owners’ daughter, the plaintiff quit his job and began working on the ranch for considerably less pay than he had earned as a heavy-duty mechanic. The parties had discussed and attempted succession planning. As here, the defendant acknowledged that it was his hope that his daughter and son-in-law would take over the ranch “if things worked out.” It was not financially viable for the plaintiff and the daughter to afford to pay for the ranch.
[325] McCreary J. found that unjust enrichment had not been proven but proprietary estoppel had been. The plaintiff had been promised a proprietary interest in the ranch. He was disappointed after the separation when it was made clear that he would not be given the ranch. As here, the promise was not well defined. For instance, the representation was that the ranch would be left for the plaintiff, the daughter, and their children – not to the plaintiff alone. The fortunes of the ranch were liable to fluctuate, which meant that what ultimately might be given was changeable. The owner “expected some payment for his ranch,”[^104] but no price had been set.
[326] The award McCreary J. made was strictly based on detriment compensation. He awarded an amount roughly equal to the difference in the wages the plaintiff would have received from working as a heavy mechanic compared to the amount he did receive working at the ranch. McCreary J. clarified that he was not awarding loss of income but an amount to compensate “for the detriment he suffered as a result of relying on the promise that was not kept."[^105]
[327] McCreary J. relied heavily on Davies v. Davies.[^106] In that case, the Court of Appeal for England and Wales awarded damage based on: (1) a financial component representing losses sustained by the plaintiff; and (2) a nonpecuniary component, for a total award of £500,000 (reducing the trial judge’s award of £1.3 million). The court mentioned the “impossibility of evaluating the extent of imponderable and speculative non-financial detriment (for example life-changing choices),"[^107] and said that “In different situations the court is often called upon to award compensation for non-pecuniary losses, and the difficulty of assessment is no bar to an award."[^108] The court accepted as “a useful working hypothesis” that:
there might be a sliding scale by which the clearer the expectation, the greater the detriment and the longer the passage of time during which the expectation was reasonably held, the greater would be the weight that should be given to the expectation.
[328] In Guest, Briggs L.J. reviewed Davies and observed that the outcome was “a largely unexplained very round sum,” that was somewhere between a detriment-based assessment and an “expectation-based financial proxy."[^109] Briggs L.J. noted that sometimes the detriment a party has suffered cannot be fairly assessed, such as “when it consists of decisions about education, training and career which (as here) have life-long consequences."[^110]
[329] Briggs L.J. added, however, that the claimant in Guest (who had worked for 25 years on his parents’ farm) “had performed the bulk of his ‘working on the farm’ commitment to his parents.” So on the spectrum or sliding scale proposed in Davies, satisfaction of his expectation was the appropriate starting point for the remedy.[^111] The claimant “had spent over 25 years working for his father on minimal wages, with incalculable whole-life consequences in terms of the sacrifice of opportunities for an independent career and the ownership of his own home.” Briggs L.J. held that:
It is simply impossible to identify some monetarised value of his detriment in a way which would render a fulfilment of his expectations disproportionate. An offer now just to pay the wage differential, after more than half a working lifetime working towards the inheritance of a viable farm would in my view clearly remain unconscionable.[^112] [Emphasis added.]
[330] Here, the plaintiffs’ circumstances are similar but do not rise to the same level because they only worked the dairy for six years. They did, however, make the life-changing choice of moving to the Metske farm based on the legitimate expectations they had and the assurance they were given regarding succession. Had they not made that decision, they would have had many options open to them and there are many possibilities as to how their lives would have unfolded. An analogy to a future loss of income award in a personal injury damages assessment is apt. The award the plaintiffs receive should reflect all of the reasonably possible contingencies,[^113] but here I have little evidence on what the possibilities are.
Quantifying the Expectation
[331] The plaintiffs’ expectations in May 2012 matched those of the defendants. They expected to acquire the quota and “Martin Metske’s dairy barn” on favourable, but undefined, terms. They expected that their investments of time and money would remain applicable to the lifetime enterprise they were embarking on.
[332] Any effort to quantify the expectation in this case runs up against the reality that the parties had no real expectation as to the price the plaintiffs would pay, other than that (1) it would be on favourable terms; and (2) as of 2012, there was an element of donative intent.
Quantifying the Plaintiffs’ Detriment
[333] “Quantifying the detriment might generally be harder than valuing the expectation."[^114] In this case, I do have the plaintiffs’ tax information, from which it is easy to say that the plaintiffs earned far less between 2012 and 2018 than they would have earned had they not operated the Metske dairy. In 2011 Tim was off the farm for most the year and his personal income was $24,335. Amanda’s personal income that year was $27,416. I do not think that these figures accurately reflect the plaintiffs’ earning capacities for the relevant time frames. I believe they would have annually earned much more than these amounts if they had not chosen to operate the Metske dairy. However, as an illustration, I will use these figures as their “off-farm” earning capacity.
[334] The plaintiffs’ average actual personal incomes for 2013 to 2017 (not counting the part years 2012 and 2018) were $6,730.64 and $8,613.69 respectively.
[335] The plaintiffs’ collective average annual loss could therefore be estimated at the earning capacity less the average actual earnings:
($24,335 + $27,416) – ($6,731 + $8,614) = $36,406
[336] The total loss could be estimated on a straight-line basis at this amount for six years and one month, or roughly $221,000. This is a highly conservative figure, overly favourable to the defendants.
[337] These calculations are overly simplistic but provide something to work from. In my estimation, on a broad assessment, the reduced income the plaintiffs received (the two of them collectively) over the six years and one month that they operated the dairy would very likely exceed $500,000.
[338] In addition, the sale of the herd on a forced basis resulted in a loss. The plaintiffs had increased the herd by 2018. They sold 96 cows and heifers for an average price of $1,100. These included several nice jerseys that brought the price up to that level. Overall, the quality of the herd was better than the herd they bought in 2012 for $1,500 per cow. I have no solid evidence about market conditions and no evidence on the value of the herd if not sold on a forced basis. I can infer, however, that the 96 cows and heifers would have sold for more than what the plaintiffs paid per cow in 2012, i.e., more than $1500 each. Using this figure, the plaintiffs lost $400 x 96 or roughly $38,000 on the cows. Again, this figure is highly favourable to the defendants.
[339] Apart from the $12,266.95 that they paid to have quota added to Martin’s milk licence in 2013 (which amount has been returned to them), the plaintiffs did not pay for quota. The amounts they paid for rent, supplies, and equipment were presumably written off against the income the farm derived. Similarly, the interest they would have paid on their loan and lines of credit would likely have been something they could write off. In-depth economic loss analysis is unavailable, but I cannot ascertain any detriment for the expenses incurred and investments made by the plaintiffs.
[340] The monetary award should also contain a non-pecuniary element to reflect the required balance described in Cowper-Smith – “a balance between vindicating the claimant’s subjective expectations – which, in their full context, may or may not reflect a reasonable valuation of the claimant’s detriment – and correcting that detriment, which may be difficult or even impossible to measure.”
Result
[341] The monetary award should reflect these considerations:
• The expectation was that the plaintiffs would have acquired the dairy. However, they would have compensated the defendants with an unknown amount for the quota and “Martin Metske’s dairy barn.”
• The reasonableness of the claimants’ expectations must be assessed in light of, among other things, the detriment the claimants have actually suffered. The plaintiffs were unable to advance towards their goal of owning and operating a dairy, and they missed another very good opportunity to do so.
• Since the equity aims to address the unfair or unjust detriment the claimants would suffer if the defendants were allowed to resile from their inducement, encouragement or acquiescence, there must be a proportionality between the remedy and the detriment which is its purpose to avoid.
• In no case, however, may claimants obtain more than they expected.
• The plaintiffs devoted six years pursuing a goal based on encouragements and assurances received from the defendants. Had they not received those encouragements and inducements, they would have devoted their resources and time elsewhere and would have been far better off financially. The directions their lives would have taken and how much better off they would be is unknowable.
• Because they had to sell their herd on a forced-sale basis, the plaintiffs recovered far less for it than its true value.
• The plaintiffs bear the burden of proof relating to the remedy and the evidence they have provided is limited.
• The court must do the best it can to do justice between the parties on the available evidence. This must be balanced against the requirement that the court should not engage in speculation.
• The sliding scale described by Lewison L.J. in Davies should also be applied. The expectation that the plaintiffs held grew less clear, so deserves less weight, as the years passed. They started re-thinking the arrangement at times. In 2015 the plaintiffs looked for another dairy to acquire. In 2017 they were concerned the defendants would sell the quota. Subsequently, Roseanne brushed off Amanda when succession planning was raised in 2017 (see para. [92] above). I accept Amanda’s testimony to the effect that she held out hope that succession planning could be revived, despite the frequent discord. In hindsight, she held out hope too long.
• It is impossible to evaluate the extent of “imponderable and speculative non-financial detriment (for example life-changing choices),” but “the difficulty of assessment is no bar to an award."[^115]
[342] Weighing these considerations, I assess the appropriate monetary award to be $400,000.
[343] This is not an award of loss of income but an amount to compensate “for the detriment [the plaintiffs] have suffered as a result of relying on the promise that was not kept."[^116]
Issue 3: Counterclaim
Issue 3(a): Use of Straw
[344] The defendants argue that the plaintiffs inaccurately accounted for their monthly straw usage and used more than they paid for. The claim for the difference between the amount of straw allegedly used and the amount paid for between 2012 and 2018.
[345] To support this argument, the defendants start with the monthly lists Amanda prepared. From these lists, they have determined the total straw paid for by the plaintiffs over the six years they operated the dairy. Martin compared this amount to the amount of straw that fits in the haymows.
[346] Martin said that the haymows were filled to capacity annually. Based on Martin’s own count, supported by the testimony of Mitchell Harris, he then determined the number of bales that fit in the haymows. He then multiplied the number of bales that fit in the haymows by six years, to determine that the plaintiffs must have used more straw than they paid for.
[347] This evidence deserves to be treated with even more skepticism than the plaintiffs’ evidence in relation to issue 1(h) (the issue of the unbilled hours that the plaintiffs worked). The defendants’ evidence on this point is highly imprecise and vulnerable to contrivance. I am not satisfied on a balance of probabilities that the plaintiffs used more straw than they paid for.
[348] Roseanne testified that she had discovered the discrepancy with respect to straw usage in 2016 and did not raise it with Tim or Amanda until this lawsuit started.
[349] Martin testified that when the plaintiffs were operating the dairy, “I knew we were being shorted on straw because Roseanne must have mentioned something about straw, and I knew what we were putting in the mows, so – but I assumed, why, we’d just let it go, not make any waves.” However, the counting of the number of bales that would fit in the haymows did not even occur until November 22, 2021, during the trial.
[350] The defendants did not raise this issue contemporaneously with the use of the straw or even in hindsight at the end of any given year. This makes it difficult to test the defendants’ claim. The failure raise the issue at the time undermines the claim.
[351] This claim is not allowed.
Issue 3(b): Use of Sileage
[352] The defendants also argue that the plaintiffs used more silage than they paid for. The defendants use the same approach for this claim as in the straw claim. They say they filled the silo every year to about 60-65% capacity, that it held 335 to 381 tonnes of sileage, and that the plaintiffs emptied the silo every year to feed their cattle. The defendants have added up the monthly amounts paid by the plaintiffs for sileage, and claim that the plaintiffs must have used more sileage than they paid for.
[353] For the same reasons as in the previous issue, I do not accept this claim. An example of how vulnerable this evidence is to imprecision and contrivance was demonstrated during Martin’s cross-examination, when he acknowledged that actual moisture readings were not considered in estimating the amounts of sileage used by the plaintiffs. Moisture can affect the measurement of sileage stored or used.
[354] This claim is not allowed.
Issue 3(c): Condition of Barn
[355] The defendants claim for the cost of repairing the barn after the plaintiffs moved out. During his testimony, Martin reviewed a series of invoices for claimed expenses associated with repairs allegedly attributable to the plaintiffs. The defence submissions claim $18,959.96 for these expenses.
[356] The evidence does not show that any of these expenses are properly attributable to the plaintiffs. I will not review the evidence associated with each claimed item but will review some of them to explain.
[357] Exhibit 6-B-1 is a bill dated January 2018 for a crane hoist to repair a barn chute. Martin said the bill is misdated and likely from January 2019, after the plaintiffs left. Martin said the chute was deteriorated beyond repair because the plaintiffs never cleaned the manure off it, and it had to be replaced. The invoice is not for the chute but for the boom truck to replace the chute. The chute was not replaced until about eight months after the plaintiffs left and about four months after Ms. Olieman started to operate the dairy. No photos were shown to depict the chute or the damage to it. I am not satisfied by the evidence that the need for the crane hoist is properly attributable to the plaintiffs.
[358] Invoices for door hardware from January 2018 are also alleged to be attributable to the plaintiffs. Again, I am not satisfied that the repairs are attributable to them as this was not adequately explained. In any event, it was from January 2018 and there is inadequate explanation for why the plaintiffs were not asked to pay these expenses before they left, if they were properly attributable to the plaintiffs.
[359] Exhibit 6-B-5 is an invoice for $4,500 to replace the stable cleaner in the barn. Exhibit 6-B-20 is an invoice for $2,779.60 plus HST relating to concrete work associated with stable cleaner repairs in the barn. They are both from November 2018. Although the connection between these invoices was not directly described in evidence, I infer they were for the same stable cleaner.
[360] The stable cleaner dated from 1986 and needed frequent repair. It was replaced months after the plaintiffs left. The defendants incurred this repair expense during the time Ms. Olieman operated the dairy. Under the agreement with Ms. Olieman, Ms. Olieman was supposed to be responsible for this repair. Ms. Olieman testified before Martin. She said that the stable cleaner required repairs but never mentioned that it was replaced. Martin testified that because the stable cleaner was “wrecked” when she got there, they paid for it and did not require Ms. Olieman to do so. I would observe that the timing of this replacement tends to validate the plaintiffs’ perspective about the longstanding problems with the stable cleaner and to undermine Martin’s position that it was the plaintiffs who damaged it.
[361] Exhibits 6-B-7 and 6-B-9 are invoices for fan cooler motors replaced in May 2018 and August 2018 respectively. Martin attributed the need to replace these to the fan motors just wearing out due to the passage of time. These expenses are not properly claimable from the plaintiffs. There was no basis for these to have been included within schedule D of the defence submissions.
[362] Exhibit 6-B-8 is an estimate for $34,000 for all repairs to the barn allegedly attributable to the plaintiffs; however, this estimate duplicates the stable cleaner repair and chute repairs already discussed, and at most only some of the work specified was done. The document is, quite properly, not included in schedule D of the defence submissions.
[363] Exhibit 6-B-10 is an invoice from August 2018 for maintenance on the whole milking system, for work that “had to be done every year to keep up your grade A invoice.” Martin did not provide any rational basis for why this is properly attributable to the plaintiffs. He said the amount of the expense, $2,074.60, was typical for the annual maintenance. Again, these expenses are not properly claimable from the plaintiffs. There was no basis for these to have been included within schedule D of the defence submissions.
[364] Exhibit 6-B-12 was an invoice for repairs and maintenance for the silo unloader. Martin was asked what role the plaintiffs played in this work being done, and his answer was that they were the last ones to use it. This is simply not an adequate basis to claim for this invoice against the plaintiffs.
[365] Exhibit 6-B-13 was for lumber and hardware for “fixing things up in the barn.” That was the full explanation. This again is simply not an adequate basis to claim for this invoice against the plaintiffs.
[366] I will not review every invoice. None of the claimed expenses were properly proven in that either the expense was not adequately explained or the basis for attributing the expense to the plaintiffs was not adequate or not adequately explained.
[367] This aspect of the counterclaim is not proven.
Issue 3(d): Condition of Langside House
[368] The defendants claim for the cost of repairing and cleaning Langside house after the plaintiffs moved out. The photographs of Langside house show that the plaintiffs left it in a filthy state. I accept that the house was filthy and there were damaged items (e.g., balusters, flooring) when the plaintiffs moved into to it, but some items of damage occurred while they lived there. The state of the house when they moved in does not justify the unmaintained house in the state it was in when they moved out. Doors were broken, doorknobs were damaged, the grass was long, the back step was damaged, an outdoor light was damaged, and the place was filthy.
[369] I do not accept the plaintiffs’ evidence that when they moved out the fridge did not appear as shown in photo 17 and 18 of exhibit 4A, or that the carpet did not appear as shown in photo 16 and 17 of exhibit 4B. There is no basis to believe the defendants staged the photos.
[370] Ella Miller testified that she helped clean Langside after the plaintiffs moved out, and confirmed it was filthy. She did not remember how much she was paid. Three other women took part in the cleaning. They cleaned for a full day.
[371] While wear and tear is expected, the state of the house was such that the plaintiffs should be required to reimburse the defendants for the cost of cleaning and repairing it, excluding any betterment, and deducting a very modest amount for the work they had to do when they moved in.
[372] The plaintiffs claim $2,429.78 for the expenses associated with repairing Langside house. Roseanne could not recall what part of these were for (e.g., there was an undated bill from Dan Byler for labour for $110). The plaintiffs have proven some of the expenses (e.g., $456.52 for a new entrance door). Others represent improvements to the property (e.g., flooring). Roseanne testified that they did lots of labour on repairs to Langside house, but she had “no idea” how much labour. She also said that she did not have receipts for other (undescribed) work done at Langside house.
[373] I assess the damages for the repairs and cleaning of Langside house, net of deduction for betterment, at $2,000 and award this amount in the counterclaim.
Issue 3(e): Setoff for Quota Rent
[374] Mid-trial, the Bank of Montreal produced its copy of Amanda’s “business plan” containing the notes of the bank representative. This document became exhibit 3. After Amanda testified about this document, the defendants amended their amended statement of defence to add a plea of setoff for underpayment of quota rent.
[375] Amanda testified that at the March 2012 meeting, the parties discussed the leasing rate for quota. She said they agreed to prime plus one percent. Prime was 3% at the time. Therefore, the lease rate per year would be the total quota value times 4%, paid in monthly instalments. Amanda testified that despite this agreement, Martin later decided the lease rate should be based on 5%, not prime plus one.
[376] Amanda’s business plan states that the rates would be “5yr term plus 1%,” which is not consistent with either prime plus one percent or 5%.
[377] In any event, the plaintiffs accepted Martin’s 5% demand. The total quota at the time was 46.29 kg and the quota value was $25,000 per kg at the time, for a total quota value of $1,152,250. At 5%, the quota rent worked out to $57,862.50 per year or $4,822 per month. The first sheet submitted by Amanda to Roseanne at the end of May of 2018 used the figure $4,822, reflecting the 5% rate that Martin had demanded.[^117]
[378] The bank representative’s handwriting on exhibit 3 shows a figure of $4,792. This figure was unexplained but points to a rate of 4.97%.
[379] The defendants both testified, and I accept, that they did not know how to calculate a 5% rate of return. They relied on Amanda’s calculation.
[380] Due to a general decrease imposed by DFO in January 2013, the defendants’ quota decreased to 45.6 kg, which at 5% would result in a new monthly quota rent of $4,750 per month. Amanda’s submitted sheets correspond to this change effective January 2013. That is, the plaintiffs started paying $72 per month less for quota rent when the defendants’ quota was reduced.
[381] Due to the plaintiffs’ purchases of quota in May, June and July 2013, the total quota increased by 0.51 kg. Amanda did not recalculate the quota rent at that time. This is neither surprising nor inappropriate, since the plaintiffs had paid for the quota increase. It was effectively their quota, so it would not be fair that they should pay increased rent on it.
[382] Due to general increases in quota in April 2014, the total quota increased to 46.9 kg. Amanda did not recalculate the quota rent at that time.
[383] Amanda’s explanation for this was unclear. She did point out that Martin had unilaterally increased the rate to 5% when it was supposed to be prime plus one. Also, when DFO announced a later general decrease in quota, the lease rate did not decrease. Rather, the parties just stuck with the $4,750 for the rest of the time that the plaintiffs ran the dairy. There was one general decrease in December 2014, but there were several general increases after that. I also note that the rate did not change to reflect any interest rate changes.
[384] The defence submissions argue that between 2012 and 2018, if the rent was based on a 5% rate of return for the defendants, and if rent increases had been applied to reflect quota increases and decreases, the plaintiffs would have paid an added $21,155.67 in quota rent. The defendants claim a setoff for this amount.
[385] The setoff claim is not well founded. I accept that the defendants relied on Amanda to calculate the quota rent. Even so, the defendants did know that the amount of quota increased, and yet they never suggested that the lease rate should increase as a result. The proper inference is that after 2013, the parties were content to maintain the quota lease rate at $4,750 per month.
[386] I do not allow the claimed setoff for the quota rent.
Disposition
[387] The awards for unjust enrichment and proprietary estoppel are duplicative to some extent. I found the defendants liable for $28,700 for unjust enrichment associated with their expenditures on the barn. These expenditures helped inform the plaintiffs’ detriment in the proprietary estoppel because I took them into account, indirectly, when I considered the plaintiffs’ net income. It would amount to duplication to grant judgment for this aspect of the monetary award for unjust enrichment as well as the monetary award for propriety estoppel. I allow only the award for proprietary estoppel for $400,000, being the higher of the two amounts.
[388] The award of $5,000 for unjust enrichment associated with the furnace at Langside house is not duplicated in the proprietary estoppel award so should be allowed separately.
[389] The plaintiffs shall have judgment in the total amount of $405,000.
[390] Any items left in the barn by the plaintiffs shall be treated as the defendants’ property and the defendants may detach and sell them.
[391] The defendants shall have judgment in the counterclaim for $2,000.
[392] If the parties cannot resolve prejudgment interest or costs, counsel may contact the trial coordinator to arrange a hearing.
Chown J.
Released: February 10, 2023
[^1]: Lisa was called as a witness by the defendants and supported their position. She acknowledged she moved out because she was not getting along with her father, but testified that they subsequently got along. [^2]: Saleable and non-saleable quota and the price and premium for quota is explained below, at para. [118]. [^3]: Kerr v. Baranow, 2011 SCC 10, at para. 32. [^4]: Kerr at 33; Pettkus v. Becker, 1980 22 (SCC), [1980] 2 S.C.R. 834, at p. 844; Peel (Regional Municipality) v. Canada, 1992 21 (SCC), [1992] 3 S.C.R. 762, at p. 784, [1992] S.C.J. No. 101, at para. 32. [^5]: Mitchell McInnes, The Canadian Law of Unjust Enrichment and Restitution, 2nd Ed. (Toronto: LexisNexis, 2022), at §1.01[2][a][i]. I will cite this text simply as “McInnes”. [^6]: McInnes, at §1.01[2]. McInnes urges lawyers and jurists to use clear labels surrounding unjust enrichment. “Unjust enrichment by wrongdoing” should not be conflated with the three-part cause of action that the Supreme Court of Canada formulated in Pettkus v. Becker and revised in Garland v. Consumers’ Gas Co., 2004 SCC 25. “Unjust enrichment by wrongdoing” refers to “instances in which the defendant, having breached an obligation owed to the plaintiff, is compelled to give up an improper gain rather than repair a wrongfully inflicted loss.” For example, instances when disgorgement of a profit received by the defendant is appropriate: McInnes, at §1.01. In contrast, the simple phrase “unjust enrichment” should be used for the three-part cause of action. The phrase “autonomous unjust enrichment” can be used to describe the three-part cause of action when it is necessary to distinguish it from “unjust enrichment by wrongdoing”: McInnes, at §1.01[1] and §1.01[2][a]. [^7]: McInnes, at §2.01. [^8]: Peel, at para. 43. [^9]: McInnes, at §2.02; Stevested Machinery & Engineering Ltd. v. Metso Paper Ltd., 2014 BCCA 91, at para. 59. McInnes notes that the label “subjective devaluation” “is a bit misleading. The defendant may be personally delighted to have a benefit, but still escape liability. The explanation lies in the fact that subjective devaluation is a test of autonomy. It allows the defendant to turn to the plaintiff and say, ‘it is not your job to make my choices’”: Mitchell McInnes, Improvements to Land, Equity, Proprietary Estoppel, and Unjust Enrichment (2016) 2:2 Can J Comp & Contemp L 421 at 435, citing Magical Waters Fountains Ltd. v. Sarnia (City), (1990) 1990 6709 (ON SC), 74 O.R. (2d) 682 at 691 (Gen. Div.), rev’d on other grounds (1992) 1992 7411 (ON SC), 8 O.R. (3d) 689 (C.A.). [^10]: McInnes, at §2. [^11]: McInnes, at §2.03[2]. [^12]: McInnes, at §2.03[2][b][ii]. [^13]: Peel (Regional Municipality) v. Canada, 1992 21 (SCC), [1992] 3 S.C.R. 762, at p. 795, [1992] S.C.J. No. 101, at para. 54. [^14]: Peel, at p. 705 (S.C.R.), para. 54 (S.C.J.), quoting in part J.R.M. Gautreau, When Are Enrichments Unjust? (1989) 10 Advocates’ Q. 258, at p. 270 to 271. [^15]: Peel, at p. 796 (S.C.R.), para. 56 (S.C.J.). [^16]: Improvements to Land, supra, note 9, at p. 440. [^17]: Ibid., at p. 441. [^18]: Ibid., at pp. 451 to 457. [^19]: “Having been unjustly enriched, entirely innocent recipients may, in good faith, become disenriched prior to trial”: ibid., at p. 442; Ross Cromarty Developments Inc v Arthur Bell Holdings Ltd (BCCA), 1993 345 (BC CA), [1993] BCJ No 2437, 85 BCLR (2d) 77; McInnes, at §2.03[1][b][ii]. [^20]: Moore v. Sweet, 2018 SCC 52, at para. 53. “The essence of the action lies in the fact that the plaintiff is also the material source of the defendant’s enrichment”: McInnes, at § 3.01. [^21]: McInnes, at § 3.02. [^22]: Peter v. Beblow, 1993 126 (SCC), [1993] S.C.J. No. 36, 101 D.L.R. (4th) 621 at 631 (S.C.C.). [^23]: The defendants’ submissions suggest that Smith v. Smith, 2011 ONSC 3559, at para. 5 supports this proposition. It does not. [^24]: Pacific National Investments Ltd. v. Victoria (City), 2004 SCC 75, [2004] 3 S.C.R. 575, at para. 20. See also McInnes, at 3.02. [^25]: McInnes, at §4.02[2][a]; Garland v. Consumers’ Gas Co., 2004 SCC 25, at paras. 44 to 46. [^26]: Garland, at paras. 45, 46, and 54. [^27]: This does appear to be a new “established category.” In Garland, Iacobucci J. indicates, at para. 44, that the established categories are a closed list and consist of contract, disposition of law, donative intent, and other valid common law, equitable or statutory obligations. However, Iacobuci J. went on to state, at. para. 46, that it is possible for a new category of juristic reason to be established. In Simonin v. Simonin, 2010 ONCA 900, at para. 23, the Court of Appeal, relying on Campbell v. Campbell, (1999), 1999 2294 (ON CA), 43 O.R. (3d) 783 (C.A.), asserts, “Campbell identifies the situation where the plaintiff conferred a benefit while acting voluntarily in his own self interest as an established category to deny recovery.” Campbell was decided in 1999, and the Supreme Court of Canada did not include “acting voluntarily in self interest” it in the “closed” list it developed in Garland in 2004. Nevertheless, the Court of Appeal held in Simonin, in 2010, that this was a separate established category. In this case, it happens that the “voluntarily acting in self interest” category significantly overlaps with the “contract” category, because the voluntary acts are alleged to arise from the plaintiffs’ interest under the contract between the parties. [^28]: Moore v. Sweet, 2018 SCC 52, at para. 116. [^29]: Lesko v. Lesko, 2021 ONCA 369, at paras. 15 to 17. [^30]: “In looking at whether a monetary award is insufficient the court may take into account the probability of the award’s being paid”: Peter v. Beblow, 1993 126 (SCC), [1993] 1 S.C.R. 980, at p. 999, [1993] S.C.J. No. 36, at para. 34; Stec v. Blair, 2021 ONSC 6212, at paras. 82 and 112. [^31]: Mitchell McInnes, The Measure of Restitution (2002) 52:2 U Toronto LJ 163, at p. 177. [^32]: Ibid., at p. 179. [^33]: Ibid., at p. 181. [^34]: See para. [118] above. [^35]: The DFO licence was solely in Martin’s name until 2017, when it was transferred to the defendants’ name jointly for tax planning reasons. [^36]: Kerr v. Baranow, 2011 SCC 10, at para. 109. [^37]: McInnes, at §1.01[2][b]. [^38]: The language here is inspired from McDonald v. McDonald, 2017 BCCA 255, at para. 72, leave ref’d 2018 33053 (SCC), although the issue there was different. [^39]: McInnes, at §13. Chapter 13 of McInnes is helpful for understanding unjust enrichment in the context of “anticipated contracts that fail to materialize,” defined as “a situation in which the plaintiff conferred a benefit, despite knowing that no contract existed, in the expectation that one was imminent.” [^40]: McInnes, at § 12.03[4][b]; 676083 B.C. Ltd. v. Revolution Resource Recovery Inc., 2021 BCCA 85, at para. 50. [^41]: McInnes, at §12.03[4]. [^42]: Jack Beatson, Restitution and Contract: Non-Cumul (2000) 1:1 Theoretical Inq L 83, at p. 94; Niamh Connolly, European Review of Private Law 6-2014 [1005–1028], at p. 1016; McInnes, at §12.03[4]. [^43]: Full details about this are discussed under issue 3(e), beginning at para. [374]. [^44]: The parties’ statement of issues and the plaintiffs’ submissions state that the quota held by the defendants in May of 2018 was 55.22 kg. The plaintiffs say the premium was 4,000 $/kg. 55.22 kg x 4,000 $/kg = $220,880. However, according to p. 220 of exhibit 1-33 (also p. 38 of exhibit 2-B-2), the defendants held 56.69 kg of quota in May of 2018. The correct figure would therefore be 56.69 kg x 4,000 $/kg = $226,760. [^45]: (1999), [1999 2294 (ON CA)](https://www.canlii.org/en/on/onca/doc/1999/1999canlii22